Achieving Purchasing Competence Through Purchasing Performance Measurment System Design

Achieving purchasing compeIence Ihrough purchasing perIormance
measuremenI sysIem designA muIIipIe-case sIudy anaIysis

MaIhies PohI
a,
, Kai F orsII
b,1
a
uropcun 8usncss School (8S), Supply Chun Munugcmcnt Insttutc (SMI), 8S Cumpus Wcsbudcn, Sochnlcnstrussc 8F, 65201 Wcsbudcn, Ccrmuny
b
Fruunhojcr IISCcntcr jor ^pplcd Rcscurch on Supply Chun Scrvccs SCS, Nordostpurk 93, 90411 Nurcmbcrg, Ccrmuny
A R 1 I c I B I N I c
^rtclc hstory:
Received 28 March 2010
Received in revised Iorm
14 March 2011
AccepIed 1ApriI 2011
AvaiIabIe onIine 15 ApriI 2011
Kcyvords:
Purchasing perIormance measuremenI
sysIems
FuncIionaI aIignmenI
Purchasing compeIence
Case sIudy
A 8 s 1 R A c 1
Purchasing compeIence, Ihe IeveI oI sIraIegic inIegraIion and aIignmenI, is a key deIerminanI oI Ihe
purchasing IuncIion's impacI on overaII corporaIe success. Previous research has reveaIed IhaI Ihe
impIemenIaIion oI a maIure purchasing perIormance measuremenI sysIem PPMS) can be a means Io
aIIain a high IeveI oI IuncIionaI sIraIegic inIegraIion. In Ihis research, ve deveIop ve proposiIions on
hov PPMS shouId be designed Io IaciIiIaIe sIraIegic inIegraIion. Ve chaIIenge Ihese proposiIions using
daIa gaIhered Irom Iour case sIudies viIh Cerman companies Irom diIIerenI indusIriaI secIors. VhiIe
each oI Ihese companies pursues muIIipIe sIraIegic ob]ecIives viIhin Purchasing, Ihe PPMSs designs
Iocus heaviIy on cosI-reIaIed sIraIegy and perIormance dimensions. Thus, our ndings indicaIe
Ihe need Io deveIop PPMS schemes aIIoving a direcI Iinkage beIveen nanciaI perIormance and
non-nanciaI perIormance measures in order Io incenIivize Ihe desired muIIipIe sIraIegic goaIs beyond
periodicaI cosI reducIion. Moreover, such measuremenI sysIems need Io be adapIed aI Ihe caIegory
IeveI oI purchasing pracIices Io obIain Ihe desired IeveI oI pre-dened sIraIegic perIormance
dimensions. Hence, Ihe IeveI oI purchasing compeIence is deIermined aI caIegory IeveI and a PPMS
musI IransIorm sIraIegy inIo measurabIe goaIs aI Ihis IeveI.
2011 EIsevier LId. AII righIs reserved.
T. lntroduction
Purchasing acIiviIies have been shovn Io conIribuIe Io and
criIicaIIy inBuence Ihe nanciaI perIormance oI rms e.g. Chen
eI aI., 2004; EIIram and Liu, 2002; Hendricks and SinghaI, 2003).
ThereIore, corporaIe success depends on Ihe IeveI oI sIraIegic
purchasing presenI in Ihe company e.g. Carr and SmeIIzer, 1997;
Chen eI aI., 2004; Conza Iez-8eniIo, 2007). SIraIegic inIegraIion
and aIignmenI oI Ihe purchasing IuncIion viIh overaII corporaIe
ob]ecIives, aIso reIerred Io as inIernaI ''I'' or purchasing
compeIence, is a key eIemenI oI sIraIegic purchasing acIiviIies
8aier eI aI., 2008; Conza Iez-8eniIo, 2007; Narasimhan and Das,
2001). FiI is reIerred Io here as Ihe congruency oI Ihe sIraIegic
goaIs oI Ihe enIire company viIh Ihe sIraIegic ob]ecIives pursued
by Ihe purchasing IuncIion. Purchasing sIrives Io achieve Ihese
ob]ecIives by engaging in specic purchasing acIiviIies and
pracIices. Research in Ihis area has demonsIraIed IhaI Ihe IeveI
oI sIraIegic inIegraIion oI Purchasing deIermines Ihe sIrengIh oI
Ihe reIaIionship beIveen sIraIegic corporaIe and purchasing
ob]ecIives. ThereIore, sIraIegic purchasing is creaIed Ihrough
sIraIegic inIegraIion oI Ihe purchasing IuncIion e.g. LinIukangas
eI aI., 2009; Yeung, 2008). These ideas are based on conIingency
IheoreIicaI argumenIs, sIaIing IhaI I is parI oI Ihe necessary
aIignmenI oI company sIrucIure, sIraIegy and environmenI Ior
Ihe generaI success oI companies Fig. 1) 8urns and SIaIker,
1961; Voodvard, 1965).
II has been idenIied by exIanI IiIeraIure IhaI one means Io
aIIain a high IeveI oI IuncIionaI sIraIegic inIegraIion is Ihe
impIemenIaIion oI a maIure purchasing perIormance measure-
menI sysIem PPMS) Dumond, 1994; MenIzer and Konrad,
1991). Moreover, iI has been previousIy suggesIed IhaI such a
sysIem is a requiremenI Ior being perceived as a sIraIegic
conIribuIor Io business perIormance because iI aIIovs inIernaI
sIakehoIders Io hoId Ihe purchasing IuncIion accounIabIe Ior
Ihe reaIizaIion oI sIraIegic goaIs EIIram eI aI., 2002; KapIan
and NorIon, 1992). FurIhermore, perIormance measuremenI is
cIoseIy Iinked Io sIraIegic purchasing and Ihe IeveI oI sIraIegic
inIegraIion accompIished PauIra] eI aI., 2006; Carr and SmeIIzer,
1997). In shorI, a PPMS is regarded as a IooI Ior creaIing and
achieving high IeveIs oI purchasing compeIence and sIraIegic
aIignmenI.
ExIanI IiIeraIure suggesIs IhaI purchasing perIormance can be
achieved by execuIing specic inIernaI and exIernaI purchasing
pracIices, in addiIion Io oIher inIernaI and exIernaI perIormance
drivers Carr and Pearson, 2002; Chen eI aI., 2004). As a resuII,
Contents IIsts avaIIabIe at ScIenceDIrect
journaI homepage: vvv.eIsevIer.com/Iocate/pursup
]ournaI oI Purchasing & SuppIy ManagemenI
1478-4092]$-see IronI maIIer 2011EIsevier LId. AII righIs reserved.
doi:10.1016]].pursup.2011.04.001
Corresponding auIhor. TeI.: 4961136018800; Iax: 4961136018802.

-mul uddrcsscs: maIhies.pohI@myebs.de M. PohI),
kai.IoersII@scs.IraunhoIer.de K. F orsII).
1
TeI.: 49911580619500; Iax: 40911580619599.
]ournaI oI Purchasing & SuppIy ManagemenI 17 2011) 231-245
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Ihe choice oI pracIices is a cruciaI consIiIuenI oI purchasing
perIormance. Hence, a PPMS musI anaIyze in vhaI manner
Purchasing's engagemenI in cerIain pracIices conIribuIes Io
corporaIe success Day and LichIensIein, 2006; 8aier eI aI.,
2008). Moreover, PPMS use specic measures Io seI perIormance
IargeIs in Iine viIh sIraIegic goaIs and Io quanIiIy Ihe aIIainmenI
oI Ihese goaIs. These perIormance measures are Ihe cenIraI
componenIs oI any perIormance measuremenI sysIem NeeIy,
2005; Van VeeIe, 2010). The quesIion oI measuremenI design
encompasses hov perIormance measures shouId be chosen and
pIanned Io Iink purchasing pracIices viIh purchasing sIraIegy, in
order Io achieve aIignmenI. Thus, one cenIraI quesIion Ior
managers in purchasing pracIice and researchers in Ihe eId oI
purchasing perIormance measuremenI is hov Ihe acIuaI deIer-
minanIs oI perIormance can be idenIied, measured and incenIi-
vized Ihrough PPMS. The goaI is Io creaIe aIignmenI by
inBuencing purchasing empIoyee behavior Io IoIIov purchasing
sIraIegy and hence corporaIe sIraIegic goaIs NeeIy eI aI., 2000).
Thus, Ihe IoIIoving research quesIion viII be addressed in
Ihis paper:
Hov shouId purchasing perIormance measuremenI sysIems
be designed Io aIIov Ior successIuI aIignmenI oI purchasing
pracIices viIh Ihe sIraIegic goaIs oI purchasing and Io IosIer
overaII IuncIionaI aIignmenI aI Ihe corporaIe IeveI?
This paper seeks Io ansver Ihis quesIion by anaIyzing Ihe
reIaIionships on a IuncIionaI IeveI and by Iocusing on perIor-
mance measures as Ihe cenIraI componenI in PPMS. As ve Iocus
on Ihe design oI Ihe acIuaI PPMS, ve superciaIIy Iouch on Ihe
compIex eId oI incenIive sysIems Ihrough PPMS. Hovever, a
Ihorough anaIysis oI Ihis phenomenon vouId require a research
approach specicaIIy dedicaIed Io Ihis Iopic. In Ihis paper, ve
connecI Ihe research sIreams Irom perIormance measuremenI
and sIraIegic purchasing inIegraIion Io purchasing perIormance
measuremenI sysIems Ihrough Ihe Iramevork derived by Franco-
SanIos eI aI. 2007). Ve derive insighIs and proposiIions
concerning Ihe roIe oI purchasing perIormance measuremenIs
sysIems and purchasing compeIence. The idenIied proposiIions
are chaIIenged and evaIuaIed subsequenIIy in a muIIipIe
cross-indusIry case sIudy. The paper concIudes viIh a discussion
oI Ihe ndings and an ouIIook Ior IurIher research.
2. Conceptual development
The connecIion oI purchasing perIormance Io company
perIormance reIers Io Ihe degree oI ''purchasing compeIence''
presenI. Purchasing compeIence describes Purchasing's abiIiIy Io
acI in aIignmenI viIh corporaIe sIraIegy and execuIe iIs capabiI-
iIies and pracIices accordingIy 8aier eI aI., 2008; Das and
Narasimhan, 2000; Conza Iez-8eniIo, 2007; Vickery eI aI., 1993).
The underIying Iheory oI purchasing compeIence is based on
conIingency Iheory and expecIancy Iheory. These main Iheories
expIain a rm's need Io reacI Io Ihe conIexIuaI IacIors oI Iheir
surroundings 8urns and SIaIker, 1961; Voodvard, 1965). In Ihe
conIexI oI purchasing, iI IaciIiIaIes a sIrucIuring oI Ihe suppIy
base in aIignmenI viIh Ihe business prioriIies oI Ihe rm. Since a
PPMS esIabIishes Iransparency abouI Ihe conIribuIion oI Ihe
purchasing IuncIion Io business perIormance, iI enabIes Ihe
creaIion oI I beIveen rm and IuncIionaI IeveI sIraIegic execu-
Iion. Thereby iI aIso provides Iransparency on Ihe degree oI
IuncIionaI goaI achievemenI. Hence, iI aIIovs companies Io assess
Iheir purchasing compeIence Van VeeIe, 2010), vhich in Iurn
can Iead Io Iearning and conIinuous improvemenI Io aIIainhigher
IeveIs oI purchasing compeIence over Iime.
