Contents
What is Decentralized Procurement?
Decentralized procurement is a process in which individual business units or departments are responsible for its own purchases. This is different from centralized procurement, where all purchases for a company are handled by one purchasing department.
What are the advantages of Decentralized Procurement?
The advantages of decentralized procurement lies mostly lies within the individual departments, be it separated by business unit or split geographically. Relations between the department and suppliers could be improved as well as increase supplier diversity. Certain specialisations needed by each location are taken into consideration at a deeper level therefore benefitting the department’s needs. Other advantages include:
- Emphasizing supplier diversity and prioritizing local options
- Building strong interpersonal relationships and understanding supplier capabilities
- Making quicker decisions
- Ensuring prompt delivery times
- Specializing to meet local needs
- Enhancing agility and facilitating swift replacement of defective items
What are the disadvantages of Decentralized Procurement?
A common disadvantage of this style is the lack of administrative support from one purchasing department. Other disadvantages include:
- Unauthorized or out-of-contract spending
- Inefficient management of expenditures
- Inability to leverage economies of scale
- Loss of bulk discount opportunities
- Disorganized data and scattered information management
- Redundant efforts in vendor and contract administration
- Non-adherence to corporate policies and procedures
