Organizing Purchasing
The effectiveness of purchasing activities can be enhanced by proper organization and coordination of the activities. There are two types of purchasing system:
Centralized purchasing system
In a centralized purchasing system, all the purchasing activities of an organization are carried out by a separate department, i.e. the purchase department. A centralized system is effective when an organization has a number of production sites or many autonomous production units within the same site which require materials with the same or similar specifications. In such cases, a centralized purchasing system would allow pooling of all the requirements so that the benefits of bulk purchasing can be realized. The centralization of purchasing activities also leads to consistency in buying policies and uniformity in maintaining purchasing records.
Decentralized purchasing system
In a decentralized purchasing system, the heads of different departments purchase the needed materials according to their specific requirements. This method gives each department the flexibility to alter its purchasing policy on the basis of specific requirements.
However, most organizations do not totally depend on any one system; instead, they use a combination of both systems. In such organizations, each division or department identifies its specific purchasing requirements while a central authority, such as a purchasing director or manager, manages the actual purchasing activities.
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