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Benchmarking in the
purchasing function and its
impact on purchasing and
business performance
Purchasing and
business
performance
457
Cristobal Sanchez-Rodrguez
School of Business and Economics, Wilfrid Laurier University, Waterloo,
Ontario, Canada
ngel R. Martnez-Lorente
A
Jose G. Clavel
Department of Quantitative Methods for the Economy, Faculty of
Business and Economics, University of Murcia, Murcia, Spain
Keywords Purchasing, Benchmarking, Performance measures
Abstract The importance of benchmarking in the achievement of better results in the purchasing
function and in overall business performance has been widely asserted in literature. However, few
studies have addressed the implementation of benchmarking in the supply function and its impact
on purchasing and business performance. Data was collected from 306 companies and structural
equations modeling was used to develop valid and reliable instruments for benchmarking,
purchasing performance and business performance. The results showed a significant positive
impact of benchmarking on purchasing performance and an indirect positive effect on business
performance. Implications of the findings for purchasing managers are also discussed.
Introduction
Since the 1970s the organizational buying behavior has been changing
drastically due to a wide variety of factors. Increasing foreign and domestic
competition, and an increasing quality awareness of customers have forced
organizations to develop and implement a number of different quality
assessment initiatives in order to remain competitive. The inclusion of
benchmarking in the Malcom Baldrige National Quality Award manifests its
widespread use and its importance in quality management (Hackman and
Wageman, 1995). The purchasing literature contains numerous examples of
how close supplier relationships and teamwork-based human resource
management can improve quality performance. However, other
quality-oriented purchasing practices have not received the same degree of
The authors wish to thank Catedra Cajamurcia (University of Murcia) for its generous support in
this research.
Benchmarking: An International
Journal
Vol. 10 No. 5, 2003
pp. 457-471
q MCB UP Limited
1463-5771
DOI 10.1108/14635770310495500
BIJ
10,5
458
.
.
Purchasing and
business
performance
459
BIJ
10,5
460
Figure 1 depicts the model tested for the hypothesized relationships (H1, H2,
H2a, H2b, and H3) enumerated above. The unidirectional arrow between
benchmarking and purchasing performance represents H1. The unidirectional
arrow between benchmarking and business performance represents H2a. H2b
is represented by the combination of two arrows: the unidirectional arrow
between benchmarking and purchasing performance and the unidirectional
arrow between purchasing performance and business performance. H3 is
represented by the unidirectional arrow between purchasing performance and
business performance. The research methodology is described next.
Purchasing and
business
performance
461
Methodology
Sample description
A questionnaire was mailed to a sample of 1,182 purchasing managers drawn
from the Dun & Bradstreet database (www.dnb.com) of the largest
manufacturing companies in Spain. The survey was designed following a
modified version of Dillmans (1978) total design for survey research consisting
of three mailings. The first was a cover letter explaining the purpose of the
study and requesting their participation. The questionnaire and a postage-paid
return envelope accompanied the cover letter. Three weeks after the initial
mailing, a reminder letter was sent to non-respondents. Six weeks after the
initial mailing, a second survey and cover letter were sent to the remaining
non-respondents.
Ultimately, 306 usable responses were received, for a response rate of 25
percent. Non-response bias was investigated using two separate approaches.
First, non-response bias was examined by comparing the responses of early
respondents and late respondents in terms of variables relevant to the problem
investigated (Armstrong and Overton, 1977). This was based on the argument
that late respondents are more similar to non-respondents than early
Figure 1.
Proposed model
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462
Sales (e million)
Table I.
Comparisons between
respondents and
non-respondents
Number of employees
Non-respondents
Respondents
Non-respondents
Respondents
Mean
SD
Significancea
898
302
890
302
169.38
141.61
536
568
514.11
349.83
1,024
932
0.383
0.637
Industry
Food and beverage
Auto components
Miscellaneous manufacturing
Chemicals
Machinery
Pharmaceutical products
Construction materials
Telecommunications and electronic equipment
Electricity materials
Primary metals
Paper
Electric appliances
Non-ferrous metallurgy
Textile
Total
Frequency
Percentage
58
46
40
38
20
15
14
12
12
12
11
10
9
9
306
18.9
15.0
13.4
12.4
6.5
4.9
4.6
3.9
3.9
3.9
3.6
3.3
2.9
2.9
100.0
Purchasing and
business
performance
463
Table II.
Respondents industries
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464
Construct/item
BMK: benchmarking (a 0.71)
BMK1
We gather information about prices and level of
quality of purchases of other companies in our
industry
BMK2
We analyze the purchasing process of other
companies to improve our own purchasing
process
BMK3
There is a formal procedure to compare our
performance with the purchasing performance of
other companies
PPF: purchasing performance (a 0.76)
PPF1
Most of raw materials and parts received are in
conformance with specifications
PPF2
All raw materials and parts arrive within the
delivery date
PPF3
The quantity of materials purchased in inventory
meets the companys quantity performance goals
PPF4
Customer departments are satisfied with the
speed with which we react to their requirements
PPF5
Customer departments are satisfied with the level
of attention and commitment shown by
purchasing when there is a problem
Table III.
