Achieving purchasing competence through purchasing performance measurement system design—A multiple-case study analysis

Purchasing competence, the level of strategic integration and alignment, is a key determinant of the purchasing function's impact on overall corporate success. Previous research has revealed that the implementation of a mature purchasing performance measurement system (PPMS) can be a means to attain a high level of functional strategic integration. In this research, we develop five propositions on how PPMS should be designed to facilitate strategic integration. We challenge these propositions using data gathered from four case studies with German companies from different industrial sectors. While each of these companies pursues multiple strategic objectives within Purchasing, the PPMSs designs focus heavily on cost-related strategy and performance dimensions. Thus, our findings indicate the need to develop PPMS schemes allowing a direct linkage between financial performance and non-financial performance measures in order to incentivize the desired multiple strategic goals beyond periodical cost reduction. Moreover, such measurement systems need to be adapted at the category level of purchasing practices to obtain the desired level of pre-defined strategic performance dimensions. Hence, the level of purchasing competence is determined at category level and a PPMS must transform strategy into measurable goals at this level.     

How to achieve cost savings and strategic performance in purchasing simultaneously: A knowledge-based view

The competitive advantage purchasing provides has been debated for decades. For a novel perspective we derive a theoretical framework grounded in the knowledge-based view in order to examine how purchasing knowledge and purchasing integration impact cost and strategic performance. The derived hypotheses are tested based on extensive secondary data from a large European multinational utility company. The 179 studied ‘purchasing-internal client relationships’ contain real contracted savings data and internal client ratings of purchasing knowledge, purchasing integration and strategic purchasing performance. We show that purchasing knowledge is a major antecedent for both savings and strategic purchasing performance. This effect is further amplified by purchasing integration. With this study, we extend the understanding of the purchasing knowledge–performance link. We conclude that purchasing knowledge becomes particularly valuable when combined with other functions' processes through purchasing integration. This causal chain is also supported through general knowledge-based view theory. Moreover, we provide numerical evidence of the value of knowledge creation and integration processes to purchasing professionals in our managerial implications based on results obtained from actual purchasing savings data.     

The impact of performance measurement on purchasing group dynamics: The Canadian experience

Purchasing groups were first created in the healthcare sector, which has faced unprecedented challenges in terms of cost control for over two decades. Purchasing groups are indeed supposed to generate additional savings and more efficient purchasing processes. However, although various aspects of purchasing groups have been studied since the early 2000s, both their performance measurement and the influence that this measurement has on inter-organizational dynamics have been neglected. In purchasing groups, the dynamics between the group itself and its members often results in tensions between both parties. Performance measurement within purchasing groups could alleviate those tensions, since “objective” data could then be used to improve communication.Based on a case study, this research sheds light on performance measurement in a purchasing group, on the dynamics between the group and its members, and on the interaction between performance measurement and inter-organizational dynamics. Results indicate that measuring performance impacts the dynamics between both parties, but that the relationship is also the other way around, and that the inter-organizational dynamics is quite complex. In addition, this paper proposes a framework summarizing the research findings.     

Managing tensions between exploitative and exploratory innovation through purchasing function ambidexterity

This paper investigates how companies can manage tensions between exploitative and exploratory innovation by developing an ambidextrous purchasing function. We identify four types of ambidexterity (structural, sequential, contextual and managerial) and discuss how these can be combined to complement each other. We present an in-depth case study of a large firm (S Corp), which has implemented an ambidextrous purchasing function to contribute simultaneously to exploitative and exploratory innovation. We observe how the four types of ambidexterity were manifested and applied to balance purchasing's contribution to both exploratory and exploitative innovations. The case study shows how the different types of ambidexterity can be combined to mitigate tensions. Based on our case study findings, we identify a two-stage process of developing purchasing ambidexterity, combining the four types of ambidexterity over time. Our findings enrich the understanding of how companies can develop an ambidextrous purchasing function to facilitate purchasing's contribution to exploitative innovation and exploratory innovation.     

Intra-organizational legitimization strategies used by purchasing managers

This paper addresses the issue of how purchasing managers can develop the purchasing department's legitimacy within an organization. A qualitative exploratory approach based on six cases has been used since: (1) there has not yet been a research performed on this topic; and (2) an analysis of internal legitimization strategies must take into consideration the context and the nature of the relationships among departments. Our analysis shows that in order to create, maintain or increase the purchasing department's internal legitimacy, purchasing managers have to do very well about two complementary strategic orientations: (1) identify and attract the best suppliers; (2) identify and implement collaborative processes and coordination mechanisms that cannot be duplicated by competitors. In fact, supply managers actually develop legitimization strategies based internally and externally, since a higher level of internal legitimacy can also be supported partially by external stakeholders, who then influence the other departments' and top management's perceptions.Our study also shows that the strategies used by purchasing managers take different forms depending which legitimacy dimension (cognitive, pragmatic, or moral legitimacy) they are trying to influence. Moreover, a purchasing department's legitimacy strategy is developed based on a few important factors: (1) where the purchasing department stands at a given time in terms of the contribution perceived, similar to a "balance sheet" evaluation; (2) the purchasing personnel's technical and relational competencies; and (3) the extent of their implication in the strategic choices leading to the development of a competitive advantage for the organization they work for. It seems that any effort to take steps based on coherent legitimization strategies could help improve both a purchasing department's legitimacy level and its development level. From this standpoint, this study also shows that the purchasing department's internal legitimacy is a crucial driver of purchasing practices.     

