Procurement Analytics — 10 Metrics to Track in 2025 [+ Examples]

What is Procurement Analytics?

Procurement analytics is the process of collecting and analyzing procurement data to aid important business decision-making.

It is also a process that gives you and your office important insights into the whole procurement process.

There are many forms of procurement analytics available; some may range from historical data from actual purchases while others are advanced programs that can predict and create budgets for future purchases.

In the past, procurement analytics meant documents upon documents of data, usually printed out in Microsoft Excel and they all bring in reports of past purchases done by the company in the past.

The newer form of procurement analytics is powered by AI that has automated procurement analytics that can combine many data sources.

10 Metrics to Include in Your Procurement Analytics 

Tracking key procurement metrics help businesses optimize costs, strengthen supplier relationships, and improve efficiency. Below are the ten essential procurement analytics metrics with a real-life example of how Walmart utilizes them: 

1. Key figures (Cost of Goods, Volume, etc)

Every analysis starts with the basics, so does the forming of a clear procurement plan. The Total Cost of Goods Sold (COGS) is the cumulative cost of all spend purchases.

Make sure you decide whether to take or not into account all costs incurred during the procurement phase and include all direct and indirect costs of a product or system. It’s not limited to just the purchase price but includes transaction fees, warehousing, and other incidental costs.

Volume is the total amount of pieces that you are buying. If needed, make a clear distinction between cost of goods sold & volume bought against regular and promotional prices.

2. Spend under management

Spend under management is the total amount of spend that is actively managed by you as a procurement manager. This figure can include every product group, category, or supplier that you are working with, or can be divided into separate metrics that represent a specific region or category.

Spend under management is an important metric for a procurement organization because it reflects maturity and controls overspending. 

3. Value chain analysis

A value chain is a concept describing the full chain of your business’s activities in the creation of a product or service — from the initial reception of materials all the way through its delivery to market, and everything in between.

The value chain concept was first described in 1985 by Michael Porter, in his book Competitive Advantage: Creating and Sustaining Superior Performance. The value chain framework helps organizations understand and evaluate sources of positive and negative cost efficiency.

Conducting a value chain analysis can help you to diagnose points of ineffectiveness for corrective action, understand linkages and dependencies between different activities and areas in your business and create a cost advantage over competitors.

4. Cost price breakdown

The cost price breakdown is the process of identifying the individual elements that comprise the total cost of your bought goods or services. It assigns a specific value to each element. Alternately, the value of the individual elements are expressed as a percentage of the total cost.

A good cost breakdown structure provides insight on overspend, or underspend, against your original plan. Having a good structure makes it straightforward to understand deviations. When you see a deviation from the plan within a cost category early it is easier to make the right decisions for improvement

5. Number of suppliers

The number of suppliers tells you how many distinct suppliers are being used in your procurement organization, or in a specific category. Reducing the number of overlapping suppliers in a category can result in efficiencies or cost savings. Increasing the number of suppliers in key categories may be advantageous to reduce supply risk.

6. Cost Savings

Cost savings is measured by the cumulative amount of savings gained. You could break them down per category and/or supplier for focused measurement. They are followed over a time period to see how cost-saving targets are met.

Cost savings could be achieved through aggregating spend, taking out longer-term contracts or introducing more competition, ordering in larger quantities, standardizing and rationalizing the spend, or using combinations of these different levers.

7. Payment terms

Average payment terms measure the average time (in days) invoices are paid by, calculated using every single instance of payment term information. Improving payment terms among suppliers is a perfect way of improving your company’s working capital.

While the improvement in working capital will not be reflected in financial statements, you can calculate savings based on proxies such as the cost of borrowing.

For example, by increasing average payment terms from 0 to 45 days across your supplier, you are able to save 20.000 dollars in interest charges.

8. Contract coverage

Contract coverage measures the amount of spend that is covered by a contract. Increasing the amount of spend that is covered by contracts (or procurement approved purchase orders) can result in savings, while also reducing compliance risk.

9. Exchange rate

This only applies if you buy and sell goods or services outside of your own country. Exchange rate exposure measures the changes currency fluctuations and conversions have on the overall spend. The long-term impact of exchange rates can be measured and isolated from realized savings measurement.

For example: Over the last financial term, the procurement team’s contribution of €3m euro spend reduction was offset by an increase of €900K euro costs from the increasing value of the US dollar.

10. Supplier Rating

The unhappier you are with the performance of your supplier, the higher the need to reduce dependency. Supplier accountability measures suppliers’ performance and how they are responsible for handling deliveries, quality issues, errors, and claims.

