purchasing measures that drive improvement

Purchasing Measures to Drive Improvement

Discussion of the Benefits of Incorporating Lead Measures for Purchasing to Drive Improvement

Bill Kohnen October 2013Updated June 2014

Bill Kohnen October 2013

SummaryPurchasing has lots of data to measure and while

‘big data” tools are useful, what really drives performance and improvement generally is on the surface and not deep in data.

Cost remains on the top of the measurement list but CSR and more direct link to revenue and innovation are becoming more important to Purchasing

Strategic and Tactical measures are different even if in the same organization

Purchasing performance in 2014 will be improved by adding leading measures to your

Scorecard


Thoughts Have Basis From The 4 Disciplines of Execution

1.Focus on Important Goals

2.Act on Lead Measures

3.Create Compelling Scorecards

4.Create a Cadence for Accountability


Setting Goals Make the Finish Line clear

From (X) to (Y) by When

Examples:Will obtain 30% total cost savings by replacing manual travel, purchase and expense systems with integrated Software as a Service (SaaS) Indirect Spend Solution by September 2014

Average Supplier performance will increase from 85 to 95 by July 2014

Average processing time for MRO items purchase orders reduced from 3 day to 4 hours by Dec 2014


Know What to Do to Achieve Goals

Lead measures◦You can influence◦Predictive of Outcome◦Cadence for review is short term

(weekly)

Lag measures ◦Show only what has happened◦Cadence for review is longer


Leading Measures to Reduce Total Cost Examples

Month

Supplier Visits

Key Supplier QBR

SaaS Indirect Spend Strategy Defined and Sourced

Cost Savings Projects Engaged

Negotiations planned or in process

% of Key Supply Categories with updated Strategy

Purchasing Staff Training

Jan 3

Feb 2

Mar 5


Lagging Measures for Total CostTraditional

Jan Feb Mar0

20406080

100120

All Cost Savings

Q1 Q2 Q3 Q450

60

70

80

90

100Supplier Performance

Jan Feb March April0

20

40

60

80

100

T&E and MRO Purchasing Savings From SaaS Indirect Spend Solution


Leading Measures of Purchasing Tactical Performance

Month

SystemAvailability

Approval Cycle Time

SaaS Indirect Spend

Implementation

Invoice Issues

Purchasing Processing Time

New Catalog or Inventory items

Purchasing Staff Training Completed

June

Jul

Aug


Lagging Measures for Tactical Performance

Jan Feb Mar0

50

100

150

% Delivery to Need Date

Q1 Q2 Q3 Q450

60

70

80

90

100Lot Acceptance Rate

Jan Feb March0

2

4

6

Expedite Cost

Q1

Q2

Q3

Q4

0 20 40 60 80 100 120 140 160

Staff


Cadence for AccountabilitySimply means report regularly

and consistentlyConduct interactive reviews of

information with stakeholdersMake adjustments and

commitments based on reviews and alignment to most important organizational goals


SummaryIt is up to you to define goals and measures

that apply best to your organizations needs.

Once there is Buy In then the path to the achieving the Important goal is clear

Identifying and maintaining Lead Measures is effective tool to get the resources needed to achieve goals◦ For example if supplier visits are clearly needed to

improve then if budget cuts prevent travel then this shows up quickly and can be discussed immediately relative to ultimate goal


SummaryOn going training is included as a

core element in almost any effort to achieve big goals

Included throughout is reference to further use of an integrated Software as a Service Indirect Spend Solution to make a big impact. This topic is worth further investigation.

purchasing measures that drive improvement

Business