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is measured and corrective actions are taken. For the majority of survey respondents (69.5%), the performance of procurement is measured against the cost-savings target, followed by measurement against an agreed list of KPIs (62.9%).
Figure 8: HOW IS PERFORMANCE OF THE PROCUREMENT AND SUPPLY CHAIN FUNCTION MEASURED IN YOUR ORGANISATION?
Achievement of the cost-saving target Assessment of performance based on agreed Key Performance Indicators (KPIs) There is no formal assessment of the performance of the procurement function Formal assessment by internal stakeholders
69.5%
62.9%
20%
17.1%
Formal assessment by suppliers
6.7%
Don’t know
1%
0
10%
20%
30%
40%
50%
60%
70%
One in five (20%) do not formally measure the performance of the procurement function, which suggests that these organisations are missing opportunities to align its value to corporate strategy and objectives and / or take corrective actions to improve the way their supply chains are managed. Interestingly, only 6.7% of respondents said that they seek feedback from their suppliers regarding their performance as a customer. Without this information, organisations will inevitably miss opportunities to improve processes and efficiency, reduce waste (and therefore cost), manage risks more effectively, and so on. In addition, the typical feedback that we receive when we conduct “Voice of the Supplier” surveys on behalf of our clients is that the suppliers usually have great ideas and innovations that they want to propose to their customers, but they often don’t get heard. Suppliers can be a great source of improvement ideas, but ineffective communication can hinder the realisation of these opportunities. We recommend that, if they haven’t already done so, organisations should start looking for valuable information and ideas from their trusted partners. We would also recommend that measurable objectives should be included in people’s personal development plans (PDPs) to drive the right behaviours and make the assessment of the procurement team more relevant to their work. Challenges A sign that the area of performance measurement is one that requires attention is the fact that the difficulty in measuring benefits delivered by procurement represents the second biggest challenge that organisations face. Unless the benefits that procurement delivers are measured, it is not possible to lift the role of procurement in the organisation and obtain sufficient attention and internal commitment (a challenge faced by about one in four organisations). The top challenge, identified by 39.6% of survey respondents, is the low (or diminishing) budget of the procurement department, while 32.7% mentioned their difficulty in adopting rigorous procurement processes.
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