Centralized Purchasing, Decentralized Purchasing, Integrated Purchasing - [advantage and disadvantage]
Many company understand that if they manage the purchasing to be centralized purchasing should be more effective to control and convenient and to hold the purchasing in one spot should create a negotiation power than the pother method and the company not allow each department to do their own purchasing, so all departments must submit their inquiry to purchase departments to processes these makes purchasing into a system and also good because purchasing by acknowledge people
This understanding is right but not always true because there are many factor and cases that makes centralized purchasing not effective and may lead to be disadvantage.
Disagree people or against it always claim about the delay because there are many procedure until receive the order and claim that purchaser will get the right thing and negotiate to get the reasonable price if purchaser have never use it.
People who agree with this system also claim that to let each other do by their own or as we call Decentralized purchasing will leak and cause a corruption because it is difficult to control and not throughout.
But for people who agreed with Decentralized purchasing is even worst because of high value will create a power then a huge corruption.
If you ask for my opinion, I will give you an explanation that it can be happen however if the system and control is not good for both type and the suspicious is not only occur within purchase department only but it can be happen with every department, please do not wastes your time on accusing as the quote “there is nothing under the sun which can not be cheat”
So let’s consider about advantage and disadvantage of purchasing system carefully as following so we can have an idea before making a decision otherwise it will like flee a tiger meets a crocodile.
Decentralized Purchasing ;
If it is a big company with branches in many countries or many provinces, Decentralized
Will give a power to each branch to do their own purchasing and it is good because fast and convenient and they should have their supplier database in own area better than people from the center.
Decentralized power to each branch making decision by their own will force them to be responsible, they will brainstorming among relevant parties to solve the problem although to find the best solution. They will buy when needed, decide the quantity and quality and follow up to get the products within the period limited by themselves and gain the direct experience them be cautious is planning and preparation.
The important advantage should be a faster purchasing time since the documentation is reduce, approval process and not wasting time for information inquiry when changing or return problem goods.
But do not neglect disadvantage such as to find a supplier information by their own will be a work repeated, waste the time more than centralized purchasing and each department have to use their resource and less expertise than resource of purchase department which is normally well trained in purchasing and feel sure that they can manage this effectively.
Centralized Purchasing ;
This purchasing type comes from bring amount of acknowledged people in purchasing as a center and work for every department in the company, so staff in other department can concentrate their own responsibility without wasting their time in finding source, supplier estimation, negotiation and follow up goods to be on time.
Even though it is a big company with many branch in many countries but also can use this method. The center purchaser will coordinate with each branch to find a data of source worldwide, quantity needed in short term and long term which are total the purchaser will see and in this case purchase will have a very good reputation when negotiation with supplier.
But when we look for disadvantage, Centralized purchasing is to give a giant power to a small group of people. Hand every purchase work to them to do, if there is no effect IT system enough to reduce documentation purchasing work will emphasize in documentation management more than to create a strategy purchasing and if lack of people to working and less knowledge not consistent with the work and not skillful enough both internal and external work then you will see a disaster or a company’s nightmare is soon.
Integrated Purchasing ;
This method is in the middle, foreigner call as a Hybrid or integrate means have both center purchase and purchasing for each department with the specific working frame and good coordination among them. Center will limit the overall purchasing policy for every branch to know, management of branch purchasing will be under their own branch but due to they have to follow rules and policy of center so they have to report center, for this method CPO-Chief Procurement officer is needed and supported by CEO.
Normally every company concentrate on Cost saving and raw material purchasing for production, purchasing MRO or expensive parts, travel expense, PR and marketing cost and IT thus CPO should plan a strategy carefully to work effectively.
For a single company without any branch also can use a concept from integrated purchasing such as purchasing contact to sign agreement to buy an office furniture and stationary cover 1 year period and let each department that center sign but should be within the budget and policy of the company or allow engineering to order some parts by their own but under supervision of factory manager without passing purchase department.
Centralized purchasing have an advantage in from the high total than other method bring a discount and beneficial condition to the company and the purchasing staff are well trained and acknowledged than other department but the disadvantage is slowness of procedure and the staff inpurchase department may have less knowledge or not careful enough.
Decentralized purchasing have an advantage in flexibility and also knowledge in flexibility and also knowledge in what they are going to buy or employ because they are user but disadvantage is lose the negotiation power because total amount is spread among the company and not attract the company and less skill than staff who working directly.
Integrated purchasing is the answer by looking for weakness and strength and choose strength that you got utmost and avoid all weakness
In conclusion, policy of three method also good but you have to choose the right one and fit to your company, do not follow other peoples without a serious analysis in what we have got but they don’t.