Procurement plays a significant role in most businesses and partnering with a reliable procurement provider demands trust and comprehension of your objectives for the partnership. While other procurement teams may prioritize different success measures, we advise monitoring 3 crucial KPIs (Key Performance Indicators).
3 KPIs to track with your procurement partner
Throughout the course of your relationship with a procurement partner – whether they offer a service, platform, or combination – we recommend measuring success with the following KPIs:
Return on investment, or ROI, is the most obvious procurement KPI to track. You’ll want to know how much you’ve saved on your SaaS stack and how that number relates to what you’ve invested in your procurement partner’s service.
If your outsourced procurement team can create a positive ROI, that’s a quick win and indicates you’ve chosen a good partner who is worth the cost. This can also be the most compelling if you need to defend your budget.
2) Cost avoidance
In addition to cost savings (ROI), it’s also helpful to track any cost avoidance that outsourcing your procurement department can help you achieve. For example:
- Spotting the tech overlaps – Features or tools that are costing you double, e.g. if multiple overlapping project management tools are being used across the company
- Identifying possible downgrades – Tools where you aren’t using all the features or licenses and could downgrade to avoid cost
- Avoiding penalties – For example, helping you spot areas where you consistently receive overage penalties
- Uncovering “Shadow IT” – Identifying tools being used outside the proper procurement processes to mitigate risk and avoid potential regulatory fines
3) Time saved
Finally, the amount of time saved as a result of your procurement partner should be measured.
It’s well known that the procurement process takes a lot of time, not to mention the mental bandwidth needed to negotiate purchases with multiple vendors. On average, procurement professionals spend about 4 hours per issue or topic result. This amounts to around 1.5 months per year. The amount of time your team saves is a great procurement KPI to measure.
Time or hours saved is also a good metric to measure the objective of increasing visibility. Most companies use a static Excel file for procurement that can easily become outdated within a week, but a good procurement platform will give you a full overview of your tech stack: an accurate number of tools, amount of spend, etc.
Measure the number of hours you save after switching to a procurement partner (like Sastrify) on getting an accurate number of tools and spend. It’s not as obvious of a metric as ROI, but it’s highly relevant over time.
The results of measuring success with a procurement partner
There are a variety of reasons to track procurement KPIs. For starters, it helps managers build a case for buy-in to tools or services. Plus, you can also measure how your procurement partner is helping you reach internal OKRs.
If your partner is successful in the KPIs we’ve discussed, then hopefully they’ll be seen as business critical. And if you’re still looking for a procurement partner that’s focused on long-term relationships with measurable KPIs and guaranteed ROI, speak to one of our SaaS pricing experts to see how Sastrify works today.