Don’t Cripple Your Business by Refusing to Centralize Purchasing

• Standard
• Business Optimization

Having many people in charge of purchasing often leads to confusion, especially in large businesses. It’s hard to take advantage of bulk ordering discounts or keep track of inventory when different people are in charge of purchasing the same items.

In contrast, centralized purchasing involves setting up a single purchasing department. This sort of department is headed by a purchasing manager and makes all the company’s purchases.

Centralized purchasing is best for large companies that aren’t too geographically diverse. But companies of other sizes can still benefit from centralizing certain aspects of purchasing. Implementing a single system for processing all company purchases lets you consolidate purchasing without necessarily using a centralized purchasing system.

Clear Advantages

Centralizing makes it easier to implement strategic purchasing and accountability for expenses. Since all purchases go through a purchasing manager, it cuts out reckless purchases and duplicate purchases. Having all the records in one place also makes tracking purchase history easier and provides a holistic view of company spend.

Making all the purchases for your company from a central location cuts down on delivery charges as well. All the items your company purchases come into one central location, which allows for better inventory control. This also enables bulk ordering, which often lets you take advantage of supplier discounts.

A Few Downsides

There are some situations where completely centralizing purchasing has its downsides. Very small companies might find that centralized purchasing isn’t cost-effective. Large companies which are very geographically diverse might find that it’s more expensive and time-consuming to ship items to and from a central location.

Centralized purchasing also means that branches of your company in different areas of the country can’t take advantage of local discounts. Nor can they purchase supplies from local stores in an emergency. Keep this in mind when centralizing and adjust the model as needed to accommodate your company’s unique needs. You could, for example, have several purchasing managers over different regions rather than one centrally located.

Implementing Effective Purchasing

No matter what the size of your company, you can use principles of centralized purchasing to make your purchasing model more effective. Even if you don’t hire a purchasing manager to handle purchasing, implementing a single Purchase Order Module takes care of many common problems experienced when purchasing isn’t centralized.

Using a single software module that incorporates automated policy enforcement helps you centralize purchasing. NextProcess’ software is highly flexible and works with any size company. You choose who has access to the software and set up custom purchasing tolerances. Contact us today if you want to learn more and see a demonstration of our purchasing module.