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Metrics are a critical aspect of measuring the success of any business function. The importance of quantifying progress against goals and objectives cannot be overstated. Without a metrics program, underperforming organizations are unable to target functional areas that require improvement, and growing organizations are unable to set goals or scale resources to align with the changing state.

Because procurement organizations are often challenged by stakeholder resistance and a lack of executive-level sponsorship, metrics are key to demonstrating value. Sourcing efficiencies, cost savings, stakeholder satisfaction, and overall procurement ROI are just the starting point for capturing bottom line impact. While these are often viewed as the foundation for a metrics program, the final structure can’t be established without being certain of data quality and availability.

Clean data is critical in ensuring that the spend volumes, inventory, and supplier information used to calculate metrics are true representations of the current state. Beginning a sourcing initiative or formulating a strategy with incorrect data can lead to missed cost savings opportunities, or worse, execution of a resource-intensive project with results that cannot be implemented. To get your metrics program started in the right direction, there are a few ‘pre-metrics’ to establish and track to ensure your data is sufficient to move forward into a formalized program.

 

Spend Duplication Control

 

Supplier Name Normalization

 

Spend Categorization

 

Spend with Line Item Visibility

 

Contextualized Data

 

While these metrics do not tie directly to the bottom line value that procurement brings to the organization, they are paramount in ensuring that all results are accurate and do not require excessive data cleansing before reporting.  Starting with foundational data hygiene alleviates analyst resource constraints and allows for ease of automation and duplication of all defined procurement and sourcing metrics. Enabling technologies such as spend management software can easily track the quality of the data, and setting up a process for transactional data entry will ease the burden year over year, allowing resources to focus on using the results of strategic metrics to drive organizational success.