Procurement performance indicators

What are the procurement performance indicators used by the Departments?

One of the major challenges for companies is the consistency between the actions of Purchasing department and the strategic line dictated by the leaders. First of all, it involves a understanding the terms used, on one side by the managements, and on the other by the Purchasing Department.
We are therefore going to define the three Purchasing performance indicators most used by Purchasing departments.

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Earnings Per Share or EPS

BPA is one of the Purchasing performance indicators used. Achieving significant EPS is one of the main objectives of listed companies.
Financial analyses predict an initial EPS, then shareholders assess the company's managers based on the current change in EPS with the previously calculated forecasts.
EPS is calculated by dividing the profits made by the company by the number of shares invested by the investors. Purchases can have a positive impact on BPA, in particular by succeeding in save money which then facilitate the realization of profits.
Major procurement departments report savings on BPA.
For example, if the purchase saves 2 million euros and the company has 100 million shares outstanding, it can be said that the purchases contribute 0.02 euros to the company's EPS.

EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) or EBITDA (Earnings before interest, taxes, depreciation, and amortization):

This indicator of Purchasing performance Measure the operational profitability which is sometimes omitted by certain accounting and financial decisions. Thus, EBITDA shows to a lesser extent the impact of operational expenses affected by the Purchasing department. Some Purchasing departments report the savings made by their actions on EBITDA.

RSI (Return On Investment) or ROI (Return On Investment):

When the management committee spends a significant amount on the company, it is then delighted to learn that part of this expense Return to the organization through increased profits or reduced costs. In analyzing ROI, it is also important to take into account the time elapsed before total expenses are recovered. In the majority of organizations, we prefer to have the result of the RSI during a fiscal year.
Purchasing departments are often evaluated based on ROI.
This ROI makes it possible to know how much an internal Purchasing department costs, including salaries, profits, office space, etc., and thus measure the amount of savings that the Purchasing department generates, and therefore to recover personnel and operational costs.