SIraIegic aIignmenI is a IundamenIaI prerequisiIe in Iinking
IuncIionaI Io corporaIe sIraIegic goaIs Hudson eI aI., 2001). In a
PPMS, sIraIegicaIIy aIigned meIrics viIh key ob]ecIives or sIraIe-
gic goaIs shouId be derived 8ourne eI aI., 2000; KapIan and
NorIon, 1992; NeeIy eI aI., 2000, 1995), Ihereby creaIing I) oI
sIraIegy beIveen corporaIe and Ihe IuncIionaI IeveI ChenhaII,
2005; Cousins, 2005; Narasimhan and CarIer, 1998; David eI aI.,
2002). ThereIore, perIormance measures shouId represenI
''concreIe IormuIaIions oI Ihe rm's sIraIegic choices'' VouIers
and SporIeI, 2005, p. 1063).
ReBecIing on Ihe muIIiIude oI research perIormed on Ihe
deveIopmenI oI perIormance measuremenI sysIems in generaI
e.g. Henri, 2008; OIIey eI aI., 1995), Franco-SanIos eI aI. 2007)
idenIied in a IiIeraIure anaIysis, covering more Ihan 300
documenIs, Ivo basic condiIions necessary Ior a perIormance
measuremenI sysIem, nameIy ''perIormance measures'' and
''supporIing inIrasIrucIure''. These ndings underIine Ihe cenIraI
roIe oI perIormance measures in aII perIormance measuremenI
sysIems.
Ve ground our research in Ihe ve caIegories oI roIes IhaI a
purchasing perIormance measuremenI shouId IuIII in order Io
compare and conIrasI Ihe aIIribuIes oI Ihe PPMSs oI our case
companies Franco-SanIos eI aI., 2007). The ve roIes are as
IoIIovs:
1) ''Strategy management''compromises pIanning, sIraIegy
IormuIaIion, sIraIegy impIemenIaIion]execuIion, and Iocus
aIIenIion]aIignmenI
2) ''Measure performance''encompasses moniIoring progress
and perIormance measuremenI]evaIuaIion
3) ''lnuence behavior''encompasses revarding or compen-
saIing behavior, managing reIaIionships, and conIroI
4) ''Learning and improvement''reIers Io Ieedback, doubIe-
Ioop Iearning and perIormance improvemenI
5) ''Communication''incIudes inIernaI and exIernaI commu-
nicaIion, benchmarking and compIiance viIh reguIaIions
Ve anaIyze Ihe impIicaIions oI Ihese roIes Ior measuremenI
design in PPMS. ]ohnsIon and PongaIichaI 2008) supporI Ihe
conIribuIion oI Ihe ve roIes pro]ecIed by Franco-SanIos eI aI.
Organizational alignment
Business Strategy
and integration through
,strategic purchasing"
Purchasing Strategy
Functional alignment and
integration through
PPMS
Purchasing Practices
Fig. T. OvervievoI inIernaI sIraIegic aIignmenI process.
M. Pohl, K. F orstl / journul oj Purchusng OSupply Munugcmcnt 17 (2011) 231-245 232
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2007) Ior purchasing perIormance measuremenI sysIems in Iheir
sIudy. Each oI Ihese roIes is reIaIed Io creaIing purchasing
compeIence.
2.1. Strutcgy munugcmcnt
Since Ihe opIimaI porIIoIio oI purchasing pracIices varies
according Io corporaIe and caIegory sIraIegy 8aier eI aI., 2008),
Ihe business sIraIegy deIermines Ihe sIrucIure oI Ihe desired
purchasing compeIence Ior Ihe IuncIion ]ohnson eI aI., 2008).
Thus, diIIerenI business environmenIs and compeIiIive prioriIies
Iead Io diIIerenI sIraIegic choices, vhich inIurnIead Io a diIIerenI
seI oI nanciaI and non-nanciaI measures used Ior perIormance
measuremenI IIIner eI aI., 2003). On a IuncIionaI IeveI, specic
perIormance measures are IhereIore used Io creaIe inIernaI
congruence oI purchasing sIraIegy and pracIices ChenhaII,
2005; Cousins, 2005; David eI aI., 2002; Narasimhan and CarIer,
1998; NoIIeI eI aI., 2008). Thus, a purchasing perIormance
measuremenI sysIem shouId Iocus on sIraIegic resuIIs and
measure perIormance in direcI reIaIion Io sIraIegic ob]ecIives oI
Ihe purchasing IuncIion Henri, 2006; Nanni ]r. eI aI., 1992;
UIIrich and TuIIIe, 2004). This impIies IhaI specic measures Ior
purchasing shouId be deveIoped vhich reBecI purchasing sIraI-
egy and enabIe measuremenI oI perIormance conIribuIion aIong
sIraIegic ob]ecIives HaII, 2008).
A IiIeraIure reviev oI Ihis sub]ecI reveaIs IhaI purchasing
perIormance measuremenI sysIems visuaIize and operaIionaIize
sIraIegic ob]ecIives oI Ihe purchasing IuncIion. ThereIore, Ihe
IoIIoving proposiIion concerning Ihe reIaIionship beIveen
measures and purchasing sIraIegy can be sIaIed:
Proposition T. Pcrjormuncc mcusurcmcnt dmcnsons upplcd n
purchusng pcrjormuncc mcusurcmcnt systcms urc dcrvcd jrom
purchusng strutcgy und rccct thc objcctvcs nhcrcnt n thc
corporutc strutcgy.
2.2. Mcusurc pcrjormuncc
As a cenIraI dogma, purchasing perIormance measuremenI
sysIems shouId measure perIormance cIose Io Ihe acIiviIies IhaI
Iead Io perIormance Reck and Long, 1988). For Purchasing, Ihis
direcIIy reIaIes Io purchasing pracIices, since Ihey are deIermi-
nanIs oI purchasing perIormance 8aier eI aI., 2008; Day and
LichIensIein, 2006; Conza Iez-8eniIo, 2007; Narasimhan and Das,
2001). Purchasing pracIices describe Ihe specic acIiviIies vhich
Purchasing engages in Io manage Ihe suppIy base oI Ihe company
and encompass aII possibIe acIiviIies in a purchasing and suppIy
managemenI PSM) conIexI. Day and LichIensIein 2006) dened
purchasing pracIices as having inIernaI and exIernaI dimensions,
based on Ihe earIier esIabIished Iramevork oI Narasimhan and
Das 2001), vho idenIied Ihree key caIegories oI purchasing
pracIices: 1) suppIy-base Ieveraging, 2) buyer-suppIier reIaIion-
ship deveIopmenI and 3) suppIier perIormance evaIuaIion. As a
resuII oI Iheir exIension, purchasing pracIices encompass aII
observabIe inIernaI managemenI acIiviIies as veII as aII obser-
vabIe exIernaI acIiviIies perIormed by Purchasing Io achieve
purchasing compeIence Day and LichIensIein, 2006). Moreover,
Ihe choice and emphasis oI purchasing pracIices vary according Io
Ihe purchased iIems, based on Ihe idea oI porIIoIio segmenIaIion
oI procured producIs and services e.g. AxeIsson eI aI., 2002;
KraI]ic, 1983). For exampIe, iI mighI be sensibIe Io deveIop cIose
reIaIionships viIh a smaII number oI suppIiers Ior one producI
group, vhiIe oIher purchasing caIegories appIy arm-IengIh
reIaIionships viIh a Iarger suppIy base. On a simpIied IeveI,
Ihis reIaIionship can be, in exIreme cases, pureIy IransacIionaI
or characIerized by a cIose reIaIionaI sIraIegic parInership.
Thus, opIimaI purchasing pracIices are conIingenI on Ihe markeI
characIerisIics oI Ihe producIs and services procured. Hence, Ihe
PPMS musI reBecI Ihese conIingencies in Ihe deveIopmenI oI Ihe
measures and goaIs Io be pursued.
In summary, according Io Ihe basic prerequisiIes oI perIor-
mance measuremenI, purchasing perIormance measuremenI
sysIems have Io measure aI Ihe pracIice and purchasing caIegory
IeveI in order Io obIain adequaIe inIormaIion on perIormance
generaIed. ThereIore, Ihe IoIIoving proposiIion concerning per-
Iormance measures and purchasing perIormance can be made:
Proposition 2. Thc cjjccts oj thc cxccutcd purchusng pructccs on
thc strutcgc goul uttunmcnt urc mudc vsblc vu pcrjormuncc
mcusurcs n ordcr to cjjcctvcly plun, munugc und trucc pcrjormuncc.
2.3. Inucncc bchuvor
According Io Ansari 1977), perIormance measuremenI sys-
Iems shouId encompass a sIrucIuraI and a behavioraI viev in
order Io be eIIecIive. The sIrucIuraI componenI encompasses Ihe
basic necessary condiIions Ior perIormance measures. The beha-
vioraI componenI is needed Io moIivaIe empIoyees Io acI aIong
Ihe sIrucIuraI componenIs, as sIaIed in expecIancy Iheory
Cummings and Schvab, 1973). An individuaI acIs on inIrinsic
and exIrinsic revards, e.g. perIormance revards IhaI are coherenI
viIh her]his ovn expecIaIions Ansari, 1977; Kominis and
EmmanueI, 2007). OIher research reveaIs Ihe inBuence oI perIor-
mance measuremenI sysIems on improving manageriaI perIor-
mance Ihrough Ivo concepIs: roIe cIariIy and psychoIogicaI
empovermenI HaII, 2008). These aspecIs are concerned viIh
individuaI knovIedge avareness abouI generaI and individuaI
perIormance roIe cIariIy) and improving inIrinsic moIivaIion by
demonsIraIing Ihe signicance oI Ihe empIoyee's vork, reIerred
Io as psychoIogicaI empovermenI Savyer, 1992; SpreiIzer,
1995; Thomas and VeIIhouse, 1990).
Concerning purchasing pracIices, Ihe behavioraI componenI oI
purchasing perIormance measuremenI sysIems aIIecIs purchas-
ing personneI Io choose appropriaIe purchasing pracIices Io
achieve Iheir purchasing IargeIs. Top-dovn appraisaI and revard
mechanisms Ihus moIivaIe purchasing personneI Io execuIe
sIraIegicaIIy aIigned purchasing pracIices EngIysI eI aI., 2008;
PageII eI aI., 1996). This noIion is based on Ihe IacI IhaI
perIormance measuremenI sysIems assess Ihe impIemenIaIion
oI sIraIegy and Ihe success oI sIraIegy, vhich in Ihis case requires
Ihe seIecIion oI suiIabIe purchasing pracIices 8ourne eI aI.,
2000). ThereIore, ve sIaIe Ihe IoIIoving proposiIion:
Proposition 3. Purchusng pcrjormuncc mcusurcmcnt systcms urc
dcsgncd to motvutc PSMstujj bchuvor so thut thcr uctons lcud to
u strutcgcully ulgncd cxccuton oj purchusng pructccs.
2.4. Lcurnng und mprovcmcnt
The evoIuIionary aspecI oI perIormance measuremenI is highIy
imporIanI since perIormance measuremenI sysIems have Io adapI
Io dynamic environmenIs and shiIIs in sIraIegies. This aspecI is
chaIIenging because Ihe need Ior measuremenI conIinuiIy in
order Io conducI a IongiIudinaI perIormance comparison over
Iime has Io be counIer-baIanced viIh Ihe need Io change and
adapI Ihe design oI Ihe PPMS. In order Io meeI Ihe conIemporary
organizaIionaI needs, changes Io Ihe sysIem may someIimes be
necessary. Hovever, iI is imporIanI Io noIe IhaI changes and
adapIaIions oI Ihe sysIem make iI more compIex and diIcuII Io
assure a sIabIe measuremenI oI perIormance over Iime.
