24 June 2015 Leave a comment
Written by Martin Murray, About.com Guide
Measuring purchasing performance is important as the purchasing department plays an ever increasingly important role in the supply chain in an economic downturn. A reduction in the cost of raw material and services can allow companies to competitively market the price of their finished goods in order to win business. An obvious performance measure of the success of any purchasing department is the amount of money saved by the company. However there are a number of performance measurements that businesses can use when they measure purchasing performance.
Administrative costs are the basis for measuring purchasing efficiency. This performance measurement does not relate to the amount of purchased items that the department has procured. The measurement relates to how well the purchasing department is performing in the activities they are expected to perform against the budget that is in place for the department. If the purchasing costs are within the budget then the efficiency of the purchasing department will exceed expectations. If the department is using funds over and above the budget then the purchasing function is not efficient.
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