Top and bottom line relevance of purchasing and supply management

Getting a substantial value addition out of investments in purchasing and supply management (PSM) is of central importance to senior management. However, the empirical evidence of a financial value contribution is fragmented. The current study addresses this fragmentation by using a comprehensive performance measurement model to validate empirically (a) whether PSM contributes to the company's financial success and (b) whether the financial value contribution is mediated by benefits of three operational performances (cost, quality, and innovation performance). Our findings from an international survey of 306 major companies from eight industry sectors suggest that an advanced, comprehensive implementation of PSM activities contributes to an improvement in PSM outcomes, which in turn mediates company success.

► We interviewed 306 CPO-level executives from international sample spanning eight industries. ► Analysis conducted with structural equation modelling. ► Advanced implementation of PSM activities improves operational performance. ► Operational performance mediates improvement effect on financial success. ► Positive effect was valid for both manufacturing and service companies.