The conIexIuaI IacIors deIermining sIraIegy cannoI be IhoughI
oI as sIaIic, Ihus purchasing perIormance measuremenI sysIems
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have Io assure an ongoing ''I'' oI sIraIegy viIh Ihe environmenI
in accordance viIh conIingency Iheory 8ourne eI aI., 2000;
KennerIey and NeeIy, 2003). This aspecI is especiaIIy inIeresIing
because iI emphasizes Ihe increasing sIraIegic inIegraIion oI Ihe
purchasing IuncIion. Purchasing perIormance measuremenI
sysIems shouId conIinuousIy quesIion Ihe purchasing or corpo-
raIe sIraIegy iIseII Ihrough Ieedback cycIes. This Ieads Io a
conIinuous Iearning and improvemenI process, vhich has an
overaII posiIive inBuence on perIormance 8ourne eI aI., 2000;
Hays and HiII, 2001). For Ihis reciprocaI process, goaI-orienIed
measures are required. These measures shouId be compared viIh
IargeI vaIues, e.g. compeIiIion perIormance NeeIy eI aI., 1997), in
order Io sIimuIaIe Ihe Iearning process oI vheIher purchasing
pracIices vere suiIabIe Io environmenIaI condiIions and IhereIore
Ihe ''righI'' sIraIegy vas appIied or noI.
This Iocus on inIernaI Iearning has Io be parI oI a successIuI
purchasing perIormance measuremenI sysIemin order Io achieve
Io conIinuousIy adapI Io changing environmenIaI and business-
reIaIed IacIors and improve perIormance. Thus, Ihe IoIIoving
proposiIion can be made concerning Iearning abiIiIy:
Proposition 4. Mcusurcs n purchusng pcrjormuncc mcusurcmcnt
systcms contrbutc to thc lcurnng cxpcrcncc by dcmonstrutng thc
cjjcctvcncss oj purchusng pructccs.
2.5. Communcuton
The visibiIiIy and accounIabiIiIy oI perIormance are core
requiremenIs Ior being perceived as a sIraIegic conIribuIor Io
business perIormance EIIram eI aI., 2002). This noIion reIers Io
Ihe conIribuIion oI purchasing's perIormance Iovards achieving
sIraIegic corporaIe goaIs. Purchasing's success musI be commu-
nicaIed in order Io be acknovIedged IhroughouI Ihe rmPauIra]
eI aI., 2006). In order Io receive aIIenIion as a sIraIegic IuncIion,
Ihe visibiIiIy oI purchasing is a cenIraI componenI. Purchasing
perIormance needs Io be inIegraIed inIo Ihe corporaIe reporIing
sysIem so IhaI execuIive managemenI is avare oI Ihe specic
conIribuIion Io corporaIe perIormance Carr and SmeIIzer, 1997;
Dumond, 1994). CommunicaIion oI perIormance resuIIs enabIes
Purchasing Io parIicipaIe in Ihe sIraIegic debaIe oI Ihe company
and IhereIore acIiveIy shapes Ihe aIignmenI process CarIer and
Narasimhan, 1996; Narasimhan and Das, 2001).
Moreover, Ihe inIernaIIy perceived sIraIegic imporIance oI
Purchasing by oIher inIernaI IuncIions e.g. R&D, ProducIion and
MarkeIing) IIIner eI aI., 2003; Tassabeh]i and Moorhouse, 2008)
is cruciaI Ior Ihe overaII sIraIegic inIegraIion in sIraIegic pIanning
Cousins eI aI., 2006; EIIram eI aI., 2002; PauIra] eI aI., 2006;
SchieIe, 2007). Thus, Ihe impacI oI purchasing pracIices has Io
be made knovn inIernaIIy in order Io operaIe as sIraIegic
purchasing.
Since Ihe resuIIs oI cerIain purchasing pracIices can be
aIIribuIed Io key ob]ecIives oI measuremenI e.g. cosI reducIion,
quaIiIy improvemenI, responsiveness or innovaIion), Ihe achieve-
menIs oI Ihese key ob]ecIs musI be reporIed and Iinked Io Ihe
desired dimensions oI purchasing compeIence Conza Iez-8eniIo
2007). ThereIore, an inIegraI parI oI purchasing perIormance
measuremenI sysIems is communicaIing and reporIing measures,
boIh inIernaIIy and exIernaIIy, based on pre-dened reporIing
inIervaIs. Concerning Ihe sIraIegic imporIance oI perIormance
measures used in purchasing perIormance measuremenI sysIems
and Ihe imporIance oI inIernaI visibiIiIy oI purchasing perIor-
mance, Ihe IoIIoving proposiIion can be made:
Proposition 5. Thc pcrjormuncc outcomcs urc communcutcd to
cxccutvc munugcmcnt n u structurcd munncr n ordcr to rccct
thc dcgrcc oj strutcgc pcrjormuncc contrbuton oj thc purchusng
juncton.
3. Research design and sample selection
The case sIudy meIhod in Ihis arIicIe uses a deIerminisIic
sampIing approach Io anaIyze purchasing perIormance measure-
menI sysIems HandeId and MeInyk, 1998; Voss eI aI., 2002).
This approach is appIicabIe since perIormance measuremenI
sysIems are individuaIIy IaiIored Io companies and, IhereIore,
Ihe surrounding dynamics have Io be IhoroughIy anaIyzed
Yin, 2009). FurIhermore, a case sIudy approach Ior anaIyzing
perIormance measuremenI sysIems has aIready been successIuIIy
used Ior Ihe anaIysis oI perIormance measuremenI sysIems in
pubIic organizaIions ]ohnsIon and PongaIichaI, 2008).
In accordance viIh SiggeIkov 2007) and DuI eI aI. 2010),
case sIudy research is used in Ihis paper Io criIicaIIy reviev Ihe
proposiIions derived Irom previous sIudies and Iheory by obser-
ving in deIaiI Ihe causaI eIIecIs Ihrough deIerminisIic case
seIecIion. The case sIudy meIhod provides us viIh Ihe adequaIe
depIh in Ierms oI daIa and company inIeracIion Io achieve
Ihe research ob]ecIive IormuIaIed in Ihe research quesIion and
IheoreIicaI IoundaIion. Hence, ve IoIIoved Ihe recommendaIion
Irom Dubois and Arau]o 2007) Io sIrive Ior a good I beIveen
IheoreIicaI background and Ihe empiricaI research meIhod
appIied.
In order Io be abIe Io chaIIenge Ihe proposiIions sIaIed, Ihe
''cruciaI case'' meIhod Ior case seIecIion vas used, based on Ihe
guideIines provided by Cerring 2006). The cruciaI case meIhod
aims aI anaIyzing cases in vhich Ihe predicIed ouIcome is ''mosI-
IikeIy'' Io occur. This meIhod buiIds on Ihe core Popperian insighI
IhaI a proposiIion or hypoIhesis can onIy be IaIsied buI noI
vaIidaIed. ThereIore, a seIecIion bias Iovards companies scoring
high on Ihe ''cruciaI'' aIIribuIes is needed Ior Ihis research.
According Io Ihe reasoning oI EisenhardI 1989), inIensive anaIy-
sis is possibIe since Ihe cruciaI seIecIion meIhod Ieads Io sIrong
causaI eIIecIs in Ihe research due Io Ihe biased seIecIion meIhod
Cerring, 2006). These eIIecIs aIIov Ior a chaIIenge oI Ihe
proposiIions creaIed in order Io shape Iheory DuI eI aI., 2010;
Cerring, 2006; SiggeIkov, 2007).
3.1. Sumplc sclccton
The seIecIion oI cruciaI cases vas based on Ihe IeveI oI
sIraIegic purchasing prevaIenI aI Ihe company since purchasing
perIormance measuremenI is a cruciaI aspecI oI ''sIraIegic
purchasing'' PauIra] eI aI., 2006; Carr and SmeIIzer, 1997).
ThereIore, in a seIIing vhere sIraIegic inIegraIion oI purchasing
is high, iI can be reasoned IhaI Ihis aIso impIies a greaIer
emphasis on Ihe design and use oI purchasing perIormance
measuremenI sysIems Dumond, 1994; EIIram eI aI., 2002;
MenIzer and Konrad, 1991). FurIhermore, a cross-indusIry seIec-
Iion approach vas empIoyed Io anaIyze besI pracIices across
diIIerenI indusIry and conIexIuaI IacIors Cerring, 2006; Yin,
2009). This research design aIIovs us Io assess Ihe sIrengIh oI
Ihe conIribuIion oI proIound PPMS Io Ihe IeveI oI sIraIegic
purchasing, and hence Ihe IeveI oI purchasing compeIence.
The case companies vere seIecIed ouI oI Ihe vorkshop
''PerIormance MeasuremenI in Purchasing and LogisIics'' heId
by Ihe Cerman LogisIics AssociaIion 8VL), vhich ensured appIic-
abiIiIy oI Ihe ''cruciaI'' seIecIion meIhod. OnIy companies IhaI
emphasize Ihe use oI a maIure purchasing perIormance measure-
menI sysIem parIicipaIed in Ihis vorkshop.
ThroughouI Ihe course oI Ihe vorkshop, Ihe companies
vere approached Io presenI Iheir perIormance measures and
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measuremenI designs Ior Ihe IaIer case sIudy anaIysis. A IoIaI oI
nine companies agreed Io provide Iheir perIormance measures Ior
IuIure anaIysis. These companies provided deIaiIed inIormaIion
on Iheir purchasing sIraIegy, Iheir perIormance measuremenI
sysIem, as veII as aII measures used. Tvo companies vere noI
incIuded because Ihey presenIed IogisIics perIormance measure-
menI sysIems and couId noI provide reIevanI inIormaIion on
purchasing perIormance measuremenI. The remaining seven
companies vere assessed concerning Iheir sIraIegic inIegraIion
oI Ihe purchasing IuncIion, as a basis Ior idenIiIying ''cruciaI''
cases. The measuremenI scaIes provided by PauIra] eI aI. 2006)
vere used Io evaIuaIe Ihe IeveI oI sIraIegic inIegraIion in Ihis
research. This modeI vas chosen because iI vas creaIed using a
perIormance-orienIed approach and Ihus aIready provides a
vaIuabIe Iink Io Ihe eId oI perIormance measuremenI SchieIe,
2007). As a resuII oI Ihis anaIysis, Iour companies vere chosen,
vhich scored highesI on Ihe IeveI oI purchasing sIraIegic inIegra-
Iion, and aIso agreed Io IurIher parIicipaIe in Ihe research.
The number oI cases obIained abides Io Ihe guideIines recom-
mended by Yin 2009). Moreover, a smaII number oI cases is
IavorabIe Ior using a ''cruciaI case'' seIecIion meIhod Cerring,
2006). The uniI oI anaIysis vas Ihe purchasing perIormance
measuremenI sysIem anaIyzed according Io Ihe Iramevork
esIabIished TabIe 1.
The case sIudy companies vere made up oI companies Irom
Iour diIIerenI indusIries: nanciaI services, uIiIiIies, inIormaIion
IechnoIogy and machinery. Due Io condenIiaIiIy reasons, Ihe
companies vere IabeIed according Io Iheir indusIry cIassicaIion.
TabIe 2 provides a shorI descripIion oI Ihe companies and Ihe
sIaII invoIved in our case sIudy research.
3.2. Dutu collccton
ThroughouI Ihe case sIudy process, ve coIIecIed inIormaIion
Irom muIIipIe sources oI daIa. DaIa coIIecIion vas based on Ihe
Table T
AssignmenI oI Ihe PPMS beneIs
a
Io Ihe PPMS caIegories oI our Iramevork
b
.
