analyzing the best key performance indicators (kpi) in ... brudan.pdf · # employees in the...

Aurel Brudan

CEO, The KPI Institute

198 Harbour Esplanade, Suite 606. Melbourne Docklands, VIC

3008, Australia

T: +61 3 9028 2223 | M: +61 4 2456 8088

E: [email protected] | W: www.kpiinstitute.org

ANALYZING THE BEST KEY PERFORMANCE

INDICATORS (KPI) IN BENCHMARKING

PROCUREMENT MODELS

18 February 2015 | Melbourne

http://www.kpiinstitute.org/





© The KPI Institute 2015 2

Online resources Contact details

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Australia

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+ 61 3 9028 2223

Web:

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http://www.balancedscorecardreview.com

http://www.integratingperformance.com

http://www.performancemagazine.org/

http://elearning.smartkpis.com/






http://www.smartkpis.com/







http://www.integratingperformance.com/












http://www.balancedscorecardreview.com/




















© The KPI Institute 2015 www.kpiinstitute.org

Nr. Match Statement Nr. Tool

90% 1 Target

# Air temperature in the refrigerated storage 2 Goal

# Employees in the procurement department 3 Initiative

$ Average minimum cost of raising an order 4 Key Risk Indicator

Complete 50% of the Purchasing Office implementation by 31/12/15 5 Key Performance Indicator

Enable our staff to deliver compassionate care, by bringing together our people

and suppliers to optimize value and outcomes from our external resources 6

Metric

Hire Purchasing Advisory Service Manager 7 Milestone

Improve awareness and compliance to procurement policies 8 Mission Statement

Integrity 9 Objective

Plan and coordinate procurement and logistics activities supporting

organisational excellence 10

Process

Procurement department transformation 11 Program

Provide an efficient procurement practice 12 Task

Purchasing Advisory Service establishment 13 Value Driver

Requisition and purchase order processing 14 Value Statement

Timeliness 15 Vision Statement

© The KPI Institute 2015 www.kpiinstitute.org

Nr. Match Statement

1 Target 90%

4 Key Risk Indicator # Air temperature in the refrigerated storage

6 Metric # Employees in the procurement department

5 Key Performance Indicator $ Average minimum cost of raising an order

7 Milestone Complete 50% of the Purchasing Office implementation by 31/12/15

15 Vision Statement

Enable our staff to deliver compassionate care, by bringing together our people and

suppliers to optimize value and outcomes from our external resources

12 Task Hire Purchasing Advisory Service Manager

9 Objective Improve awareness and compliance to procurement policies

14 Value Statement Integrity

8 Mission Statement

Plan and coordinate procurement and logistics activities supporting organisational

excellence

11 Program Procurement department transformation

2 Goal Provide an efficient procurement practice

3 Initiative Purchasing Advisory Service establishment

10 Process Requisition and purchase order processing

13 Value Driver Timeliness

© The KPI Institute 2015

KPI Definition:

The measurable expression

for the achievement of

a desired level of results

in an area relevant

to the evaluated entity’s activity.

www.kpiinstitute.org The World of

KPIs

1. % Perfect purchase order rate

2. Quality

3. Category management implementation finalised on time

4. Supplier performance

5. # Procurement employees

6. % Procurement projects delivered on time, budget and scope

7. # Purchase order cycle time

8. % Purchase spend under management

9. $ Procurement department budget

10. Achieve cost savings

11. # Procurement categories

12. % Procurement department employee engagement

13. Timeliness

14. Achieve negotiated cost reduction savings of $1,000,000 this

financial year under the Head of Procurement’s guidance

15. 3 line items on average per purchase order.

The KPI Institute (2015)


1. METRICS – KPIS- KRIS - ANALYTICS

7

Decision Making

Performance

Assessment

KPIs

Risk

Assessment

KRIs

Measurement

Metrics

Analytics


2. TERMINOLOGY STANDARDS

Objectives

start with

Verb

KPIs

start with

$ = Value of

# = Number of

% = Percentage of

Initiatives

start with

Noun

8

Increase customer satisfaction

$ Revenue per client CRM software implementation

# Complaints received

% Customer satisfaction


3. UNDERSTAND SMART OBJECTIVES

Objective

KPI

Target

Time

Owner

9

2

The Wrld of KPIs

• Increase customers base

• % Market share

• By financial year end

• 20%

• Sales Director

Option 1: Increase customers base to reach 20% market share by financial year end under Sales

Director coordination.

Option 2:


4. EXTERNAL RESEARCH

10

Most popular Procurement KPIs

No. List

1 % Perfect purchase order rate

2 $ Negotiated cost reduction savings

3 % Supplier on-time delivery

4 % Purchase spend from sales revenue

5 # Safety stock

6 % Cost reduction savings in procurement

7 % Relationship established with certified suppliers

8 # Purchase order cycle time

9 # Purchase orders

10 % Key suppliers accounting for 80% of spending

11 % Invoice accuracy

12 % Purchase spend under management

13 $ Variable cost of placing order with supplier

14 % Cost avoidance savings in procurement

No. List

15 $ Purchase spend per purchasing employee

16 % Contract compliance

17 % Procurement return on investment

18 # Requisition, purchase order, or invoice transaction

volume

19 % Purchase spend controlled by purchasing

20 % Pending purchase order invoices

21 $ Activity-based cost of acquiring materials and services

22 % Transactions handled by the purchasing department

23 % Purchase spend offshore

24 % Purchase operating expense from purchase spend

25 % Payable invoices not matched to a purchase order


5. STRUCTURE PERFORMANCE ARCHITECTURE

11


6. PROCUREMENT DEPARTMENT SCORECARD

12


National Health System, UK

Source: NHS (2013)

