PROCUREMENT CHEAT-SHEET

KPIs KPIs
Procurement Process E-Procurement

System Uptimemeasures the percentage of time that the

e-procurement system is available. A high uptime percentage
Spend Under Management: Measures the percentage of spend that is
indicates good system reliability.
actively managed by procurement. A high percentage indicates good
contract management.
Order Cycle Time: measures the time it takes to complete an order
using the e-procurement system. A short cycle time indicates efficient
Cost Savings: measures the amount of money saved through
system management.
procurement activities. A high amount indicates good procurement
management.
User Adoption: measures the percentage of users who are using the
e-procurement system. A high adoption rate indicates good system
Purchase Order Cycle Time: measures the time it takes to create and
implementation.

Procurement
approve purchase orders. A short cycle time indicates efficient
procurement management.
Spend Visibility: measures the percentage of spend that is visible
through the e-procurement system. A high percentage indicates good
Purchase Order Accuracy: measures the accuracy of purchase orders.
system implementation.
A high accuracy rate indicates good procurement management.

Supplier Performance: measures how well suppliers are meeting their

contractual obligations, such as on-time delivery and quality. A high
supplier performance rate indicates good procurement management.
Inventory Management
Procurement is a more comprehensive approach that involves managing ongoing System Accuracy: measures the accuracy of data within the
e-procurement system. A high accuracy rate indicates good system
supplier relationships and ensuring that goods and services are delivered to a high implementation.
standard. It includes identifying the need for goods or services, developing specifica-
tions, identifying potential suppliers, negotiating contracts, managing supplier
relationships, and ensuring compliance with regulations and standards.
Logistics and Transportation

On-Time Delivery: measures the percentage of deliveries that arrive

on or before the promised delivery date. A high percentage indicates
Stock Turnover Ratio: measures the number of times inventory is sold Top 5 Procurement good logistics management.
and replaced in each period. A high ratio indicates efficient inventory
management. Formulas Confusing terms Delivery Lead Time: measures the time it takes for goods to be
delivered. A short lead time indicates efficient logistics management.
Average Days in Inventory: measures the average number of days
inventory is held before being sold. A low number indicates efficient Transportation Costs: measures the cost of transporting goods. A low
inventory management in synch with product sales. Strategic sourcing vs tactical cost indicates efficient logistics management.
Sourcing vs. procurement
sourcing
Contract vs. purchase order Shipment Accuracy: measures the accuracy of shipment records. A
Stock Accuracy: measures the accuracy of inventory records. A high Actual procurement Inventory turnover Direct vs. indirect procurement
Requestor vs. requester high accuracy rate indicates good logistics management.
percentage indicates accurate inventory and loss mitigation cost savings = rate formula: Preferred supplier vs. sole supplier
management. Inventory turnover PO vs Invoice
(Quantity Purchased RFQ vs. RFP vs. RFI
rate = Cost of Warehouse Capacity Utilization: measures the percentage of
x (Previous Invoiced
Carrying Cost of Inventory: measures the cost of storing inventory. A goods sold / warehouse capacity that is being used. A high utilization rate indicates
Price - Latest
low cost indicates efficient cost containment. Average inventory efficient logistics management.
Negotiated Price))
value

Career tips in
Obsolete Inventory: measures the percentage of inventory that is
obsolete. A low percentage indicates efficient inventory management.
Supplier Diversity
Reorder point
Procurement ROI
formula:
procurement
Purchase price index
formula: Reorder Procurement ROI =
formula: PPI =
Supplier Relationship point = (Average daily
usage x Lead time) +
(Current price / Base
(Total cost savings +
Revenue increase - Spend with Diverse Suppliers: Measures the percentage of spend
price) x 100 Develop strong communication and negotiation skills.
Safety stock Procurement costs) / that is allocated to diverse suppliers. Good supplier diversity spend is
Procurement costs x  Stay up to date on industry trends and best practices.
better tracked by economic impact in the company's community. More
Build relationships with suppliers and stakeholders. diverse suppliers mean more jobs, means more tax revenue for the
Pursue certifications, such as CSCP or CPSM. area, means more societal improvement. One large supplier may not
meet this need except to say the company spends x on supplier
Seek out mentorship and networking opportunities.
On-Time Delivery: measures the percentage of orders that are diversity.
delivered on or before the promised delivery date. A high percentage
indicates good supplier performance. Diverse Supplier Growth: measures the percentage increase in spend
with diverse suppliers over time. A high growth rate indicates good
Quality of Goods and Services: measures the number of defective supplier diversity management.
products or services. A low number indicates good supplier
performance. Procurement Diverse Supplier Retention: measures the percentage of diverse

