Procurement controlling: How to make procurement a driver of success

What is procurement controlling?

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 procurement management with relevant information to ensure the economic efficiency and performance of procurement. It goes far beyond mere cost control and includes strategic aspects such as vendor management, risk assessment and the optimization 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 optimization: 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 analyzing 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 vendor or geopolitical instability, is crucial. Controlling helps to ensure the security of supply and develop contingency plans.
• Quality assurance in procurement: It provides tools to systematically measure and improve the quality of materials and the performance of vendors (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 operational level: day-to-day business under control

The operational level is concerned with the short to medium-term planning, management and control of daily procurement processes. The work here is very data-intensive and reactive. The aim is to ensure efficiency and take immediate countermeasures in the event of deviations. The core tasks include:

• Budget monitoring: Comparison of actual expenditure with planned budgets.
• Order processing: Monitoring order quantities, prices and delivery dates.
• Vendor performance: Measurement of delivery reliability and quality.
• Inventory controlling: Monitoring stock levels to avoid bottlenecks or overstocking.

The strategic level: setting the course for the future

Strategic procurement controlling takes a long-term view of the future and makes a direct contribution to achieving the company's overarching goals. The aim is to align procurement in such a way that it creates sustainable competitive advantages. The tasks are analytical, proactive and closely linked to management:

• Procurement market research: Analysis of global markets, trends and potential new vendors.
• Vendor portfolio management: Strategic selection, development and classification of vendors to minimize risks.
• Risk management: Identification and evaluation of potential risks in the supply chain (e.g. political instability, insolvency of a key vendor).
• Make-or-buy analyses: Well-founded decision templates on whether a product should be manufactured in-house or sourced externally.

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 prioritization tool. It classifies materials or vendors 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.
• Vendor evaluation: A systematic process in which vendors 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 vendor 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 optimization potential and helps to set realistic targets.

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

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 optimization. Data-based management is also 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 procurement.
• Maverick buying rate: Shows the proportion of procurements that are made outside of standardized processes and without the involvement of procurement. 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 vendor 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.

Procurement controlling with simple system

If you order indirect materials and C-parts through simple system, the data for controlling is already in one place. The controlling module provides procurement analyses of orders, prices and vendors as well as Power BI based group reports. Cost centers, general ledgers and budgets are maintained directly in the platform, so budget monitoring and the maverick buying rate become visible without manual analysis.

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, minimizes 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.