Procurement has changed a lot over the last decade. Once seen primarily as a cost-cutting function, it has now evolved into a core area of strategic procurement management. With the rise of AI in procurement and digital procurement tools, organizations are rethinking how they define success — and which procurement performance indicators matter most.
Older KPI models focused mostly on things like purchase price variance and total spend. While still useful, these metrics don’t show the full picture. They often leave out essential areas like risk management, supplier innovation, and sustainability—factors that now define procurement success. These overlooked areas are exactly what we explored in our blog post on AI-powered SRM, where supplier innovation plays a leading role.
Modern procurement metrics aim to fix this by:
As supply chains become more complex and global, measuring and improving supplier relationships has become more important than ever. Today’s KPIs help teams make better decisions—not just track performance.
Even though most companies know procurement is important, many still struggle to track it properly. Some teams use no KPIs at all. Others track too many or focus on the wrong ones—making it hard to drive real improvements.
For a structured overview of how to define and apply the right KPIs, see this guide from the Chartered Institute of Procurement & Supply (CIPS).
Common problems include:
To succeed, KPIs need to clearly show how procurement contributes to the company. Good metrics connect day-to-day decisions to long-term goals. This also helps show the value of procurement to leadership.
Every business is different, so the right KPIs will depend on your goals. These could include saving money, reducing risk, supporting innovation, or meeting sustainability targets.
The right procurement KPIs give a clear view of performance—financial, operational, relational, and strategic. While you should tailor your KPIs to fit your needs, the 11 below are a strong starting point for any team.
We’ve grouped them into four key areas:
Start with the basics, then build towards more advanced metrics as your processes improve.
If you’re looking to put these KPIs into context, our webinar overview features expert-led sessions breaking down how procurement teams are applying them in real-world scenarios.
Financial KPIs help show the direct value procurement brings to the bottom line. These metrics demonstrate how procurement contributes to cost control, efficiency, and overall business performance.
Cost avoidance captures savings from avoiding unnecessary expenses. This might involve negotiating price holds in volatile markets, choosing cost-effective alternatives, or implementing early payment discounts.
In order to measure cost avoidance, you need to compare forecasted costs without procurement involvement to actual costs after procurement actions.
By tracking cost avoidance, procurement teams can prove their strategic value beyond simple price reductions. This helps justify investments in better sourcing strategies and supplier negotiations.
This metric tracks how well procurement negotiates by comparing actual prices paid to standard or expected prices. It helps evaluate pricing strategies and supplier performance.
How to measure: (Actual Price - Standard Price) × Quantity Purchased
A lower variance suggests strong negotiation tactics, while a higher one may indicate pricing inefficiencies or missed opportunities. Tracking this metric helps procurement refine supplier contracts and improve cost predictability.
This measures how much of total company spend is actively managed by procurement. A higher ratio reflects greater control, better compliance, and more opportunities to create value.
How to measure: (Procurement-managed spend / Total organizational spend) × 100%
A high percentage means procurement is actively influencing purchases, reducing maverick spending, and ensuring compliance with company policies. It also strengthens purchasing power with suppliers.
Operational KPIs focus on how efficiently procurement functions. They reveal opportunities to streamline processes, reduce delays, and enhance service levels across departments.
Time This metric tracks the full process from placing an order to completing payment. Shorter cycle times often reflect more efficient operations, fewer delays, and better stakeholder satisfaction.
How to measure: Average time from requisition to supplier payment, broken down by category or supplier.
Shortening this cycle improves efficiency, reduces administrative workload, and ensures suppliers receive timely payments—leading to better relationships and potential cost savings through early payment discounts.
Maverick spending refers to purchases made outside of established procurement processes. These off-contract purchases can lead to higher costs, lower compliance, and lost savings.
How to measure: (Off-contract spend / Total spend) × 100%
Reducing maverick spend improves budget control, strengthens supplier partnerships, and ensures negotiated cost savings are fully realized.
This tracks how consistently teams purchase according to contract terms, such as price, volume, and supplier. High compliance helps ensure negotiated savings are realized.
How to measure: (Spend with compliant suppliers / Total addressable spend) × 100%
Strong contract compliance prevents uncontrolled spending, minimizes disputes, and allows procurement to enforce preferred supplier agreements for better pricing and service levels.
