ValueBased Purchasing

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When companies spot out the considerable percentage of their budget affected by the outcomes of purchasing, the significant prospective benefits from putting into effect purchasing management, and the reality that purchasing management processes and outcomes utilize and affect the entire company, they frequently start to change their perspective of the purchasing role from that of a strategic support group to a tactical potential. The metrics applied to monitor progress toward achieving these value-added purchasing management objectives are outcome-based, such as total cost reduction, supplier quality improvements, or number of preferred suppliers rather than function-, process-, or tool-based metrics (Leftwich 2004, 112) that are entirely inherent to the purchasing responsibility, such as the quantity of agreements and/or purchase orders processed annually or quantity of electronic orders. Nevertheless, only setting up objectives and determining parallel metrics alone is insufficient to jumpstart the shift to a strategic or value-based paradigm to purchasing management. The companies that have been most effective and successful in putting into effect paramount purchasing management practices also allocate tasks and liabilities for achieving the purchasing management goals, starting with high-level corporate purchasing management stakeholders (Lewis 1993). As a final step toward implementing a more value-based approach to purchasing management, companies are incorporating the purchasing management organization and deliberations into the topmost echelons of internal decision making. For instance, Intel’s top management currently acknowledges purchasing as strategically comparable with design and manufacturing (Leftwich 2004, 114).