It doesn’t matter how innovative your brand is or how groundbreaking your business model might be; if your business is ridden with glaring inefficiencies, your potential for growth is eventually going to get stunted.
In fact, an IDC study showed that over 80% of business leaders surveyed from sales, HR, procurement, and other departments agreed that issues arise because companies are equipped with different internal systems and applications that don’t ‘talk’ to one other. 43% of the surveyed staff also said they often have to copy and paste or rekey in information, thereby wasting time and hindering productivity.
Now, regardless of the sector or industry, the procurement of goods and services in a timely and efficient manner is one of the primary drivers of success. If your procurement process costs you valuable time and incurs unnecessary costs, you may end up falling behind your competitors.
Fortunately, we live in a digital age rife with statistics, data, and insights that give us the power to spot potential issues and inefficiencies within the business. Thanks to the right KPI software, it is much easier to identify trends and setting goals that will ultimately increase productivity, drive growth, and boost profits. And procurement reporting is no exception to this.
What Are Procurement Reports?
A procurement report allows an organisation to demonstrate how its procurement activities deliver value for money, contribute to the realization of its broader goals and objectives, and provide a panoramic snapshot of the effectiveness of its procurement strategy.
Through a host of comprehensive metrics, insightful data gleaned by tracking the right procurement KPI, reporting gives a business the power to enhance its procurement strategy by preventing minor inefficiencies from becoming significant issues and providing a clear insight into the practices or supplier relationships that work, as well as those that don’t.
Why Are Procurement Reports Important?
“The price of light is less than the cost of darkness.” – Arthur C. Nielsen, Market Researcher & – Founder of ACNielsen
In a time when digital data reigns supreme, offering us more insight into our commercial activity than ever before, businesses that conduct their procurement activities blindly will pay the price.
With procurement being such a critical component of any business, providing the oil that greases the organizational cogs and keeps everything flowing along with monitoring and analyzing all aspects of the process is essential. From costs and supplier delivery to compliance rates and order cycle time, there is wealth of procurement-centric insights to explore.
Procurement reports that drill down to significant areas of the procurement process have the power to help you make the kind of improvement that can make or break your business in today’s cutthroat digital climate. Reporting is the crystal ball that offers a glimpse into the past, present, and future of a business’s procurement activities, helping it move forward in the best and most sustainable way possible.
In the following sections, we discuss the insights that you can simply not afford to ignore.
Procurement Report: Benefits And Challenges
There are a host of benefits to procurement reporting. By monitoring and analyzing key elements of your procurement activities, it is possible to:
- Improve the accuracy of the financial forecasting of your business
- Minimize errors throughout the supplier chain
- Make financial efficiencies and save costs by identifying potential procurement problem areas.
- Monitor your dependency on suppliers over a set time frame
- Increase crucial order cycle times and order fulfillment speeds.
- Understand which supplier relationships are working for your procurement strategy and which need termination or replacement
- Take accurate measurements of your ROI based on your various procurement actions and activities
- Reduce and avoid unnecessary procurement costs to the business
Procurement reports provide a wealth of opportunity to improve both, short-term and long-term procurement goals of your business by providing a tangible glance at every vital aspect of the order and fulfillment spectrum.
With so many areas to consider, deciding which KPIs to focus on while defining metric measurement periods can prove to be a challenge at the initial stages. Scaling the value of data and analytics across all areas of your procurement process might prove difficult in the beginning, but by ensuring that all key members of your procurement team have access to your reporting dashboards and understand how to leverage the data to their advantage, the steps to take towards your procurement strategy will swiftly become clear.
As the business evolves and grows, scaling your procurement reports to reflect the new demands of the business might also prove challenging. However, by making a collaborative approach and following some BI dashboard best practices to remain in line with your key business objectives, you’ll be able to avoid data fragmentation and continue to benefit from the procurement insights that are the most valuable.
Procurement Report Examples
Now that we’ve explored the benefits and challenges of procurement reporting, we’re going to look at the three primary dashboards associated with the order, supplier, and fulfillment-based activities of a business.
Procurement KPIs report
**click to enlarge**
Whether your business deals with physical goods or digital services, procurement is of equal importance. This is because procurement links the needs of an organization with its suppliers or contractors and as such, plays an integral role in the competitiveness of any business.
