Unintended responses to a traditional purchasing performance metric

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Abstract
Purpose – To describe the tactics that buyers often use to avoid unfavorable purchase price variance (PPV) and identify alternate approaches that will improve purchasing performance and also help achieve company objectives. Design/methodology/approach – Descriptive: presents for the first time 12 dysfunctional tactics used by buyers of industrial goods use to avoid unfavorable PPV. Findings – The tactics are shown to increase costs rather than decrease costs and lead to organizational dysfunction. Findings are broadly applicable to large corporations that use legacy software systems or newer enterprise requirement planning (ERP) software systems to track purchasing costs and transactions, and also have a strong management focus on price-based purchasing performance. Research limitations/implications – Findings are limited to organizations that measure the success of purchasing and supply management activities using price-based metrics. Practical implications – Should propel managers to identify alternative metrics or processes for managing purchasing performance, reduce system-wide costs, and improve day-to-day work in purchasing organizations. Originality/value – This paper will be helpful to academics researching operational or behavioral aspects of purchasing, practitioners managing supply chains, auditors assessing the integrity of material cost reporting and management controls, and persons concerned about ethics in business.

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