A key performance indicator [KPI] is a term for a performance measure that is important to the organisation, business unit or individual who is being measured. In procurement, KPIs are typically used as measures of supplier performance and may be part of a contract or service level agreement. For example, in a contract for responsive repairs, the time taken to perform is important, so the time taken to respond to a call-out might be one possible performance indicator. Choosing the right KPIs requires a good understanding of what is important to the organisation, which in this case is the time taken to make the repair, not just how quickly the engineer took to arrive on site. Provided there are metrics for each KPI, reviewing performance can give each party an understanding of the level of service being provided. See also Performance Review and Service Level Agreement.
Developing Service Level Agreements (SLA) and Key Performance Indicators (KPI) training is available at Academy of Procurement.« Back to Glossary Index