One of the goals of a business is to have as much spend (with a capital “S” for all expenditures: CapEx, OpEx and COGS) under management as possible. And that goal should be extended out to supplier spend, where procurement wants to have as much supplier spend influence as possible. That way you know what you’re spending on suppliers (and the pricing component of that, of course), what you’re getting from those suppliers (i.e., supplier performance), and how well you’re spending in terms of applying best practices and tools/intelligence to the process (e.g., proactively guiding stakeholders and minimizing maverick spend).
The metric of spend under management (SUM) is actually determined by a set of indicators that we’ll explore in this latest Spend Matters installment of our series on KPIs that all procurement leaders should know. In the first two parts of this KPI series, we highlighted some of the foundational measurements for procurement pros and the problems of traditional procurement key performance indicators in terms of how they can be incomplete, misleading and even damaging to a value chain transformation. We also delved into the “keys” that unlock the value of spend and supply management.
For spend under management, we’ll explore the true spirit of how this metric is used, what role technology plays and how to get a balanced scorecard for different segments of supply base management.
