Procurement performance measurement systems: A survey of large manufacturing companies in Nairobi

Abstract

The Procurement function can hardly be ignored in any manufacturing enterprise. Modem manufacturing thinking highly associate prudent procurement practices to profitability of the enterprise. This is because most financial commitments an organization makes 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. The aim of this study was to explore and establish if Kenyan manufacturing firms measure procurement performance, measurement systems they use, the performance dimensions that guide their measurement and the indicators they commonly use. A census of large manufacturing firms in Nairobi (68 firms) was undertaken. The collected data was analyzed using descriptive statistics and presented using tables charts and graphs. Findings of the study showed that 60% of Kenyan manufacturing firms measure the efficiency and effectiveness of their procurement process. As regards the performance measurement systems used in measuring procurement performance the study shows that 66.7% of large manufacturing firms in Nairobi use the non-traditional performance measurement systems in measuring their procurement performance. The study further revealed that these firms measure their procurement performance based on varied dimensions and indicators. Those who measure also showed that they enjoy various benefits, which their counterparts may not be enjoying. On the other hand the study found out that many firms encounter various challenges, which in a way hamper their effort to sustain continuous and objective procurement performance measurement. Such challenges include lack of professionalism in procurement, lack of defined measurement indicators and poor data management systems.