Optimal '22 - The Leadership Summit for Predictive Procurement

Bid Ops is now. Find out why learn more

10 Procurement KPIs That Will Matter Most in 2022

Procurement professionals rely on tools to maximize their performance. One of the most essential additions to the strategic sourcing toolkit is procurement KPIs or key performance indicators. KPIs provide the targets that the procurement team needs to hit, and they provide status indicators that make it possible to gauge whether the team’s performance is on track. After the fact, KPIs are essential to evaluating the team’s performance and can provide valuable insights to ensure the organization does better next time.

In short, KPIs are one of the best ways to facilitate and motivate procurement process excellence.

Every procurement team has many potential KPIs they might be tracking. Total spend by supplier is a classic, a metric that helps an organization weed out infrequently used suppliers to consolidate spending for cost savings. Some procurement teams need to track maverick spend to get a handle on employees who authorize purchases outside of standard approval channels. Every company has its own list. However, there are always key KPIs that are at the top of the list for every procurement organization. That list changes every year. Here are the 10 procurement KPIs that will matter most for 2022.

 

Top Procurement KPIs of 2022

 

1. Cost Savings Tracking

This key procurement KPI is on the list every year. Organizations are constantly under pressure to save money, and for the procurement team, cost savings is always one of the top priorities. With a spotlight on cost savings, you don’t want to take any risk of falling short on the target. That makes the cost savings tracking KPI one of the most critical. 

 

2. Cost Avoidance Tracking

Cost avoidance can be an essential part of the overall cost savings equation. This is especially true for organizations in sectors like manufacturing, retail, and healthcare. The cost avoidance tracking KPI shows how much money is being saved through avoiding preventable spending such as having to trash expired materials or paying extra for warehouse space due to overstocked inventory.

 

3. Purchase Price Variance (PPV)

Purchase Price Variance (PPV) can seriously derail any budget. PPV occurs when you end up spending more on a product or material than you had planned to. Obviously, it’s better to pay less than expected. Companies can achieve this through methods like consolidation of suppliers for bulk purchases and improved procurement processes. Tracking this KPI shows how effective the procurement process is.

 

4. Purchase Request Cycle Time

Over the past year and a half, speed has become more critical than ever. With supply chain shortages and logistics challenges, procurement teams must move quickly to secure materials and transportation. Speed is going to be just as important in 2022. Procurement teams will have to watch their purchase request cycle time KPI carefully, keeping it as low as possible.

 

5. Supplier Diversity

In 2020, Harvard Business Review published an article highlighting the importance of supplier diversity in procurement. Consumers and customers are increasingly looking for socially conscious companies, rewarding organizations that pursue a supplier diversity strategy. In addition, the pandemic and related disruptions proved that supplier diversity is also important in terms of business continuity—if shipments from one supplier are tied up in a port, having a local option can save the day. The supplier diversity KPI has been an important one for procurement teams over the past two years. Expect it to be one of those that matter most in 2022 as well.

 

6. Supplier Performance

For a procurement organization to meet its goals, it needs to be able to count on its suppliers. One of the important procurement KPIs to monitor is supplier performance. Put simply, if a supplier is not delivering the goods and services they agreed upon in the time frame agreed upon, the procurement team needs to know it. That becomes a key consideration when deciding whether to award that supplier further contracts.

 

7. Supplier Risk

Supplier risk is another key KPI that needs to be tracked. With ongoing supply chain challenges, organizations will continue to be pressed to adapt quickly to shortages again in 2022. This can mean pivoting from regular suppliers to alternatives. However, before making such a decision, supplier risk needs to be assessed. There are many factors here, such as the supplier’s credit rating and their history of regulatory violations. Knowing of any potential risks before entering into a contract minimizes the risk of a bad outcome.

 

8. Supplier Geography

Part of risk management for procurement is knowing where your suppliers are located. Over the past several years, we’ve seen large regions affected by issues ranging from COVID-19 rates to wildfires and flooding. The supplier geography KPI helps to manage risk by providing a warning if your suppliers are concentrated in an area that has become unstable.

 

9. Procurement NPS

Net Promoter Score, or NPS, is a valuable metric for procurement. It identifies customer-centric companies based on a ratio of customers who would recommend it versus those who would not. A supplier with a high KPI for NPS provides value; one that falls behind is a red flag for the procurement team.

 

10. Take the Next Step to Real-Time KPI Tracking

The thing about KPI reports is that they are often backwards-looking and manually generated. That’s useful for analyzing what went right or wrong, but there’s a superior approach. Arkestro predictive procurement software provides KPI dashboards with real-time data and exception alerts. Instead of relying solely on historical data gathered manually by your team, with Arkestros KPI dashboards, procurement teams can make necessary adjustments as needed in real-time, ensuring the best possible outcome.

