A top reason for failure of Purchasing Managers, especially joining an organization from outside, is misunderstanding actual expectations and setting wrong metrics. What metrics you use needs to be based on what are the perceptions and expectations of purchasing in your organization. Updated from a presentation at PASIA Supply Chain Conference Manila PI 2011. Includes how to determine measures and operational benchmark methodology.

1. Purchasing Metrics: One Size
Does Not Fit All
Practical Thoughts For New and Current Purchasing Managers
Bill Kohnen
Revised and Updated Thoughts From Presentation at PASIA Supply
Chain Conference Manila PI 2011

2. Perception of Purchasing
• What metrics you use needs to be based on what are the
perceptions and expectations of purchasing in your organization
• Where do perception and expectations lie?
Tactical Strategic Value Creation
• Metrics should Align with real expectation
• A top reason for failure of Purchasing Managers, especially joining
an organization from outside, is misunderstanding actual
expectations and setting wrong metrics.
– Most often Purchasing Managers are fired for thinking that an
organization wants a Strategic or Value Adding organization but in
reality they are not ready for it.

3. Business Conditions
Conditions Metrics That Take Priority
Business Down Cost Cutting
Low Cost Sourcing
Substitute Material
Stable Maintain Cost
Maintain Quality
Stable and Predictable Supply
Business Increase Material Availability
New Sources for capacity, technology
Innovation
Supplier Relationship Management

4. What Are The Measures
Purchasing is a Data Rich Environment with many
“Generically Good” Measures Available
• Cost Savings
• Process efficiency
• Objective Supplier Performance: Quality, Delivery, Cost
• Subjective Supplier Performance: Customer Service,
Innovation, Responsiveness
• Risk
• Corporate Social Responsibility
• Contribution to broader financial goals: ROI, Margin,
COGS

5. Top Performing Purchasing Organizations Tend
to Have a Balanced Set of Metrics
If Your Organization Does Not Want This Do Not Put In Place What Consultants
and Purchasing Experts Say Are Best Practice

6. Specific Metrics Based on Perception

7. No Matter What the Perception is of Purchasing
Benchmarking with Other Organizations is Valuable
Source of Benchmark Info Comment
Internet Quick Access, Free, Info might be
reliable
Professional Organization Industry
Reporting
Reasonable Access once identified,
Moderate cost, reliable
Seminars As available, Moderate cost, Reliable
depending on Seminar, good for
contacts
Internally Developed Studies Need internal skills, Higher cost to
develop, Reliable, Very specific for needs
Academic Studies Reasonably quick, Low to moderate cost,
Reliable, Relevance may be dated
Professional Consultants Generally not quick, Generally Highest
cost, Reliable but with Consultants bias

8. Sample Tactical Operational Performance
Benchmark Based on CAPs Research
Category Your Organization
Purchasing Employees As % Of All 2%
Cost Savings 10%
Purchasing Expense as % Spend 1%
Approved Req to PO Cycle time 3.5
Excel Spreadsheet Detailed Version Available from conference our e-mail me kohnenwilliam@yahoo.com

9. Closing Thoughts
• One Size Does Not Fit All For Measures
• The right measures for an organization depend on perceptions,
expectations and market conditions
• Using the wrong measures is a top cause for failure of Purchasing
executives
• Operational benchmarks are effective for comparison to other
organizations
• The correct measures set path to better performance aligned with
organizational goals.