Journal of Supply Chain Management Systems

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World Class Procurement Practices and its Impact on Firm Performance: A Selected Case Study of an Indian Manufacturing Firm


Affiliations
1 College of Economics and Management Studies, University of Petroleum and Energy Studies, Dehradun
     

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Purpose- Procurement Management has emerged as a key approach for enterprises seeking to become competitive in the long run. This paper aims to evaluate and describe world class procurement practices and impact on firm performance among various Indian manufacturing organizations.

In order to sustain competitive edge in extreme cut throat competition and also global recession has forced producers to reduce cost and improve profitability without compromising with quality of the goods/services which is finally delivered to the customer. Procurement has major impact on direct material costs which constitute around 40%-70% of the total cost of the goods sold (Aberdeen Group, 2006; Bumpas and Betsch, 2009). Thus, it is likely the way purchasing is managed can significantly impact a firm's financial performance.

Design/methodology/approach- Our research uses longitudinal case study methodology, which gives a possibility to be close to data, enabling in-depth insight into procurement practices. The study was conducted at a mining and bulk material handling equipment manufacturing company in India with multi location plants across the globe.

Findings- Procurement directly impacts on the corporate strategic planning process of the firm mainly with regard to aligning the strategic goals of procurement management with the firm strategy. To strategically manage supply, managers must examine the effect of procurement on competitive position and firm performance. Indian firms have increased their environmental awareness due to regulatory, competitive, and marketing pressures and drivers. However, this awareness has not been translated into strong GSCM practice adoption.

Research limitations/implications- The investigation and its findings are still relatively exploratory. Future research can investigate relationships identified in this work. A more broadly-based and random sample study across India would also provide a better picture of this situation.

Practical implications- Mangers must understand the importance of procurement management and should adopt the world class purchasing practices to gain competitive advantage. Mangers should use a specific framework for evaluating the purchasing performance.

Originality/value- This work is one of the few and pioneering efforts to investigate world class procurement practices in Indian manufacturing firms.


Keywords

Procurement, Strategy, Environment Performance, Financial Performance, COGS, Profitability
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  • World Class Procurement Practices and its Impact on Firm Performance: A Selected Case Study of an Indian Manufacturing Firm

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Authors

Surajit Bag
College of Economics and Management Studies, University of Petroleum and Energy Studies, Dehradun

Abstract


Purpose- Procurement Management has emerged as a key approach for enterprises seeking to become competitive in the long run. This paper aims to evaluate and describe world class procurement practices and impact on firm performance among various Indian manufacturing organizations.

In order to sustain competitive edge in extreme cut throat competition and also global recession has forced producers to reduce cost and improve profitability without compromising with quality of the goods/services which is finally delivered to the customer. Procurement has major impact on direct material costs which constitute around 40%-70% of the total cost of the goods sold (Aberdeen Group, 2006; Bumpas and Betsch, 2009). Thus, it is likely the way purchasing is managed can significantly impact a firm's financial performance.

Design/methodology/approach- Our research uses longitudinal case study methodology, which gives a possibility to be close to data, enabling in-depth insight into procurement practices. The study was conducted at a mining and bulk material handling equipment manufacturing company in India with multi location plants across the globe.

Findings- Procurement directly impacts on the corporate strategic planning process of the firm mainly with regard to aligning the strategic goals of procurement management with the firm strategy. To strategically manage supply, managers must examine the effect of procurement on competitive position and firm performance. Indian firms have increased their environmental awareness due to regulatory, competitive, and marketing pressures and drivers. However, this awareness has not been translated into strong GSCM practice adoption.

Research limitations/implications- The investigation and its findings are still relatively exploratory. Future research can investigate relationships identified in this work. A more broadly-based and random sample study across India would also provide a better picture of this situation.

Practical implications- Mangers must understand the importance of procurement management and should adopt the world class purchasing practices to gain competitive advantage. Mangers should use a specific framework for evaluating the purchasing performance.

Originality/value- This work is one of the few and pioneering efforts to investigate world class procurement practices in Indian manufacturing firms.


Keywords


Procurement, Strategy, Environment Performance, Financial Performance, COGS, Profitability

References