How to Measure the Value of Procurement
By Jana Spivey | June 9, 2021
Oftentimes, procurement has a narrow lens when it comes to determining and measuring metrics. Savings is a primary calculation used to determine success. On the other hand, savings can be a continual pursuit as pricing changes, new vendors and products emerge, and better offers arise.
Another way to measure procurement efforts is by defining the value delivered. Value is often intrinsic to purchasing, as goods and services are purchased to meet a need. Measuring the needs that have been met can help define the success of a procurement team.
How to measure the value of procurement
The following are seven ways the value of procurement can be defined and measured:
From a software purchase to vendor outsourcing, the efficiency gained through procurement can be demonstrated in many ways. Increased productivity, reduced pain points, and achievement of business objectives can all be measured, tracked, and documented.
A key to moving an organization forward, innovation can be measured by tracking the results of new tools aimed at fostering, sharing, or building out new ideas. The procurement of a new business tool, such as InVision, can result in a plethora of shared projects and boards containing innovative ideas. Obtain a login and track the number of ideas shared to measure the innovation yield from procurement’s selection of a powerful tool.
When procurement is involved with a corporate event, employee benefit, or incentive, it can have a direct result in employee satisfaction and retention. Work with HR to track employee satisfaction survey results and retention rates as a metric for procurement’s success.
Effective and thorough contract negotiations can mitigate risk in an organization. Calculating the hypothetical cost of a business loss related to risk will vary depending on the organization, but it can be a powerful metric to show the importance of the risk that was mitigated via procurement’s dedicated efforts.
Arguably one of the most important efforts in any organization, purchasing for IT can ensure that a business continues operations despite cyber attacks that attempt to infiltrate an organization. Working with IT to measure total thwarted phishing attempts, for example, can demonstrate an immediate value gleaned from procurement for security.
Measuring the value of social procurement results in a feel-good metric worth sharing with the entire organization. Procurement from a social enterprise can result in supporting organizations combating poverty, hunger, unemployment, homelessness, and more.
These organizations regularly report on the difference they’re making, such as the number of jobs they created. These numbers can be shared within your organization to demonstrate the value of procurement’s social impact.
Need to bring more value to the table? Contact Una to learn how a group purchasing organization can help facilitate sourcing efficiency and profitability.