More than half of procurement leaders surveyed do not believe that they have the capability in their teams to deliver their procurement strategyٰ¹. Thus, CPOs know they must change how they operate to succeed. To accelerate industry performance, the Silicon Valley Sourcing Leaders (SVSL) meet once every quarter to elevate core capabilities through knowledge sharing and collaboration. With new insights in tow, these trailblazers continue to bring innovation to their departments and organizations.
“In order to scale, you have to simplify.” So says John Bruno, VP, Global Real Estate, Workplace and Procurement at Workday, and host of the latest Silicon Valley Sourcing Leaders event. Simplification starts by looking at the procurement process. In order to be wildly successful, today’s sourcing and procurement teams must first determine how success is being measured.
So, how can you unlock key performance indicators (KPIs) that align with the values of both customers and the executive team? SVSL attendees broke out into groups to brainstorm three tiers of KPIs: operational, transformative, and strategic, and the use cases to make these KPIs happen.
Defining Procurement KPIs to Make Your Blueprint a Reality
Actively Monitor Progress with Operational KPIs
Digging into operational KPIs will help you identify existing bottlenecks, show what’s working well, and pinpoint investments to prioritize. Examples discussed among the group included:
- Percentage of contract renewals in an upcoming quarter
- Number of times production is stopped
- Invoice price compared to contract negotiated price
One new-age operational KPI that groups brought up was the percentage of spend weighted on innovation. Metrics put behind this KPI included: vendor scorecarding, percentage of future contract renewals teams can tackle, and percentage of requisitions never converted to POs.
Track Collaboration across the Business with Transformative KPIs
The stand-out KPI for this tier? Unsurprisingly, Net Promoter Score (NPS). To transform to become an advisor to the business, sourcing teams must have collaborative relationships with their customers — even if it’s a little scary. So, how were SVSL’s attendees defining relationships with their stakeholders?
Mark Zafra, Head of Global Strategic Sourcing at Twitter shared his method to the madness: “fearless communication” with their internal customers by color-coding levels of interaction (you don’t want to know what red represents!) and hosting meetings to talk through these definitions.
Although confronting someone about why they’re in the “red” zone isn’t easy, it’s necessary to have open, productive conversations. Because by illuminating the black box that vexes Sourcing, teams are more likely to control their role in the engagement process and the portrayal of their org in the greater business.
Align with the Office of Finance with Strategic KPIs
How are Sourcing teams measuring digital transformation, and what are the metrics behind successfully communicating those values to leadership teams?
One way companies like Yelp and Facebook are getting their execs’ attention? Through “unimpeachable” deal summaries and back-ups. These methods veer away from basic metrics, and instead focus on a “right vendor at the right time” strategy. Teams create intense summarizations of deals and must include a thorough background of the vendor and why the company must purchase this product. Next step? Sending it straight to the desk of the CFO.
Of course, companies who choose this route defer to internal metrics (e.g. the deal size must be over a certain dollar) before taking on this audacious goal.
Please join us at Anaplan on March 27, 2019!
I wanted to thank the SVSL members for making it out to the event at Workday. One thing was for certain: everyone, from companies big and small, spanning multiple categories and verticals, wanted to make an impact and wanted others to make an impact, too. That’s the true beauty of the Sourcing and Procurement industry. Not only in the Bay Area, but across the globe. Sourcing and Procurement professionals want (and do!!) make a difference every single day.
If you’re interested in participating, which I hope you are, we’d love to see you at the next Silicon Valley Sourcing Leaders (SVSL) event at Anaplan’s HQ on March 27th. Mark your calendars, and make sure to join the SVSL LinkedIn group and stay up-to-date on future networking events, roundtable discussions, and key industry research.
- “The Deloitte Global Chief Procurement Officer Survey 2018.” Deloitte,https://www2.deloitte.com/content/dam/Deloitte/at/Documents/strategy-operations/deloitte-global-cpo-survey-2018.pdf. Accessed Dec. 10, 2018.