Purchasing performance measurement system
categories
enets of performance measurement identied fromeXtant literature
1. Strategy management
2. Measure performance
3. lnuence behavior
4. Learning and improvement
5. Communication
InIorming Ihe organizaIion abouI sIraIegic direcIion (2; 5)
CommunicaIing sIraIegic prioriIies (5)
CreaIing a shared undersIanding (T)
MoniIoring and Iracking Ihe impIemenIaIion oI sIraIegy (T)
AIigning shorI-IermacIions viIh Iong-IermsIraIegy (T)
Encouraging behavior consisIenI viIh sIraIegy (3)
Making boIh goaIs and means visibIe (T)
Making cIear Ihe Iinks beIveen Ihe perIormance oI individuaIs and sub-uniIs, and sub-uniIs and overaII
organizaIionaI perIormance (2)
PromoIing inIegraIion among various organizaIionaI processes (T)
LimiIing overemphasis on IocaI ob]ecIives (T; 3)
Focusing change eIIorIs (T; 4)
PermiIIing and encouraging organizaIionaI Iearning (4)
a
8ased on Franco-SanIos eI aI. 2007).
b
8ased on ]ohnsIon and PongaIichaI 2008).
Table 2
OvervievoI case companies.
Company Firmdescription Purchasing function description Participants in
study (informant
]ob titles)
FinanciaI
Services
FS)
This nanciaI services company is one oI Ihe IargesI
banks in Europe and is acIive in aII eIds oI banking
services
The cenIraI purchasing deparImenI is responsibIe Ior suppIying
Ihe Iarge neIvork oI branches and subsidiaries in 46 counIries
Head oI
Purchasing
Purchasing
Manager
Machinery
MA)
This IamiIy-ovned company is one oI Ihe Ieading
producers oI machinery Ior agricuIIure vorIdvide
The purchasing deparImenI Iinks and coIIaboraIes viIh suppIiers and
manages Ihe exisIing reIaIionships Ior Ihe suppIy oI aII producIion-
reIaIed and non-producIion-reIaIed maIeriaIs and services
Head oI
Purchasing
Purchasing
Manager
InIormaIion
TechnoI-
ogy IT)
This company is one oI Ihe IargesI companies in Ihe
vorId Ior IT services and hardvare
The purchasing deparImenI is a cross-IuncIionaI deparImenI responsibIe
Ior aII producI groups, covering Ihe mosI imporIanI soIIvare, hardvare
and parIs Ior hardvare producIion and aII non-producIion-reIaIed
maIeriaIs e.g. eIecIriciIy, oIce maIeriaI)
Head oI
Purchasing
Purchasing
Manager
UIiIiIy UT) This uIiIiIy company is one oI Ihe IargesI companies in
Europe, mainIy Iocused on Ihe producIion and saIe oI
eIecIriciIy and gas
The purchasing IuncIion manages aII sourcing acIiviIies oI Ihe company.
II esIabIished cenIraI purchasing guideIines Ior aII company parIs
and uniIs
Head oI
Purchasing
Purchasing
Manager
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inIormaIion coIIecIed during Ihe vorkshops, suppIemenIed by
in-depIh inIervievs as veII as pubIicIy avaiIabIe daIa. The Irame-
vork by Franco-SanIos eI aI. 2007) vas used according Io Ihe
ideas oI Ragin 2000) as an ''orienIing concepI'' Io aIIov Ior
hoIisIic daIa coIIecIion. This Iramevork vas noI previousIy
inIroduced during Ihe vorkshop or Ihe inIervievs in order Io
avoid bias in Ihe daIa coIIecIion.
The vorkshops vere conducIed in six sessions over a period oI
one year Irom2008Io 2009. Eachsession IasIed anenIire day. The
sessions vere Iranscribed during Ihe sessions and Ihe proIocoIs
vere revieved by Ihe parIicipanIs, a represenIaIive Irom Ihe
LogisIics AssociaIion and a senior researcher. Moreover, Ihe
companies vere asked Io prepare inIormaIion prior Io each
vorkshop abouI Iheir PPMS. The inIormaIion vas used Io sIarI
Ihe diIIerenI sessions by presenIing Ihe sIaIus quo in Ihe specic
company. This inIormaIion aIIoved Ihe researchers Io gaIher
specic insighIs in Ihe company processes, vhich vas IurIher
enriched via Iace-Io-Iace inIervievs. In order Io achieve daIa
saIuraIion, Ihe researchers vere abIe Io inBuence Ihe agenda
prior Io or during sessions. This heIped in sIeering discussions
Iovards eIds oI inIeresI vhiIe absIaining IromdirecIIy inIerIer-
ing in Ihe discussions.
AIIer compIeIion oI Ihe vorkshop, an in-depIh semi-
sIrucIured IoIIov-up inIerviev concerning Ihe PPMS and Ihe
corresponding processes vas conducIed viIh Ihe represenIaIives
oI Ihese companies Io suppIemenI Ihe inIormaIion gained
Ihrough Ihe vorkshops. These inIervievs IasIed Irom 45 Io 60
minuIes and vere Iranscribed during Ihe inIerviev. OIher
researchers previeved Ihe inIerviev Iead quesIions and Ihese
quesIions vere aIso pre-IesIed viIh purchasing proIessionaIs
exIernaI Io Ihe case sampIe.
AparI Irom Ihe vorkshops, Ihe parIicipaIing companies vere
asked Io evaIuaIe Iheir PPMS Ihrough a shorI survey. ThereaIIer,
Ihe companies vere evaIuaIed using Ihe measuremenI scaIes
provided by Narasimhan and Das 2001) and EIIrameI aI. 2002)
on Ihe use oI purchasing pracIices and Ihe roIe oI purchasing
perIormance measuremenI sysIems in Ihe company. FurIher-
more, Ihe anaIysis oI Ihe sIraIegic ob]ecIives oI Ihe purchasing
IuncIion vas supporIed using Ihe measuremenI scaIes provided
by Conza Iez-8eniIo 2007). The resuIIs oI Ihe shorI survey vere
used Io provide basic inIormaIion abouI Ihe company and
provided suppIemenIary daIa Io enrich Ihe ndings oI Ihe
quaIiIaIive daIa gaIhered. Moreover, Ihe resuIIs aIIoved Ior a
vericaIion oI argumenIs broughI Iorvard by Ihe respondenIs
IhroughouI Ihe personaI inIervievs.
MuIIi-response vas assured Ihrough Ivo parIicipanIs oI diI-
IerenI hierarchicaI sIaIus in Ihe vorkshops per company. One
person Irom each company vas avaiIabIe Ior an in-depIh inIer-
viev. NeverIheIess, boIh parIicipanIs revieved Ihe case reporI
individuaIIy Io assure consisIency. The case sIudies vere con-
ducIed aI Ihe companies and Ihe diIIerenI siIes oI Ihe vorkshop.
A case sIudy proIocoI oI Ihe responses vas creaIed and daIa vas
gaIhered Io provide reIiabiIiIy in Ihe research meIhod Yin, 2009).
In Appendix A, ve presenI Ihe measures underIaken IhroughouI
Ihe research phases in order Io assure reIiabiIiIy and vaIidiIy
oI our research CibberI eI aI., 2008, Yin, 2009; ReuIer eI aI.,
2010).
4. Data analysis
The daIa vas coded according Io Ihe guideIines esIabIished by
Yin 2009). In Ihe nexI sIep, viIhin-case anaIysis vas used Io
sIrucIure and Iocus Ihe inIormaIion gaIhered MiIes and
Huberman, 1994). As resuII oI Ihe viIhin-case anaIysis, a sIruc-
Iured evaIuaIion oI Ihe appIicabiIiIy oI Ihe proposiIions Ior each
company vas possibIe. Cross-case anaIysis vas used Io idenIiIy
Ihe simiIariIies and diIIerences oI Ihe resuIIs and Io evaIuaIe Ihe
proposiIions in a cross-indusIry seIIing Cerring, 2006; Yin,
2009).
In a rsI sIep oI anaIysis, aII daIa vas openIy coded and
grouped according Io Ihe ve caIegory Iramevork oI Franco-
SanIos eI aI. 2007) in order Io provide an overviev oI Ihe daIa
gaIhered and Io esIimaIe vheIher daIa saIuraIion Ior a eId oI
anaIysis had beenreached or noI. II IurIher research vas required,
iI vas conducIed by conIacIing Ihe inIormanIs oI Ihe companies
and requesIing addiIionaI inIormaIion. Through axiaI coding in
Ihe caIegories oI Ihe Iramevork, Ihe anaIysis vas IurIher IaciIi-
IaIed and aIIoved Ior a deIaiIed anaIysis Ior each caIegory oI our
research Iramevork.
The resuIIs oI Ihese anaIyses are dispIayed in Ihe IoIIoving
secIions. Ve presenI our ndings based on Ihe ve caIegory
Iramevork Ior purchasing perIormance measuremenI sysIems
Franco-SanIos eI aI., 2007). Each secIion commences viIh a
cross-case anaIysis, IoIIoved by a discussion oI our ndings in
comparison Io our iniIiaI proposiIions. A summary oI our ndings
Ior each case is presenIed in TabIe 3.
The codes idenIied Ior Ihe dimension oI behavioraI inBuence
vere based on Ihe guideIines derived by Ansari 1977) and
Komminis and EmmanueI 2007). In Ihe anaIysis, exIrinsic moIi-
vaIion vas considered as any Iype oI revard reIaIed Io Ihe
perIormance measures used. InIrinsic moIivaIion vas regarded
as Ihe evaIuaIion oI individuaI perIormance in impIemenIing
pracIices, as measured by Ihe purchasing perIormance measure-
menI sysIem. In Ierms oI Iearning and improvemenI, Ihe purchas-
ing perIormance measuremenI sysIems vere assessed on Ihe
presence oI perIormance measures IhaI Iriggered Iearning
processes, parIicuIarIy Ihe eIIecIiveness oI seIecIed purchasing
pracIices and specic Iearning KPIs.
4.1. Strutcgy munugcmcnt
The anaIysis reveaIed IhaI purchasing sIraIegy vas derived
IromcorporaIe sIraIegy in aII surveyed companies. The degree oI
perIormance conIribuIion vas evaIuaIed based on Ihe sIraIegic
ob]ecIives seI IorIh by Ihe IuncIion's upper managemenI. The
generic sIraIegic ob]ecIives and Ihe dened sIraIegic goaIs are
shovn Ior each company in TabIe 3.
AIIer maIching Ihe overaII sIraIegic ob]ecIives viIh Ihe sIra-
Iegic goaIs oI PSM, a diverging range oI goaIs couId be observed
across case rms. Hovever, Ior aII Iour rms, Ihe generic sIraIegic
goaIs vere sIrongIy aIigned viIh Ihe dened IuncIionaI sIraIegic
goaIs. These dened sIraIegic goaIs in purchasing consIiIuIe Ihe
IundamenIaI eIemenIs oI vhich Ihe PPMS oI each rm is based
upon. Moreover, aII case companies assess a vide range oI
inIernaI and exIernaI perIormance measures, as indicaIed in
TabIe 3. II is imporIanI Io noIe IhaI aI Ihe companies FinanciaI
Service FS) and InIormaIion TechnoIogy IT), parIicuIar emphasis
is pIaced on Ihe sIraIegic deveIopmenI oI Ihe IuncIion. This
prioriIy is aIso reBecIed in Ihe perIormance measures appIied,
e.g. 'maverick-buying raIio' and 'inIernaI cusIomer saIisIacIion'.
