Procurement Key Performance Indicators

Types of procurement KPIs

Indicating how well procurement activities are performing against key objectives, procurement key performance indicators, or KPIs, help teams measure progress, uncover inefficiencies, and drive continuous improvement. They can span cost control, process efficiency, and vendor performance – offering practical insight into how procurement is contributing to wider business goals.

Below are some of the most common types of procurement KPIs, along with example metrics and illustrative targets.

Cost-based procurement KPIs

Cost-based key performance indicators are critical metrics that are used to assess the effectiveness of an organization’s procurement strategies in terms of cost management. Some examples of cost-based procurement KPIs include:

Cost savings

A direct measure of how well the procurement function is able to reduce expenses over a specific time frame. This KPI could be even more specific and framed as Supplier Negotiation Savings, measuring the amount saved by negotiating better pricing or contract terms with suppliers. This could be through the likes of price reductions, volume discounts, or improved payment terms.

An example cost-saving KPI for procurement teams may therefore be:

• KPI: Percentage of total spend saved through supplier negotiations
• KPI Target: Save 10% of total spend on negotiated supplier contracts within a fiscal year

Cost reduction

This measures how effectively the procurement function is able to reduce the cost of goods and services over a defined period. It looks beyond negotiation savings and includes a broader range of activities that lead to a decrease in total procurement spend.

This may involve lowering unit costs through negotiations, supplier consolidation, or where relevant, bulk purchasing. It may also include improving operational efficiencies by streamlining procurement processes, reducing waste, or leveraging economies of scale – and therefore increasing purchasing power.

An example procurement KPI focused on cost reduction could be:

• KPI: Total spend reduction
• KPI Target: Achieve a 5-10% reduction in total spend within one fiscal year

Purchase Price Variance (PPV)

Purchase price variance, or PPV, is another financial metric that is often used in procurement and supply chain management to assess the difference between the expected cost of an item – the baseline cost – and the actual purchase cost. In other words, it measures the gap between what an organization planned on spending for a particular product or service, and what they actually paid.

Ultimately, it can be an effective way to assess whether cost-saving targets have been met. By monitoring it over time across different suppliers or product categories, you can identify patterns of cost fluctuations, allowing you to focus on improving negotiations or managing pricing inconsistencies.

An example PPV KPI for procurement teams would be:

• KPI: Purchase Price Variance (PPV)
• KPI Target: Achieve a PPV of -10%

Procurement ROI

This gauges the effectiveness of procurement activities in terms of the value generated for the business compared to the costs incurred. In other words, it demonstrates the value procurement is generating – cost savings, efficiencies and other benefits – relative to the costs involved in running the procurement function.

An example key performance indicator focused on procurement ROI would be:

• KPI: Cost savings return on investment
• KPI Target: Achieve 25% ROI

Efficiency-based procurement KPIs

KPIs focused on efficiency are crucial in procurement as they help measure and improve the effectiveness of the procurement process and ensure that resources are being used optimally. They can also be used to identify bottlenecks, for example delays in approvals processes, and reduce wasted spend.

Procurement cycle time

This measures the total time it takes to complete a procurement process, from identifying the need, to receiving the goods – or in the context of IT procurement, implementing the software.

An example KPI to measure procurement cycle times could be:

• KPI: Software procurement cycle time
• KPI Target: Achieve a procurement cycle time of 20 days for tactical software purchases

Time to contract renewal

A key performance indicator focused on time to contract renewal would measure the time taken to complete the process of renewing a contract.

An example KPI could therefore be:

• KPI: Time to contract renewal
• KPI Target: Renew existing contracts within 15 days.

Supplier KPIs

Measuring supplier performance is critical for ensuring the supplier – or software vendor – is delivering value, meeting service levels, and aligning with your business needs. The following example of procurement KPIs can be used to help assess a supplier’s effectiveness.

Service availability

The percentage of time the software is available and operational, excluding planned downtime. Knowing this metric, particularly for highly utilized platforms, is important as it could impact your decision on whether to renew the particular contract. You should also be thinking about requesting a clause that allows for an early exit should the supplier fail to meet the agreed service levels.

See a full list of contract clauses that can be negotiated.

An example KPI may therefore be:

• KPI: Service availability/uptime
• KPI Target: 99.9% uptime (This may depend on the agreements you have with individual SaaS providers)

Percentage of purchases from approved suppliers

With maverick spending and shadow IT a huge issue for many organizations, this can be a useful KPI to track as it measures the proportion of procurement activities that involve approved suppliers. Low percentage levels may indicate a need for procurement teams to update supplier approval processes, implement stronger purchase controls, and communicate the impact of non-compliance as part of a wider change management strategy.

An example KPI could therefore be:

KPI: Percentage of purchases from approved suppliers

KPI Target: Ensure at least 95% of purchases are from approved suppliers

Choosing the right procurement KPIs

Selecting the right KPIs is essential for demonstrating procurement’s value, driving performance, and aligning with business goals. If you’re unsure where to start, our Procurement Maturity Assessment can help identify the most relevant KPIs based on your current capabilities and strategic priorities.

Otherwise, here are some key principles to guide your selection:

• Align with procurement objectives: Choose KPIs that directly support your core goals – whether that’s reducing SaaS spend, improving supplier performance, ensuring compliance, or driving efficiency.
• Include both operational and strategic KPIs: Track metrics that reflect day-to-day efficiency and long-term strategic impact to get a full picture of procurement performance.
• Ensure KPIs are measurable and data-driven: Focus on metrics backed by reliable, accessible data that can be tracked consistently over time.
• Prioritize actionable insights: Select KPIs that lead to clear actions. As an example, poor supplier performance KPIs can trigger renegotiations or vendor changes.
• Tailor KPIs to stakeholders: Align some KPIs with the interests of key teams. Finance, for instance, may focus on cost control, whereas IT may care more about contract compliance.
• Keep it manageable: Aim to track 5–10 core KPIs to stay focused and avoid overwhelming your team.

For inspiration, check out the 11 procurement metrics top-performing leaders track.

Tracking KPIs and proving procurement’s value with Vertice

Procurement KPIs are only as good as the data they are based on, meaning that to effectively track these KPIs, organizations need access to accurate procurement information. In other words, you need a tool that can provide real-time visibility and actionable insights to drive informed decision-making.

A tool such as Vertice.

As a Procurement Orchestration Platform, Vertice can specifically provide you with visibility of your spend, utilization rates, and workflow efficiencies, enabling you to optimize processes, reduce costs, and prove procurement’s value within your organization.

See for yourself how Vertice can help you simplify your procurement by taking a self-guided tour of the platform.

Alternatively, have a read of how we helped one company achieve an average of 30% savings on their software contracts, while accelerating their procurement cycles by as much as 55%.