Key Metrics to Track the Success of Purchase Order Processes

Jan 1, 2022 | Leadership diaries

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Jan 1, 20223 min read

Streamlining a purchase order (PO) process can improve a company's efficiency, accuracy, and customer relations. By automating tasks and using efficient systems, companies can reduce manual labor costs and improve supply chain visibility. Key performance indicators (KPIs) and regular monitoring can help measure the effectiveness of the PO process and drive continuous improvements. Leveraging technology and analytics can optimize the PO process for maximum efficiency and success.

In any company, its purchase order (PO) process is an integral part of its operations. Without a streamlined, efficient system for issuing purchase orders, the company cannot effectively manage the inventory and procure the goods and services necessary to run its business. For this reason, it is important for businesses to ensure that their PO processes are well-managed and efficient so that their operations remain productive and cost-effective. 

Identifying Key Metrics for Evaluating PO Processes 

One of the first steps in assessing a PO process is to identify key metrics that can be used to measure its success. These metrics can include the time it takes to issue a PO, the number of PO documents that are approved within a given period, and the accuracy of the purchase orders. Other metrics to consider include the number of POs that were cancelled or rejected, and the percentage of POs that were placed outside of the normal purchase process. By looking at these metrics, companies can gain an accurate picture of how effective their PO process is. 

It is also important to consider the cost associated with the PO process. This includes the cost of the materials and services purchased, as well as the cost of the labor involved in issuing and approving the PO. Companies should also consider the cost of any additional paperwork or processes that are required to complete the PO process. By taking into account all of these costs, companies can get a better understanding of the overall cost of their PO process. 

Understanding the Benefits of Streamlining PO Processes 

Streamlining a PO process can have a range of benefits for a company. By automating certain tasks and using efficient systems for issuing POs, companies can reduce errors, improve accuracy and reduce delays in processing orders. Automating the PO process can also reduce manual labor costs, as well as free up staff time so they can focus on other areas of the business. In addition, streamlining a PO process can help to improve customer relations, as well as ensure a more secure flow of information related to purchase orders. 

Streamlining a PO process can also help to improve the visibility of the supply chain, allowing companies to better track orders and deliveries. This can help to reduce the risk of stockouts and ensure that customers receive their orders in a timely manner. Furthermore, streamlining a PO process can help to reduce the risk of fraud and ensure that all orders are legitimate.  

Establishing KPIs for Evaluating Purchase Order Processes 

Once key metrics have been identified, companies should then establish key performance indicators (KPIs) that measure the success of their PO process. These KPIs can include things such as the number of POs issued within a given period, the average processing time per PO, and the total cost of goods received. By monitoring these KPIs on a regular basis, companies can measure the effectiveness of their PO process, identify areas for improvement and make necessary changes to ensure that their PO process is as efficient as possible. 

In addition to the KPIs mentioned above, companies should also consider tracking the accuracy of their PO data. This includes the accuracy of the item descriptions, pricing, and delivery dates. By monitoring the accuracy of their PO data, companies can ensure that their orders are being processed correctly and that their suppliers are delivering the correct items on time. This can help to reduce the risk of costly mistakes and improve the overall efficiency of the PO process. 

On FactWise, an end-to-end comprehensive procurement platform for product manufacturers across industries, purchase order creation is simplified and can be automated to ensure accuracy and efficiency. With our holistic supplier analytics and RfX management analytics, teams can negotiate lower costs, lead times and better payment terms to maximize their cash flow. Teams can also save multiple templates for differing Terms and Conditions (geographies, supplier terms, goods categories, etc.) to simplify PO creation. FactWise increases savings by up to 25% and efficiency by up to 20%.  

PO creation is automated on FactWise, and all item information including item description and specifications, quantities, payment terms, delivery timelines, incoterms, and other user-added custom fields are auto-added from the RfX event to all Purchase Orders created ensuring a high degree of data integrity and tremendous accuracy. FactWise POs also include all company information for buyers and sellers, and can be downloaded from the system with a single click.  

Driving Improvements in PO Processes Through Continuous Monitoring 

When evaluating a PO process, it is important for companies to take a continuous improvement approach. This means that they should regularly monitor their key performance indicators and make timely adjustments to their PO process where necessary. This approach also means that companies should be open to suggestions and feedback from staff, as well as involve them in the process of evaluating and improving their PO process. 

In addition, companies should also consider the use of technology to automate and streamline their PO process. Automation can help to reduce manual errors, improve accuracy, and increase efficiency. Companies should also consider the use of analytics to gain insights into their PO process and identify areas for improvement. By taking a continuous improvement approach and leveraging technology and analytics, companies can ensure that their PO process is optimized for maximum efficiency and effectiveness. 

In conclusion, measuring the success of purchase order processes is an essential step for companies looking to continuously improve their procurement processes and achieve their business goals. With clear metrics and a focus on continuous improvement, companies can ensure that their procurement processes are effective and delivering the desired outcomes. 

FactWise is committed to transforming the procurement journey for buyers and suppliers globally. 

About the Author

Stawan is the founder and CEO of FactWise. Before founding FactWise, Stawan was the NA TMT-Procurement Leader at McKinsey. Passionate about procurement, Stawan has 15 years’ experience in enabling clients of all sizes to achieve business impact via procurement.


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