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I. General Procurement KPI Measurements: Inventory Turnover Ratio
I. General Procurement KPI Measurements: Inventory Turnover Ratio
V. Inventory KPI’s
Inventory Turnover Ratio = Forecasted Cost of Goods Sold Over the Next 12
Months/Current Inventory Value (Inventory average is 3)
OBJECTIVE 2: MANAGE THE PROCUREMENT PROCESS AND THE SUPPLY BASE EFFICIENTLY AND
EFFECTIVELY
To manage the procurement process and supply base efficiently and effectively, procurement must
follow the following key steps:
• Identify opportunities where the procurement team adds true value:
– Evaluation and selection of suppliers based on sound ethical norms and standards
a) All purchases must go through the approved procurement processes
b) Engineering and other functional inputs are part of this process
c) Contractual agreements will be done with the involvement of Procurement
d) Increased use of sourcing teams
– Continued liaison with internal customers to achieve greater understanding of requirements and
integration
– Timely, pro-active communication with internal customers
– Sharing of information i.e. market trends, price, quality, delivery, forecast and demand
– Highlighting achievements
1) Inventory
– Monitor spend on Stock, Direct Charge and Service spend, monthly
– Major Reagents and Consumables based on 80/20 Pareto principle – Stock on Hand сover 2-3
month on average; Purchase prices against Budget; Monitoring of the Market Trends
– Percentage of Stock Inventory covered by BPA (small value; high turnover items)
– 95% service level for normal stock and 100% service level for Critical, Insurance, major
consumables and reagents
2) Supplier performance
– Price Structure, Discount, Payment terms based on 80/20 Pareto principle
– Lead time monitoring
– Deficiency report
3) Buyer Performance
– Saving (monthly) by assigned category
– RFQ/PR processing; actual vs. target (2 weeks for regular; 1-3 work days for Urgent)
– Spend/Number of PO/Number of Items by Buyer
4) International/Local Spend Analysis
– Target to increase the local spend
– Newspaper advertiseme