Linking purchasing department structure and performance — toward a contingency model

Abstract

The purchasing department is now considered by many firms to be a vital link to the success of a firm because of its greater role in managing the supply chain. Therefore, critical to the ongoing viability of the firm is good purchasing performance. Certain, less controllable factors act as constraints on a purchasing organization, including the external environment, technology and the size of the firm. In addition, certain dimensions of organizational structure determine the performance of the firm and the purchasing function. These dimensions include centralization, formalization and organizational size. Based on the existing literature, there appear to be significant relationships between centralization and formalization, and centralization and job specialization. In addition, the research suggests that formalization is positively related to performance; structure is but one element that affects performance; and performance is positively related to a department's reward/measurement system. This paper develops a conceptual framework to examine the dependent relationship between purchasing performance, the structure of the purchasing unit, and environmental influences using literature from sociology, organizational behaviour and marketing.

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