A contingency-configurational view of purchasing operations: The mediating role between supplier relationship and firm performance

The literature has considered purchasing and supply management activities from a strategic perspective, but the tactical role of purchasing operations has yet to be explored. Purchasing operations represent the internal modus operandi for transactions with suppliers, comprising three main activities – purchasing transactions, purchasing document management, and purchasing assessment – and supportive activities like purchasing knowledge management. Following the contingency theory, we hypothesize that these internal activities mediate between external supplier relationship management and firm performance (financial, customer and delivery performance). Complementarily, we adopt the configurational theory to hypothesize that this link between external and internal activities can be combined to increase firm performance. To test this contingency-configurational view of purchasing operations, we conducted a quantitative survey with 234 companies. The regression results of the contingency analysis show that purchasing operations activities have a full mediation role in most relationships between supplier relationship management and firm performance, while knowledge management positively moderates the association between purchasing assessment and customer performance. Moreover, the cluster analysis for the configurational analysis shows that supplier relationship management and purchasing operations follow maturity levels of joint implementation of internal and external activities. Our findings shed light on the purchasing operations by defining the activities representing this concept and showing their role in supply management. We also contribute to practice by proposing an integrative system that helps managers organize the firm's purchasing and supply management activities.     

Navigating the socio-technical impacts of purchasing digitalisation: A multiple-case study

The wave of digitalisation is impacting companies at multiple levels. Beside the most researched impacts on manufacturing, also other business functions are subjected to the change. Among them, purchasing is expected to greatly benefit from digitalisation, if properly managed. This research analyses the digitalisation of the purchasing process, in terms of how and why it happens, and the co-evolution which is triggered on the social dimension. A multiple-case study approach is adopted, analysing eight companies from industries characterized by different digital intensity levels but all at a relatively advanced stage of digitalisation of the purchasing department. The results show how different technological innovation approaches (i.e., automation and/or augmentation) impact the evolution of the purchasing department's social dimension in terms of autonomy, job enlargement, competences, internal and external collaboration. A new framework describing how automation and augmentation impact on purchasing social dimension, as well as purchasing efficiency and effectiveness, is proposed as main theoretical contribution. The study combines the socio-technical systems perspective with the automation-augmentation paradox and describe the strong relationship between purchasing departments' social and technical dimensions, offering managers insights on handling a purchasing digitalisation process, simultaneously managing the technical and social dimensions impacted along the process.     

An analysis of research into the future of purchasing and supply management

Business organisations are going through rapid external environmental and internal organisational changes due to increasing globalisation, E-business, and outsourcing. As a result, the future of purchasing and supply management—as a function within organisations, as a process that spans organisation boundaries and as a profession—raises important concerns for both organisations and the purchasing professional. This paper considers a broad and rather fragmented body of empirical evidence and analyses 42 relevant empirical studies on the future of purchasing and supply management. The major findings are reported in terms of changes in business contexts, purchasing strategy, structure, role and responsibility, system development and skills. Cross-sectional comparative analyses were also conducted to examine variation by sector, firm type, people's roles in purchasing, and country. A number of major implications for the purchasing function, process and professional bodies are presented together with suggestions for future research to address significant gaps in the current body of knowledge.     

Managing the global supply base through purchasing portfolio management

‘How to source globally’ has become a critical strategic decision for companies competing on a global basis. Despite an increased focus on global sourcing and supply chain management, little is known about the challenges and solutions surrounding such sourcing practices. Extant literature points at the critical importance of developing and sharing knowledge in multinational companies (MNCs). However, little work has been undertaken to examine the organizational mechanisms used by MNC headquarters for knowledge leveraging across subsidiaries, especially in the area of purchasing and supply management. Based on an in-depth case study, focusing on a chemical company, the actual buying systems for managing the global supply base are explored. Kraljic's purchasing portfolio approach appears useful, both for developing effective purchasing strategies as well as for managing a global supply base.     

