Volume 21, Number 2 Article by Michael Stolle, Roger Moser June, 2009
The Effects of Purchasing and Supply Management on Performance: A Structural Model :
This paper presents a framework integrating a range of purchasing and supply management (PSM) practices and evaluates their impact on performance indicators.The objective of the study is to derive recommendations for Chief Purchasing Officers (CPOs) of PSM organisations.The partial least square (PLS) analysis approach was applied to evaluate the model.
The study results indicate that many organisations are still focusing on operational and tactical activities although their competitive environment requires a more strategic role. The lack of a holistic approach is the most important inhibitor in this evolution. A strong focus on internal rather than external benchmarks is required to identify specific weaknesses and eliminate them. Moreover, it emerges that CPOs' self-perception about their performance has a low correlation with an external interview-based PSM practice evaluation.CPOs are not fully aware of current best practices from different industries.Finally, the paper provides insights into the most important PSM practices at different levels and empirically proves best practices to reduce the cost of goods sold and improve return on equity. Human resources in PSM and their interaction with other functions still seem to be a blind spot of CPOs compared to the improvement projects on central/decentral organisations and sourcing processes efficiencies undertaken. The empirical results support most of the relationships hypothesised in the conceptual framework and identify those PSM practices which have a strong impact on performance. The PLS model indicates that CPOs' self-assessment seems to overemphasise core purchasing processes, and neglects strategic involvement of PSM although it may have a stronger influence on company performance.
Reprint No 09201