Journal of Supply Chain Management Systems

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

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
     

   Subscribe/Renew Journal


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
Subscription Login to verify subscription
User
Notifications
Font Size


  • Agndal. (2006). The Purchasing Market Entry Process-A Study of 10 Swedish Industrial Small and Medium-Sized Enterprises. Journal of Purchasing and Supply Management, 12(4), pp. 182-196.

  • Arnold. (1999). Organization of Global Sourcing: Ways towards an Optimal Degree of Centralization. Journal of Purchasing and Supply Management, 5(3-4), pp.167-174.

  • Azzone, G. & Noci, G, (1998). Identifying Effective PMS for the Deployment of Green Manufacturing Strategies. International Journal of Operations & Production Management, 18(4), pp. 308-335.

  • Bag. S, (2011). Review of Supplier Selection Models: Key Success Factors and Blueprint of Supply Chain Excellence. International Journal of Supply Chain Management Systems, 1(1), pp. 28-292.

  • Bjorklund. (2011). Infl uence from the Business Environment on Environmental Purchasing-Drivers and Hinders of Purchasing Green Transportation Services. Journal of Purchasing & Supply Management, 17(1), pp. 11-22.

  • Bartlett, D. & Trifi lova, A, (2010). Green Technology and Eco - Innovation. Journal of Manufacturing Technology Management, 21(8), pp. 910-929.

  • Carter.et.al. (2000). Environmental Purchasing and Firm Performance: An Empirical Investigation. Transportation Research, 36(3), pp. 219-228.

  • Day. & Lichtenstein. (2006). Strategic Supply Management: The Relationship between Supply Management Practices, Strategic Orientation and Their Impact on Organizational Performance. Journal of Purchasing & Supply Management, 12(6), pp. 313-321.

  • Dubey, R. (2011). Role of Manufacturing Competencies on Performance of Indian Firms-An Empirical Study, IIM Shillong. Journal of Management Science, 2(2), pp. 230-246.

  • Eco Buy. (2009). Report on Green Purchasing in Australia.

  • Feisel. et al. (2011). The Importance of Human Aspect in the Supply Function: Strategies for Developing PSM Profi ciency. Journal of Purchasing and Supply Management, 17(2), pp. 54-67.

  • Gelderman. & Semeijn. (2006). Managing the Global Supply Base Through Purchasing Portfolio Management. Journal of Purchasing and Supply Management, 12(4), pp. 209-217.

  • Guest Editorial. (2006). The Global Purchasing Challenge: A Look Back and a Look Ahead. Journal of Purchasing and Supply Management, 12(4), pp. 167-169.

  • George. et.al. (2000). Environmental Purchasing: A Framework for Theory Development. European Journal of Purchasing and Supply Management, 7(1), pp. 61-73.

  • Gavronski, I. et.al. (2011). A Resource Based View of Green Supply Management. Transportation Research, 47(6), pp. 872-885.

  • Guang. V, et.al. Natural Resource Based Green Supply Chain Management. Supply Chain Management: An International Journal, 17(1), pp. 54-67.

  • Hazen.et al. (2011). Diffusion of Green Supply Chain Management. The International Journal of Logistics Management, 22(3), pp. 373-389.

  • Hong, P. et al. (2009). Implementation of Strategic Green Orientation in Supply Chain. European Journal of Innovation Management, 12(4), pp. 512-532.

  • Hartmann. et.al. (2008). Organizational Design Implications of Global Sourcing: A Multiple Case Study Analysis on the Application of Control Mechanisms. Journal of Purchasing and Supply Management, 14(1), pp. 28-42.

  • Hervani. & Helms. (2005). Performance Measurement for Green Supply Chain Management, Benchmarking: An International Journal, 12(4), pp. 330-353.

  • Jahns. et.al. (2006). Offshoring: Dimensions and Diffusion of New Business Concept, Journal of Purchasing and Supply Management, 12(4), pp.218-231.

  • Inemek et.al, (2009), The impact of global buyer-supplier relationships on supplier Innovation. Proceedings of 18th IPSERA Conference.

  • Knudsen. & Servais. (2007). Analyzing Internationalization Confi guration of SME’s: The Purchasers Perspective. Journal of Purchasing and Supply Management, 13(2), pp. 137-151.

  • Kaufmann. & Carter. (2000). Report on International Purchasing and Supply Management: A Comparison of U.S. and German Practices by Center for Advanced Purchasing Studies, pp. 1-12.

  • Large. et.al. (2011). Drivers of Green Supply Management Performance: Evidence from Germany, 17(3), pp. 176-184.

  • Quintes.et.al. (2006). Global Purchasing: State of Art and Research Directions. Journal of Purchasing & Supply Management, 12(4),pp. 170-181.

  • Quintens. et.al. (2005). Purchasing Internationalization on Both Sides of the Atlantic. Journal of Purchasing & Supply Management, 11(2-3), pp. 57-71.

  • Steinle. & Schiele. (2008). Limits to Global Sourcing? Strategic Consequences and Dependency on International Suppliers. Journal of Purchasing and Supply Management, 14(1), pp. 3-14.

  • Shiers. D, (2000). Green Developments, Property Management. European Journal of Purchasing & Supply Management, 18(5), pp. 352-365.

  • Smith. (1999). Item Selection for Global Purchasing. European Journal of Purchasing & Supply Management, 5(3-4), pp. 117-127.

  • Yen.et.al. (2012). Top Management’s Role in Adapting Green Purchasing Standards in High Tech Industrial Firms. Journal of Business Research, 65(7), pp. 951-959.

  • Yeung. (2008). Strategic Supply Management, Quality Initiatives and Organizational Performance. Journal of Operations Management, 26(4), pp. 490-502.

  • Zhu. et.al. (2005). Green Supply Chain Management in China. International Journal of Operations & Production Management, 25(5), pp. 449-468.


Abstract Views: 675

PDF Views: 0




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

Abstract Views: 675  |  PDF Views: 0

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