FurIhermore, a varieIy oI inIernaI perIormance measures couId be
observed aI UIiIiIy UT), vhich aIso sIrongIy Iocused on Ihe
eIciency oI inIernaI purchasing processes, as iIIusIraIed by KPIs
such as 'order posiIions per empIoyee'. AI Machinery MA) a
disIincI IoIaI cosI Iocus couId be observed vieving boIh inIernaI
and exIernaI cosIs vhenassessing Ihe quaIiIy, innovaIiveness and
cosI reducIions in purchasing pro]ecIs. In addiIion, a pronounced
sIraIegic ob]ecIive across cases vere periodicaI savings and cosI
reducIions. AIIhough onIy UT assigned Ihe highesI sIraIegic
prioriIy Io cosI reducIions, aII Iour rms disIincIiveIy prioriIize
Ihe measuremenI oI 'periodicaI savings'. This dimension vas aIso
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Table 3
Purchasing perIormance measuremenI sysIemcharacIerisIics.
Framework category Sub-category Financial service
(FS)
Machinery (MA) lnformation
technology (lT)
Utility (UT)
T. Strategy
management
Hierarchy of the
generic strategic
ob]ectives in
purchasing
a
1. DeIivery
2. QuaIiIy
3. CosI
4. FIexibiIiIy
1. FIexibiIiIy
2. QuaIiIy
3. CosI
4. DeIivery
1. DeIivery
2. CosI
3. QuaIiIy
4. FIexibiIiIy
1. CosI
2. DeIivery
3. QuaIiIy
4. FIexibiIiIy
Dened strategic goals
of the purchasing
function
1. Ensuring opIimaI
suppIy oI business
processes
2. CeneraIion oI
savings Ihrough
opIimizaIion and
cosI reducIion
3. ConIinuous
sIraIegic
deveIopmenI oI
purchasing
deparImenI
1. QuaIiIy assurance,
conIroIIing and
suppIier
deveIopmenI
2. Savings generaIion
and cosI reducIion
3. ConIribuIion Io
innovaIiveness oI
Ihe company
1. Enhance
cusIomer vaIue
2. 8ecome a gIobaIIy
inIegraIed
purchasing
IuncIion
3. MainIaining
suppIy chain
susIainabiIiIy
4. Achieve susIained
producIiviIy
1. CenIraI bundIing oI
savings generaIion
2. ImprovemenI oI
inIernaI
purchasing
processes in Ierms
oI cosI and quaIiIy
3. ConIinuous
Iearning oI
purchasing
personneI
4. TransparenI and
susIainabIe
purchasing
processes
2. Measure
performance
lnternal measures
applied per PPMS
InIernaI cusIomer
saIisIacIion
Maverick-
buying raIio
CosIs oI Ihe
purchasing IuncIion
]savings
MaIuriIy oI suppIier
managemenI sysIem
ToIaI CosI oI
Ovnership oI
purchasing pro]ecIs
Purchasing voIume
deveIopmenI
CIobaI
sourcing raIio
ProIessionaIizaIion
oI suppIier
perIormance
evaIuaIion
CIobaI inIernaI
suppIy expenses
ProcuremenI
by-pass
ConIracI
managemenI
Training and
quaIicaIion days
Average Iime oI
processing Ior
purchasing
requisiIions
PercenIage oI iIems
procured via e-
caIaIog or Irame
agreemenIs
Order posiIions per
empIoyee
ReceipI voIume per
empIoyee
Number oI ERP
processes
8ackIog oI open
requisiIions
FXternal measures
applied per PPMS
Savings per period
MaIuriIy oI suppIier
managemenI sysIem
SuppIier
perIormance in
Ierms oI DeIivery,
QuaIiIy, CosI and
FIexibiIiIy
QuaIiIy oI
suppIied iIems
ProducIion
disIurbance raIe
PeriodicaI savings
Currency risks
InvenIory IeveI
SuppIier
perIormance
SuppIier
saIisIacIion
CompeIiIiveness oI
price IeveI
compared Io
indusIry IeveI
CosI reducIion
CosI avoidance
QuaIiIy PPM),
On-Iime
deIivery raIe
ForecasI
commiImenI
Lead-Iime
EnvironmenIaI
perIormance
CO2 Emissions per
purchased iIem
DiversiIy spend
Savings as a
percenIage oI
receipI voIume
per period
ProducI resuIIs
gains Iess cosI)
Number oI IaIe
deIiveries
Purchasing quaIiIy
perIormance
OveraII suppIier
evaIuaIion
Number oI acIive
suppIiers
QuaIied
cIienI visiIs
3. lnuence behavior ParI oI variabIe
incenIives Ior
purchasing
caIegory Ieams
Choice oI
purchasing
perIormance
measures vary
among purchasing
caIegories
Choice oI
purchasing
pracIices
deIermined in
caIegory
managemenI Ieams
PerIormance
ouIcomes are parI
oI moneIary
incenIive scheme
Ior purchasing
managemenI Ieam
Choice oI
purchasing
pracIices is decided
viIhin Ihe caIegory
managemenI
organizaIion
PerIormance
ouIcomes are parI
oI Ihe incenIive
scheme Ior aII
purchasing
empIoyees
ProducI sIraIegy
deIermined in
procuremenI Ieams
Choice oI
purchasing
pracIices depend
on producI group
MoneIary
incenIives and
promoIion oI
purchasing
empIoyees is based
on purchasing
perIormance
Purchasing
perIormance
measures vary
across purchasing
caIegories
Choice oI
purchasing
pracIices depend
on purchasing
caIegory and is
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communicaIed viIh Ihe highesI inIensiIy in Ierms oI prioriIy and
periodicaI recurrence across cases, as viII become evidenI in
Ihe subsequenI secIions. FurIhermore, MA did noI provide a
measure Ior iIs sIraIegic goaI oI 'conIribuIion Io innovaIiveness
oI Ihe company'. The company sIaIed IhaI comprehensive per-
Iormance measures Ior Ihis purpose are noI appIicabIe across
purchasing caIegories. NeverIheIess, Ihey sIaIe IhaI innovaIive-
ness is raIed in periodicaI suppIier perIormance evaIuaIions.
Our anaIysis provides supporI Ior our rsI proposiIion. AII
perIormance measures vere derived Irom purchasing sIraIegy
and measure Ihe diverse sIraIegic goaIs oI Ihe respecIive purchas-
ing IuncIion. Hovever, some sIraIegic ob]ecIives vere noI repre-
senIed Ihrough disIincI perIormance measures. The respecIive
companies aIIribuIed Ihis aspecI Io a generaI Iack oI appIicabIe
perIormance measures across purchasing caIegories. Thus, Ihe
observaIion aI MA concerning innovaIiveness provided parIiaI
conIradicIion Ior Ihe rsI proposiIion. Hovever, in summary Ihe
perIormance measures vere represenIaIive oI Ihe deniIion oI
purchasing compeIence and vere designed Io appIy purchasing
perIormance measuremenI sysIems Io aIIain sIraIegic aIignmenI
oI Ihe purchasing IuncIion e.g. ChenhaII, 2005; Cousins, 2005).
4.2. Mcusurc pcrjormuncc
AII companies measured Ihe eIIecIiveness oI Ihe purchasing
IuncIion by appIying inIernaI and exIernaI measuremenIs. The
resuIIs in TabIe 3 dispIay IhaI Ihe emphasis on Ihe inIernaI and
exIernaI caIegories varied sIrongIy, probabIy due Io Ihe naIure oI
Ihe companies' indusIries: Ivo service and Ivo manuIacIuring
companies. FS and UT pIaced a sIronger Iocus on inIernaI PSM
processes, vhiIe IT and MA Iocused more proIoundIy on exIernaI
PSM processes.
The Ivo service companies, UT and FS, measured Ihe
compIiance viIh purchasing sIandards and Ihe saIisIacIion oI
inIernaI cusIomers viIh purchasing services. 8oIh companies
measured process-orienIed perIormance in shorI periodic inIer-
vaIs in order Io be abIe Io Iake IasI correcIive measures vhen
necessary. For insIance, Ihe number oI acIive suppIiers aI UT viII
Table 3 contnucd)
decided upon in
cross-IuncIionaI
procuremenI Ieams
4. Learning and
improvement
lnternal perspective Process map Ior
sIraIegic
deveIopmenI oI Ihe
IuncIion
DeveIopmenI oI
purchasing
empIoyees is
Iracked
PeriodicaIIy
comparabIe KPIs
are compared Ior
improvemenI
ConIinuous
deveIopmenI oI
purchasing skiIIs
ExIernaI
benchmarking oI
Ihe purchasing
IuncIion
DeveIopmenI oI
cross-IuncIionaI
reIaIions
Tracking oI
personneI career
paIhs noI Ior aII
purchasing
caIegory Ieams)
Tracking oI Iraining
days Ior
purchasing sIaII
PeriodicaI
comparison oI
cerIain KPIs, viIh
Iocus on cosI
reducIion
InIernaI
deveIopmenI oI
purchasing
deveIopmenI
programs
Tracking oI
personneI
deveIopmenI and
Iraining
FXternal perspective No specic
measure exisIs
SuppIier
deveIopmenI
pIanned
Training
deveIopmenI
programs Ior
seIecIed suppIiers
based on
perIormance
poIenIiaIs
PeriodicaIIy
comparabIe KPIs aI
suppIier IeveI are
compared Ior
improvemenI
SuppIier
parInership and
deveIopmenI
programin pIace
SuppIier musI meeI
a perIormance
IhreshoId
every year
5. Communication Tvo KPIs are
reporIed Io
execuIive
managemenI,
nameIy:
1) PeriodicaI
Savings and 2)
Maverick-buying
raIio
AII KPIs are
reporIed Io
managemenI oI Ihe
Purchasing
IuncIion
DeniIions oI
perIormance
measuremenI
IormuIae
KPIs are reporIed Io
Ihe head oI
purchasing
SuppIier
perIormance
communicaIed Io
1) inIernaI
cusIomers and
2) suppIiers
KPIs reporIed IoIhe
board oI direcIors
1) Purchasing
voIume
deveIopmenI and
periodicaI savings,
2) QuaIiIy oI
suppIied iIems
3) ProducIion
disIurbance raIe
4) CIobaI
sourcing raIio
ExIernaI & inIernaI
communicaIion oI
cosI reducIions
AII measures are
reporIed Io Ihe CPO
no board member)
CPOdeIivers resuIIs
Io board member;
savings are oI
highesI reIevance
CommunicaIion oI
aII KPIs Io Ihe nexI
managemenI
hierarchy viIhin
purchasing
Savings are
reporIed Io
ExecuIive
managemenI
ReIevanI KPIs are
reporIed Io inIernaI
cIienIs
DeniIions oI
perIormance
measuremenI
IormuIae
a
8ased on Ihe dimensions provided by Conza Iez-8eniIo 2007) assessed in our quesIionnaire.
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be reduced Ihrough consoIidaIion. This reducIion is expecIed Io
resuII in inIernaI eIciency gains as veII as improved conIracI
Ierms and service IeveIs IromIhe remaining suppIiers. 8oIh rms
cIoseIy moniIored suppIier perIormance aIong Ihe deneddimen-
sions oI quaIiIy, deIivery perIormance and prices IeveIs compared
Io Ihe spoI markeI. The PPMS aI IT and MA addiIionaIIy incIuded
periodicaI assessmenIs oI currency risks, invenIory IeveIs, Iead-
Iimes and quanIiIy IorecasI commiImenI oI Ihe suppIiers. 8oIh
rms highIighIedIhe imporIance oI eIIecIiveIy managing a suppIy
base according Io Ihese measures in addiIion Io periodicaI
savings.