13

7. PROCUREMENT DEPARTMENT DASHBOARD

# Incidents where patients were

affected by lack of product/service

availability

% Non pay expenditure captured

electronic

% Cost to procure to non pay

expenditure

% Procurement staff with formal

procurement qualification


8. SUPPLIER SCORECARD

14

Compliance with client requirements

Quality and severity of defects

The objectives of the engagement were achieved

Timely delivery schedule

Ability to meet interim milestones

Ability to complete work within agreed upon budget

Ability to control costs / Cost improvements over time

Value for money / Competitiveness of pricing

Provides effective and timely communication

Service and product delivery problems were quickly resolved

Documentation requirements / Understanding of business requirements

Innovative in helping delivering solutions

Understanding of the client’s business processes and practices

Understanding of the industry and market and how it applies to VG

Technical skills and experience

Personnel quality (i.e. independence and thoroughness)

Overall project management

Reasonable negotiations and contract, ease of doing business

Effective, accurate and efficient billing system

Flexible, accessible and responsive to inquiries

Overall satisfaction with vendor deliverables and services

Professional and cooperative behaviour with the client personnel

Work ethic, flexibility and responsiveness

c) 24 Indicators b) 8 Categories a) 3 Perspectives

Outcomes

Schedule

Budget

Communication

Value add/Innovation

Delivery capability

Responsiveness / Account

Management

Client satisfaction

Outcome performance

Delivery performance

Service excellence


9. CONSIDER DATA VISUALIZATION PRINCIPLES

15

Victorian Government Procurement, Australia

Source: Department of Treasury and Finance, Victorian Government Procurement (2013)

% Delivery on time

% Delivery in full

% Cost to industry

benchmark

% Risks managed


10. APPROACH BENCHMARKING WITH CARE

16

A. Performance Benchmarking

B. Organisational Benchmarking

- Process, experience – site visits


IN WORDS

17

Vision:

Change the world - More happy people, acting ethically in

beautiful organizations and a sustainable environment.

Values:

• Added value: offering more through innovation and value for

money

• Best know-how: through own research and integration of

multidisciplinary global expertise

• Common sense: respect, modesty and friendship

• Data and facts: expertise and opinions based on specific

data

• Efficiency: key principle for prioritisation and getting things

done

Mission:

Establish performance integration as a discipline through

research, publications and educational programs.

IN NUMBERS 4: offices in Australia, Europe, Middle East, SE Asia

5: continents on which we delivered training

10: years spent on researching KPI best practice

11: global partner organisations

20: countries where we delivered educational programs

50: staff members

75: countries with research clients

117: research reports published to date

2004: year of establishment

2,500: professionals trained

3,400: training hours delivered

20,475: KPI examples published on smartKPIs.com

28,000: companies registered on smartKPIs.com

73,000: members in our online communities

654,949: professionals reached through smartKPIs.com


RESEARCH

18


PUBLICATIONS

19

Top 25 KPIs Series Toolkits


EDUCATION

20

For more details, consult our 2015 scheduled courses agenda: http://store.kpiinstitute.org/scheduled-courses

http://store.kpiinstitute.org/scheduled-courses





CERTIFIED SUPPLIER PERFORMANCE PROFESSIONAL

• Supplier selection

• Supplier panels

• Service Level Agreements Development

• Contract management

• Supplier performance reporting governance

• Supplier scorecards and dashboards

• Supplier relationship management

Highlights of the agenda:

21

© The KPI Institute

2014

• Department of Treasury and Finance, Victorian Government Procurement (2013), Supplier scorecard. Available at:

http://www.procurement.vic.gov.au/CA2575BA0001417C/WebObj/KPIandSupplierPerformanceScorecardTool(Appendix6)/$File/KPI%20and%20

Supplier%20Performance%20Scorecard%20Tool%20(Appendix%206).XLS

• National Contract Management Association (2004), Creating and using supplier scorecards. Available at:

http://www.ncmahq.org/files/articles/fdde5_cm_sept04_p22.pdf

• National Health System (2013), NHS Procurement Dashboard: Overview. Available at:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/255874/nhs_procurement_dashboard_overview.pdf

• SmartKPIs.com (2015), KPI examples. Available at: http://www.smartkpis.com/kpi/functional-areas/supply-chain-procurement-

distribution/procurement-purchasing/

• Spider Strategies (2015), QuickScore. Available at: http://www.integerperform.com/kpi-dashboard-balanced-scorecard-software/

REFERENCES

22

http://www.procurement.vic.gov.au/CA2575BA0001417C/WebObj/KPIandSupplierPerformanceScorecardTool(Appendix6)/$File/KPI and Supplier Performance Scorecard Tool (Appendix 6).XLS



http://www.ncmahq.org/files/articles/fdde5_cm_sept04_p22.pdf



http://www.smartkpis.com/kpi/functional-areas/supply-chain-procurement-distribution/procurement-purchasing/











http://www.integerperform.com/kpi-dashboard-balanced-scorecard-software/









Web:


http://www.smartkpis.com


http://www.balancedscorecardreview.com

http://www.integratingperformance.com


http://elearning.smartkpis.com

Why choose The KPI Institute?

Global expertise in:

• Strategy Management

• Performance Management

• KPIs and analytics

• Business Intelligence

Rigorous research programs

Extensive collections of publications

Comprehensive educational programs

Headquarters

Melbourne Office

Life.lab Building

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