10 KPIs to measure the performance of your purchasing department

In recent years, the purchasing area has undergone significant transformations. The buyer is no longer just an “order taker” and has evolved into a strategic professional. As a result of these changes, monitoring Purchasing KPIs, or key performance indicators, has become essential in the purchasing routine.

KPIs, from the acronym in English Key Performance Indicators, are indicators that help measure the performance of any sector in relation to company goals. In purchasing, the KPIs allow process management to be done based on facts and data, rather than assumptions. With the constant advancement of technologies, KPIs can be monitored in real time, allowing buyers to be more agile when making decisions.

Os KPIs purchasing decisions must be chosen carefully to ensure that they are aligned with the company's objectives. It is important to remember that KPIs They should be specific, measurable, achievable, relevant, and time-bound. Tracking these metrics allows the buyer to anticipate issues and make adjustments as needed. In addition, the use of metrics increases transparency, leading to a data-driven culture.

Below, we have selected the main KPIs to monitor, evaluate and improve the performance of your purchasing area:

1. Saving

Savings, an indicator of savings, is considered one of the main purchasing KPIs. In short, it is the cost avoided by closing a purchase for a lower value than what was initially budgeted.

Saving helps to evaluate the team's performance in negotiations with suppliers, with the aim of reducing acquisition costs and increasing the sector's profitability.

Here, on the ME blog, we have a post with a step-by-step guide on how to calculate savings on purchases. Access it here.

2. TCO (Total Cost of Acquisition)

TCO (Total Cost of Acquisition) compares the actual total cost of acquisition with the initial budget, considering purchase price, transportation, freight, storage and taxes.

TCO goes beyond just the initial purchase price and incorporates a range of other costs that can occur over time.

Various types of costs can be considered in this KPI, such as operational, maintenance, training, disposal and product life cycle.

3. Level of deliveries

The delivery level KPI assesses the supplier's performance and is related to the delivery of the product, for example, if there were delays or if the items did not meet quality standards.

One way to measure the level of deliveries is to evaluate the return rate in relation to the total number of products purchased, showing the percentage of defective goods.

Regarding deadlines, the company can evaluate the latest deliveries made by the supplier to find out whether they are being met within the agreed period or whether delays are constant.

4. Lead time

O lead time is a metric that measures the time needed to complete the entire purchasing process, from research and selection of suppliers to delivery of the product.

This metric is important for evaluating the duration of each stage of the purchasing process. This allows you to propose adjustments to optimize deadlines.

Furthermore, lead time allows you to evaluate the punctuality of suppliers and their history as partners of the company.

5. Price evolution

The price evolution KPI is an essential metric in purchasing management. This indicator measures price fluctuations over a given period during the purchasing process.

Monitoring price trends is also essential for planning future acquisitions, as it recognizes seasonal periods and the best offers already negotiated.

With the help of this KPI, the company can also anticipate the acquisition of a product and keep it in stock, which can result in greater savings and cost control.

6. Productivity

There are several ways to assess the productivity of your purchasing team. One way is to analyze the number of requests and transactions made in a given period.

Additionally, it is important to note the hours dedicated to certain processes per week and the number of tasks performed in a given period.

Productivity KPIs are a valuable tool for companies to identify what adjustments need to be made to reduce the operational burden on buyers. For example, implementing a digital solution for purchasing management can be an excellent option.

7. Customer satisfaction

To establish the best purchasing strategies, it is essential that professionals understand the customer experience, since inputs are the basis of the final product.

One of the most effective ways to find out whether your product or service is pleasing consumers is by periodically conducting satisfaction surveys.

The customer satisfaction indicator is a metric that involves the entire organization and should be considered one of the most important KPIs when planning purchases.

8. Cost of supplies

The supply cost indicator compares the volume of purchases of materials and inputs with the sales volume, with the aim of discovering the percentage of costs for the sector.

By monitoring this KPI, the purchasing area identifies opportunities for cost reduction, optimizes inventory management and understands whether it is obtaining a good return on its investments.

Furthermore, the cost of supplies provides data for strategic decision-making regarding suppliers, negotiations and contracts, to achieve the best cost-benefit.

9. Purchasing and compliance policies

The purchasing policies KPI and compliance helps ensure that purchasing practices comply with regulations and standards, reducing legal and financial risks.

There are different indicators that can be evaluated when it comes to purchasing and compliance policies. Each company must select the most important aspects to monitor.

For example, percentage of purchasing transactions that comply with internal and external policies, participation in compliance-related training and risk assessments.

10. Sustainable purchasing

The purchasing area is linked to the sustainability of companies. Therefore, it is increasingly important to evaluate the proportion of purchases made from sustainable sources.

In purchasing, this involves considering environmental, social and ethical factors when selecting suppliers, production inputs, logistics, transportation, among others.

This indicator reflects the company's commitment to aligning its purchasing practices with the ESG, contributing to the construction of a more sustainable and ethical supply chain.

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