Performance metrics that provide detailed data are essential for the purchasing function to assess the effectiveness and efficiency of the company’s purchasing effort. These metrics help identify areas that need improvement. Purchasing performance measurement is based on three dimensions.
Supplier Performance Measurement
The process of measuring supplier performance involves ensuring that the buyer and supplier are meeting their agreed upon objectives, expectations, and contracts. Key areas of focus in this measurement include supplier quality and reliability.
Purchasing Department Performance
It is important to regularly assess the performance of the purchasing department to ensure that their activities are optimized towards achieving value-added goals. Key areas that require evaluation include reducing costs, managing expenses, developing supplier relationships, and assessing the effectiveness of internal procurement systems, processes, and personnel.
Continuous Improvement
In both areas of performance, there is a dedication to improving purchasing management continuously. Companies that thrive view continuous improvement as a lifestyle for suppliers, customers, and employees alike. To gain a competitive edge, it is essential to incorporate purchasing performance measurement programs and continuous improvement goals. Procurement improvement categories may cover global sourcing, technology and online resources, and supplier relationship management (SRM).