The process of Procurement essentially revolves around 'ensuring that the inputs moving into the organizational processes' that conform to certain quality standards in a timely manner. Pulling together these aspects creates enough 'dilemmatic' situations for the management group to get caught. However, one can come out from this network of 'cross-roads' by opting for a 'KPI (Key Performance Indicators) based approach. The various aspects that can be of use are- Financial Perspective, Process Perspective, Internal Operations and Performance Perspective. The metrics for Financial Perspective are- 'Procurement Expense: Sales'; 'Percentage increase in revenue on 'per customer basis''; 'average discount size availed' and 'rise in cost savings level'.Process perspective can be evaluated using parameters such as- Number of Alliances with Suppliers, Logistics' system Grading, Inventory Control Increase and Manufacturing Cycle Improvement.Internal Operations can be had with indicators like 'average procurement time overruns', 'Procurement Policy Compliance', 'Degree of merging with other systems' and 'Technological Stand'.Performance Perspective can be calculated with metrics like- 'Wastage Drop', 'Timelines Deviation', ''Below Benchmark Quality' Decline Ratio' and 'Stock-out instances Dilution'.
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Procurement is the act of making the raw materials available at the right place, in right quantity and at right time. Such 'input acquisition' demands evaluation of a number of factors, which can affect the important aspects like 'quality', 'quantity', 'best possible price' and 'timeliness'. The exact procurement process involves steps like 'gathering of information', 'contacting the supplier', 'reviewing the background', 'negotiating the deal', 'consumption' and 'renewal'.
The decision revolves around choosing a suitable vendor to be placed order with. The competency of supplier in terms of delivering the raw materials in light of mentioned traits has to be obtained. The choice can often get complicated when the question is of 'searching a long-term partner' for having the supplies.
One can accurately carry out this act of screening by using Balanced Scorecard (BSC). To use it beneficially, metrics are to be selected. These sets of indicators should be capable enough to mirror the progress in an unbiased and transparent manner.
Such a 'calculative' mode of analyzing the choices removes the chances of output failing to meet the client's specification at least in terms of 'delays' and 'quality' issues.
Organizations have drawn substantial returns from usage of such a management instrument in the subject of procuring inputs and the buying process.
This is the actual scorecard with Procurement Indicators and performance indicators. The performance indicators include: financial perspective, procurement expenses: sales, average discount size availed, increase in cost savings level, percentage increase in revenues on per customer basis, internal operations perspective, average procurement time overruns, technological stand, procurement policy compliance, degree of merging with other systems, process perspective, number of alliances with suppliers, logistics system grading, manufacturing cycle improvement, inventory control increase, performance perspective, wastage drop, timeliness deviation, stock-out instances dilution, below benchmark quality decline ratio.
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