The amounI oI periodicaI savings vas measuredand conIroIIed
by aII sampIe rms. As previousIy presenIed, Ihe cosI reducIion
measure appeared Io be a common sIraIegic ob]ecIive. Our
observaIion is here is in Iine viIh NoIIeI eI aI. 2008), vho sIaIed
IhaI savings measuremenI vas Ihe dominanI criIerion Ior
Purchasing, as veII as Cadde and Hakansson 1993) vho idenIi-
ed raIionaIizaIion as a permanenI goaI Io be conIinuousIy
pursued by aII PSM IuncIions. This couId expIain vhy cosI
reducIions are such an imporIanI dimension oI aII our case
companies' PPMSs. The IoIIoving sIaIemenI oI Ihe ChieI Purchas-
ing OIcer oI FS besI iIIusIraIes Ihis nding:
''Savings are Ihe key Io everyIhing. In Ihe end, iI aII comes
dovn Io Ihe moneIary eIIecIs ve as a IuncIion can deIiver''.
VhiIe Ihe ob]ecIives oI measuremenI and perIormance conIroI
reIaIed sIrongIy Io Ihe purchasing caIegories or producI groups,
Iheir Iink Io individuaI purchasing pracIices Ior procured iIems, as
recommend by KraI]ic 1983), vere noI observabIe aI any oI our
case rms. For exampIe, aI FS, savings vere noI diIIerenIiaIed
according Io Ihe kind oI Iender processes used, e.g. simuIIaneous
e-aucIion vs. round-based bidding Ior a purchased iIem. Hovever,
Ihe perIormance measures vere raIher appIied Io Irack Ihe
dispersion and usage oI inIroduced pracIices. ExampIes oI Ihese
purchasing pracIices used vere: 'degree oI proIessionaIizaIion oI
suppIier evaIuaIion' FS), 'diversiIy spend' IT), 'gIobaI sourcing
raIio' MA) and 'Irame agreemenI raIio' UT). These meIrics
measured Ihe aIIainmenI oI organizaIionaI compIiance Io Ihe
sIraIegicaIIy desired pracIices. Thus, aIIhough Ihe perIormance
measures reIaIe Io Ihe impIemenIaIion oI specic purchasing
goaIs Ihrough purchasing pracIices, Ihe IraceabiIiIy oI Ihe perIor-
mance conIribuIion aIIribuIabIe Io individuaI purchasing prac-
Iices couId noI be observed and vas noI desired aI Ihe case
companies. Hovever, aII companies sIaIed IhaI perIormance
measures vere IraceabIe aI Ihe commodiIy Ieam IeveI and IhaI
Ihe respecIive measures reIaIed Io specic producI or service
caIegories. This reIaIion enabIed a diIIerenIiaIed measuremenI
approach and a perIormance comparison across caIegories and
Ieams. NeverIheIess, a diIIerenIiaIion oI perIormance measures
and measuremenI resuIIs based on purchasing pracIices vas noI
possibIe in any oI Ihe purchasing perIormance measuremenI
sysIems anaIyzed.
In summary, Ihese resuIIs primariIy supporI Ihe second
proposiIion since perIormance measures reIaIed Io purchasing
pracIice caIegories are IraceabIe Io Ihe person or Ieam in charge
Ior Ihe producI group or commodiIy. Hovever, comparison oI Ihe
eIIecIiveness oI purchasing pracIices across commodiIy groups
vas noI enabIed Ihrough Ihe PPMS oI our case companies.
A measure onIy exisIed Ior Ihe presence oI cerIain pracIices, such
as Ihe usage oI e-caIaIogs.
Hence, iI appears Io be Ioo compIex Io creaIe Iransparency
concerning Ihe purchasing compeIence and sIraIegic aIignmenI
aIIribuIabIe Io aII purchasing pracIices execuIed. Moreover, many
sIraIegic goaIs seemIo be highIy quaIiIaIive and noI IraceabIe Ior
every caIegory aI Ihe same in-depIh IeveI. Thus, Ihere vas IimiIed
IraceabiIiIy, in parIicuIar, Ior soII IacIors such as BexibiIiIy or
innovaIiveness. For Ihese dimensions iI seemed Io be impracIicaI
and ineIcienI Io measure perIormance viIh comparabIe mea-
sures across purchasing caIegories. Hovever, Ior Ihe quanIiIaIive
measures Ior vhich a dened and universaIIy accepIed measure-
menI IormuIa exisIed, such as periodicaI savings, a comparison aI
Ihe purchasing caIegory, Ieam and pracIice IeveIs vas possibIe.
ThereIore, our second proposiIion does noI seem generaIizabIe
across aII measuremenI dimensions. The IimiIed measurabiIiIy oI
purchasing compeIence across purchasing caIegories and, Ihus,
Ihe inabiIiIy Io assess Ihe conIribuIion oI purchasing Ieams and
pracIices according Io Iheir purchasing compeIence vas an
unpredicIed nding. A comparabIe measure across purchasing
Ieams and caIegories couId be deIecIed Ior Ihe cosI savings
dimension, vhich supporIed our resuIIs. NeverIheIess, ve con-
cIude IhaI Ihe rms in our sampIe aIIempIed Io Iink goaI
aIIainmenI viIh appIied purchasing pracIices, hovever primariIy
viIhin comparabIe groups oI purchased iIems and caIegory
Ieams. ParIicipanIs cIaimed IhaI Ihe harmonizaIion oI meIrics
assures perIormance Iransparency and communicaIion oI perIor-
mance ouIcomes in a manageabIe, sIrucIured and comprehensive
manner.
4.3. Inucncc bchuvor
TabIe 3 iIIusIraIes IhaI exIrinsic revards vere a parI oI Ihe
empIoyee moIivaIion scheme across aII cases. NeverIheIess, such
perIormance appraisaIs vere mosIIy appIied aI manageriaI IeveIs.
For FS, Ihis reIers Io Ihe direcIor oI a Ieam responsibIe Ior Ihe
procuremenI oI a cerIain producI or service caIegory. The same
appIies Ior IT, UT and MA vhere perIormance measures vere
used onIy Ior Iead-buying personneI Io evaIuaIe and appraise
perIormance. This Iocus seemed vaIid since Ihese empIoyees
make Ihe decisions Ior and againsI cerIain suppIiers and impIe-
menI inIernaI purchasing sIrucIures, such as e-procuremenI IooIs,
or increase Ihe gIobaI sourcing raIio. Hence, noI aII empIoyees
couId inBuence KPIs Io Ihe same degree and, IhereIore, noI every
purchasing empIoyee's revards and paymenIs shouId be aIIecIed
by Ihe purchasing perIormance, as sIaIed by inIormanIs aI IT and
FS. The decision as Io vhich purchasing pracIices vere used vas
aIso made aI Ihe manageriaI IeveI aI aII Ihe companies. Moreover,
some decisions on pracIices are made cenIraIIy by Ihe responsibIe
head oI purchasing or CPO. For exampIe, Ihe decision vheIher Io
enhance Ihe usage oI Irame agreemenIs FS) or e- procuremenI
UT) is made aI Ihe Iop-IeveI, yeI iI musI be execuIed by Ihe
purchasing empIoyees, vhich is exempIied by Ihe sIaIemenI oI
Ihe CPOoI UT.
''Purchasing pracIices are generaIIy incenIivized Ihrough cen-
IraI purchasing guideIines; hovever, experience proved IhaI
our empIoyee behavior vas mosI aIIecIed by undersIandabIe
and inBuenceabIe perIormance measures. In our case, PSM
guideIines seI boundaries on Ihe aIIoved purchasing pracIices
Ior suppIier seIecIion, vhiIe perIormance measuremenI pro-
vides a reporI sysIem Io eIIecIiveIy appIy Ihe guideIines''.
AII companies excepI FS used cross-IuncIionaI purchasing
Ieams Io deIermine Ihe sIraIegic course oI acIion Ior a cerIain
producI or service caIegories. AI FS such Ieams excIusiveIy
consisIed oI members Irom Ihe purchasing deparImenI. These
Ieams aIso deveIoped individuaI producI group sIraIegies. AII
case rms sIaIed IhaI Ihis process vas necessary because Ihe
generaI purchasing sIraIegy did noI I aII producI groups and
had Io be adapIed individuaIIy Io each segmenI oI purchasing.
Thus, purchasing pracIice seIecIion vas based on Ihe respecIive
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producI group sIraIegy and goaIs, as sIaIed by Ihe purchasing
manager aI MA:
''Some |producIs]services| require BexibiIiIy and some do noI.
For indirecI maIeriaI, such as oIce suppIies, I do noI need
BexibiIiIy. For producIion-reIaIed maIeriaI, iI depends on Ihe
producIion process.''
ConsequenIIy, aII sampIe rms decided upon specic purchas-
ing pracIices aI Ihe purchasing Ieamor purchasing caIegory IeveI.
Thus, Ihe seI oI perIormance measures aIso varied across pur-
chasing caIegories. Hovever, across our case companies Ihere
vas no sIraIegic process IhaI guided Ihe choice vheIher Io
measure a cerIain meIric Ior one purchasing caIegory e.g. direcI
rav maIeriaI) vhiIe negIecIing iI Ior anoIher caIegory e.g. oIce
equipmenI). The producI group sIraIegy diIIered IromIhe cenIraI
purchasing sIraIegy, in accordance viIh Ihe noIions inIroduced
by KraI]ic 1983) regarding segmenIed purchasing. Thus, noI
every measure vas suiIabIe Ioevery producI groupdue Io specic
suppIy markeI characIerisIics. In order Io be eIIecIive, perIor-
mance measuremenI sysIems vouId have Io be derived IromIhe
segmenIed producI sIraIegy Io incenIivize suiIabIe purchasing
pracIices aI aII organizaIionaI IeveIs. Hovever, such an approach
vouId have a sIrong negaIive eIIecI on Ihe comparabiIiIy and Ihe
perIormance Iransparency across producI groups, resuIIing in Ihe
inabiIiIy oI Ihe organizaIion Io guide empIoyee behavior Irom a
Iop-dovn IeveI. A sIaIemenI made by Ihe head oI procuremenI
Irom IT besI iIIusIraIes Ihis siIuaIion.
''8oIIom-up deniIion oI perIormance measures increases Ihe
IoIaI number oI measures Io an unmanageabIe IeveI oI com-
pIexiIy and opaciIy Irom a business coordinaIor's poinI oI
viev.''
Hence, Ihe aIignmenI oI purchasing pracIices appeared Io be
achieved Ihrough segmenIed purchasing caIegory-specic sIraIe-
gies. Case rms aIIoved BexibiIiIy vhen iI came Io perIormance
evaIuaIionoI purchasingIeams or producI groups. This noIionvas
presenI aI MA, IT and FS, vhich aII aIIoved a boIIom-up inBuence
on Ihe PPMS deveIopmenI. MoIivaIion Ior creaIing purchasing
compeIence is creaIed aI Ihe manageriaI and producI]service
caIegory IeveIs. AI Ihe operaIionaI IeveI, derived caIegory goaIs
vere pursued, vhich Ied Io Ihe seIecIion oI purchasing pracIices.
Moreover, Ihe PPMS aIIecIs Ihe exIrinsic moIivaIion oI man-
ageriaI empIoyees and parIiaIIy aI Ihe empIoyee IeveI. VhiIe
moneIary revards vere generaIIy announced Io Ieading empIoy-
ees, more cIericaI empIoyees are revarded viIh Irainings and
career deveIopmenI paIhs as a resuII oI sIrong perIormance.
MoneIary revards vere sIrongIy based on Ihe aIIainmenI oI
nanciaI KPIs, such as periodicaI savings or cosI avoidance, across
aII sampIe rms. ConsequenIIy, Ihe decision-Iakers in Purchasing
vere incIined Io pursue sIraIegies vhich Iead Io cosI reducIions,
as opposed Io a more muIIi-dimensionaI perIormance opIimiza-
Iion in Iine viIh Ihe muIIi-dimensionaI sIraIegic ob]ecIives oI Ihe
IuncIion and Ihe company as a vhoIe.
