Measuring purchasing performance A case study at a forest company

The role of purchasing has changed from an administrative and supporting role to a crucial strategic part of the business that affects the overall performance of the organization, mainly due to globalization and the competitive environment organizations operate in today. To enable purchasing performance and effectively contribute to the company's competitive advantage it is crucial that an alignment between strategies at various levels exists. To be able to measure performance, key performance indicators are commonly used to evaluate a functions contribution to the overall company’s performance. The case study will focus on the alignment of strategies from a holistic corporate perspective down to purchasing strategies, purchasing practices and the measurements needed to evaluate their performance. The study was conducted at the purchasing organization of Södra Skogsägarna in Växjö. A case study approach was used since the report focuses on creating an internal knowledge and awareness in a specific context within a purchasing department. Empirical data were gathered by interviews from purchasing management and top management. An abductive approach was used, mainly because of the way the theoretical and empirical data were gathered. To further increase understanding and trustworthiness, two additional case companies where selected and interviewed. When comparing the theory to the empirical data a misfit where discovered. It revealed a lack of strategic alignment within measurement system. The study clearly states the importance of strategic alignment between the various levels within an organization. The importance of a well formulated, communicated purchasing strategy directly aligned with corporate and business strategies is crucial for setting key performance indicators. Therefore, without the strategy, the KPIs will lose its role and importance. Conclusively the analysis of the report clearly states that a lack of strategic alignment directly affects the performance of a purchasing department. As a result, the purchasing KPIs used in the case company, did not fulfill their role as a tool to develop the purchasing performance according to the corporate strategy. Thus, several recommendations are stated mainly regarding their strategic alignment and the need for a clear connection from strategies to KPIs