Purchasing Performance Evaluation: An Investigation of Different Perspectives

By Chao, Chiang-nan; Scheuing, Eberhard E. et al. | International Journal of Purchasing and Materials Management, Summer 1993 | Go to article overview

Purchasing Performance Evaluation: An Investigation of Different Perspectives


Chao, Chiang-nan, Scheuing, Eberhard E., Ruch, William A., International Journal of Purchasing and Materials Management


INTRODUCTION

Measuring purchasing performance is essential for effective management and continued improvement of the purchasing function. Purchasing evaluation provides vital feedback to the purchasing department as well as to top management for assessing the effectiveness of an organization's purchasing strategies and decision-making processes. This is of major interest to practitioners and researchers, since a hefty share of the sales dollar--more than 50 percent of a firm's revenues--is paid to outside suppliers for a broad array of materials, supplies, equipment, and services.|1~ The overall performance of the organization is strongly affected by how well the purchasing function is able to contribute to the firm's strategies and goals.

In making purchasing decisions, purchasing professionals usually play the leading role, but those decisions are made to serve the needs of internal customers. It is not always clear, however, if all these internal players are using the same criteria and the same set of priorities in evaluating the effectiveness of purchasing performance. Which is most important: quality of the purchased materials, on-time delivery, ability to negotiate favorable prices and terms, or some other factor? Is the factor most important to the internal customer also most important to the purchasing manager and to the buyers in the performance of their day-to-day activities? A better understanding of how purchasing professionals and internal customers evaluate purchasing performance is needed in order to improve the overall effectiveness and efficiency of the organization.

This article reports the results of a study of purchasing managers, buyers, and internal customers in 15 organizations and examines their views of 10 key purchasing performance measures.

REVIEW OF PREVIOUS STUDIES

A few prior studies have compared purchasing performance evaluation from the perspectives of personnel in different roles in an organization. The different roles studied include purchasing managers, buyers, internal customers, and external suppliers. Some of these studies focused on one organization, while others collected opinions from a small sample of firms. The conclusions drawn by those studies are difficult to generalize to other business settings, but they do provide insights into the problem.|2~

A study by Cavinato indicated that service to users is the element most frequently mentioned by nonpurchasing personnel in evaluating purchasing performance. Cavinato noted, however, that the problem with traditional performance measurement is that the performance evaluations travel only upward in the firm. Thus, purchasing's accomplishments do not reach many of the interfacing departments and other peer groups in the organization. He suggested that strong support from interfacing departments is essential in developing an effective and efficient purchasing function.|3~

STUDY METHODOLOGY

Selection of the Variables for Measurement

The purchasing performance measures examined in this study stem from structured discussions with purchasing professionals, coupled with a synthesis of the key purchasing performance measurement studies discussed in the literature.

Most earlier studies included a large number of purchasing performance measures. For example, in 1979 one group of researchers studied 15 measurement categories with more than 200 specific criteria.|4~ More recently, issues such as strategic purchasing planning, just-in-time strategies, and supplier partnering have been studied with respect to required purchasing performance measurements.|5~

In 1988, two purchasing researchers captured the normative weights of 20 performance criteria in a Fortune 500 electronics manufacturing organization from the perspectives of four groups involved in purchasing decisions: buyers, purchasing managers, external suppliers, and internal customers. They started with 188 performance measures, generated in focus groups by the participants in the study, and subsequently narrowed these down to 20 criteria. …

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