Best Procurement KPIs to Measure and Track in 2025
In 2025, procurement is more than a cost-cutting function—it’s a strategic driver of business growth, risk management, and innovation. But you can’t improve what you don’t measure. Tracking the right Key Performance Indicators (KPIs) ensures your procurement team delivers measurable value aligned with your company’s strategic goals.
Here are the most important procurement KPIs to measure and track in 2025.
1. Cost Savings (Realized vs. Forecasted)
Why it matters: This is still the most visible measure of procurement’s impact. But in 2025, stakeholders expect transparency between forecasted savings (from sourcing initiatives) and realized savings (actual results after implementation). It is important to track actual savings after finishing your sourcing projects and make sure that the chosen suppliers are actually being used by the business and operating as contractually required.
Formula: Savings % = Total Savings Realized ÷ Total Spend Sourced X 100
2. Cost Avoidance
Why it matters: Avoidance is often overlooked but critical—it reflects procurement’s ability to prevent cost increases through negotiation, alternative sourcing, or process changes. And when you don’t have an existing cost base for comparison purposes or the spend is of a non-recurring nature, any savings achieved would be classified as cost avoidance.
Example: Negotiating the purchase of new equipment, new items without a historical cost base or negotiating to keep pricing flat despite raw material inflation.
3. Spend Under Management (SUM)
Why it matters: This measures the percentage of total organizational spend that procurement actively manages. High SUM means a stronger partnership with the business, better governance, leverage, and visibility. Those companies with a low SUM percentage are effectively allowing too many areas of the business do their own buying, often without the skills to perform market analysis and negotiate the best deals with appropriate contractual safeguards and out clauses. I have often seen contracts negotiated without the involvement of procurement giving up ownership rights to products and processes co-developed with their suppliers.
Formula: SUM % = Sourced Spend ÷ Total Third Party Spend Base X 100
Target for 2025: Leading organizations aim for 80%+ SUM and work to develop relationships and expertise to manage additional areas of the business.
4. Procurement ROI
Why it matters: Procurement’s value should be measured like any investment. ROI compares savings and value generated to the cost of running the procurement function.
Formula:
Procurement ROI=Total Value Delivered/Procurement Operating
5. Supplier Performance Score
Why it matters: A healthy supplier base ensures quality, on-time delivery, and innovation. Track supplier performance using scorecards that include quality metrics, delivery times, responsiveness, and compliance. Review at least quarterly and use as input for supplier development plans.
6. Maverick Spend
Why it matters: Maverick spend is purchasing made outside approved processes or suppliers. High levels mean lost savings, compliance risks, and reduced control.
Target for 2025: Keep below 5% of total spend.
7. Supplier Risk Score
Why it matters: In 2025, supply chain risk—from geopolitical instability to ESG non-compliance—is a top concern. Risk scores combine financial stability, operational performance, and compliance ratings to proactively flag potential issues.
8. Contract Compliance Rate
Why it matters: Ensures purchases follow agreed pricing, terms, and suppliers. Low compliance erodes negotiated savings.
9. ESG & Supplier Diversity Metrics
Why it matters: Many customers and investors expect ESG alignment. Tracking the percentage of spend with sustainable, ethical, and diverse suppliers not only meets compliance but also opens new business opportunities.
Target for 2025: At least 15–20% with diverse and ESG-compliant suppliers for competitive advantage.
How to Succeed with Procurement KPIs in 2025
Align KPIs with business objectives – Choose metrics that directly support company strategy.
Review quarterly – KPIs should drive decisions, not sit in a dashboard.
Balance savings with value – Focus on innovation, speed, and risk reduction alongside cost metrics.
At AES Consulting & Business Services LLC, we help organizations identify the right KPIs, implement measurement systems, and transform procurement into a results-driven function. Contact us to start improving your procurement performance in 2025.