Advancing Purchasing Performance in Medium Sized Manufacturing Companies

Abstract:   Background and research problem: In more recent years, the purchasing function has been given more attention as it has come to play a bigger role in improving and maintaining company performance. One of the underlying reasons for this could be the trend of increased outsourcing which implies that costs that used to be internal in form of wages and production costs are now external in the form of purchased items. This development therefore enhances the strategic importance of purchasing and the need for managing the relations with external sources. Currently available research in the area of purchasing management is mostly based on large companies and puts forward general guidelines for increasing purchasing effectiveness. From my observations of previous research I have concluded that there is a need for gaining a better understanding of how purchasing performance can be advanced in medium sized companies in particular. Currently available theory also show that the techniques and tools that provide for operational effectiveness and efficiency in purchasing also differs dependent on the industry and the relative position of the company in the value chain. Through studying purchasing for companies of this specific size segment with a similar position in the value chain the objective to be able to generate solutions for improving the purchasing function that are better fitted to this company segment. Research purpose: The purpose of this paper is to investigate what measures can be taken to improve the purchasing function in medium sized manufacturing companies. Method: The study is based on a qualitative research design and has been conducted by the use of semi-structured interviews. Five medium sized manufacturing companies participated in the study. Theoretical perspective: Literature relating to competitive strategy, the construct and process of the purchasing function and theories concerning improvements of the same is overviewed. Conclusions: The main obstacles to improving purchasing performance in medium sized companies are cooperation, information and costs. By improving organizational coordination and knowledge about internal processes, medium sized manufacturing companies could also have a better ability to identify separate issues specific to their company that is causing ineffectiveness in the purchasing function.  Information about costs and complete cost calculations are also of essence for being able to correctly evaluated alternatives and to make well informed choices.