Centralized and Decentralized Purchasing

The concept of Centralized Purchasing is to enable and organization to have one central location/department that handles the purchasing for the entire organization. Advantages of this procedure are that it provides a standardized procedure for purchasing commonly used goods and services, allows all inventories levels to be managed at a central location to help reduce incidental storing cost. Being that all responsibility for purchasing is limited to one department with a department head it will eliminate the ability to shift responsibility for errors in decision making. Organizations that use centralized purchasing are more likely to benefit from supplier discounts by pooling purchases from that supplier which aids in enhancing the relationship with that supplier. Also centralized purchasing will allow for reduction in cost for transportation because purchases can be consolidated to be shipped together and makes for easier tracking of materials during shipment.

Centralized Purchasing does come with a few disadvantages. One of the biggest disadvantages in my opinion is that it could lower the morale of the organization’s employee. As more restrictions are put in place when it comes to purchasing the more likely different departments/units will try to counteract the processes that are in place. To get the most out of your employees it is very important that they feel that they are a part of the organization and that their opinion matters. That is not the culture of centralized purchasing. When using the centralized process organizations may run into the issue of an individual staff member not having the expertise in buying a certain items which could lead to the purchase of the wrong item needed further delaying production. Also with all purchasing being “centralized” it can cause delays in a department receiving their goods since placing of orders are left to the purchasing department instead of the manager of the unit/department that needs the goods....