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There are several different Key Performance Indicators available to measure the performance of a sourcing organization. Traditionally negotiated cost savings are at the top. This could however be a pitfall since the saving might never reach the bottom line of the profit and loss statement. Implementing the negotiated saving is as important as negotiating it and should be an important measurement for all purchasing organizations.
Here are some examples of different KPIs:
1. Negotiated cost reduction savings
2. Implemented cost reduction savings
3. Percentage of total spend under management (contract)
4. Cost avoidance
5. Purchasing ROI = savings/operating costs
6. % of suppliers = 80% of the spend
7. Supplier performance (price, delivery, quality, service, technology, etc)
8. Innovation from the supplier base
9. Contract compliance
10. % of purchasing order
11. % of wild invoices
12. Number of invoices
13. % competitive bidding (%of spend done under competition)
14. Subjective feedback score from internal customers
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