What Gets Measured Gets Managed
Define KPIs during the sourcing event (not after contract signature). They must be SMART: Specific, Measurable, Achievable, Relevant, and Time-bound.
Key Performance Indicator Framework
| Category | Example KPI | Target |
|---|---|---|
| Cost | Realized savings vs. baseline | ≥ X% per year |
| Cost | Price compliance (actual vs. contractual) | ≥ 98% |
| Quality | Defect rate / rejection rate | < 0.5% |
| Delivery | On-Time Delivery (OTD) | ≥ 95% |
| Delivery | On-Time In-Full (OTIF) | ≥ 92% |
| Service | Incident resolution time | < 5 business days |
| Innovation | Improvement proposals | ≥ 2 per year |
| Sustainability | Carbon footprint reduction | Annual reduction |
💡 Key Takeaway: KPIs must be defined during the sourcing event, not after. If you wait until contract signature to define how you'll measure success, you've lost the opportunity to embed these metrics in the contract.