During one of Procurement Leaders’ 2025 CPO Connect calls, one member was asked how they measure the impact of all the work they do in procurement.
It was a good, no-nonsense question and followed an in-depth session that had focused on how the CPO was aligning procurement strategy with corporate goals and where the function must focus to have the greatest business impact.
The CPO had shared the five pillars that procurement is structured around – which include innovation, resilience and sustainability – and how they work collaboratively with suppliers they class as strategic innovation partners to unlock new value.
It was a clear and informative session, but the question about metrics and procurement’s ultimate impact cut to the chase. Fancy slides and words are all well and good, but the execution and impact of those words is what really matters.
First, and fundamentally, contribution to net income is measured – a tool that’s used to track the impact of negotiated cost savings and any cost-engineering programmes that have been driven by procurement. Second, payment terms and the impact on cash; third, quality and nonconformance; fourth, the cost and return on investment of the function; and, finally, innovation impact.
One thing that struck me was the CPO in question was very clear in explaining that they don’t track cost avoidance. It struck me how blunt the statement was – especially following a period of such dramatic inflation.
The approach makes sense; presenting cost avoidance as a metric and reporting it as part of a financial dashboard is notoriously difficult and can soon erode procurement’s credibility.
There is no doubt that procurement’s work to mitigate price increases does bring value to an organisation, but capturing and reporting that impact can cause more problems with the CFO than the benefits provided.
It clearly doesn’t stop most procurement functions doing so, but it was refreshing to hear such a no-nonsense approach.
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