This measure of purchasing effectiveness is appropriate because it takes into account the reality that the price of a good or service cannot be a sufficient measure of purchasing effectiveness since it fluctuates depending on a number of internal and external factors. It therefore looks at the stock usage and inventory liquidity. Slow moving items can be detected and stocking levels of each item can be adjusted depending on its specific nature. A purchasing department that treats each item and orders its purchases depending on inventory movement is efficient (AWC Carey, 2008, p.2).
This measure interrogates whether the purchasing department has been able to deliver quality items at the best reasonable or reduced prices. An effective purchasing department should be able to either seek a better deal of quality by changing suppliers or negotiating with the existing ones for better deals as such waste is cut down or completely eliminated while boasting business productivity.
Delivery or Transportation Metric
A purchasing department demonstrates the effectiveness through its ability to secure cheaper means of transporting goods to the business premises. This metric is sufficient in measuring effectiveness since the results of this metric are quantifiable. It should be recalled that carriage inwards costs in accounting forms a part of purchasing costs and hence the higher they are, the lower the gross revenue and the inefficient the purchasing department.
In the modern time, another measure of efficiency in procurement that cannot be left out is how well an organization has incorporated cheaper, efficient, and modern technology in making purchases. Various studies indicate that organizations that employ technology are more efficient in supplier-consumer satisfaction, saves on time, cut down on costs, and in overall boast of better order. In addition to externally related benefits, technology metric also measures how well an organization uses modern system to track its performance and the performance of specific commodities of stock. This metric is important since it can store historical data therefore allowing comparison (Murray, nd, p.1).
In conclusion, it is justifiable to say that any metric (regardless od its its categorization) that is well defined and understood, that helps in collecting valid and reliable data is fit for use. Additionally, a metric that is an end-to-end process, that is one in which the measurement of purchasing effectiveness is not a one-time occasion but rather an integral part of the purchasing department is reliable. Lastly, a good metric also is a reflection of an organization’s goal; it is the one in line with its pursuits and it reflects its spirit (AWC Carey, 2008, p.2).