Purchase Specifications and Profit Performance

Abstract

The nature of specifications received by purchasing functions has a heavy influence on an organisation′s ability to minimise bought‐out costs and thus maximise profits. The nature of purchase specifications and the effect of other functions upon their creation are discussed; “open” and “closed” specifications and the relationship between purchase specifications and profit performance are demonstrated, defining the precise type of purchase specification needed to enable the purchasing function to achieve its primary goal of cost‐minimisation.