Procurement KPIs and how to use them to your advantage
Procurement and professional buyers now enjoy a senior management position in many organizations, making it unwise to try to work around them or delay their involvement in the decision-making process.
Top sales people know they must proactively engage professional buyers, and the best way to do this effectively is to understand their buyers’ strategic sourcing process and the role professional buyers play in each organization. The sales team should be aware of:
- Demand analysis: business and technical specifications required
- Market analysis: market size, key players and market dynamics
- Strategy development using the Commodity Positioning Matrix
- Supplier selection comprised of parameters that represent needs of the user and procurement
- Supplier management including efficiency and effectiveness metrics
Professional buyers have very clear metrics, covering finance, quality, service, and reliability. These metrics, also known as Key Performance Indicators, KPIs, vary from company to company. The key to helping buyers meet those performance measurements is to ask provocative questions to truly understand the buyer, the buying process, and key decision-making criteria.
Sales people must have the courage to move away from the same old boring questions everyone else is asking and differentiate themselves by asking questions that strike buyers’ issues and metrics.
In developing Dealing with Procurement, we spoke with many top procurement professionals from a variety of industries, so we could pinpoint key metrics. With this knowledge, we can prepare sales teams for ever-intensifying, stressful procurement negotiations.
The top 4 metrics
Here are the top four metrics the sales team should play to, so they can give buyers what they want, (and more importantly, need) and, at the same time, negotiate a deal that hits sales KPIs, too.
1. Increase cost savings while managing a global supply network
Everybody wants to lower costs – that’s not a surprise – but professional buyers are not just looking to pay the lowest price. They want to pay the right price and get the most value in return.
2. Generate higher levels of innovation through stronger stakeholder engagement
Buyers, like the rest of us, love it when the solution to a problem is delivered on a silver platter. Of course, the less work they need to do, the better for them. If the sales team can present innovative ideas and share nuggets of value through engaged dialogue, rather than just responding to requests for proposals (RFP), they stand out from the competition as pioneering and driven, with an eye on the future.
3. Targeting and eliminating unnecessary expense
Buyers are looking to see what value a product or service will offer their organization. They’re not interested in what happened yesterday or examples not relevant to them; they want quantifiable evidence relevant to their business and their numbers.
4. Creating social value and higher levels of sustainability and transparency
Social value is big business these days, from increasing recycling and reducing energy and consumption to ensuring sustainability and ethical behavior throughout the supply chain. Buyers want to know how a supplier can help them be, and stay, successful and socially aware.
Again, the sales team should be prepared to innovate and inform, sharing nuggets of value to enhance the organization’s experience and future.
The key for meeting metrics in procurement is to know and understand your buyers’ KPIs and prepare innovative ideas meeting them. Make sure the sales team addresses and engages with each metric at a very different level to the rest of the competitors to meet the buyer’s personal and professional goals and stay at the top of today’s marketplace.
Create dialogue that inspires both buyer and seller to agree on action steps that lead to the right price and produce maximum value for both parties. Move away from focusing just on price and explore how to ensure:
- Guaranteed supply and delivery assurance
- Risk mitigation
- Increased flexibility
- Decreased total cost of ownership
- Innovative ideas to generate process and product improvements
- Achievement of sustainability targets
The more you understand the KPIs of professional buyers and procurement partners, the better you can structure your dialogue to differentiate you, your solution and your company from all of the other options available.