Procurement KPIs For Maximum Cost Savings NOTE: If the audio - - PowerPoint PPT Presentation

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Procurement KPIs For Maximum Cost Savings NOTE: If the audio - - PowerPoint PPT Presentation

Oct 30, 2023 20 likes •354 views

Procurement KPIs For Maximum Cost Savings NOTE: If the audio quality from your computer is poor, you can dial in to 1-513- 241-0892 & use conference code 951074#. Write these #s down in case you need them later! Procurement KPIs

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Procurement KPI’s For Maximum Cost Savings

NOTE: If the audio quality from your computer is poor, you can dial in to 1-513- 241-0892 & use conference code 951074#. Write these #’s down in case you need them later!

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Procurement KPI’s For Maximum Cost Savings

Charles Dominick, SPSM, SPSM2 President & Founder, Next Level Purchasing Association

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Think Outside The Box

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Think Outside The Box

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KPI’s Defined

Key Performance Indicators (KPI’s): Statistics that measure how well a business is performing in the areas that are the most critical to its overall success

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SLIDE 7

How do you react to the “more cost savings” edict?

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SLIDE 8

“The Sales Funnel”

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SLIDE 9

Sales KPI’s

  • # of Leads
  • Conversion Rate
  • Average # Transactions/Customer
  • Average Transaction Value
  • Pre-tax Profit Margin
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Sales KPI’s

  • # of Leads: 2,000,000
  • Conversion Rate: 20%
  • Average # Transactions/Customer: 2.5
  • Average Transaction Value: $1,000
  • Pre-tax Profit Margin: 15%
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Sales KPI’s

  • # of Leads: 2,000,000
  • Conversion Rate: 20%

# Customers: 400,000

  • Average # Transactions/Customer: 2.5

# Transactions: 1,000,000

  • Average Transaction Value: $1,000

Sales: $1,000,000,000

  • Pre-tax Profit Margin: 15%

Pre-tax Profit: $150,000,000

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SLIDE 12

Procurement KPI’s

  • Total Spend
  • % Spend Under Management
  • % of Spend Under Management

Addressed

  • % Savings For Addressed Spend
  • % Compliance
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Procurement KPI’s

  • Total Spend: $1,000,000,000
  • % Spend Under Management: 60%
  • % of Spend Under Management

Addressed: 50%

  • % Savings For Addressed Spend: 2%
  • % Compliance: 75%
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Procurement KPI’s

  • Total Spend: $1,000,000,000
  • % Spend Under Management: 60%

Spend Under Management: $600,000,000

  • % of Spend Under Management

Addressed: 50% Addressed Spend: $300,000,000

  • % Savings For Addressed Spend: 2%

Negotiated Savings: $6,000,000

  • % Compliance: 75%

Realized Savings: $4,500,000

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SLIDE 15
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How Sales KPI’s Are Used

KPI Last Year Improved By 10% # Leads 2,000,000 Conversion Rate 20% # Customers 400,000 Average # Transactions/Customer 2.5 # Transactions 1,000,000 Average Transaction Value $1,000 Sales $1,000,000,000 Pre-tax Profit Margin 15% Pre-tax Profit $150,000,000

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How Sales KPI’s Are Used

KPI Last Year Improved By 10% # Leads 2,000,000 2,200,000 Conversion Rate 20% 22% # Customers 400,000 Average # Transactions/Customer 2.5 2.75 # Transactions 1,000,000 Average Transaction Value $1,000 $1,100 Sales $1,000,000,000 Pre-tax Profit Margin 15% 16.5% Pre-tax Profit $150,000,000

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How Sales KPI’s Are Used

KPI Last Year Improved By 10% # Leads 2,000,000 2,200,000 Conversion Rate 20% 22% # Customers 400,000 484,000 Average # Transactions/Customer 2.5 2.75 # Transactions 1,000,000 1,331,000 Average Transaction Value $1,000 $1,100 Sales $1,000,000,000 $1,464,100,000 Pre-tax Profit Margin 15% 16.5% Pre-tax Profit $150,000,000 $241,576,500

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How Sales KPI’s Are Used

KPI Last Year Improved By 10% # Leads 2,000,000 2,200,000 Conversion Rate 20% 22% # Customers 400,000 484,000 Average # Transactions/Customer 2.5 2.75 # Transactions 1,000,000 1,331,000 Average Transaction Value $1,000 $1,100 Sales $1,000,000,000 $1,464,100,000 Pre-tax Profit Margin 15% 16.5% Pre-tax Profit $150,000,000 $241,576,500

That’s a 61% increase in Pre-tax Profit!

