Creating a Purchased Price Index as a Key Performance Indicator

Author(s):

Robi Bendorf, C.P.M.
Robi Bendorf, C.P.M., Consultant, Bendorf & Associates, (www.bendorf.com), 412-856-4453, robi@bendorf.com

91st Annual International Conference Proceedings - 2006 - Minneapolis, MN
Abstract

Developing and maintaining a Purchased Price Index and comparing it to external indexes is an essential Key Performance Indicator (KPI) to demonstrate Supply Management's value added. A rather common issue for Supply Management organizations is their desire to provide faster information that clearly shows that they are in fact doing a good job at obtaining best pricing from suppliers. This can be extremely difficult when cost reductions are difficult to obtain and prices are going up because of economic conditions that fall beyond the control of the either buyer or seller. One of the best ways to show Supply Management’s pricing performance is to compare the changes in prices paid by the organization to the changes in published Indexes. This article will explain this process by taking the reader through a typical scenario.

Creating a Purchased Price Index as a Key Performance Indicator — 69 KB (PDF)