This document discusses key performance indicators (KPIs) for measuring supply chain performance. It outlines several areas that should be measured, including cost savings, cash generation, operational excellence, and maturity of the organization. Specific KPIs are provided for measuring value added, stakeholders such as customers and suppliers, and processes like procurement cycle time. The document emphasizes that defining and measuring KPIs allows an organization to identify areas for improvement and track progress over time.

1. September 2021
Supply Chain KPI´s
Paco Rodriguez de Molina
Supply Chain Executive
PMP © CCM © CPM ©
es.linkedin.com/in/pacorodriguezdemolina/
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2. Contents
1. Basics
2. Scorecards
3. Why to measure
4. What to measure
5. Key Performance Indicators KPI’s
6. Value Added
7. Operational Excellence
8. Maturity Organization
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3. 1. Basics
• Supply Chain, Procurement, Purchasing…, you name it:
Materials and Services that cost money
• General expenses cost money
• Every saving goes to Bottom Line
• Every improved terms is Free Cash Flow
• Simple: Quality, Service, Cost (TCO), Innovation
• No suppliers, no business
• Focus Core: Outsource Non Core
• Sales, HR, Payroll and Taxes: “Horses of a different color”
• Life is too short, have fun and smile
Professional dedicated team spends company´s money aligned with
company´s Mission, Vision and Values
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4. 4
2. Scorecards
• Strategies to achieve long term goals
• Scorecards: Set of Key Performance Indicators
• Objective: status, correct, improve

5. 5
• If not defined can not be measured
• If not measured can not be improved
• If not improved, always gets worse
William Thomson, Lord Kelvin 1824 – 1907
0º K = -273,15º C (absolute zero)
Define, Measure, Improve
3. Why to measure

6. 6
4. What to measure
KPI’s: Simple, Results based
• Align behaviors
• Determine what is working right
• Identify what to improve
• Report to Enterprise
• Set SMART objectives
• Benchmark: Compare KPI’s

7. 7
5. Key Performance Indicators KPI’s
• Value added (Savings and Free Cash Flow)
• Stakeholders:
 Supply Base performance
 Personnel performance
 Customer feedback
• Operational Excellence of the Processes

8. 8
Core Area KPI Calculated KPI Remarks Formula Units Where
How
Often
1.1.1. Cost Savings Recurrent spend
One off spend
(P2 - P1)*V2 Annual
Budget - PO price
€
€
KPI report
KPI report
Monthly
Monthly
1.1.2. Cost Avoidance Price Increase delay
Opportunistic Buy
Annual Impact
(Budget - PO price)*V
€
€
KPI report
KPI report
Monthly
Monthly
1.1.3. Cash Generation Term improvements
Inventory Sale
@ Oficial Interest rate € KPI report Monthly
1.1.4. Transactional Savings Simplify Backoffice
Proccesses
Avoid / reduce / simplify
workflows, redundancies
€ KPI report Monthly
1.2 Procurement ROI Savings / Procurement Budget Salaries, Gen Exp., Travel
From ERP system
Savings / Procurement
Budget
% Anual
Report
Annually
1.3 Spend per employee
Transactions per employee
Total Spend / No. of
Employees No. Transactions /
No. of Employees
From ERP system Total Spend / Number of
Employees
€ /
Employee
Anual
Report
Annually
1.4 Savings per employee Savings / No. of Employees Salaries, Gen Exp., Travel
From ERP system
Savings / Number of
Employees
€ /
Employee
Anual
Report
Annually
1.5 Managed Spend
% Spend that Procurement
manages
% of Spend competitively
sourced
From ERP system Total Spend/ Sourced
Spend
% Anual
Report
Annually
1.6 Commodity Strategy Maturity Assesment Assesment n. a. Report Anual
Report
Annually
Core Area KPI Calculated KPI Remarks Formula Units Where
How
Often
2.1 Customers Perception Internal Customer
Satisfaction Survey
Group Focus Free text
input Short, simple
questions
n.a. Report Anual
Report
Biannually
(6m)
2.2 Employees Performance Track skills and competencies Training Plan n.a. Anual
Report
Annually
2.3.1. Supplier Quality
Right product / Service
ppm if volume big enough
Quality Incidents tracking
Deffects per Million
n.a.
ppm
No.
SQ Report
SQ Report
Monthly
Monthly
2.3.2. On Time Delivery
Right timing
OTD to promised date
OTD to reschedule date
No. Shipments
ontime / not on time
%
%
SQ Report
SQ Report
Monthly
Monthly
2.3.3. Supplier Rating Score
Stakeholder Feedback
Supplier Survey n.a. Rating SQ Report Biannually
(6m)
Core Area KPI Calculated KPI Remarks Formula Units Where
How
Often
3. Operational
Excellence Process /
Policy / Controls
3.1 Procurement Cycle Time
Measure Effectiveness of
Procurement processes
3.1 Procurement Cycle Time
From ERP system
Average time from PR to
PO
n.a. Days Monthly
Report
Monthly
1.Value Added by
Procurement Function
1.1 Savings
Based on TCO
(Total cost of ownership)
Verified by Finance
Globally agreed and Applied
2. Stakeholders
Customers
Employees
Suppliers
2.3 Suppliers Performance
Sample

9. 9
6. Value added by Supply Chain:
Hard Savings go straight to G/L
• Direct Savings:
Recurrent expenses
One off purchase
Cost Avoidances
• Free Cash Flow (FCF):
Terms: Less Working Capital and WACC
Soft Savings
• Transactional : bureaucracy
• Frame agreements, Bundle PO´s, Reduce Suppliers

10. 10
7. Operational Excellence:
Procurement Cycle Time
Measure of Procurement processes
Process time and first time thru
Data fromrom ERP systems:
Procurement Cycle Time =
PR approval time + PO issuing time + PO approval time
PR: Purchase Requisition
PO: Purchase Order

11. 11
(-)
Value
Capture
(+)
(-) Maturity of the Organization (+)
Reck and Long, ISM, 1988
1.- Passive
Everybody purchases
Ad–hoc Chaotic
Savings
3% - 5%
2.- Purchasing
Processes and procedures
Suppliers Evaluation
Cost Improvements
8% -12%
3.- Sourcing
Expense Analysis, SRM,
Category Management
Productivity
4.- Resources
Supplier integration in Value
Generation
Top Line Impact
Innovation
5.- Value Chain
Overlapping Value Chains
Extended Enterprise
8. Maturity of Supply Chain Organization
Maturity
Sophistication
Professionalism
Multifunctional
Contribution to
results

12. 12
Less mature organizations:
Bigger potential savings…
Avoid:
• Chaotic, “everybody purchases”
• High number of suppliers
• Buyers do other things
• Purchases through distributors
• Low influence in Supplier selection
How mature is your Supply Chain Organization?