An interrelation model of power and purchasing strategies: A study of vaccine purchase for developing countries

The purpose of this study is to further understand the relationship between purchasing strategies practiced by less-powerful buyers and their purchasing power. Drawn on the resource dependency theory, a two-way relationship was predicted where power is both a cause and an effect. The theoretical predictions were then explored in a multiple-case study in the context of vaccine procurement for developing countries. This context presents an asymmetric power situation, favoring suppliers, and changes some of the basic assumptions of theories used; i.e. nonprofit, public procurement, and end customer satisfaction. Cases were selected to represent different strategies towards similar power constraints. The results of the study indicated that purchasing strategies were set in response to individual constraints from sources of purchasing power, and not in response to the power positions as the cumulative effect of all sources of power. In practice, some of these purchasing strategies changed the level of sources of power, and some contributed to a changed buyer power position. Based on the findings, it is recommended that less-powerful buyers, like that of vaccines, practice purchasing strategies with the orientation towards an attempt to change the environment, such as encouraging new supply market entries.     

Purchasing orchestration practices – Introducing a purchasing-innovation framework

This research investigates the purchasing role in enhancing an organization's innovation performance. Taking a purchasing perspective, this research introduces a new purchasing-innovation framework and specific purchasing orchestration (PO) practices related to the acquisition, integration, re-configuration, and commercialization of critical resources to enhance innovation performance. A theory elaboration methodology is applied to broaden the scope of resource orchestration theory (ROT) and introduce PO practices as an essential enabler of innovation. Qualitative interviews with managers from different industries enrich the theory elaboration process. This research contributes to theory by developing the concept of PO and enhancing the theoretical understanding of its meaning. Based on theory and empirical data, this research elucidates the PO practices of resource structuring, bundling, and leveraging support. The purchasing innovation framework explains how open-mindedness and technological uncertainty influence purchasing orchestration practices and innovation performance. Purchasing managers benefit from this research by learning to identify and address potential PO capability gaps and take a holistic perspective on resource management, looking both upstream and downstream in the supply chain.     

Does purchasing recognition help or hinder purchasing quality performance in developing market SMEs? Effects of resource conditions

Prior studies contend that top managers’ ability to harness purchasing recognition to enhance purchasing quality performance is crucial for boosting competitive advantage. However, there are doubts about the universal benefits of purchasing recognition, particularly in developing market small and medium enterprises (SMEs). This research uses upper echelons theory (UET) to move the literature forward by suggesting that the purchasing recognition-purchasing quality performance link depends on varying conditions of financial resource and environmental munificence. Consistent with the study hypotheses, survey data from one hundred and thirty-eight SMEs in Ghana indicates that financial resource and environmental munificence positively moderate the relationship between purchasing recognition and purchasing quality performance. In particular, the study results show that, under low and high conditions of financial resource and environmental munificence, the link between purchasing recognition and purchasing quality performance is significantly negative and positive, respectively. Theoretical and practical implications alongside the limitations of the results are discussed.     

The purchasing department's leadership role in developing and maintaining a preferred customer status

Developing and maintaining a preferred customer status is one of the main objectives of organizations that want to obtain a better access to supplier's information, resources, and innovation. This paper addresses the extent and the nature of the purchasing department's leadership role in the process of developing and maintaining a preferred customer status. A qualitative exploratory approach based on eleven cases has been used in order to take into consideration the context specific to the buyer-supplier relationship in a preferred customer scenario.Our study shows that the purchasing department performs four main categories of roles: (1) identifies and selects the best supplier, (2) structures and segments the supply base, (3) builds close relationships with selected suppliers and (4) develops working relationships, using an effective communication. Each of these roles is related to three key components of the purchasing department's capabilities: boundary, relational, and coordination. These four categories of roles illustrate supply's ability to recognize and understand the specifics of the preferred customer situation. Based on our analysis, the purchasing department should be viewed as extending an organization's resource base, making the organization more competitive.Our analysis also shows that the purchasing managers' leadership is critical for the development and the coordination of activities with selected suppliers, as well as proper communication with them. Specifically, the purchasing manager's transformational leadership generates more internal user and supplier involvement through the creation and articulation of a common vision, by establishing shared goals with other organizational units, and by focusing on activities that benefit the organization; this allows to move from initiative-driven efforts to an “institutionalized preferred customer status management” in the organization.     

The purchasing market entry process—A study of 10 Swedish industrial small and medium-sized enterprises

While an area of importance and concern to managers, international purchasing remains an under researched phenomenon, especially in the context of small and medium-sized firms. Therefore, this article presents a study of the international purchasing market entry processes of 10 industrial SMEs. The findings indicate that managers of SMEs are often reluctant to source abroad. Purchasing markets entries are generally more reactive than proactive, occurring as a consequence of needs for certain products that cannot be found domestically, high domestic costs, unsolicited opportunities and pressures from owners and customers. Nearby purchasing markets typically dominate throughout the process unless cost savings motivate firms to explore more remote markets.     