The goal of vendor accountability is to ensure that the overall best product or service is delivered and to develop more strategic supplier relationships.

Types of Procurement Analytics Explained

1. Diagnostic Analytics

This looks at historical procurement data to identify the root causes of past issues. It helps you understand why something happened and what factors contributed to cost fluctuations, supplier performance issues, or delays. 

Let me give you an example: Walmart faced recurring delays in supplier deliveries, which affected the inventory levels in their store. To understand the issue, Walmart analyzed historical delivery data, supplier lead times, and transportation bottlenecks.

Walmart then found that specific routes had longer customs clearance times, causing late shipments. Due to this, Walmart optimized its logistics strategy by partnering with alternative shipping providers and streamlining documentation processes. 

As a result, delivery times improved, and Walmart ensured better stock availability in its stores. 

2. Descriptive Analytics

This focuses on summarizing past data and providing insights into spending patterns, supplier performance, and contract compliance.  

For example, Amazon uses descriptive analytics to track its procurement spending across various product categories. Doing this, Amazon discovered that one supplier was consistently charging them higher prices for packaging materials compared to others. 

This insight allowed Amazon’s team to renegotiate better contracts and consolidate orders with cost-effective vendors, ultimately reducing procurement costs and improving profit margins. 

3. Predictive Analytics

This uses historical data, trends, and statistical models to forecast future procurement performance. It helps you anticipate demand changes, supplier risks, and cost fluctuations.

For instance,  Starbucks relies on predictive analytics to anticipate coffee bean price fluctuations based on weather conditions, demand trends, and currency exchange rates.

By analyzing data from previous years, Starbucks predicted that an upcoming drought in a key coffee-growing region would lead to supply shortages and price increases.

Acting on this forecast, Starbucks secured contracts with multiple suppliers in advance, ensuring a stable supply of coffee beans while mitigating the risk of rising costs.

4. Prescriptive Analytics

This analytics shows actionable insights and possible future procurement performance scenarios. It can help you define specific steps to achieve purchasing goals and mitigate risks and disruptions.

An example of this would be Tesla relying on this analytics to enhance its supply chain for electric vehicle batteries. 

Given the high demand and fluctuating prices of lithium and cobalt, Tesla’s analytics system recommended sourcing raw materials from multiple suppliers across different regions. Additionally, it suggested long-term contracts to stabilize costs and reduce dependency on a single supplier. 

Following these recommendations, Tesla secured long-term supply agreements for battery materials, reducing production costs and ensuring stable supply for its electric vehicles.

Examples of Procurement Analytics

1. Spend analytics

Spend analytics is the analysis of procurement spending data taken from internal or external sources which include:

• Invoice analytics – Analysis of invoice data and payment cycles from internal or external data sources.
• Purchase order analytics  – The analysis of purchase orders, maverick spend, and purchase order cycle times.
• Payment term analytics – Analytics on working capital improvement opportunities.

2. Supplier Analytics

Supplier analytics is the analysis and comparison of individual suppliers’ performance, analysis of supplier risks, analysis of sustainability, and analysis of supplier base. 

3. Contract analytics

Contract analytics is the analysis of suppliers’ contracts and their meta-data which include the payment terms and expiration dates. 

4. Spend forecasting

Spend forecasting is the analysis of future procurement spending data and its impact on profitability. 

5. Market benchmarking 

This analysis evaluates the risks and discovers opportunities by benchmarking your purchase prices against the market price development. 

Procurement Performance Analytics- How to Track Procurement

Before we talk about tracking procurement, it is only right that we start talking about the different generations of procurement analysis tools that are currently being used. By recognizing these tools, the procurement manager is also able to identify how to use each tool and when to use these tools.

• Generation 1 (1990-2000) – These are procurement performance analytics done in Microsoft Excel by business analysts and/or consultants. It largely focuses on past procurement spend analysis. While crude and often has less information, it is still reliable than simply counting fingers and basing each purchase order on memory.
• Generation 2 (2000-2010) – These are procurement analysis software often installed on a desktop computer. Often paid for as legitimate software and with a license, procurement data is often stored inside an in-house data center or the company firewall. Often used by small or middle-sized businesses.
• Generation 3 (2010-2015) – Browser-based analysis software often used and bought by start-ups. These are the type of tools that use analytics dashboards to provide business intelligence level visualizations and usability.
• Generation 4 (2015-present) – The future of procurement performance analytics, this AI-driven software is often automated and combines many data sources. Sometimes used by start-ups to project future procurement insights.

Once we’ve already determined the different procurement performance analytics tools that one can use, then it’s time we talk about the actual process.