Procurement Objectives and KPI’s

OBJECTIVE 1: Support Operational Requirements

• Understand business requirements
• Buy products and services
– At the right price
– From the right source
– At the right specification that meets users’ needs
– In the right quantity
– For delivery at the right time
– To the right customer

OBJECTIVE 2: Manage the Procurement Process and the Supply Base Efficiently and Effectively

To manage the procurement process and supply base efficiently and effectively, procurement must follow the following key steps:
• Identify opportunities where the procurement team adds true value:

– Evaluation and selection of suppliers based on sound ethical norms and standards
a) All purchases must go through the approved procurement processes
b) Engineering and other functional inputs are part of this process
c) Contractual agreements will be done with the involvement of Procurement
d) Increased use of sourcing teams

– Review of specifications or scope of work
a) Review the requirements for the material or service being provided
b) If possible, suggest alternative standardized materials that can save the organization money
c) Periodic review of categories can allow greater leveraging of requirements

– Purchasing will act as the primary contact with the supplier
a) Manage the supply base, identification and mitigation of risks
b) Identify new potential suppliers and develop relationships
c) Improvement and development of non-competitive existing suppliers
d) Determine the method of awarding contracts
e) Support local business (local procurement) and consider social responsibilities wherever possible without compromising objective 1

• Manage internal operations
– Management of procurement staff
– Development and maintenance of policies and processes
– Introducing and leveraging appropriate technology and systems
– Defining procurement strategy and structure
– Provide procurement leadership to the organization
– Provide professional training and growth opportunities for employees

OBJECTIVE 3: Develop strong relationships with other groups within the organization

– Continued liaison with internal customers to achieve greater understanding of requirements and integration
– Timely, pro-active communication with internal customers
– Sharing of information i.e. market trends, price, quality, delivery, forecast and demand
– Highlighting achievements

OBJECTIVE 4: Support organizational Goals and Objective

– Develop purchasing strategies that support organizational strategies:
a) Monitor supply markets and trends i.e. material price increases, shortages, changes in supply and
interpret the impact these trends will have on the organization
b) Identify the critical materials and services required to support the company strategies in KPA’s particularly during new project development
c) Support the organization’s need for a diverse and globally competitive supply base
d) Develop supply options and contingency plans that support company plans
e) Quality reporting as required and continued improved communication
f) Develop KPI’s for Procurement personnel which will support the objectives and organizational goals

Procurement Key Performance Indicators:

1) Inventory
– Monitor spend on Stock, Direct Charge and Service spend, monthly
– Major Reagents and Consumables based on 80/20 Pareto principle – Stock on Hand сover 2-3 month on average; Purchase prices against Budget; Monitoring of the Market Trends
– Percentage of Stock Inventory covered by BPA (small value; high turnover items)
– 95% service level for normal stock and 100% service level for Critical, Insurance, major consumables and reagents
2) Supplier performance
– Price Structure, Discount, Payment terms based on 80/20 Pareto principle
– Lead time monitoring
– Deficiency report
3) Buyer Performance
– Saving (monthly) by assigned category
– RFQ/PR processing; actual vs. target (2 weeks for regular; 1-3 work days for Urgent)
– Spend/Number of PO/Number of Items by Buyer
4) International/Local Spend Analysis
– Target to increase the local spend
– Newspaper advertisement