Measuring Supply Management's Budget Effects (eBook)

Dr. Anna Quitt was a research assistant at the Chair of Financial Supply Management of Prof. Dr. Michael Henke and obtained her doctoral degree at the European Business School EBS in Oestrich-Winkel.

Foreword 6
Preface 8
Overview 9
Table of Contents 11
Index of Appendixes 14
List of Figures 15
List of Tables 18
List of Abbreviations 19
1 Problem Set and Course of Investigation 21
1.1 Supply Management’s Bottom Line Impact – A Never Ending Issue? 21
1.2 Objectives and Research Questions of his hesis 25
1.3 Course of Investigation 26
2 Supply Management’s Financial Effectiveness – ‘The Story Behind it’ 29
2.1 Supply Management’s Role and Corporate Value Contribution 29
2.1.1 Effective Supply Management – Key for Becoming an Equal Business Partner 30
2.1.2 Purchasing Performance Versus Performance of Purchasing – A Modified Understanding of Supply Management’s Value Contributi 33
2.1.3 Different Issue, Participants, and Interests – A Principal Agent Perspective 37
2.2 Supply Management’s Financial Effectiveness – Return on Spend 40
2.2.1 Discussion of Different Performance Management Systems as Potential Role Models for Supply Management’s Effectiveness Indicator 40
2.2.2 Discussion of Different Financial Performance Indicators as Potential Role Models for Supply Management’s Financial Effectiveness Indicator 45
2.2.3 Supply Management’s Budget Effects as Refined Savings and Basis for Financial Effectiveness Measurement – An Integrated Budgeting Approach 55
2.3 Design Implications for Measuring Supply Management’s Budget Effects 64
2.3.1 Process-Related Implications – A First Draft of an Integrated Budget Effects Measurement Process 64
2.3.2 Organisational Implications – The Consideration of Soft Factors Within the Context of Change 69
2.3.3 Research Design and Process from the Design Sciences Perspective 71
2.4 Interim Result: Return on Spend as Newly Defined Indicator of Supply Management’s Financial Effectiveness 80
3 Measurement of Supply Management’s Bottom Line Impact: Status Quo and Future Requirements 82
3.1 Quantitative Methodology 82
3.1.1 Questionnaire Design 83
3.1.2 Data Collection 85
3.1.3 Sampling 86
3.2 Status Quo of Savings Measurement Practices 87
3.2.1 Sample Characteristics 88
3.2.2 The Relevance of Measuring Supply Management’s Bottom Line Impact 89
3.2.3 Current Savings Measurement Practices 91
3.3 Requirements for Supply Management’s Budget Effects Measurement 98
3.3.1 Components’ Relevance for an Adequate Measurement Approach 99
3.3.2 Dependence of Measurement Certainty on Specific Measurement Components 102
3.3.3 Design Implications of the Survey Results for the Measurement Approach – A Second Draft of an Integrated Budget Effects Measurement Process 104
3.4 Interim Result: Existent Need and Preparedness for Advanced Savings Measurement in Practice 109
4 Measurement Process Design: Measuring Supply Management’s Budget Effects – A Qualitative Approach 112
4.1 Contextual Case Analysis 113
4.1.1 The Different, Applied Qualitative Methodologies 113
4.1.2 Identification of Contextual Issues in Practice to be Aware of in the Further Concept Establishment – A Contextual Exploration 123
4.1.3 Consolidation and Classification of the Different Relevant Contextual Issues 141
4.2 Integrated Planning and Budgeting as a First Step Towards Solid Budget Effects Measurement 150
4.2.1 Definition of Measurement Prerequisites – Design Rule 1 150
4.2.2 Outline of a Comprehensive Supply Planning Process – Design Rule 2 156
4.2.3 An Integrated Budgeting Approach – Design Rule 3 164
4.3 From Planning to Measurement – A Structured and Integrated Budget Effects Measurement Approach 174
4.3.1 Realisation and Monitoring – Design Rule 4 175
4.3.2 Measurement and Reporting – Design Rule 5 180
4.3.3 Process-Design Implications of the Case Study Research - The Final Draft of an Integrated Budget Effects Measurement Process 191
4.4 Interim Result: Five Design Rules as a Guideline for the Configuration and Functional Set-Up of the Budget Effects Measureme 193
5 Process Implementation Design: Implementing Supply Management’s Return on Spend 196
5.1 Definition of Measurement Process Requirements 196
5.1.1 One-Dimensional Requirements: Data or Process or Behaviour 197
5.1.2 Two-Dimensional Requirements: Data & Process &
5.1.3 Three-Dimensional Requirement: Data, Process, & Behaviour
5.2 Identification and Discussion of Measurement Process Inhibitors 202
5.2.1 Identification of Requirement Gaps – A Methodological Excursus 203
5.2.2 Requirement-Gap-Analysis – Requirements Versus Status Quo 203
5.2.3 Discussion of Inhibitors – Data, Process, & Behaviour
5.3 Analysis of Measurement Process Enablers – Management Implications 212
5.3.1 Corporate Enablers 212
5.3.2 Supply Management-Specific Enablers 214
5.3.3 Implementation Process – Design Rule 6 216
5.4 Interim Result: One Design Rule as a Guideline for the Implementation and Organisational Set-Up of the Budget Effects Measurement Process 221
6 All-Encompassing Final Statements 224
6.1 Limitations of Research 224
6.2 Future Research 225
6.3 From Planning to Measurement – Six Design Rules as Guidance for a Solid Measurement Approach of Supply Management’s Budget Effects 226
Reference List 233
Appendix 255