That said, this procurement report template offers a comprehensive overview of the various metrics that are vital to the success of the procurement department. This intuitive and interactive dashboard helps in summarizing a procurement department’s main activities as well as its relationship with the company’s suppliers. In turn, the procurement KPI dashboard not only helps with the smooth and successful management of the department but also assists in building brand awareness.
- Compliance rate: In procurement, compliance represents the basic agreements set by a company and its supplier. By breaking down each supplier into definitive categories, this particular KPI provides a clearcut snapshot of how compliant your various partners are and if any changes should be necessary.
- Number of suppliers: This KPI tracks the level of dependency you have towards your suppliers over a particular time frame. Relying on too few suppliers and failing to diversify your sources can cultivate a significant risk of dependency. On the contrary, too many suppliers can reduce the possibilities of valuable discounts. This priceless metric will help you decide on the optimum number of suppliers for your business.
- Purchase order cycle time: The procurement order cycle time is a metric that measures the end-to-end ordering process, from the time a purchase order is raised to the order approval, receipt, invoice, and payment. By reducing this time and ironing out any inefficiency, you will not only improve your productivity rate but also help to enhance your brand’s reputation.
Supplier Delivery report
**click to enlarge**
This procurement report template is based on a supplier’s ability to provide your business with the right products and services at the right time.
With a mix of metrics and KPIs based on elements such as defect rates and delivery times, all geared towards offering valuable information on the performance of single suppliers as well as overall supplier performance, this is one procurement report that your business definitely needs.
- Supplier availability: This supplier-facing KPI measures your suppliers’ capacity and ability to respond to urgent demand consistently. In an age where consumer purchasing habits are constantly changing in response to the growing number of buying channels, it’s never been more critical to ensure that your suppliers are available to cope with fluctuating volumes of orders and requests. And the supplier availability will help you do just that.
- Supplier defect rate: In our fast-paced digital age, there’s little time for error, and consistent defects can prove to be detrimental to the reputation of a brand. This invaluable procurement KPI measures the quality of your individual suppliers concerning quality and service and product and helps you nip potential issues in the bud before they prove harmful to yourself, your partners, and your customers.
- Lead time: The lead time assists in quantifying the total time it takes to fulfil an order. The concept of this insight is to reduce the lead time as much as you possibly can while maintaining an exceptional level of quality. The data pulled from this metric will steer you on the right path.
Procurement Costs report
**click to enlarge**
The final of these 3 procurement report examples drills down to the costs and purchases associated with your various procurement activities.
To successfully optimize these costs, anticipate the needs of the various business units across the organization, and ultimately save valuable time, it’s vital to oversee the entire purchasing area in one central place. This procurement report offers a panoramic snapshot of all valuable cost-based information.
- Cost of purchase order: This metric helps to monitor and control the internal costs incurred by every purchase the business makes, thereby theoretically representing the average cost of processing an order, from purchase creation to invoice closure. These costs come with an incredible level of variation, so it’s important to look at the data carefully and decide on the average cost of a purchase order based on the length of time it takes.
- Procurement cost reduction: One of the most central components of the Procurement cost report, this KPI helps to streamline tangible monetary savings across all procurement activities and processes, boosting an organization’s economic efficiency in a significant way.
- Procurement cost avoidance: By offering a view of your various suppliers and their activities in association with your business, you’ll be able to understand the areas of inefficiency that are incurring the business unnecessary costs and develop a strategy to avoid them in the future. These are what are referred to as ‘soft savings’ because they don’t go directly to the bottom line. Despite this, these savings are nonetheless invaluable.
- Procurement ROI: The procurement ROI helps to determine the profitability of investments made within your procurement department. To calculate your Procurement ROI, you must divide the annual cost savings by the internal yearly cost of procurement, and express it as a ratio. Doing so will help you gain maximum value from your investments, and by measuring these metrics along with other key indicators, you will see significant improvements in a relatively small space of time.
Procurement reporting is vital to the growth and development of your business and by using this wealth of insights to your advantage, you will no doubt enjoy a sustainable level of commercial success you undoubtedly deserve. With the help of an effective procurement dashboard, you can harness the power of your data and make the best out of it.