Centralized Purchasing - 4 Benefits and 3 Disadvantages

Centralized purchasing concentrates all the purchasing power to one, singular group with staff professionally trained for the sole purpose of procurement.

There are a amount of benefits to centralizing the purchasing efforts of a business, for example:

Ballpoint Pen

1. No duplication:
When there is only one person, or even one group using an effective procurement system, there should be virtually no duplication of purchased items because the authority to buy is vested in one centralized purchasing man or department.

2. Bulk purchasing:
Purchasing officers can buy in bulk quantities thereby reducing communication and unit costs. From there, quantities would be distributed to their designated locations. For example, ten departments have submitted requisitions for 100 ball point pens each. While 500 might cost 0.00, buying in bulk will typically sell out the unit cost so that buying 1000 is only 0.00 reducing the unit cost for each group from.20 to.18 per ball point pen.

3. Description management:
When purchasing is centralized, it is completed through a singular man or department, the records are kept in one place production them organized and categorically managed.

4. Focus on core competencies:
Other departments who may have had the accountability of purchasing along with their other duties can focus their attentiveness on their sole responsibilities leaving that of procurement to the purchasing department.

Unfortunately, there are some down-sides to centralizing purchasing, as well. For example:

1. Delay:
When all the private departments of a enterprise are sending their purchasing orders to one group (rather than purchasing within their own department), there may be some delay because of multiple orders from several dissimilar departments.

2. Cost Increase:
If the purchasing group is settled in someone else location or state, there may be increased communication costs connected with purchasing and the group may not be able to take benefit of buying local or the incentives connected therewith.

3. Perishable quantities:
Many times a centralized purchasing group does not work with goods that will perish. The goods must be received by the centralized location and by the time they get to the designated group that ordered them, they may have spoiled, etc.

Given the significance of centralized purchasing in some industries, it is wise to consider both the pros and the cons of such a model before production the decision of either to centralize your purchasing efforts.

Centralized Purchasing - 4 Benefits and 3 Disadvantages