Ve concIude IhaI perIormance appraisaI aI Ihe manageriaI
IeveI vas sIrongIy based on Ihe aIIainmenI oI cosI reducIion
goaIs, vhich conIradicIs our Ihird proposiIion, suggesIing an
appraisaI sysIem based on Ihe aIIainmenI oI aII sIraIegic ob]ec-
Iives. Hovever, perIormance appraisaI aI Iover hierarchicaI IeveIs
vas Iess moneIary orienIed and aIso seemed Io incenIivize a more
baIanced pursuiI oI sIraIegic goaIs. II remains quesIionabIe
vheIher superiors viII supporI a baIanced pursuiI oI perIormance
measures oI Iheir subordinaIe iI Iheir periodicaI saIary sIrongIy
depends on periodicaI cosI reducIions.
4.4. Lcurnng und mprovcmcnt
The perIormance measures empIoyed in Ihe companies vere
used Ior various Iearning processes in Ihe assessed PSMIuncIions.
In Ihis regard, an inIernaI and an exIernaI dimension oI Iearning
aims couId be observed. Considering Ihe resuIIs shovn in TabIe 3,
Ihe inIernaI perspecIive aimed aI deveIoping Ihe purchasing
IuncIion, vhiIe Ihe exIernaI perspecIive Iocused on deveIoping
Ihe suppIy base. In our sampIe ve Iound an inIenIion Ior inIernaI
deveIopmenI across aII case rms. NeverIheIess, measures Ior
Iracking Ihis deveIopmenI couId onIy be deIecIed aI FS and IT. FS
used an empIoyee deveIopmenI process map, vhiIe IT measured
Ihe days spenI in Iraining Ior each empIoyee. UT and MA did noI
provide any separaIe measures Ior inIernaI Iearning and improve-
menI. MAIocused on proIessionaI Irainings vhiIe UT, on Ihe oIher
hand, used Ihe esIabIished perIormance measures Io demonsIraIe
Ihe perIormance capabiIiIy oI individuaI Ieams. This process Ied
Io Ihe derivaIion oI acIion pIans based on deviaIions Irom
pIanned perIormance vaIues. This noIion is besI iIIusIraIed by
Ihe IoIIoving sIaIemenI oI Ihe purchasing manager aI UT:
''The cenIraI idea is noI Io Iook back and ask vhaI misIakes
vere made. RaIher, our goaI is Io improve and ask ourseIves
vhaI ve shouId do beIIer.''
Hence, iI can be concIuded IhaI UT appIied Ihe PPMS Io deIecI
Ihe areas viIhin Purchasing IhaI require Ihe sIrongesI improve-
menI, vhich can be considered an ouIpuI orienIed Iovards Ihe
]ob measure oI Iearning and improvemenI. The oIher Ihree rms
considered empIoyee deveIopmenI as a separaIe dimension Io be
expIiciIIy measured via PPMS.
Concerning Ihe exIernaI perspecIive, ve idenIied Ihe desire Ior
IurIher deveIopmenI aI aII case companies, viIh Ihe excepIion oI FS.
The ongoing impIemenIaIion oI a suppIier perIormance evaIuaIion
vas undervay aI FS aI Ihe Iime oI our research and Ihis siIuaIion
mighI have inBuenced Ihe resuIIs. MAusedspecic measures IoIrain
and deveIop Iheir suppIiers Ihrough an exIensive Ieedback program
as parI oI Ihe PPMS. IT deveIoped acIion pIans based on Ihe resuIIs oI
cerIain key measures Iike 'quaIiIy' parIs per miIIion deIecI raIe) or
'on-Iime deIivery raIe'. AI UT a Iearning and deveIopmenI process
exisIed as an inIegraI parI oI Ihe PPMS. The suppIiers' resuIIs vere
compared Io Ihe seI goaIs and in case oI suppIier under-achieve-
menIs, an acIion pIan Ior improvemenI vas deveIoped. Thus, simiIar
Io UT's inIernaI Iearning perspecIive, a IuIure-orienIed improvemenI
pIan based on pasI perIormance daIa vas deveIoped. Moreover, onIy
UT expIiciIIy sIaIed Ihe purpose oI Ihe purchasing perIormance
measuremenI sysIem: Io deIecI ineIciencies in Ihe IuncIion and
maI-perIormance inIhe suppIy base. 8ased on suchinIormaIionIrom
PPMS, an improvemenI process vas Iriggered. IIs eIIecIiveness is
Iracked Ihrough Ihe deveIopmenI oI Ihe perIormance measures oI
IuIure periods. AcIear connecIionIopurchasing compeIence couIdbe
observed since Ihe Iearning process vas based on perIormance goaIs
derivedIrompurchasingsIraIegy. ConcerningIhe exIernaI dimension,
Ihe resuIIs supporIed Ihe noIion puI IorIh inSecIion 4.3IhaI Iearning
based on Ihe producI or purchasing caIegory IeveI may aIIov Ior an
assessmenI oI I oI Ihe segmenIed purchasing sIraIegy Io overaII
purchasing sIraIegy. Such a cIose sIage-gaIe process couId noI be
idenIied aI Ihe oIher Ihree case companies, vhich IimiIed Iheir
abiIiIy Io IosIer Iearning and improvemenI IromIhe raIher adminis-
IraIive Iask oI pureIy measuring perIormance.
VhiIe Irom a generaI perspecIive iI can be sIaIed IhaI Ihe
desire Io Iearn and improve vas presenI aI aII observed cases,
ve couId noI Iink Ihis desire Io Ihe PPMS. AII companies do
noI use Ihe purchasing perIormance measuremenI sysIems
coherenIIy and IhereIore Ihe resuIIs casI doubI on Ihe roIe puI
IorIh in ProposiIion 4. Feedback concerning Ihe degree oI
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aIignmenI oI Ihe pracIices and Iheir eIIecIiveness in creaIing
purchasing compeIence does noI seem possibIe. Moreover, com-
parabIe Io Ihe ndings reIaIed Io Ihe Ihird proposiIion, a Iink Io
Ihe individuaI pracIice IeveI is noI discernibIe Ihrough Ihe Iearn-
ing measures appIied in Ihe PPMS oI our case companies. The
Ieedback Ioops and goaI seIIing is orienIed aIong Ihe generaI
sIraIegic caIegories and does noI incIude direcI Iinks Io Ihe
individuaI purchasing pracIice aI producI or service caIegory
IeveI. This supporI mosIIy sIemmed Irom observaIions aI UT.
AI MA and aI IT, improvemenI vas measured in Ierms oI
proIessionaI empIoyee deveIopmenI, vhiIe FS appIied a raIher
sIand-aIone deveIopmenI map.
To concIude, Ihe resuIIs provide considerabIe conIradicIion Ior
ProposiIion 4because Iearning and improvemenI vas appIied as a
separaIe measuremenI dimension in Ihe respecIive PPMS oI IT,
MA and FS. The connecIion beIveen perIormance measures and
Iearning vas onIy inIerIinked aI UT and, Ihus, connecIed Io Ihe
sIraIegic ob]ecIives IosIering higher IeveIs oI purchasing compe-
Ience. AI Ihe oIher rms, perIormance measures vere noI direcIIy
appIicabIe in providing a Iearning basis aI Ihe segmenIed producI
group or caIegory IeveI.
4.5. Communcuton
In every company, Ihe measures vere reporIed Io Ihe Head oI
Purchasing or Ihe respecIive CPO in order Io sIeer and manage
each purchasing IuncIion see TabIe 3). This cenIraI reporIing Iine
vas presenI in aII oI Ihe purchasing deparImenIs. II underIined
Ihe connecIion beIveen purchasing perIormance measures and
purchasing sIraIegic ob]ecIives since Ihe cenIraI purchasing
sIraIegy is deIermined aI Ihe highesI organizaIionaI IeveI. These
measures reporIed aIong Ihis Iine vere inIernaIIy visibIe and
IhereIore regarded as represenIaIive oI Ihe inIernaI percepIion oI
purchasing perIormance conIribuIion. AIong Ihese reporIing Iines,
FS reveaIed IhaI Ivo perIormance measures: savings and maver-
ick buying vere communicaIed Io execuIive managemenI. AI UT,
Ivo meIhods oI periodicaI saving measuremenI vere reporIed.
ConIrary Io Ihis cosI reducIion emphasis, MA reporIed Iour xed
measures Io execuIive managemenI: cosI reducIions compared Io
Ihe previous year and compared Io currenI markeI deveIopmenI;
Ihe oIher Ivo meIrics reporIed Ihe quaIiIy IeveI deIivered by Ihe
suppIier. The reporIing sysIemaI IT vas noI sIandardized: savings
and cosI reducIion comparisons viIh compeIiIors vere xed
eIemenIs in Ihe reporIing scheme. These nanciaI indicaIors vere
suppIemenIed by oIher measures Io dispIay Ihe sIaIe oI opera-
Iions. ThereIore, despiIe comprehensive reporIing aI IT, Ihe Iocus
remained on cosI reducIions. As Ihe purchasing manager aI IT
sIaIed:
''Through savings you can shov posiIive gains, vhiIe on Ihe
oIher perIormance measures you can onIy Iook bad vhen you
do noI achieve Ihe pIanned vaIues.''
Concerning exIernaI communicaIion, onIy IT reporIed deIaiIed
inIormaIion oI Ihe perIormance oI Ihe purchasing IuncIion. UT
reporIed in generaI IhaI Ihe purchasing IuncIion had achieved
eIciency gains, vhiIe MA Iocused on Ihe suppIier managemenI
iniIiaIives and Ihe success oI suppIier inIegraIion. FS, on Ihe oIher
hand, did noI reporI any inIormaIion exIernaIIy on Ihe cenIraI
purchasing IuncIion.
Froma cross-case perspecIive, Ihe onIy company IhaI deviaIed
Irom Ihe oIhers in Ierms oI cosI dominance vas MA, vhere
savings and quaIiIy vere veighIed equaIIy in reporIing. Hovever,
Ihe innovaIion ob]ecIive vas aIso negIecIed since a measure
did noI exisI Ior iI. AII oIher companies primariIy reporIed
cosI-orienIed measures. AI IT, more measures vere reporIed buI
Ihese aIso supporIed Ihe cenIraI roIe oI cosI reducIion Ior inIernaI
communicaIion.
In summary, Ihe anaIysis reveaIed sIrongIy conIradicIing
ndings reIaIed Io Ihe IIh proposiIion. AIIhough aII companies
measure perIormance conIribuIion Ihrough sIraIegic ob]ecIives,
noI aII sIraIegic ob]ecIives are presenI in Ihe reporIing and
communicaIion scheme Io execuIive managemenI. Ve nd con-
sisIenI resuIIs onIy concerning Ihe cosI dimension in aII cases,
vhich provides supporI Ior ProposiIion 5. The sIrong Iocus on cosI
reducIion vas aIso empiricaIIy observabIe inSecIion 4.3. For Ihree
oI Ihe Iour companies, Ihe amounI oI savings dominaIed Ihe
reporIing scheme. A second sIraIegic ob]ecIive is perceived as
being equaI in imporIance Io savings onIy aI MA. NeverIheIess,
MA couId aIso noI provide measures Ior Iheir sIraIegic ob]ecIive
oI innovaIiveness. AI IT, Ihe emphasis on cosI reducIion aIso
became evidenI since Ihe oIher measures vere inIerchangeabIe
and, Ihus, can be considered Io be oI minor imporIance in
comparison over Iime. ViIh regard Io Ihe oIher sIraIegic ob]ec-
Iives in a cross-case perspecIive, a reporIing scheme, as puI IorIh
in ProposiIion 5, did noI exisI. This vas especiaIIy surprising since
measures exisIed Ior aImosI aII sIraIegic direcIions excepI
Ior innovaIion across rms. DespiIe Ihe previous ndings IhaI
purchasing perIormance measuremenI sysIems vere derived
Irom sIraIegy, ve observed a vide gap beIveen Ihe purchasing
sIraIegic ob]ecIives puI IorIh and Ihe communicaIed purchasing
perIormance conIribuIion. Hence, Ihe acIuaI perIormance con-
IribuIions vere noI hoIisIicaIIy communicaIed Io execuIive
managemenI. Thus, Ihe observed PPMS did noI creaIe inIernaI
Iransparency concerning Ihe muIIidimensionaI IeveI oI purchas-
ing compeIence.
