Procurement Metrics That Drive Decisions and Show Value

In recent years, supply management has secured its long-sought seat at the executive table, but leaders shouldn’t be there just to drive discussion. They should explain performance in way that drives decision-making.

That was the theme of a recent webinar hosted by CAPS Research, the Tempe, Arizona-based program in strategic partnership with Institute for Supply Management^® (ISM^®) and Arizona State University. In “Supply Management Metrics: Measure Performance, Justify Head Count, Communicate Value,” CAPS Research Interim Executive Director Geoff Zwemke outlined a persistent gap across organizations.

Many procurement teams have metrics but are unable to translate them into clear, credible narratives that influence business decisions. “They can answer parts of the question,” Zwemke said. “But connecting those pieces into a narrative is where the challenge shows up.”

For decades, procurement organizations focused on tracking performance via such efficiency measures as cost savings, TCO and spend under management. That scope has expanded significantly — to the function’s impact on risk, resilience and overall business value — while executive scrutiny has intensified.

“The bar has moved,” Zwemke said. “What supply management is expected to deliver is broader than it was even just two years ago.” But capability has not kept pace. According to CAPS Research data, organizations rate their data and analytics maturity at just 2.4 out of 5 on average. The issue is not a lack of data, but rather its usability.

“Companies have data — sometimes too much,” Zwemke said. “It’s just not always consistent, comparable or trusted across the business.” And that lack of trust, he said, results in meetings or communication that stall over definitions instead of advancing decisions.

Context Is the Missing Link

CAPS Research’s benchmarking work — built on decades of data from hundreds of global organizations — aims to provide missing context. By standardizing definitions and enabling peer comparisons, benchmarking allows organizations to move beyond isolated performance metrics.

“Internal numbers don’t settle conversations,” Zwemke said. “Clear comparisons do.”

Without that external lens, the same data can be interpreted differently across functions. Finance may focus on savings and return on investment, while procurement emphasizes supply chain performance and reliability. The result is misalignment, even when everyone is working from the same numbers.

Zwemke emphasized that the issue is not the quantity of metrics, but how they are applied. “It’s not always about adding more data,” he said. “It’s changing how it’s interpreted.”

CAPS Research Interim Executive Director Geoff Zwemke discussed how supply managers can close the gap between discussion and decision-making during the “Supply Management Metrics: Measure Performance, Justify Head Count, Communicate Value” webinar.

He highlighted three core metrics that, when used together and in context, can transform how supply management communicates its performance:

Managed spend as a percentage of sourceable spend reflects coverage — how much of the organization’s purchasing activity is influenced by supply management. However, it should track categories that have traditionally been outside the function’s reach, including marketing, IT and professional services.

Sourceable spend per full-time employee (FTE) is often viewed as a measure of efficiency. But Zwemke cautioned that higher ratios could signal constraint rather than strength, while lower ratios might indicate greater strategic focus or broader coverage. “The number itself doesn’t tell you as much on its own,” he said. “It’s the context that matters.”

Supply management ROI demonstrates the function’s financial impact, often expressed as savings generated per dollar of operating expense. But ROI has limitations: Organizations can achieve strong ROI while still facing gaps in coverage or capacity, meaning opportunities may be left on the table.

Together, these metrics offer a fuller picture of how supply management operates and can help organizations identify trade-offs. For example, low coverage and high spend per FTE may indicate a team that is less engaged and overstretched; high coverage and low spend per FTE could suggest broad involvement but potential inefficiencies.

“You move from descriptive to directional,” Zwemke said, “because (the metrics) have shown you where to look and what questions to ask.” When ROI is added to the metrics mix, he said, conversations shift from whether supply management is delivering value to how that value can be expanded and sustained.

Benchmarking and Starting Small

Despite widespread access to data, many organizations struggle to make this transition, Zwemke said, due to such recurring issues as (1) metrics used in isolation rather than in combination, (2) a lack of standardized definitions across teams, (3) an absence of external benchmarks and (4) a weak linkage between metrics and decision-making.

Changes in leadership, strategy or organizational structure can disrupt established reporting practices, even at mature organizations.

“Data can explain what happened,” Zwemke said. “But it doesn’t always help answer what to do next.” The bridge between reporting and action, he added, is benchmarking that compares performance against peers, whether across sectors or within specific industries — giving organizations a clearer understanding of where they stand.

CAPS Research’s benchmarking platform allows companies to analyze performance across dozens of key performance indicators, filter by industry and examine quartile rankings. “These comparisons create a shared starting point,” Zwemke said.

For organizations looking to improve, the path forward does not require a complete overhaul. Zwemke advised starting with a small set of metrics, such as the trio detailed above, and focusing on how they are used in combination.

The ultimate goal is to shift from reporting metrics to using them as inputs for such decisions as how to structure teams and where to invest resources. This enables supply management to better communicate its impact — and its value.

“It’s not just about having metrics,” Zwemke said. “It’s about being able to show how you compare, as well as what that means.”

(Image credit: Getty Images/Merovingian)