 

Book an Arkestro demo to see how real-time KPI dashboards will strengthen your procurement toolkit.

Related Articles

predictive procurement metrics

Sourcing Education

Top 5 Predictive Procurement Metrics

Arkestro Series A

Feature Announcements

Arkestro Lands $26 Million in Series A Funding

Spend Matters Value Leader

Feature Announcements

Arkestro Named Value Leader in Spring 2022 Spend Matters SolutionMap

Predictive Procurement in Health and Pharma

Sourcing Education

Why Predictive Procurement in Health and Pharma is the Future

How to solve supply chain disruptions

Sourcing Education

How to Solve Supply Chain Disruptions — It’s Not What You Think

predictive procurement in chemical manufacturing

Sourcing Education

How to Use Predictive Procurement in Chemical Manufacturing

Rob DeSantis

Founder

As a former co-founder of Ariba running sales, Rob has deep expertise in the procurement space, having helped propel Ariba from zero to $250 million in revenue in four years and IPO of the year in 1999 before its acquisition by SAP a decade later. In addition to co-founding Ariba, Rob was also an early angel investor and board member of LinkedIn, the world’s largest professional online network.

More recently, Rob served as an investor and advisor to a small portfolio of companies including Bloom Energy, AEye, Inc., HiQ Labs, Agiloft, USEND and more. He is also a co-founder of Dibbs Technology and TrueParity. Rob holds a BSME from the University of Rhode Island.

Marty Meyer

Chief Financial Officer

A trusted partner and advisor on the executive team, Marty has a unique background having been the CFO of nine venture backed technology companies. Marty has raised over $300M in venture funding and has closed six strategic M&A transactions with a combined value of over $1B. Marty has deep domain expertise in ecommerce, consumer internet, networking, data security, data privacy, media technology and enterprise software industries. Marty is especially experienced in the finance and operations activities of SaaS companies and is driven by data and metrics to help create outstanding customer experiences and drive efficient growth.

Neil Lustig

President and Chief Operating Officer

Neil is a seasoned executive with over 30 years of experience leading and building teams in Tech. Neil brings insights from a variety of market spaces and company sizes. Most recently Neil was the CEO of GAN Integrity, an innovative SaaS Compliance technology company serving enterprise customers in North America and Europe. Before that Neil was the CEO of Sailthru, a leader in ML driven personalized multi-channel marketing communications for media and e-commerce markets. Prior to that Neil was the CEO of Vendavo, the leader in B2B price optimization and management for large enterprises. Before Vendavo, Neil led the commercial team at Ariba, the market pioneer that defined and created the eProcurement space. Neil served as the GM of Ariba Europe and subsequently the GM of Ariba North America. Neil started his career at IBM where he spent sixteen years, initially as a software developer, and then twelve years in a variety of Sales and Marketing roles

 

Neil has a BS in Computer Science and Applied Mathematics from SUNY Albany. He is a native New Yorker, Brooklyn born, and still resides with his wife and three children in New York City.

Bonnie Adams

Director of People Operations

Bonnie is a People Operations and HR veteran, with over a decade of experience establishing successful people and culture functions for early to mid-stage tech startups going through high growth phases. She has a passion for supporting and creating inclusive and collaborative work environments and is well-versed in driving positive changes in her organizations as a trusted leader. Prior to joining Arkestro Bonnie worked as the People & Culture Coordinator for Ionic Security, helping them scale from 5 to over 200 employees in addition to a $120M funding round. Most recently she was the Head of People & Culture for blockchain innovator Storj Labs and was the Director of Human Resources at PrizePicks, the largest independently owned Daily Fantasy Sports platform in North America.

Arym Diamond

Chief Revenue Officer

Arym Diamond joined Arkestro in January 2022 bringing over 20 years of experience in the enterprise software and consultancy industry.  He is responsible for the worldwide go-to-market revenue strategy. Prior to Arkestro, Arym was Chief Revenue Officer at CalAmp focused on Telematics and Logistics. He also served as the area vice president of North American Sales within the Salesforce.com Enterprise Business unit for Einstein Analytics & AI, where analytics and machine learning were re-imagined for the front office.  Prior to that, he spent over 10 years at Oracle in various sales positions. Arym holds an MBA from the University of Southern California Marshall School of Business, and an undergraduate degree from California State University.

Thank you!

Thanks for all your details! We are working hard to prepare the perfect event. The final step for you is to book your hotel room and you can do that by clicking here.

Book a Demo

Find out how Sourcing Enablement with Arkestro means better quotes faster

Arkestro Whitepaper

How to Deliver the Competitive Advantage of a High-Performing Procurement Team