More than just price: Evaluation and optimization of the PPMS in a mid-sized German company – a case study
This paper aims at further increasing the body of knowledge concerning central Purchasing Performance Measurement Systems (PPMSs) for manufacturing companies that go beyond the solely consideration of purchase prices as the yardstick for performance valuation. In contrast to much of the evidence garnered to date, this study chose an empirical case study rather than a theoretical approach. To achieve this, the paper in a first step gives a detailed overview about of the current state of knowledge concerning such systems with a particular focus on the history of PPMSs, their development as well as proposed processes, methods and metrics in the form of key performance indicators (KPIs). Given the high practical relevance of the topic, this investigation thereby incorporates not only academic literature but also other publications like white papers from consultancies and trade associations. To achieve the desired objective, the findings of the literature review are put to the test within a case study at a medium-sized, multi-business manufacturing company. The main focus of the study was thereby on advanced KPIs that enable a holistic view of the overall purchasing performance. The results show that, although a number of innovative approaches described in the literature initially sound very promising, a considerable proportion of them quickly reach their limits when going to be implemented. The reasons for these shortcomings are comprehensively described and technical, economical and organizational in nature. The study resulted in a spreadsheet-based prototype of an advanced PPMS which is specifically tailored towards the needs of the company where the case study took place. As a result, the study’s outcomes are aligned with the specific requirements of the enterprise and are geared to practice. Due to the chosen research approach, the findings presented here cannot easily be transferred to other companies, but might give hints about possible major structural characteristics of PPMSs and provide guidance for similar ventures.