Developing the Purchasing Department’s KPIs for Performance Follow-up

This thesis focuses on finding suitable performance measurement indicators for three different stakeholder groups in the case company from the purchasing department’s viewpoint. At the moment, the Key Performance Indicators for purchasing used in the case company are not strategically derived, so the performance of the purchasing department is not visible. The purchasing department needs indicators to measure its performance. The assembly unit as an internal customer needs KPIs to be able to follow-up on its internal suppliers’ (purchasing) performance and the management needs KPIs to know whether purchasing is strategically on track. The needs, strengths and weaknesses of the current state of performance measurement in the case company are approached through the current state analysis. The proposed set of KPIs is carried out by collecting best practices from relevant literature and appreciating the needs of the stakeholder groups through discussions, interviews and workshops to form the conceptual framework of purchasing performance measurement and to support the KPI proposal. The research tackles the weaknesses in performance measurement from three different perspectives, i.e. daily management, strategic and financial. Based on the findings of the current state analysis, the study focus is on financial performance measurement, which is the main weakness in the case company. The outcome of this thesis is a proposal of a grounded set of KPIs with recommendations on how to finalize the proposal. The proposal serves all three stakeholder groups from three perspectives. Also, the identified needs are taken into account by enhancing the strengths of the current state and tackling the weaknesses of performance measurement with new KPIs. In addition to the new KPIs, the proposal also includes tools and introduces a new concept on how to measure and handle raw ERP data to support the overall performance assessment. The outcome of this thesis also increases the efficiency of the assembly and purchasing department’s daily work by removing manual work regarding the interpretation and combining of different listings and tables