Survey items, alpha
values, means, and
standard deviations
Mean
SD
3.51
1.06
3.11
1.12
2.15
1.06
4.34
0.63
3.34
0.97
3.78
0.86
3.94
0.75
3.89
0.79
3.60
3.50
3.64
0.75
0.75
0.84
Purchasing and
business
performance
465
Purchasing performance
(n 306)
Company performance
(n 268)
Benchmarking
1
Purchasing performance
0.145*
1
Company performance
0.035
0.083**
1
Notes: * Correlation is significant at the 0.01 level (one-tailed); ** correlation is significant at the
0.10 level (one-tailed)
Table IV.
Bivariate correlation
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466
There are two parts to the structural equation model: the measurement model
and the structural model. The measurement model examines the relationship
between the observable variables (indicators) and the latent variables
(constructs) they intend to measure. The structural model differs from the
measurement model because it includes causal paths based on hypothesized
relationships between specific latent variables in the model.
The data analysis performed followed the two-step approach recommended
by Anderson and Gerbing (1988). The first step involved a confirmatory factor
analysis to test the measurement part of the model. As recommended by many
researchers, multiple fit criteria are presented to rule out measuring biases
inherent in the various measures (Bollen and Long, 1993; Hair et al., 1995).
Table V shows the fit statistics for the measurement model. The Chi-squared
statistic (x2) was significant, which was expected given the relatively large
sample size (n 268) (Bagozzi and Yi, 1988; Byrne, 1994; Hair et al., 1995).
Other fit indices indicated an acceptable fit of the measurement model to the
data (see Table V). The ratio of x2 to degrees of freedom (x2/df) and the root
mean square error of approximation (RMSEA) were below the recommended
maximum of 3.00 and 0.10 respectively (Chau, 1997). The adjusted goodness of
fit index (AGFI) was above the minimum recommended value of 0.80 (Byrne,
1994; Hair et al., 1995). The remaining indexes, i.e. normed fit index (NFI),
non-normed fit index (NNFI), comparative fit index (CFI) and goodness of fit
index (GFI) were all above the minimum acceptable level of 0.90 (Byrne, 1994;
Hair et al., 1995). Table VI shows the standardized factor loadings and
t-statistics for each indicator in the measurement model. These numbers
provide information about how well each individual item is related to its
respective latent variable. The computed t-values ranged from 11.31 to 44.02
well above the minimum acceptable t-value of 1.96 ( p , 0:05, two tailed). The
alpha coefficient and explained variance for the latent variables were above the
minimum acceptable of 0.70 and 0.50 (Hair et al., 1995) respectively, and
therefore confirmed the reliability of the latent variables.
Fit measures
Table V.
Results of the overall
model fit
Chi-square (x2)
Degrees of freedom (df)
p-value
x2/df
RMSEA
NFI
NNFI
CFI
GFI
AGFI
Suggested values
$
#
#
$
$
$
$
$
0.05
3.00
0.10
0.90
0.90
0.90
0.90
0.90
Measurement model
Structural model
66.15
41
0.007
1.61
0.048
0.97
0.98
0.99
0.99
0.98
66.15
41
0.007
1.61
0.048
0.97
0.98
0.99
0.99
0.98
0.76
0.86
0.57
0.78
0.55
0.87
0.57
0.93
0.82
15.41
15.33
11.31
PPF
PPF1
PPF2
PPF3
PPF4
PPF5
0.67
0.81
0.81
0.74
0.73
13.36
23.69
19.96
14.58
19.41
BPF
BPF1
BPF2
BPF3
0.96
0.98
0.77
43.26
44.02
19.78
Purchasing and
business
performance
467
Table VI.
Measurement model
The second step involved a test of the structural model. The fit statistics for the
structural model are displayed in Table V. The indices indicated an adequate
fit for the structural portion of the model. The x2/df and RMSEA were below
the recommended maximum of 3.00 and 0.10 respectively (Chau, 1997).
Additionally, the indexes NFI, NNFI, CFI, and GFI were all above the minimum
acceptable 0.90 level. The AGFI index was also above the 0.80 value suggested
by Byrne (1994) and Hair et al. (1995). The model resulting from the estimation
of the structural model is the one shown in Figure 2. LISREL coefficients
between latent variables give an indication of the relative strength of each
relationship (Joreskog and Sobom, 1993). The test of the proposed hypotheses is
based on the total effects in the structural model (see Table VII). A positive
significant coefficient estimate (t-values greater than 1.65 are significant at
p , 0:05, one tailed) for the hypothesized paths reveals that support is found
for each hypothesis.
In view of the results, H1 was supported. The path between BMK and PPF
was positive and significant (path coefficient 0:16, t-value 4:06) indicating
Figure 2.
Structural model
estimated
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Constructs
Direct effects
BMK
468
Indirect effects
BMK
Total effects
BMK
Table VII.
Direct, indirect and total
effects
PPF
Purchasing performance
Business performance
Coefficient 0:30
t-value 4:06
Coefficient 20:17
t-value 22:36
H2a not supported
Not applicable
Coefficient 0:05
t-value 1:77
H2b supported
Coefficient 0:30
t-value 4:06
H1 supported
Not applicable
Coefficient 20:12
t-value 21:96
H2 not supported
Coefficient 0:16
t-value 2:14
H3 supported
Purchasing and
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performance
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