Centralized Purchasing Essay

1043 Words Jan 21st, 2016 5 Pages

Centralized purchasing is when a company’s corporate office takes control of all the purchasing for the business. This allows for central management and volume purchases that lead to better prices and terms as well as the ability to work with larger suppliers. This central control enables more efficient inventory control, lower staffing costs and a decrease in overheads. Staff also benefit with better training and support and the ability to build better relationships with suppliers. Many large companies either have experienced quick growth through mergers and acquisitions, and they often have several separate purchasing departments that are each responsible for purchasing a group of products. In a company with a local
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This can improve inventory turns and avoid unnecessary freight costs and improve lead times. The local buyer has better communication with production as they are at the same facility. For a company to decide whether to move from a decentralized purchasing organization to a centralized one depends on its overall organization, its products, and how many similar products are among the items and services it buys. A company whose business units all use the same types of products, if not interchangeable parts, will likely gain the most by centralizing its purchasing. The centralized purchasing program consolidates the purchasing of similar items in all its business units and leverages that combined volume, producing lower costs, improved quality, and better service. On the other hand, a company whose business units each have unique requirements for parts and materials benefits more from a purchasing structure that puts buyers closer to end users. I work for a large distributor to the composites (fiberglass) industry. Since I started in 1984, we have had numerous acquisitions, typically buying up smaller regional distributors. As we continued to grow, we found ourselves in a position to pick up a couple of national distributors. When this happened, we found ourselves with a great deal of overlap in all areas of the company. It took time to determine what sellers we would keep, who is the best customer service representative as well as reviewing

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