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Procurement KPIs are the measures a purchasing function uses to show how much of its spend it controls, what supplies cost, and how reliably product reaches the shelf. In health care, the Association for Health Care Resource & Materials Management (AHRMM) publishes a defined set of supply chain KPIs, each with a formula and a favorable direction. Others, such as cost per case and procurement compliance, have no AHRMM standard formula.
Short answer
A procurement KPI is a ratio with a stated numerator, denominator and favorable direction. AHRMM’s published health care supply chain “Keys” cover finance (spend under management, supply expense, inventory turns) and operations (distributor fill, items with identified substitutes). Cost per case, contract compliance and savings are common but not AHRMM Keys, so each organization has to define them locally.
What counts as a procurement KPI
A usable KPI names what is counted, what it is divided by, and which direction is better. AHRMM’s KPI pages follow that pattern. Its definition of total supply expense is “all medical, non-medical, inventory and direct-ship/on-consignment supply expense”, and it excludes purchased services, labor, real estate, capital, utilities, taxes, insurance, bad debt and depreciation. Most Finance Keys use that figure as a numerator or denominator, so two organizations only compare fairly if they count it the same way.
Some AHRMM Keys, such as supply expense per case-mix-index (CMI) adjusted discharge, are built for hospitals. A research lab or outpatient clinic will usually use the spend, inventory and fill measures and leave the discharge-based ones aside.
Spend under management, with a worked example
AHRMM describes spend under management (SUM) as a measure of the amount of total spend that is being effectively managed by the organization’s supply chain team. The formula divides spend actively sourced or managed by supply chain by the sum of total supply expense and total purchased services expense, then multiplies by 100. Higher is favorable.
AHRMM’s own example: $600,000,000 managed, against $750,000,000 of supply expense and $250,000,000 of purchased services. That gives 600 / (750 + 250) = 0.60, or 60% SUM.
AHRMM states that higher SUM improves the ability to optimize costs and forecast expenses, and helps control the risk of inappropriate products or services and of contracts that conflict with each other. It also states that SUM identifies “maverick” spend, and that spend under management is not equal to identified or realized savings. For off-contract buying specifically, see maverick spend, and for categorizing the denominator see spend analysis.
Supply expense and inventory KPIs
The table lists AHRMM Keys that apply to a purchasing function, with the formula and favorable direction as AHRMM publishes them (checked 2026-10-31).
| AHRMM Key | Formula | Favorable |
|---|---|---|
| Spend Under Management | Spend actively sourced/managed by supply chain / (supply + purchased services expense) x 100 | Higher |
| Supply Expense per CMI Adjusted Discharge | Total supply expense / CMI-adjusted discharges | Lower |
| Supply Expense as % of Net Patient Revenue | Total supply expense as a share of net patient revenue | Lower |
| Inventory Turns | Total inventory supply expense / average inventory | Higher |
| Supply AP Days | 30.4 / AP turns, where AP turns = total supply expense / average AP | Lower |
| Primary Distributor Fill % | PO lines filled on first attempt / PO lines submitted | Higher |
| Items with Identified Substitutes % | Active items with substitutes / total active items | Higher |
| Supply Chain FTEs per $1M non-labor supply expense | Supply chain FTEs / non-labor supply expense in $ millions | Lower |
AHRMM’s inventory turns example divides $550,000 of total inventory supply expense by $500,000 of average inventory, giving 1.1 monthly turns. AHRMM notes that organizations usually calculate turns by category or procedural area, such as the operating room or cardiac cath lab. It also cautions that maximizing inventory turns is not the desired outcome, because higher turns must be balanced with having enough product on hand.
Supplier and distributor KPIs
Supplier procurement KPIs
Measures of a supplier’s own performance, such as delivery timeliness and order accuracy, belong on a vendor scorecard rather than in the program-level list above. They are covered in vendor scorecard metrics. The AHRMM measure that sits closest to the supplier relationship is primary distributor fill, and the general concept is explained in fill rate.
Vendor SLA
A service level agreement is where a KPI becomes a contractual commitment. The terms a medical supply SLA can carry are described in service level agreements in medical supply vendor contracts. A KPI target only means something in a contract if its formula is written into the agreement.
Cost per case and compliance: no standard formula
Cost per case
Cost per case is not one of AHRMM’s named Keys. AHRMM does say that providers with a high volume of complex, technology-heavy surgical or interventional cases “would benefit by calculating supply cost per surgical case or procedure” in addition to supply cost per adjusted equivalent discharge, because the CMI index may not reflect their supply utilization. Treat it as an optional supplement and write down which supplies and which cases are counted.
Procurement compliance
Contract or procurement compliance is a widely used measure, but it is not among AHRMM’s published Keys, so its definition varies by organization. State the formula before reporting it. Off-contract purchasing is explained in maverick spend, and invoice matching in three-way match.
Common misunderstandings
- Higher spend under management does not mean savings were realized; AHRMM states the two are not equal.
- Higher inventory turns are not automatically better; AHRMM says they must be balanced against having product available.
- Two organizations’ supply expense figures are comparable only if both follow the same inclusions and exclusions.
- Discharge-based Keys assume a hospital. A lab or clinic needs a denominator that fits its own activity.
FAQ
What are supplier procurement KPIs?
They are measures of how a supplier or distributor performs, such as fill and delivery reliability. The program-level view is AHRMM’s primary distributor fill percentage; supplier-side scorecards are in vendor scorecard metrics.
What is procurement compliance?
It is not an AHRMM Key, so there is no standard formula. Define the numerator and denominator locally, and see maverick spend for the off-contract side.
What does a vendor SLA have to do with KPIs?
The SLA is the contract clause that sets a target for a KPI. See service level agreements in medical supply vendor contracts.
Is cost per case a standard procurement KPI?
No. AHRMM suggests supply cost per surgical case or procedure as an addition for high-volume surgical or interventional providers, not as one of its Keys.
Sources
- AHRMM, Health Care Supply Chain Keys: ahrmm.org/keys, checked 2026-10-31.
- AHRMM, Health Care Supply Chain KPI: Spend Under Management (PDF): ahrmm.org, Finance-Spend-Under-Management.pdf, checked 2026-10-31.
