In the end, is centralized or decentralized purchasing more effective for corporate procurement?
It all boils down to how well you’re able to track spend and manage contracts. If you want more control and transparency, for instance, consolidating is likely worth the effort. Yes, there are downsides to centralized procurement. But, the piecemeal process of decentralized is usually a more significant risk.
However, it doesn’t have to be all or nothing. For example, it might make sense for your organization to have 80% of purchases centralized with the remaining quick-turn-around-required items managed by each department. This approach is also known as a “center-led structure.” As this helpful My Purchasing Center article put it, “A center-led procurement structure centralizes the strategic aspect of procurement and sourcing while leaving the tactical purchases to the individual business units.”
Bottom line, you need to consult your key stakeholders and ask for their feedback and concerns. Discuss how much autonomy your managers need to be effective in their role, and how quickly they need their supplies. Once you have all the data, it will be much easier to identify which approach is the best fit for your organization.
Ultimately, when it comes to controlling costs in your purchasing process, the key is getting creative. That may mean consolidating. It may even mean working with a partner like a group purchasing organization who can help you save 22% on your indirect spend.