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How Procurement KPI’s Can Be Used

KPI Last Year Improved By 10% Total Spend $1,000,000,000 % Spend Under Management 60% Spend Under Management $600,000,000 % Spend Under Management Addressed 50% Addressed Spend $300,000,000 % Savings For Addressed Spend 2% Negotiated Savings $6,000,000 % Compliance 75% Realized Savings $4,500,000

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How Procurement KPI’s Can Be Used

KPI Last Year Improved By 10% Total Spend $1,000,000,000 $1,000,000,000 % Spend Under Management 60% 66% Spend Under Management $600,000,000 % Spend Under Management Addressed 50% 55% Addressed Spend $300,000,000 % Savings For Addressed Spend 2% 2.2% Negotiated Savings $6,000,000 % Compliance 75% 82.5% Realized Savings $4,500,000

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How Procurement KPI’s Can Be Used

KPI Last Year Improved By 10% Total Spend $1,000,000,000 $1,000,000,000 % Spend Under Management 60% 66% Spend Under Management $600,000,000 $660,000,000 % Spend Under Management Addressed 50% 55% Addressed Spend $300,000,000 $363,000,000 % Savings For Addressed Spend 2% 2.2% Negotiated Savings $6,000,000 $7,986,000 % Compliance 75% 82.5% Realized Savings $4,500,000 $6,588,450

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How Procurement KPI’s Can Be Used

KPI Last Year Improved By 10% Total Spend $1,000,000,000 $1,000,000,000 % Spend Under Management 60% 66% Spend Under Management $600,000,000 $660,000,000 % Spend Under Management Addressed 50% 55% Addressed Spend $300,000,000 $363,000,000 % Savings For Addressed Spend 2% 2.2% Negotiated Savings $6,000,000 $7,986,000 % Compliance 75% 82.5% Realized Savings $4,500,000 $6,588,450

That’s a 46% increase in Realized Savings!

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If Just “Compliance” Was Improved

KPI Last Year Improved By 10% Total Spend $1,000,000,000 $1,000,000,000 % Spend Under Management 60% 60% Spend Under Management $600,000,000 $600,000,000 % Spend Under Management Addressed 50% 50% Addressed Spend $300,000,000 $300,000,000 % Savings For Addressed Spend 2% 2% Negotiated Savings $6,000,000 $6,000,000 % Compliance 75% 100% Realized Savings $4,500,000 $6,000,000

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If Just “% Spend Under Management” Was Improved

KPI Last Year Improved By 10% Total Spend $1,000,000,000 $1,000,000,000 % Spend Under Management 60% 87.846% Spend Under Management $600,000,000 $878,460,000 % Spend Under Management Addressed 50% 50% Addressed Spend $300,000,000 $439,230,000 % Savings For Addressed Spend 2% 2% Negotiated Savings $6,000,000 $8,784,600 % Compliance 75% 75% Realized Savings $4,500,000 $6,588,450

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How To Improve % Spend Under Management

  • Requires “vertical” influence
  • Demonstrate results to earn

management’s confidence

  • Show how other companies address non-

traditional spend via procurement

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How To Improve % Spend Under Management Addressed

  • Requires increased productivity
  • Process improvement
  • Better-trained staff
  • Productivity improvement tools
  • More people
  • Utilize external resources (GPO’s,

consultants, etc.)

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How To Improve % Savings For Addressed Spend

  • Better-trained staff (especially for

negotiation)

  • Cost savings tools (eSourcing)
  • More advanced practices (value analysis,

supplier collaboration for cost take-out, etc.)

  • Cooperative buying
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How To Improve % Compliance

  • Requires “horizontal” influence
  • Appeal to budget holders:

– Get more out of their budget – Have their people focus on core competencies – Compare compliance between departments

  • Bottom line: procurement department has

to be the best department at procurement!

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Summary

  • Maximizing cost savings isn’t the result of
  • ne thing, it’s the result of many things
  • Measure those key performance

indicators:

– % Spend Under Management – % Spend Under Management Addressed – % Savings For Addressed Spend – % Compliance

  • Focus on improving KPI’s and you will

improve your bottom line results!

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SLIDE 31

Bring this presentation on-site to your organization!

  • “Procurement KPI’s For Maximum Cost

Savings” and other on-site seminars are available from Next Level Purchasing!

  • Call +1-412-294-1991 for a quote!
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SLIDE 32

“How can I get the slides from today’s webinar?”

Type of account: Premium Membership All-Access Corporate Subscription

NLPA webinar slides and on-demand replays

  • Templates (e.g., RFP,

cost savings, etc.)

  • Transcriptions from

interviews with procurement experts

  • All online Express

Courses

  • All full-length online

courses, including certification

  • Access for entire

department

  • Cost

Starting at $15.99/mo. Call for quote +1-412-294-1990

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SLIDE 33

Procurement KPI’s For Maximum Cost Savings

Charles Dominick, SPSM, SPSM2 President & Founder, Next Level Purchasing Association