What are the most important KPIs to measure Supply Management efficiency?

The Key Performance Indicator (KPI) of supply management or procurement over a period of time, say one year, may be designed as below. This is a guide only and may be updated for specific requirements of particular organization

 Criterion: Efficiency of the competitive procurement process

KPI

1.     Percentage of compliant bids and proposals without any amendment

2.     Average number of suppliers per bid involved in the competition.

3.     Suppliers’ written feedback on process.

 

Criterion: Cost reduction / containment

KPI

1.     Total amount of cost reductions based on actual procurement cost and allocated budget as per requisition.

2.     Reduction/increase of average stockholding in warehouse as compared to previous years.

 Criterion: Supplier management

KPI

1.     Number of “new” suppliers prequalified and involved in competition as compared % of the total suppliers.

2.     Percentage of late deliveries.

3.     Level of quality as per feedback from customers.

Criterion: Efficiency of internal systems and processes

KPI

1.     Average value of low value transactions

2.     Percentage of low value transactions based on total number of Purchase Order issued

3.     Number of long term /framework agreements established.

4.     Internal customer satisfaction based on feedback.

 Criterion: Skill Enhancement Training

KPI

 1.     Total Number of staff days for training.

When measuring the effectiveness and cost of your supply chain you will need to set up and monitor KPIs which give visibility of cross functional activity as well as those which apply to individual supply chain components. Broadly speaking though, the following areas are those where KPIs will be necessary: Order capture Inventory management Purchasing and supplier management Production/manufacturing Warehousing Transportation Cross functional KPIs are likely to provide snapshots of the following end to end performance factors: Perfect order (the degree of accuracy to which customers’ requirements are being met) Inventory levels Stock losses and/or damages Gross profit Cost of goods sold Total logistics cost Cross functional KPIs should be constructed in such a way that each function can see its contribution towards the overall supply chain performance.

Key performance indicators or KPIs vary from company to company, commonly use Revenue, Profit margin, EPS, Return of investment, Residual income etc