4 Measurement Process Design: Measuring Supply Management’s Budget Effects – A Qualitative Approach (S. 92-93)

Finding creative problem solutions and thereby acting future-oriented as a vehicle for change, as discussed by several authors (e.g. Borja de Mozota, 2007; Lojacono & Zaccai, 2004; Michlewski, 2008; Ravasi & Lojacono, 2005; Romme, 2003), has been the reason for selecting design sciences as the research strategy for this thesis. The second draft of the savings measurement framework has already been detailed and incorporates the literature as well as practice perspective.

However, it remains theoretical; or as Mintzberg (1979, p. 587) says: “It is the anecdotal data that enable us to do the building. Theory building seems to require rich description, the richness that comes from anecdote.” The existence and relevance of the problem of measuring supply management’s RoS and budget effects has been proven.

A generic measurement approach has been designed, expressed through six design propositions. However, to advance theory building and to provide more specific answers to more specific practice problems – to be more concrete – the framework must be validated and substantiated through qualitative data from practice. Thereby, it is the objective to substantiate the six so far developed design propositions and turn them into general design rules by achieving a higher degree of detail. The following research questions hence need to be investigated:

- Which contextual issues influence the budget effects measurement process in practice?
- How do the single measurement process steps have to be designed to take care of these contextual issues and to achieve reliable measurement results?

To answer these research questions, an exploratory research approach was selected. Yin (2003, p. 23) compares exploratory case studies with an exploration itself, which requires preparation and direction. This rationale is provided through the pre-defined measurement framework and the design propositions. By means of five different case companies, which were analysed with different methodologies, the practice context is investigated in 4.1. Which challenges companies face when trying to measure bottom line effective savings and which deficiencies occur are explored. The different contextual issues were allocated to the respective design proposition to approach those problem-focused.

Thereby, it became obvious that there are process-related as well as organisational-related contextual issues. Since the latter apparently played a significant role in implementing the budget effects measurement process successfully in the long term, they are treated separately in detail in Chapter 5. In 4.2 and 4.3, which are dedicated to the first five design propositions, the entire budget effects measurement process is designed based on experiences and best practice obtained from discussions with practitioners and observations within the case companies.

Each proposition is advanced into a design rule, which lists several possible interventions for supply managers to approach the contextual issue in order to reach their particular measurement objective. By applying this structure, the CIMO-logic is maintained throughout the entire design process. In summary, the design rules can be considered as guidelines for supply managers when setting up and eventually implementing a corporate measurement process for supply management’s budget effects.