Enhancing cost savings through early involvement of purchasing professionals in sourcing projects: Bayesian estimation of a structural equation model

As in many organizations the role of the purchasing department is shifting from a clerical buying function to an internally integrated, strategic business function, purchasing professionals are increasingly involved in sourcing projects. Building on Social Exchange Theory, this study explores the effects of early purchasing involvement on internal customer satisfaction and cost savings in sourcing projects, as well as how this involvement is bounded by the strategic impact of the sourcing project. To this end, the authors gathered data on 644 sourcing projects from a database of a large, private financial services company. A research model deploying the research hypotheses was analyzed using Bayesian structural equation modeling. This technique introduced and highlighted as a valuable and more correct estimation procedure in hypothesis testing research involving ordered-categorical data. The results confirm that early purchasing involvement enhances the cost savings outcome in sourcing projects. However, this involvement has remained underutilized for projects with high strategic impact. This study empirically establishes the importance of purchasing professionals for realizing cost savings in sourcing projects.