Procurement Controlling: How to Use the Right Tools to Turn Purchasing into a Driver of Success in Your Company

Procurement controlling is a sub-area of company-wide controlling and business administration that focuses on the planning, management, measurement and control of all processes within procurement. Its primary task is to provide company management and purchasing management with relevant information to ensure the economic efficiency and performance of purchasing. It goes far beyond mere cost control and includes strategic aspects such as supplier management, risk assessment and the optimisation of the entire supply chain in order to make a measurable contribution to the company's success.

The central objectives: Why every company needs procurement controlling

Modern procurement has long since ceased to be a mere ordering department. It acts as a strategic partner that makes a significant contribution to value creation. In order to fulfill this role effectively, it needs a data-based foundation. Procurement controlling provides precisely this and pursues several core objectives that directly contribute to the success of the company. It ensures that overarching procurement not only works but is continuously optimized.

• Cost transparency and optimisation:
  The primary goal is to create a clear overview of all procurement costs - from direct material costs to process and transport costs to warehousing costs. Only those who know their costs in detail can reduce them in a targeted manner.
• Increasing efficiency and effectiveness:
  Inefficient processes are uncovered by analysing processes. The aim is to do the right things (effectiveness) with the least possible effort (efficiency), for example, by automating routine tasks.
• Risk management and security of supply:
  Identifying risks, such as dependence on a single supplier or geopolitical instability, is crucial. Controlling helps to ensure the security of supply and develop contingency plans.
• Quality assurance in purchasing:
  It provides tools to systematically measure and improve the quality of materials and the performance of suppliers (e.g. delivery reliability, complaint rates).
• Strategic support for company management:
  The processed data and analyses serve as a sound basis for management decisions, such as make-or-buy decisions or the development of new procurement markets.

Operational vs. strategic tasks in procurement controlling

In order to achieve the various objectives, the work in procurement controlling is divided into two levels: operational and strategic. While the operational level secures day-to-day business, the strategic level sets the course for long-term success. A well-functioning system links both areas seamlessly.

The most important instruments in procurement controlling

Procurement controlling uses a set of tried-and-tested tools to fulfil operational and strategic tasks. The art lies in selecting the right tool for the respective issue and interpreting the results correctly.

• ABC analysis:
  A classic prioritisation tool. It classifies materials or suppliers according to their value share of the total volume. A-parts have a high value share and require the most attention, while C-parts are managed with less effort.
• XYZ analysis:
  This tool classifies goods according to the regularity of their consumption. X goods are needed constantly and are easy to plan, while Z goods have a very irregular demand.
• Supplier evaluation:
  A systematic process in which suppliers are evaluated based on hard facts (price, delivery reliability, quality) and soft factors (communication, innovative strength) to create an objective basis for decision-making.
• Procurement portfolio analysis (Kraljic matrix):
  This helps to develop supplier strategies by classifying products according to their procurement risk and their impact on profits.
• Benchmarking:
  The comparison of your own processes, costs and key figures with those of the best competitors or industry leaders. This uncovers optimisation potential and helps to set realistic targets.

The right key performance indicators (KPIs) for measuring success in purchasing

You can't manage what you can't measure. Key performance indicators (KPIs) are at the heart of procurement control. They translate objectives into measurable variables and make the success or failure of measures visible. A good selection of procurement KPIs is the basis for any data-supported optimisation. Current studies, such as "Purchasing of the Future" by Fraunhofer IML and the BME show that data-based management is becoming increasingly important for the resilience of supply chains.

• Savings:
  Measure the price reductions achieved compared to previous periods or budgets. This is the classic value contribution of purchasing.
• Maverick buying rate:
  Shows the proportion of procurements that are made outside of standardised processes and without the involvement of purchasing. A high rate indicates inefficient processes or a lack of acceptance.
• On-time delivery rate:
  Indicates the percentage of deliveries that arrive on time at the agreed date. A key indicator of the reliability of the supply chain.
• Complaint rate:
  Measures the proportion of faulty deliveries in the total quantity. A direct indicator of supplier and material quality.
• Total Cost of Ownership (TCO):
  In addition to the pure purchase price, it takes into account all the costs that a product incurs over its life cycle - from transportation and storage to disposal. This enables a holistic view of costs.

Conclusion: Procurement controlling as a driver of corporate success

Procurement controlling is much more than just counting savings. It is an indispensable management tool that creates transparency, minimises risks and develops procurement from a reactive ordering department to a proactive strategic partner in the company. Through the targeted use of the right instruments and key figures, it provides the decisive data to ensure profitability and strengthen competitiveness in the long term. In a global economy characterised by volatility, strong procurement controlling is no longer a "nice-to-have", but a business necessity for every forward-looking company.