6 Steps to Implement a Procurement Performance Management System

Jun 27, 2022 | Procurement tools and solutions

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Jun 27, 20223 min read

Implementing procurement performance management involves defining KPIs and metrics, choosing procurement performance management software, collecting data, analyzing performance, and communicating results. Ensure adequate training for procurement team members and provide ongoing support to maintain proficiency in using the system for continuous improvement.

Procurement performance management is the practice of systematically monitoring, measuring, and managing performance within an organization's procurement operations. It allows a business to better understand the effectiveness and efficiency of their procurement process and identify areas of improvement. By implementing a procurement performance management system, businesses can ensure that their procurement processes are running smoothly and meeting goals. This article will provide an overview of how businesses can design and implement a procurement performance management system. 

Understanding the Value of Procurement Performance Monitoring 

Before implementing a procurement performance management system, it is important to understand the value it can bring to your business. A properly designed procurement performance management system can help you gain insights into the operational performance of your procurement team and departments. This information can then be used to make data-driven decisions about how to improve processes and increase efficiency. Additionally, you can use the system to identify areas that need improvement and develop strategies to address them. By understanding the value of procurement performance monitoring, businesses can set realistic goals and objectives for their system. 

Implementation of procurement performance management system 

1. Define Key Performance Indicators (KPIs) and Metrics: 

Determine what metrics are important to track and measure procurement performance. Examples of KPIs for procurement performance include: 

  • Supplier on-time delivery rate: Measure the percentage of orders delivered by the supplier within the agreed-upon timeframe. FactWise empowers procurement organization with dynamic, holistic supplier performance analytics across key supplier metrics like price, on-time delivery, quality etc., so that buyers have a high degree of decision intelligence. 
  • Cost savings: Measure the amount of money saved through negotiations with suppliers or using alternative sourcing strategies. FactWise enables organizations to unlock savings potential and reduce costs by up to 25%. 
  • Purchase order processing time: Measure the time it takes to process a purchase order from creation to receipt of goods or services. FactWise automates complex workflows to improve efficiency by up to 20%. POs and invoices can be automated and created in <20 seconds following RfX creation, and teams can leverage automated quadruple matching to ensure accurate, on-time payments accounting for rejections during customizable goods receival and quality check workflows. 

2. Choose a Procurement Performance Management Software: 

Select a software platform that supports the KPIs and metrics you have defined and integrates with your existing systems. Examples of procurement performance management software include SAP AribaFactWise, Oracle Procurement Cloud, and Coupa.  

4. Establish Data Collection Processes: 

Develop processes to collect data that will be used to calculate your KPIs and metrics. FactWise is committed to maintaining the highest degree of data integrity and provides users with intelligent, relevant, real-time analytics at every step of the procurement journey. Examples of data to be collected include: 

  • Supplier delivery data: Track delivery times for each supplier and order. 
  • Cost data: Collect data on cost savings, supplier costs, and procurement costs. 
  • Purchase order data: Track purchase order processing times, from creation to receipt of goods or services.  

5. Monitor and Analyze Performance: 

Continuously monitor the KPIs and metrics to track procurement performance and identify areas for improvement. Analyze the data to identify trends and patterns and make data-driven decisions to optimize procurement processes. 

6. Communicate Performance: 

Communicate procurement performance results to stakeholders, including senior management, procurement teams, and suppliers. Use performance results to drive continuous improvement in procurement process 

7. Training Your Team to Utilize the System 

Once you have designed and implemented your procurement performance management system, it is important to ensure that all members of the procurement team are adequately trained on how to use it. Training should include an overview of the system's features and functions, as well as how to use it to measure performance and make improvements. Additionally, it is important to provide ongoing training and support to ensure that users are comfortable utilizing the system on an ongoing basis. 

It is also important to ensure that the training is tailored to the individual needs of each team member. For example, some team members may need more in-depth training on certain features, while others may need more basic instruction. Additionally, it is important to provide regular refresher courses to ensure that team members are up to date on the latest features and functions of the system. 

In conclusion, implementing a procurement performance management system involves defining key performance indicators (KPIs) and metrics, choosing a procurement performance management software, establishing data collection processes, monitoring and analyzing performance, and communicating performance. 

At FactWise, our singular focus is to create truly distinctive procurement software solutions that delight users and provide sustainable positive impact to the organizations we serve. 

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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