Supply Chain

Discuss the concepts of centralized vs. decentralized purchasing authority, identify their relative advantages and disadvantages, and provide examples of when each may be appropriate.

When deciding on the control of the organization some firms may choose to have a centralized or decentralized of authority. A centralized authority occurs when decision-making authority is maintained at the top level of management at the company’s headquarters. In other words, is how a firm wants to keep control over all the stores in order to maintain a uniform image and merchandise. Some advantages of a centralized authority are: great top management control, more efficiency, it has a simpler distribution system and it has a stronger brand image. Some disadvantages of centralized authority are: less response to customers, less empowerment, some interorganizational conflict and lower morale away from headquarters. An example of a firm using a centralized authority is McDonald’s, they feels that purchasing, promotion, and other such decisions are best handled centrally. Every time I go to a McDonald restaurants no matter where, the menu is pretty much the same, it would be hard for them to carry different food products in each stores. Therefore McDonald’s lean toward a centralized authority. Now lets talk about firms using a decentralized purchasing authority. Decentralized authority occurs when decision-making authority is delegated to lower-level managers and employees who are more familiar with local conditions than headquarter’s management could be. In other words is how managers allow lower managers to make decisions on the organization. Some advantages of a decentralized authority are better adaptation to customer wants, more empowerment of workers, faster decision making and high morale. Some disadvantages are less efficiency, complex distribution system, less top-management control and weakened corporate image. An example of this type of organization would be JCPenney....