Improving these KPIs enhances process reliability, reduces operational costs, and strengthens procurement’s internal credibility.
Procurement is only as strong as its supplier base. These KPIs evaluate how well suppliers deliver on expectations and contribute to long-term value.
This metric shows how often suppliers meet delivery deadlines. Consistent on-time delivery supports production schedules and customer satisfaction.
How to measure: (Number of on-time deliveries / Total deliveries) × 100%
A consistent on-time delivery rate ensures smooth operations, prevents production halts, and helps procurement teams identify underperforming suppliers.
This tracks the number of products or services that don’t meet quality standards. It highlights reliability and risk in supplier performance.
How to measure: (Rejected or defective units / Total delivered units) × 100%
Tracking defects helps improve supplier selection, enforce quality standards, and reduce costs associated with returns or production disruptions.
Good supplier relationships depend on timely communication. This KPI measures how quickly suppliers respond to requests, questions, or issues.
How to measure: Average response time to inquiries, segmented by urgency level or issue type.
Fast response times indicate strong supplier engagement and reliability, reducing delays and improving collaboration on critical procurement tasks.
Together, these KPIs help organizations identify top-performing suppliers, manage risk, and prioritize relationship improvements.
Strategic KPIs show how procurement contributes to broader goals, including innovation, sustainability, and competitive advantage.
Procurement can support innovation by sourcing new ideas and solutions from suppliers. This KPI tracks contributions such as product improvements, new processes, or collaborative projects.
How to measure: Number of supplier-submitted innovations, their business impact, and contribution to time-to-market or product development.
This metric highlights suppliers that go beyond transactional relationships and contribute to business growth through new ideas and efficiency improvements.
Environmental, social, and governance (ESG) indicators measure how procurement supports ethical and sustainable practices. This includes supplier diversity, emissions tracking, and compliance with labor standards.
How to measure: % of suppliers meeting ESG criteria, combined with outcome-based indicators like CO2 reduction or local sourcing.
A strong ESG performance ensures procurement aligns with corporate responsibility goals, minimizes reputational risks, and meets increasing regulatory requirements for sustainability.
Measuring strategic KPIs often requires cross-functional input but provides key insights into procurement’s long-term impact.
The NASPO performance guide outlines how public procurement offices approach performance metrics, offering a useful reference for building structured strategic measurement.
Manual tracking is time-consuming and prone to error. It also limits teams to looking backward. With AI-powered procurement tools, teams can automate data collection, get real-time updates, and even forecast future trends.
AI improves metrics by:
These capabilities allow teams to shift focus from collecting data to acting on it. Instead of relying only on past results, they can anticipate issues and drive improvements proactively.
For example, AI might flag a supplier at risk of delay based on historical data, logistics activity, and weather conditions—giving teams time to react.
You can also watch our webinar with BS Energy to learn how SRM tools and KPIs work together during times of crisis.
Real-time dashboards turn KPIs into daily decision-making tools. They make performance data visible and actionable for both procurement teams and leadership.
To create one:
A good dashboard empowers procurement to make faster, smarter decisions and ensures alignment across the organization.
As markets evolve, procurement metrics must evolve too. Leading organizations are already expanding their approach to measurement.
Next-generation KPIs will:
Ultimately, AI will take metrics beyond reporting. Procurement tools will analyze performance, suggest improvements, and even carry out standard decisions—freeing teams to focus on strategic goals.
Choosing the right procurement KPIs lays the foundation for better processes. By measuring financial impact, operational efficiency, supplier performance, and strategic value, organizations can go from tracking results to improving them. And with AI in procurement, success is becoming more data-driven than ever.
Discover how Mercanis helps teams automate tracking, improve supplier insights, and unlock the full value of procurement.
For more on this topic, explore the full Mercanis blog archive, where we share ongoing insights into digital procurement transformation.
Fabian Heinrich is the CEO and co-founder of Mercanis. Previously he co-founded and grew the procurement company Scoutbee to become a global market leader in scouting with offices in Europe and the USA and serving clients like Siemens, Audi, Unilever. With a Bachelor's degree and a Master's in Accounting and Finance from the University of St. Gallen, his career spans roles at Deloitte and Rocket Internet SE.
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