An investigation into the effectiveness of the procurement performance measurement systems : a survey of large manufacturing companies in Nairobi

Abstract

The Procurement function can hardly be ignored in any enterprise. Modern manufacturing thinking highly associate prudent procurement practices to profitability of the enterprise. This is because most financial commitments in an organization make, pass through a procurement process. Available literature indicates that the efficiency and effectiveness of the procurement function is the least measured in many enterprises despite its contribution to the profitability of enterprises (Van Weele, 1994). The aim of this study was to establish whether Kenyan manufacturing firms measure procurement performance, the measurement systems they use, the performance dimensions that guide their measurement and the indicators they commonly use. There are a total of sixty eight (68) large manufacturing firms in Nairobi. A sample of 10 such manufacturing firms was taken using simple random sampling. Data was collected by the use of structured questionnaires. The collected data was analyzed using descriptive statistics with the help of Statistical Package for Social Sciences (SPSS) and it was presented using tables, charts and graphs. Arising from the findings of this study, several recommendations were made. These recommendations were aimed at improving the performance of procurement as a function with. great potential to enhance profitability and competitiveness of firms. They included the need to emphasize on performance measurement in procurement so as to help identify areas of weakness, control efficiency, increase profitability and competitiveness of firms. The researcher also recommended the need for the organizations to embrace the importance of professionalism and independence of the procurement function for the full potential of procurement performance measurement to be realized, and the need for procurement professionals to come together and develop sectorial procurement performance measurement indicators to facilitate uniform measurements and intercompany benchmarking.