5. Summary of ndings and conclusion
From our anaIysis, ve can concIude viIh condence IhaI
purchasing perIormance measuremenI sysIems pIay a cenIraI
roIe in Ihe aIignmenI process oI Ihe purchasing IuncIion. Never-
IheIess, Ihe roIe diIIers Irom vhaI vouId have been expecIed
Iroma IheoreIicaI perspecIive, as expressedin Ihe IormoI our ve
proposiIions sIaIed in SecIion 2. The empiricaI supporI Ior and
conIradicIion Io Ihese proposiIions is summarized in a IabIe in
Appendix A.
Ve Iound IhaI purchasing perIormance measuremenI sysIems
are derived Irom purchasing sIraIegy and aim aI creaIing Irans-
parency in desired purchasing compeIence, as sIaIed in
ProposiIion 1. NeverIheIess, ve Iound Ivo conIradicIory Ihemes
in our sampIe. These aspecIs can be perceived Io be sIrong poinIs
in research as Ihe meIhod emphasized an environmenI oI
companies viIh a high IeveI oI sIraIegic purchasing. Thus,
conIradicIory evidence in Ihese surroundings is cruciaI Cerring,
2006).
FirsIIy, our anaIysis raised doubI concerning Ihe perIormance
Iransparency creaIed Ihrough PPMS. The resuIIs Ior ProposiIion 2
demonsIraIed IhaI noI aII sIraIegic ob]ecIives vere IransIaIed
inIo perIormance measures. Moreover, Ihe anaIysis concerning
ProposiIions 3 and 5 dispIayed a bias Iovards Ihe appraisaI and
Ihe communicaIion oI periodicaI cosI reducIions. Hence, noI aII
sIraIegicaIIy desired compeIence is and can be communicaIed Io
execuIive managemenI. Thus, our research shovs a need Ior
deveIopmenI in Ihe reaIm oI purchasing perIormance measure-
menI sysIems Io diIIerenIiaIe purchasing Irom Ihe pureIy sav-
ings-orienIed deniIion oI purchasing compeIence. Managers
shouId IhereIore emphasize Ihe non-nanciaI eIIecIs oI purchas-
ing in order Io creaIe a coherenI reporIing scheme in reIaIion Io
purchasing sIraIegy. Our ndings aIso demonsIraIe IhaI Ihe
IheoreIicaI concepI oI purchasing compeIence is onIy appIied
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in Ierms oI sIraIegic ob]ecIives. The Iack oI inIeresI in Ihe
muIIi-dimensionaIiIy oI PSM's conIribuIion Io corporaIe sIraIegy
seems Io bias Ihe pursuiI oI moneIary conIribuIions IhaI are
direcIIy measurabIe. As a resuII, Ihe IheoreIicaI concepI oI
purchasing compeIence may nd IimiIed appIicabiIiIy in pracIice
due Io measuremenI, empIoyee appraisaI and corporaIe commu-
nicaIion deciencies. FurIher research musI supporI pracIiIioners
in deveIoping measuremenI sysIems, vhich aIIov Ior Ihe man-
agemenI oI muIIi-dimensionaI sIraIegies, Io creaIe a direcI
Iinkage beIveen non-moneIary eIIecIs and moneIary eIIecIs.
The second conIradicIory Iheme considers Ihe Iink beIveen
purchasing pracIices and Ihe PPMS. Ve Iound IhaI purchasing
perIormance measuremenI sysIems encourage Ihe aIignmenI oI
Ihe purchasing sIraIegy Io Ihe segmenIed producI or service
caIegory sIraIegies. The resuIIs oI ProposiIion 3 demonsIraIed
IhaI Ihe moIivaIion aspecI oI PPMS Iocused on Ihe segmenIed
caIegory sIraIegy. The same heId Irue Ior Iearning and deveIop-
menI, providing conIradicIory evidence Ior ProposiIion 4. The
resuIIs demonsIraIed IhaI sIraIegic aIignmenI in purchasing
requires more research on Ihe Iink beIveen cenIraI purchasing
sIraIegy and Ihe producI or service caIegory sIraIegy IeveI. Hence,
ve provide empiricaI supporI IhaI purchasing compeIence is
sIrongIy inBuenced by purchasing sIraIegies, appIied purchasing
pracIices and aIIained resuIIs in Ihe purchasing caIegory Ieams.
In IighI oI Ihe ndings, more research is needed Io expIore Ihe
here superciaIIy handIed Iopic oI incenIive sysIems and moIiva-
Iion Ihrough PPMS. FurIhermore, Ihe roIe and IuncIion oI
purchasing pracIices aI Ihe caIegory IeveI Ior Ihe creaIion oI
purchasing compeIence needs Io be invesIigaIed IurIher. For a
pracIiIioner, more measures aI Ihe segmenIed caIegory IeveI viII
Iead Io compIexiIy and hinder comparabiIiIy and Iransparency
across purchasing caIegories and Ieams, vhich mighI hinder
sIraIegic aIignmenI raIher Ihan improve iI.
This paper provides a conIribuIion Io Ihis research eId,
suggesIing IhaI Ihere seems Io be an opIimaI poinI oI perIor-
mance measuremenI heIerogeneiIy aI Ihe purchasing caIegory
IeveI. Hovever, IuIure research shouId Iocus on Ihe purchasing
caIegory IeveI, anaIyzing Io vhaI exIenI and under vhich circum-
sIances individuaI purchasing caIegories require specic purchas-
ing perIormance measuremenI in order Io ideaIIy supporI
purchasing sIraIegy and Ihe choice oI purchasing pracIices.
This siIuaIion reIers Io a generaI managemenI probIem oI
cenIraIIy-designed sysIems and IocaI uniIs using Ihese sysIems
LiIIis, 2002; IIIner and Larcker, 1998). AnoIher aspecI Ior
IuIure research in Ihis eId is Ihe inIegraIion oI exIernaI
poinIs oI viev on Ihe perIormance oI purchasing, such as
suppIiers' percepIion oI purchasing pracIices and perIormance
measuremenIs.
AppendiX A
See TabIes A1-A3.
Table AT
AcIions Io ensure vaIidiIy and reIiabiIiIy.
8ased on Yin, 2009; CibberI eI aI., 2008; ReuIer eI aI., 2010).
Reliability[validity criterion Research phase
Design Case selection Data gathering Data analysis
Reliability DeveIoped case sIudy proIocoI and
esIabIished a case sIudy daIabase
1-year observaIion during vorkshop
SeIecIion based on
choosing cruciaI
cases Ior IesIing Ihe
vaIidiIy oI Ihe
proposiIions made
Cross-indusIry
design Ior added
heIerogeneiIy
CoIIecIion oI daIa on
purchasing perIormance
measuremenI sysIem
Usage oI inIervievs and
anaIysis oI vorkshop proIocoIs
InIegraIion oI exIernaI
avaiIabIe inIormaIion and daIa
on purchasing perIormance
measuremenI
Reviev&
repeIiIion oI
coding procedure
Discussion oI
resuIIs in
vorkshop
dcmonstrutcs thut thc opcrutons
oj u study cun bc rcpcutcd, vth
thc sumc rcsults)
lnternal validity AnaIysis oI daIa based on a vaIidaIed
Iramevork
CruciaI case meIhod Ior sIrong causaI
reIaIionships
1-year observaIion
Io reveaI deniIe
reIaIionships
MuIIipIe sources oI
inIormaIion
DirecI daIa gaIhering Ihrough
inIervievs and indirecI
Ihrough vorkshop proIocoIs
and observaIion
MuIIipIe daIa
sources aIIovIor
IrianguIaIion oI
ndings
EsIabIished
Iramevork Ior
sIrucIuring
research and
resuIIs
cstublshcs u cuusul rclutonshp,
vhcrcby ccrtun condtons urc
shovn to lcud to othcr
condtons, us dstngushcd by
spurous rclutonshps)
Construct validity Derived proposiIions based on
previous empiricaI and IheoreIicaI
vorks in Ihe eId oI perIormance
measuremenI and purchasing
perIormance research
NA Various sources oI inIormaIion
Ihrough e.g. proIocoIs,
inIervievs and archivaI daIa
MuIIipIe uses oI Ihe same
sources over Iime
Long-IermobservaIion
ParIicipanIs oI
vorkshop and
inIervievees
revieved Ihe
draII case
sIudy reporI
cstublshcs corrcct opcrutonul
mcusurcs jor thc conccpts bcng
studcd)
FXternal validity CruciaI and cross-indusIry cases
aIIovIor a sIrong IesIing
environmenI
RevievoI resuIIs viIh proIessionaIs
IromIhe indusIries
CIear descripIion oI
rms, conIexI and
siIuaIion
DaIa vas gaIhered in
connecIion viIh sIandard
purchasing processes IhaI are
represenIaIive Ior processes in
oIher companies
NA
cstublshcs u domun n vhch thc
study's ndngs cun bc
gcncrulzcd)
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Table A3
Core quesIions oI Ihe semi-sIrucIured inIervievguide.
A.T. Semi-structured interviewguide
A. Purchasing department
1. VhaI is Ihe roIe and IuncIion oI Ihe purchasing deparImenI in your company? Hovhas purchasing deveIoped in your company?
2. PIease describe purchasing sIraIegy and iIs sIraIegic goaIs. Hovdo Ihese reIaIe Io corporaIe goaIs?
3. Hovis purchasing perceived in comparison viIh oIher IuncIions?
4. VhaI roIe does inIernaI and exIernaI communicaIion pIay Ior purchasing?
5. Hovis purchasing invoIved in Ihe inIernaI pIanning process and sIraIegy deveIopmenI?
6. Are Iraining iniIiaIives and IooIs used Ior purchasing empIoyees? Hovdo Ihese reIaIe Io purchasing sIraIegy?
7. Hovdoes purchasing vork IogeIher viIh oIher deparImenIs? PIease describe Ihe cross-IuncIionaI reIaIionships.
. Purchasing performance measurement
1. PIease describe Ihe roIe and IuncIion oI Ihe perIormance measuremenI sysIemused Ior purchasing?
2. VhaI measures are used in Ihe sysIemand vhy? PIease describe in deIaiI Ihe measuremenI procedure.
3. PIease describe Ihe connecIion beIveen perIormance measuremenI and purchasing sIraIegy. Hovdoes sIraIegy reIaIe Io measuremenI?
4. Hovdo you communicaIe resuIIs oI Ihe perIormance measure? Vho are Ihe recipienIs oI Ihese resuIIs?
5. Vho acIs based on Ihe resuIIs obIained? VhaI acIions are Iaken?
6. VhaI roIe does inIernaI and exIernaI communicaIion pIay Ior purchasing?
7. Hovis Ihe sysIemused in perIormance evaIuaIion oI Ihe empIoyees?
8. Does a bonus sysIemoI any kind exisI based on perIormance measuremenI?
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Achieving Purchasing Competence Through Purchasing Performance Measurment System Design

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