Organizational design in public procurement: A stakeholder approach

Organizing the purchasing function for public bodies and other non-profit and/or non-market bodies starts with the selection of an appropriate organizational strategy. In order to be able to select between generic strategies like low cost and differentiator or strategies described as operational excellence, customer intimacy and product leadership, a stakeholder based model was used. The selected strategy forms the basis to design the nature of three organizational elements: policies (P), organization (O) and processes (P). The aspect system of the purchasing function and the sub-system of the purchasing department reflect the nature of these three POP elements. It helps to translate the selected organizational strategy into a appropriate supplier strategy and clarifies the idealized mix of suppliers in terms of portfolio archetypes. Ten policy aspects of purchasing and four organizational aspects are described to redesign purchasing.     

Purchasing management consulting services—From management autonomy to purchasing involvement

The purchasing of management consulting services is a challenging area for purchasing agents to become involved in. A study of six organizations shows large variations in terms of the extent and way in which they were involved ranging from ad hoc and clerical approaches to their systematic and central participation. Based on a comparison of the cases, enablers of purchasing involvement are discussed, including the status of the purchasing function, managerial use of and attitudes towards consultants, how the management consulting service and the purchasing situation are framed, and the implementation strategy. We conclude that what are generally regarded as sound purchasing practices can also work in the case of management consultants. This, however, requires a good understanding of the consulting service in the client organization. We suggest that the traditionally marginal role of purchasing agents may be better understood as a consequence of the characteristics of the consultant–client relationship than any essential characteristics of the consulting service.     

Editorial: Purchasing and innovation: Past,present and future of the field of research

This paper introduces the special topic forum (STF) on purchasing and innovation. Presenting the findings from a systematic literature review, we take stock of the current state of the field, delineating themes, theories and methods, and identifying key trends over time. Our study shows a take-off in research on purchasing and innovation during the last decade. This has predominantly focused on private sector manufacturing firms although a recent expansion into public sector research is evident. Large-scale surveys and case studies are still the dominant research methods where the unit of analysis is typically the ‘firm’ or ‘project’. The findings also show how in the past the field was driven by questions on how purchasing can facilitate different types of innovation projects, seeking to derive practical implications, and rarely making explicit statements regarding theories applied; this still characterises much of the research but we find an increasing focus on theory development. We also see a shift in the type of technological innovation being investigated: past studies tended to focus on the role of purchasing in new product development (NPD) projects, which reflected a relatively low degree of technological uncertainty, but we see a trend towards innovation projects facing technological uncertainty. Research shows how this requires new ways of sourcing innovations and therefore new ways for purchasing to facilitate innovation sourcing. On the basis of the review, we offer our guidance for future research avenues to 1) carry out more research on procurement of innovation in the public sector; 2) consider new theories and research methods, and 3) go beyond firm-level or dyadic analysis to research networks and ecosystems. We conclude by introducing the papers in the STF.     

Small company purchasing: A research agenda

The small company attracts increasing attention from academia. However, research on purchasing in small companies is still limited, despite the recognised dependence of small companies on external resources. At the same time small companies operate under circumstances that pose different purchasing challenges compared to the large firm. Hence, this article proposes a new research agenda on small company purchasing. A review of the purchasing and small company literatures demonstrates limited interest in this hybrid theme and few cross-literature synergies. In addition, the paper reports on 16 interviews with small company owners. These empirical data complement the theoretical review and provide a basis for formulating the research agenda. Nine research questions are derived from the investigation, emphasising supplier relationship management and the effects of owner behaviour on purchasing as promising future research areas.     

Moving purchasing & supply management beyond a cost-focused identity

Practitioners and researchers recognize that purchasing and supply management (PSM) contributes value to business performance beyond reported cost reductions, though capturing and evaluating such contributions is often challenging. The goal of this research is to understand roadblocks impeding the recognition of PSM's contributions beyond cost reduction, and suggest potential solutions to these challenges. Social identity theory offers a conceptual framework to study PSM's self-identity and how it is perceived by others in the organization. Gaining acceptance for value-added metrics is critical to move perceptions of PSM's contribution beyond cost reduction and achieve its full potential. Social identity theory is used as a lens to assess the data and develop propositions. Using a qualitative interview method, the researchers identified important roadblocks hindering PSM's attainment of a broader value-based perception. PSM's identity is closely linked to cost-savings by itself, other functions and upper management. These perceptions are further reinforced by PSM through excessive cost reporting metrics. We provide two suggested solutions for PSM to expand its recognition beyond cost savings: 1) PSM must change its narrative and associated self-identity; and 2) PSM needs to develop metrics that are meaningful across multiple areas of the business.