Industrial Marketing

CENTRALISED PURCHASING

1. A purchasing system in which all the departments of a company with a wide geographical distribution can make purchases through a common purchasing organization.

2. A department within a business or organization that is responsible for making all procurements. Central purchasing works with other departments and agencies to consolidate orders for products and then use economies of scale in order to exact cheaper prices.

DECENTRALISED PURCHASING

This refers to the purchasing of materials by all departments and branches independently, to fulfill their organizational needs. Both operational and market needs. Purchasing occurs when departments and branches purchase separately and individually.

The difference between the two being that, for the purpose of purchasing for all, there is one purchase department; in this case referred to as centralized purchase, while on the other hand when for each production centre there is a purchase department, it is referred as decentralized purchase.

ADVANTAGES OF CENTRALISED PURCHASING

1. Economies obtained by consolidating like requirements of all units in the group, thereby improving purchasing strength in negotiating and facilitating supplier relationships.

2 .Avoidance of price anomalies between group units and of competition between them for materials in short supply.

3. Centralization leads to overall stock management and material utilization.

4. Economies of staffing and clerical effort together with uniformity in procedures, forms, standards and specifications.

5. Organized transactions and improved vendor relationships.

6. Helps in negotiating best deals with local vendors for the corresponding location of the company department.

7 .Avoids duplicity of orders and promotes benefits arising from the high volume bulk discounts, lower transportation and inventory management costs.

ADVANTAGES OF DECENTRALISED PURCHASING

1. Materials can be purchased by each department locally as and...