Decentralized Purchasing
Decentralized purchasing is a method of corporate spending in which responsibility is spread throughout an organization rather than centralized within the purchasing department or a single individual. This system of buying is popular because it facilitates rapid response times and encourages cost-effective spending. By encouraging multiple departments to take control of their spending requirements, decentralized purchasing reinforces corporate values and strengthens efficiency.
A decentralized purchasing system allows each department in an organization to become responsible for its own purchasing requirements. This improves efficiency and speed as each department is close to the product or service they are trying to source, meaning they are better able to ascertain the best supplier and obtain the most cost-effective product. There is a greater involvement from the people who actually need the product or service and this can often result in better informed choices.
In a decentralized purchasing approach, each department within an organization is given autonomy to make its own purchasing decisions within parameters predetermined by a centralized setting. This gives a greater sense of ownership over spending decisions, allowing costs to be trimmed if necessary. It also allows departments to meet their individual needs more effectively, rather than making decisions from a centralized level without an in-depth knowledge of the requirements of the different departments.
This system can produce better results and increased savings if implemented correctly. To create the best environment possible, the purchasing team should put in place proper controls and guidelines that restrict individual departments from making expensive or frivolous purchases beyond their necessary needs. Each department should also have relevant budgets assigned to them and approximate total purchasing needs should be determined in advance. This can allow the different departments to identify cost-saving opportunities such as bulk purchasing or supplier discounts.
However, there are a few drawbacks to decentralized purchasing. With purchasing decisions scattered across the organization it can be difficult to track and manage spending on a wider scale. It can also be difficult to keep track of which individuals have the authority to make purchasing decisions. This can lead to chaotic situations where different departments make purchases without the knowledge of the others.
Decentralized purchasing can be a great way for an organization to increase their efficiency and speed up the process of buying. With the right controls and guidelines in place it can be a great way to keep track of spending, allowing departments to make cost-effective decisions without being restricted by a centralized buying system. However, it is important to remember that poor implementation of this system can lead to a number of issues, so it is important to take the time to ensure that the right system is in place.
