Designing Performance Measurement System for Strategic Optimize-Sourcing Function in the Professional Services Firm

The development and application of performance measurement systems for a purchasing function within a professional service company possesses a great challenge for both practitioners and academics. Despite the increasing popularity of this topic, the systems that are currently developed are rarely adequate to be applicable at the business-unit level. Furthermore, the existing productivity measures are predominantly designed to measure performance in industries where the inputs and outputs are both tangible and standardized items. Intangible and non-quantifiable factors of production cannot be reliably measured by manufacturing performance methodologies. Consequently, purchasing professionals seek tools to accurately track purchasing performances and connect it to given business strategies and objectives. This paper aims to develop a design of the performance measurement system that can be applicable onto the optimize-sourcing department of the selected firm of this study. The first section of the paper outlines key performance measurement concepts and establishes a theoretical framework that supports the following research. Subsequent questionnaires and interviews that were conducted with vital stakeholders reveal the flaws of the current performance measurement system. Conclusions derived from the interviews and questionnaires support the findings of extensive literature reviews. In the following chapters, the paper focuses on the development of the new model that overcomes limitations of the model in use. The thesis also lists additional recommendations on the implementation phase of the new model. In the final section, this paper emphasizes the limitations of the proposed model and describes potential challenges related to the implementation phase.