Cost Savings: measures the amount of money saved through supplier Cycle suppliers who are retained over time. A high retention rate indicates
good supplier diversity management.
negotiations or alternative supplier selection. A high amount indicates
good supplier management. Supplier Development: measures the percentage of diverse suppliers
1. Need 2. Requirement 7. Order who receive development and support. A high percentage indicates
5. Evaluation 6. Purchase
Responsiveness: measures how quickly a supplier responds to 3. Requisition 4. Sourcing good supplier diversity management.
identification definition and selection Order fulfillment
requests. A fast response time indicates good supplier performance.
Diversity Spend Reporting: measures the accuracy and completeness
Innovation: Measures how much a supplier contributes to new of diversity spend reports. A high accuracy and completeness rate
product or process development. Innovation should be tracked with 11. Record 10. Contract 9. Invoice 8. Receipt and indicates good supplier diversity management.
processing and
strategic suppliers only; Effort is wasted on the other three types of keeping management payment inspection
suppliers.

Risk Management
Contract Management
Procurement organization
chart Supply Chain Risk Exposure: measures the potential risks associated
with the supply chain, such as supplier bankruptcy or natural
disasters. A low level of risk exposure indicates good risk
Chief Procurement Officer management.
Contract Compliance: measures how well suppliers adhere to contract CPO/VP Procurement
terms. A high percentage indicates good contract management.
Risk Mitigation Actions: measures the effectiveness of risk mitigation
strategies. A high effectiveness rate indicates good risk management.
Contract Value: Measures the total value of contracts managed. Best
practices means 75% of spend is under contract.
Dir Procurement Dir Procurement Dir Procurement Risk Monitoring: measures the frequency and effectiveness of risk
monitoring activities. A high frequency and effectiveness rate
Contract Cycle Time: measures the time it takes to negotiate and
indicates good risk management.
execute contracts. Contract cycle time is dependent upon the
complexity of the program to be contracted. One single number will
Risk Management Plan Implementation: measures the
not provide a good picture. Variance to established norms would be
Category Mgr Category Mgr Category Mgr Category Mgr Category Mgr Category Mgr implementation of risk management plans. A high implementation
better.
rate indicates good risk management.
Contract Renewal Rate: measures the percentage of contracts that
Crisis Management Effectiveness: measures the effectiveness of
are renewed. A high rate indicates good contract management.
crisis management plans. A high effectiveness rate indicates good risk
Procurement Procurement Procurement Procurement Procurement Procurement management.
Contract Risks: measures the potential risks associated with contracts, Analyst Analyst Analyst Analyst Analyst Analyst
such as legal or financial risks. A low level of risk indicates good
contract management.

Buyer(s) Buyer(s) Buyer(s) Buyer(s) Buyer(s) Buyer(s)

Procurement Best Types of Negotiation

Practices Contracts techniques
Conduct regular supplier assessments
Develop tracking metrics for supplier and obtain Non-monetary contracts Incentive contracts Preparation (Must Bargaining
supplier agreement (NDA, MOU, Trials) Indefinite delivery/indefinite Haves-Nice to Haves)
Best Alternative to a Negotiated
Leverage technology Fixed price contracts quantity (IDIQ) contracts Active listening Settlement (BATNA) (Walk Away Point)
Maintain strong relationships with suppliers Cost-reimbursable contracts Master agreements Win-win negotiation Non-verbal communication
Develop a comprehensive procurement strategy Time and materials contracts Anchoring
Ensure compliance with regulations and policies

Procurement Procurement Procurement

Methods Checklist 01 Challenges

Procurement
Two-Stage Open
Planning
Tendering Tendering Supplier Budget
Checklist Changing market
06 Procure- 02 performance constraints conditions
Supplier issues
ment Docu-
Request for Selection
Restricted mentation
Quotations Checklist
Tendering Checklist
(RFQ)

Design and Framework Request for

Risk Contract
Build Agreements Proposals
Management Management
(RFP) Stakeholder
Checklist Checklist Talent management
alignment
Electronic 05 03
Negotiated Procurement
Procurement Reverse
Compliance
Auctions
Checklist

04

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