It is essential for the success of any organization that its procurement operations be executed in the most efficient manner. Procurement covers an entire gamut of activities that include negotiating better rates with suppliers, purchasing the right goods or services at the right time with the right quality and quantity, streamlining vendor management, and aligning sourcing with sustainability and innovation goals. An efficient procurement process is often interconnected with back-office functions like accounts payable automation, which streamlines accounts payable invoice processing and payment cycles. If the procurement function fails or is inefficient, the consequences could be quite serious for an organization, impacting its bottom line and strategic growth.
Businesses track a range of metrics and Key Performance Indicators (KPIs) to evaluate if the procurement function is operating effectively. Metrics are measurable values that assess specific business activities or processes. KPIs are also metrics, but they are more strategic in nature and help in tracking progress against key goals or targets that have been set. They are quite narrow and focused and evaluate the success of a company in reaching objectives. KPIs are of interest to the senior leadership of an organization to closely track and assess the effectiveness of its procurement function.
Procurement KPIs help answer critical questions: How efficient is the company’s procurement cycle? Is it getting optimum value from suppliers? Is it aligned with sustainability goals? It is also important to note that purchase order (PO) metrics directly impact procurement KPIs, making alignment between the two vital.
Key Purchase Order Metrics and Their Impact on Procurement KPIs
There are several PO metrics that are typically tracked. Let us examine how some of these metrics are connected to procurement KPIs.
- PO accuracy: Errors in the PO could lead to missed discounts, invoice mismatches, and strained supplier relationships. They have a direct bearing on cost savings and contract compliance KPIs and help with the reduction in maverick spending and issues with suppliers.
- PO cycle time: PO cycle time refers to the total time it takes from the moment a purchase requisition is raised until a PO is actually issued to the supplier. A high PO cycle time is indicative of one of the core KPIs in procurement — procurement cycle efficiency. Delays in approvals, communication with vendors, or order processing are some of the reasons for a high PO cycle time. A reduction in the PO cycle time is in the best interests of the organization and reflects a more agile and efficient procurement process.
- PO compliance: This metric measures how closely procurement activities adhere to established purchasing processes. It tracks whether the POs are raised against approved vendors or negotiated contracts. It, in turn, supports the KPI of procurement policy adherence and helps mitigate supplier risk and improve internal and regulatory compliance.
- On-time delivery rate: In today’s customer-centric market, on-time delivery is no longer a competitive advantage — it is a basic expectation, whether in B2B or B2C environments. Delays in delivery can erode trust, impact downstream operations, and result in lost revenue. The On-Time Delivery Rate metric for POs helps with monitoring and managing supplier performance, which is one of the most crucial KPIs. Close tracking of this KPI helps build stronger supply chain reliability, reduce stock holding costs and improve customer satisfaction.
- Order-to-payment cycle: This metric measures the total time which has elapsed since issuing a purchase order (PO) to making the final payment to the supplier. It is important for improved cash flow visibility and liquidity management and builds supplier trust through predictable and timely payments. The tracking of this metric helps optimize the procurement-to-pay (P2P) process and aligns procurement performance with finance-focused KPIs.
- Cost per PO: There is an administrative cost associated with the creation and processing of each PO. If the cost per PO is high, then it reveals inefficiencies in the PO processes, such as high error rates, and in turn can impact procurement cost savings KPIs. Purchase order metrics may seem granular, but they are the building blocks of strategic procurement success. When measured and managed well, they enable procurement teams to hit KPIs around cost savings, efficiency, supplier performance, and compliance. In a market that demands transparency, agility and value creation, smart procurement leaders know that mastering PO metrics is really not an option but an imperative.
How can Infosys BPM help?
Accounts Payable (AP) plays a central role in both Finance & Accounting (F&A) and supply chain operations. The Infosys BPM Accounts Payable on Cloud (APOC) SaaS platform reimagines the Invoice-to-Pay process using an Agentic AI framework and intelligent AI agents — delivering rapid time-to-value while elevating the stakeholder experience.
As a unified interface for all invoice processing needs, APOC is built on deep domain expertise and designed to significantly enhance the 3Es of AP performance: Efficiency, Effectiveness and Experience. The platform empowers organizations with real-time insights and seamless automation, helping AP functions drive measurable improvements across critical business metrics.
