Date post: | 19-Dec-2015 |
Category: |
Documents |
Upload: | tauseefkhan |
View: | 10 times |
Download: | 1 times |
Procurement: Use of MetricsLecture #209 February, 2014
1
2
What are the outcome of procurements?
Result Oriented or Process Oriented
3
Primary Outcome CategoriesCostQualitySupplier SatisfactionImplementation of new initiativesSpecial interest issues
4
What should be the objectives of Procurement outcome?
5
Outcome Objectives
Corporate Objective
s
Purchasing
Objectives
Commodity group
A
Commodity group
B
Commodity group
C
6
Cost MetricsExpenditures have increasedPrices paidTotal ownership costsVaries across firms; but clearly
oriented towards cost reductions/savings
7
How would you measure cost reductions/savings?
8
Cost Metrics
Cost Metrics Description
Reduced Cost (via Prices)
Costs relative to previous year
Costs relative to other divisions or units
Costs relative to other regions
Change in cost Vs. Change in market index
Change in firm costs for an individual type of service relative to change in a market cost index for that service
Return on Investment Dollar savings divided by procurement spending
9
Calculating Cost Changes Relative to Indices
Market Cost Index Change
Firm Cost Change
Metric “Savings”
Service A %5+ +3% +2%
Service B -5% -8% +3%
10
Implementation ConsiderationsBased on comparison of costs
◦Across time◦Divisions◦Regions
For periodic or one-time purchases, data are often insufficient
11
Quality MetricsGoods purchases
◦%age of defective productsDifficult concept to measure for
servicesCustomer Satisfaction
12
How would you measure quality of services?
13
Quality Services Metrics
Quality Metrics Description
Customer satisfaction ratings
Responses from customer satisfaction survey regarding
•Overall satisfaction
•Satisfaction with specific dimensions of performance
Service reliability Frequency of service interruptions
Continuity of services
14
Implementation ConsiderationsData needed are generally not captured
by standard internal data systemsDesigning & implementing effective
customer satisfaction surveys is a complex and challenging task
Quality of data depends on:◦Sample Size◦Quality of sample◦Question wording◦Response format◦Timing of survey
15
Supplier Satisfaction MetricsEnsure that they buying firm
continues to be able to conduct business with the best suppliers
Forward-looking metric
16
How would you measure supplier satisfaction?
17
Supplier Satisfaction Metrics
Supplier Satisfaction Metrics
Description
Supplier satisfaction ratings
Responses from supplier satisfaction survey regarding
•Overall satisfaction
•Satisfaction with specific dimensions of interactions
•Satisfaction with different parts of the buying organization
Complaints Supplier-initiated concerns
18
Implementation ConsiderationsData collected via surveys
◦In-house surveys◦Third-party surveys ensuring
confidentialitySurveys can be costlyTime-consuming for both buyer
and supplierTo save time & cost, conduct
supplier surveys only annually or biennially
19
New Initiatives MetricsInitiatives to improve outcomes of
purchased products/services◦Creating a supply base that is the right
size and composition – Supply base rationalization
Process metric◦Track progress with specific parts of an
implementation planOutcome metric
◦Measure initiative results against pre-specified goals
20
How would you measure the impact of new initiatives?
21
Initiative Metrics
Example Initiative
Potential Process Metric
Potential Outcome Metric
Supplier base rationalization
Reduction in non-strategic suppliers
Savings
Reductions in sole-source reductions
Responsiveness
Customer Satisfaction
Supplier Development
Number of people involved
Savings
Number of projects Improved performance
Personnel Development
Number of training hours per year, per employee
Mastery of desired skills
22
Implementation ConsiderationsDeveloping initiatives,
implementing plans, goals and their associated metrics is a challenging, time – consuming process.
23
Special Interest MetricsNot included in other categories
discussed aboveExternal or Internal concerns
◦%age spending directed to small or minority – owned business
◦Frequency/Severity of workplace safety and security incidents
24
How would you measure the health of special interests?
25
Special Interest Metrics
Special Interest Metrics
Description
Support of small or minority-owned businesses
Dollar spent with these firms
Percentage of expenditures with these firms
Safety & Security Frequency of safety incidents
Frequency of security incidents
26
WHAT ELSE?
27
Internal Management MetricsMonitor & improve management
of purchasing organizationsComplement the high-level
effectiveness metrics discussed above
28
Internal Customer SatisfactionFirm’s business units that utilize
the procurement’s services to buy goods or services they need
Metrics evaluate how well the purchasing organization is meeting the needs of internal customers
29
How would you measure status of internal management?
30
Internal Management Metrics
Internal Management Metrics
Description
Internal Customer Satisfaction
Dollars spent outside the corporate strategies (maverick buying)
Satisfaction rating based on internal customer surveys
Personnel trainings & retention
Process: Number of training hours per employee per year
Outcome: Mastery of desired skills
Retention of high-quality employees
Ethics violations Number of violations per year
31
Implementation ConsiderationsSpecial data collections effortsTracking maverick buying – occur
outside the purchasing organization
32
Personnel Training & RetentionPurchasing organization’s current and
future depends on the quality and expertise of its personnel
Conducting analyses to design and then implement optimal purchasing strategies requires sophisticated skills
Track both process and outcome metrics w.r.t. training
Track the retention rate of high-quality personnel
33
Ethics ViolationsFirms do track ethics violationsParticularly with respect to
interactions with suppliersSensitive endeavorReports of violations can come
from employees, suppliers and may be offered anonymously
34
35
thanK yoU
36