The 5 rules to deliver valuable Purchasing KPIs

The 5 rules to deliver valuable Purchasing KPIs

03/20/2017 Bertrand Gavroy - Pre-sales Consultant at SynerTrade

As we know, all e-Procurement projects involve introducing one or more dashboards. Which begs the question as to what they are really for: are they really useful? And if so, who benefits?

A ‘useful’ dashboard is one with rules that are indisputable, indicators that are not reserved solely for management, and especially, one that is not just informative (like a reporting tool) but gives warnings and helps make the right decisions.

Bertrand Gavroy, pre-sales consultant at SynerTrade, gives you 5 fundamental rules for a high quality dashboard. These rules are not listed in order of importance and should all be respected as much as possible.


Rule N°1: Always provide a comparative indicator

An indicator is less valuable if it is not accompanied by a comparative value. A well-known example would be comparing total actual spend to total provisional spend. This approach should be applied to all indicators in the same way. For example the number of active suppliers can be compared to the same indicator for the previous year. If the number of suppliers tends to go down compared to previous years you will then be able to act accordingly in response.

Respecting this rule can transform a dashboard that is purely informative (I see that I have X active suppliers) into a decisional dashboard (I have more suppliers than last year, so I should set up processes to reduce the panel size).


Rule N°2: The dashboard should be realistic

It is important to assess an indicator’s return on investment. Choose your indicators judiciously to be able to track them. For example let’s look at justifying procurement performance via external factors (rising indices, company growth, etc.). If we can envisage tracking this when it is simply a case of processing raw materials (industry), it becomes extremely complicated and approximate when it is a matter of calculating combined indices (that take into account for example multiple materials, inflation and fuel costs).

It is therefore necessary to be pragmatic: question whether the indicator can be calculated. If it can, check that it brings you more than the effort required to calculate it, and optimise the data collection process and data quality.


Rule N°3: Remember that the indicator must lead to a decision

If the user is not able to make the decision after navigating the decisional tool, or if they have to export, reformat or add data to the indicator, it means that the dashboard is not performing.

We tend to make the common mistake of sticking to what we already know. Very often we copy a table, graphic or indicator that we are accustomed to seeing without asking ourselves the question: is it complete enough?

Another mistake many users make is asking for a dashboard that is overly exhaustive, as if to be sure of having all possible data. With too much data the dashboard becomes ineffective, losing you time.


Rule N° 4: Visualise the data

We talk a lot about data quality, and it is very important. But we shouldn’t forget about the visual side of a dashboard. Not for cosmetic reasons, but because certain ways of representing data can lead to errors or gaps in interpretation.

Let's take a simple supplier scoreboard, for example. If we convert the table into a scatter graph we get an integral view of suppliers and how they are dispersed at a glance. This makes it easy to select suppliers from their score (above or below so many) or even introduce new information (for instance the size of the dots could represent the suppliers’ volume of spend and the y-axis could be the number of evaluators).

That is how to transform a report and make it effective just by playing with visuals.


Rule N°5: The dashboard is not just for management!

You shouldn’t confuse reporting (often synonymous with constraints for workers because they have to convey data to management) with decisional analyses. Everyone should have access to the dashboard in its function as a tool for analysis. All actors, at all levels, need to make decisions. Very often an indicator for the CPO can also be useful – in a more limited way – to an operational buyer.

Bertrand Gavroy - Pre-sales Consultant at SynerTrade

Bertrand Gavroy - Pre-sales Consultant at SynerTrade

Bertrand Gavroy - Pre-sales Consultant at SynerTrade