Transcript COOPERATIVE Procurement update

Got
PPM?
Procurement
Performance
Measures
VAGP Spring Conference , March 2013
Presented by
Keith Gagnon, MBA, CPPO, VCO
Director of Procurement
Virginia Community College System
Measure Your Performance
Develop/deploy
metrics
Use same metrics over time
Look for trends in the metrics
Identify Key Performance
Indicators (KPI) important to
your procurement unit
VOLUME and Distribution KPIs
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Total procurement expenditure (total spend)
Spend per department
Spend per commodity
Total number of procurement transactions
Total number of vendors
Average spend per vendor
Average spend per transaction
Number of vendors accounting for 80% of spend
Number of vendors accounting for 80% of
transactions
Financial KPIs
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EFFICIENCY KPIs
 Procurement
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Time from initial request until PO/Contract
issued
 Delivery
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Time
Time from order to delivery
 Buyer
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Cycle Time
Productivity
Number of purchases per buyer per month
Spend volume per buyer per month (year,
week)
EFFECTIVENESS KPIs
 Protest
%
Rate
of protested transactions
 Compliance
%
Rate
of compliant transactions
(Procurement Regulations)
 Through audit results
EFFECTIVENESS KPIs
 Internal
Customer Satisfaction
 Surveys,
 Supplier
etc.
Performance
 Delivery
(% on time)
 Quality
 Service
 Through
surveys
SOCIAL RESPONSIBILITY KPIs
 SWaM
 As
Percentage
percent of total spend
 Green
Procurement
 Number
of green products substituted
for traditional products
 Economic
 Total
Impact
spend with local vendors
 Percent of spent with local vendors
Back to Savings
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Let’s call it “cost avoidance”
Why???
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Scenario
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“Savings” can be taken back and added into another
budget area
Savings is “bookable”
I gave my son $25 to get himself a hat.
He came back from the store and said, “I got a great
deal. The hat I wanted is regularly $40, and I got it on
sale for $20. I saved you 20 bucks!”
I said “Good job, now give me back what you saved.”
He handed me $5!!!!
How do we calculate cost avoidance?
Cost Avoidance Activity
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Scenario: You award a contract through an IFB for
1,000 widgets at a cost of $100 per widget
($100,000 total)
Budget for purchase was $135,000
Last year you paid $115,000 for 1,000 widgets
Average bid price was $110 per widget
eVA data shows $130 average price per widget
for all eVA widget orders in past 12 months
You paid $125 per widget for a spot purchase of
10 widgets in between contracts
How much have you saved? (You have 5 minutes)
What is the Answer?
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1,000 widgets at a cost of $100 per widget ($100,000 total)
Budget for purchase was $135,000
$35,000
What if budget calculation wasn’t a good one? Or, what if the budget was only
$90,000?
Last year you paid $115,000 for 1,000 widgets
$15,000
What about inflation?
Average bid price was $110 per widget
$10,000
Would this method ever show negative?
eVA data shows $130 average price per widget for all eVA widget orders in past 12
months
$30,000
What if many of these orders were for small quantities?
You paid $125 per widget for a spot purchase of 10 widgets in between contracts
$25,000
Again, what about the different quantities?
So, what is the answer?
 Probably
somewhere between $10,000
and $35,000
 Suggestions:
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Use some method, maybe even more than
one, to estimate cost avoidance
Express a range for calculated cost
avoidance
 Use
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high, low, mid
Support your argument with reason,
statistics, trends, etc.
Questions and Discussion
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Keith Gagnon
Director of Procurement
Virginia Community College System
804.819.4698
[email protected]
http://www.linkedin.com/pub/keith-gagnon/1b/32b/b07