Over on our World Class Procurement LinkedIn group (all practitioners welcome), we shared some of the summary findings from the 2012 edition of our annual Procurement Key Issues study we did a few months ago, and I thought the Spend Matters readership might be interested. So, to quote the Bud Lite commercial, "here we go"...

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One of the most basic procurement strategies is to separate transactional purchasing from strategic sourcing. Yet not all strategic sourcing techniques are implemented strategically. There are two aspects to this. First, sourcing methodologies themselves can only go so far in supporting broader category management objectives and other strategic procurement activities. We have already published research in this area, and there has been more than enough blog chatter on the topic, so we won't tread old ground here.

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In Part 1 of this two-part post, I talked about the importance of separating the notion of procurement VALUE (how strategic is the value delivered to the enterprise by Procurement's services?) from procurement PERFORMANCE (how effective and efficient is the performance for each service?). In this part, I'll talk about how to better measure that performance … and I’ll also ask for your help.

Measuring procurement EFFICIENCY is relatively straightforward in terms of looking at procurement FTEs, process costs, cycle times, etc. (I humbly submit that nobody measures this as well as my firm.) That said, it can be more complex than many think. For example, dividing your procurement budget by your total number of POs is a REALLY stupid way to measure a "Cost per PO" metric! I won't tell you why (hint: think activity-based costing).

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