Procurement has been identified as the core function of any manufacturing companies. But, its performance measurement is given less importance compared to the other management activities. Performance measures aide companies to evaluate, control and improve production processes and also to compare the performance of different organizations, plants, departments, teams and individuals as well as assess employees. But the only performance measurement that is carried out in procurement are hugely cost based despite the fact that performance measures are required to correspond to environmental requirement, enterprise needs and strategies to meet those needs.
A few studies have been done in the area of procurement. These studies have put a lot of emphasis on inventory models as a means of managing stocks. For Examples include Mwangi (1983), who studied statistical forecasting as a method of management and control of inventory and Amoro (1991), who carried out a study on inventory Optimization. The aim of both studies was to provide an objective and efficient way of coordinating and controlling inventory.
Ondiek (2000), recommends that due to the huge sum of money companies spend on materials; a lot of emphasis or attention needs to be given to the materials management to enable companies achieve best optimal cost structures. However, the best way his recommendation can be implemented is by auditing the performance (efficiency and effectiveness) of procurement functions. A similar recommendation has been made by
Makori (2002), who carried a study on strategic performance measurement within an operations strategy context. He recommends that organizations striving to succeed especially the small-scale firms have a leaf to borrow from the successful companies. However, there is little evidence of any study carried out to investigate performance measurement in the area of procurement, which can be borrowed by such firms.
It is against this background that the researcher is set to investigate the state of procurement performance measurement among the large manufacturing firms in Nairobi as a window to subsequent studies and replication of findings to other sectors.