Articles / Performance
Procurement KPIs that matter: what to measure and how
A short list of procurement metrics that show whether your process works: cycle time, savings, compliance, supplier performance and more, with simple formulas.
If you cannot measure procurement, you cannot improve it. But measuring everything is as useless as measuring nothing. This guide lists the key performance indicators (KPIs) that give a useful picture for most organisations, with simple definitions you can calculate from your own records.
Principles first
- Pick a few. Six to ten KPIs, reviewed regularly, beat forty that nobody reads.
- Define each one in writing. Same formula, same source, every time.
- Compare against your own history and your own targets before comparing against other organisations. Definitions differ widely.
- Measure outcomes, not only activity. A fast process that buys the wrong thing is not a good one.
Speed and efficiency
Requisition-to-order cycle time. Days from an approved requisition to a purchase order. Shows how long the business waits.
Sourcing cycle time. Days from publishing a notice to award. Compare by type: RFQ, tender, RFP.
Number of bids per notice. More bids usually means more competition. A notice that attracts only one bid may be unclear, too narrow, or poorly advertised.
Share of purchases through the system. Orders raised in the system divided by total orders. Low numbers mean the process is being bypassed.
Cost
Price versus baseline. Compare the awarded price with the previous price or a published benchmark. This is the most honest form of "savings".
Savings. Be careful here. Define the baseline in advance and count only savings that actually reach the budget. Savings claims that are not backed by finance are often disputed.
Spend under management. Spend that goes through a managed process, divided by total spend. Shows how much of your money is covered by competitive buying and contracts. Read Spend analytics: build the data foundation for how to get reliable spend data.
Compliance and control
Contract coverage. Share of spend with an active contract. Spend without a contract carries higher risk.
Maverick (off-policy) spend. Purchases made outside agreed suppliers or procedures. Track it as a share of total spend.
Competition rate. Share of awards that followed a competitive process, as opposed to single-source awards. Single-source awards should be justified and recorded.
Approval compliance. Share of orders approved by the right person before the order was placed, not after.
Supplier performance
On-time delivery. Deliveries on or before the promised date, divided by all deliveries.
Quality acceptance rate. Deliveries accepted at inspection divided by all deliveries.
Invoice accuracy. Share of invoices that pass the match without correction. See Three-way match.
Supplier scorecard rating. A combined score from delivery, quality, responsiveness and compliance, updated after each order. Use it to decide who to invite next time.
Supplier risk indicators. The number of key suppliers with expired certificates, financial warning signs or compliance problems. See Supplier risk and ESG.
Payment
Invoice-to-payment time. Days from invoice receipt to payment, compared with the agreed terms.
Share of invoices paid on time. Late payment damages supplier relationships and can carry penalties.
Exception rate. Share of invoices that need manual handling. A falling rate shows the process is improving.
A starter set
If you are beginning, track these seven:
| KPI | Why |
|---|---|
| Requisition-to-order cycle time | Speed for the business |
| Bids per notice | Strength of competition |
| Price versus baseline | Value for money |
| Spend under management | Coverage of your process |
| On-time delivery | Supplier reliability |
| Invoice exceptions | Process quality |
| Invoice-to-payment time | Cash discipline and supplier trust |
How to use the numbers
- Set a baseline from the last three to six months.
- Agree targets that are realistic.
- Review monthly with the people who can act on the results.
- Investigate outliers rather than only reporting averages.
- Share results with suppliers and internal customers where it helps them.
The workspace on eProcurement.si records the events behind many of these numbers, such as notice dates, bids, orders, deliveries, invoices and ratings. For where to begin, see A 90-day roadmap for adopting procurement technology, and for the basics, What is eProcurement?.