Purchasers or Purchase Managers need visibility into the extent of unstructured purchase that is bypassing the internal procurement process which should be mostly based on supplier contracts and purchase orders. This is also known as Maverick spend.
These purchases can ultimately be costly for businesses. Purchasers want to control the maverick spending and want to identify chances to reduce or negotiate purchasing prices, to buy less or to reduce additional operational costs for example for clarifying the legitimacy of the supplier invoices without purchase orders.
The Maverick Spend KPI helps to identify the area’s of improvement.
The KPI Maverick Spend in % compares the supplier invoices without a reference to a purchase order with all the supplier invoices. It displays the result in % for the last 12 months and a graph showing the details per month.
With a Click on the tile, you get more details showing the target and the option to change views, for example to a table view.
Coming from the KPI you can analyses further data on details and exceptions (Button Analyze Data) through drilling down in the report, for example, to identify for which product category the maverick spend happened or which suppliers were mostly affected.
Set up of the KPI ‘Maverick Spend %’:
The KPI is based on the “Maverick spend” standard report (SRMIV_B03_Q0009) with the key figure Maverick Spend Ratio which you can find in the “Sourcing and Contracting” work center for purchasers. In order to adapt the report views and selections for your needs you might need to do the changes in the “Business Analytics” work center in the Design Reports view.
In the Business Analytics work center under the Design KPI’s view, you can also create and change KPIs. In the following can you see the settings for the Maverick Spend (%) KPI:
a.) General Tab: Here you reuse the views and selections from the “Maverick Spend” report such as the selection for the last 12 months. The calculation explanation of the key figure you find here.
b.) Values and Thresholds: Here we used fixed values for target and reference values but you can also get values from the report.
The target is set here to 5%, a warning is displayed over 7% and alerts beyond 10 %. You might want to adapt this to your needs.
c.) Additional Contexts: These are additional report views you want to display in the KPI.
d) Filter: If you want to use KPI Filters to create KPI variants, the company might be useful.
This blog post is part of a series of blog posts introducing KPIs for process monitoring and optimization purposes Process Monitoring and Optimization KPI’s.