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Procurement

Vendor performance scoring and spend analytics

Overview

The Procurement dashboard provides intelligence about your vendor relationships and purchasing practices. It helps you answer critical questions:

  • Are vendors delivering on time and as promised?
  • Are we following our purchasing policies?
  • Are prices stable or creeping up?
  • Which vendors deserve more of our business?

Procurement Health Score

The Score

The Procurement Health Score (0-100) measures the overall health of your procurement operations:

Score Grade Meaning
80-100 A Excellent procurement practices
70-79 B Good with minor improvements needed
60-69 C Fair, several areas need attention
50-59 D Poor, significant policy compliance issues
Below 50 F Critical, procurement risk is high

Score Components

The score is a weighted average of:

Component Weight What It Measures
OTIF 35% On-Time In-Full delivery
PPV 25% Purchase Price Variance
Maverick Spend 25% Bills without purchase orders
Terms Compliance 15% Payment terms adherence

Weights are configurable in Settings.

Key Metrics

Header Metrics

Metric Description
Health Score Overall procurement health
Total Vendors Number of active vendors
Total Spend Total purchases in period
Maverick Spend % Percentage of bills without POs
PO Compliance Purchases following proper process
OTIF Rate On-time, in-full delivery percentage
Cash Leakage % Early payments losing discount opportunity
PPV Price variance vs. purchase orders
HHI Index Vendor concentration risk

Performance Metrics Explained

OTIF (On-Time In-Full)

Measures whether vendors deliver what you ordered, when you ordered it.

OTIF = (Orders Delivered On Time AND In Full) ÷ Total Orders × 100
OTIF Rate Performance
95%+ Excellent
85-95% Good
70-85% Needs improvement
Below 70% Poor

On-Time: Delivered within the agreed delivery window (default: 3 days grace) In-Full: Correct quantity, no partial shipments or backorders

Maverick Spend

Purchases made without a purchase order — circumventing approval processes.

Maverick Spend % = Bills Without POs ÷ Total Bill Amount × 100
Maverick % Status
Under 10% Excellent compliance
10-20% Acceptable
20-30% Needs attention
Over 30% Serious policy problem

Why it matters:

  • Bypasses approval workflows
  • No price negotiation opportunity
  • May violate procurement policies
  • Harder to budget and forecast

Purchase Price Variance (PPV)

Difference between what you agreed to pay (PO price) and what you actually paid (invoice).

PPV = (Invoice Price - PO Price) ÷ PO Price × 100

Positive PPV = paid more than agreed Negative PPV = paid less than agreed

PPV Interpretation
< -5% Good savings, verify quality
-5% to +5% Normal variance
> 5% Investigate price increases
> 10% Urgent attention needed

Cash Flow Leakage

Money lost by paying too early (before terms require).

Leakage = Early Payments × (Days Early × Daily Interest Rate)

If you pay 15 days early on $100,000 with a 5% cost of capital:

Leakage = $100,000 × 15 × (0.05/365) = $205

This adds up across many transactions.

HHI Concentration Index

The Herfindahl-Hirschman Index measures vendor concentration risk.

HHI Concentration
Under 1500 Low (healthy diversity)
1500-2500 Moderate
Over 2500 High (risky)

High concentration means you're dependent on a few vendors. If one fails, you're vulnerable.

Dashboard Sections

Vendor Scorecard

Ranking of vendors by performance:

Column Description
Vendor Vendor name
Total Spend Amount purchased
OTIF Score Delivery performance
PPV Price variance
Maverick % Purchases without POs
Overall Score Weighted performance

Leverage Matrix

Visual quadrant analysis of vendors:

Quadrant Characteristics Strategy
Strategic High spend, high complexity Partner closely
Bottleneck Low spend, high complexity Reduce risk
Leverage High spend, low complexity Negotiate hard
Transactional Low spend, low complexity Simplify/automate

Concentration Analysis

  • Pie chart of spend distribution
  • HHI score and trend
  • Top vendors by percentage

Contract Renewal Tracker

Upcoming contract expirations:

  • Vendor name
  • Contract end date
  • Auto-renewal flag (warning!)
  • Spend at risk

Using the Dashboard

Weekly Review

  1. Check overall health score
  2. Review any Critical vendor performance issues
  3. Check for upcoming contract renewals
  4. Monitor maverick spend trends

Monthly Analysis

  1. Deep-dive on OTIF performance
  2. Analyze PPV trends (are prices rising?)
  3. Review leverage matrix for strategic changes
  4. Assess concentration risk

Quarterly Strategic Review

  1. Evaluate vendor relationships
  2. Identify consolidation opportunities
  3. Plan contract negotiations
  4. Adjust scorecard weights if needed

Configuration Options

Access via Settings → Procurement:

Scorecard Weights

Setting Purpose Default
OTIF Weight Importance of delivery 35%
PPV Weight Importance of pricing 25%
Maverick Weight Importance of compliance 25%
Terms Weight Importance of terms 15%

Weights must total 100%.

Performance Thresholds

Setting Purpose Default
Maverick Warning Yellow flag level 15%
Maverick Critical Red flag level 30%
PPV Threshold Alert on variance over 10%
On-Time Window Grace days for delivery 3 days

Concentration Settings

Setting Purpose Default
HHI Warning Moderate concentration 1500
HHI Critical High concentration 2500

Best Practices

Reduce Maverick Spend

  1. Make PO process easier
  2. Train requestors on policy
  3. Set up automated approvals for low amounts
  4. Require PO number on all invoices

Improve OTIF

  1. Share scores with underperforming vendors
  2. Include OTIF in contract terms
  3. Consider alternative vendors for chronic poor performers

Manage Concentration

  1. Actively develop backup vendors
  2. Don't let any vendor exceed 20% of category spend
  3. Consider multi-sourcing for critical items

Optimize Cash Flow

  1. Use payment terms (don't pay early without discount)
  2. Negotiate better terms with leverage vendors
  3. Automate payment scheduling

Common Questions

Why is my maverick spend so high?

Common causes:

  • PO process is too slow or cumbersome
  • Employees don't understand the policy
  • Emergency purchases not converted to POs
  • Vendor doesn't require PO reference

How do I improve a vendor's score?

Share the scorecard with them. Most vendors will improve when they see objective performance data and understand the impact on your relationship.

Should I drop low-scoring vendors?

Not necessarily. Consider:

  • Can they improve?
  • Are alternatives available?
  • Is the relationship strategic?
  • What would switching cost?

What if a vendor has no POs (all maverick)?

This vendor may be a candidate for:

  • Blanket PO (standing order)
  • Preferred vendor list (pre-approved)
  • Better P-card controls

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