Applying value‐based management to procurement

Value‐based management focuses the efforts of individuals and managers on the creation of value. Starts with an analysis of the literature on general management and materials management and then extends that analysis to the concept of the value system. Identifies particular management variables which are key to efforts in creating value, e.g. organization structure and hierarchy, centralization, information systems, external relationships, job responsibilities and formalization, performance measurement system, and education and training. Groups these into two broad areas: organization design; and human resource management practices. Collectively these variables form the framework for value‐based management. Describes the nature of these variables in both a traditional, function‐based organization and the more contemporary value‐based organization. Applies the value‐based framework to procurement, identifying those actions needed by managers in the transition of the efforts of procurement individuals towards the creation of value.