Topics Purchasing Approaches to purchasing Centralize or Decentralize Type of organizational structure
Purchasing To buy materials of the right quality , in the right quantity from the right source delivered to the right place at the right time at the right price. Objectives: To achieve Competitive advantage of the enterprise Goals of corporate strategy
Approaches to purchasing function Centralised purchasing Decentralized purchasing
Centralized purchasing Purchasing is done at HQ Economies of scale To leverage its purchasing power Coordination of activity Greater focus strategic focus Control of activity (Page 168) Monitoring to avoid duplication
Decentralized purchasing Purchasing is done locally instead of HQ Purchasing is delegated to users Advantages Possible lower transportation cost Responsive to meet local needs Disadvantages (Page 169) Reduced leverage of power Focus on local rather than strategic considerations
Centralized activities Determine major purchasing strategies and policies Purchase of capital equipment Leverage, strategic and bottleneck products Negotiate for bulk contracts Research
Decentralised activities Small-value orders, maintenance, repair, operating items (MRO) Emergency purchase Local buying undertaken for social reasons Items used only for that (Or local) plant
Discuss A manufacturing company needs to buy the following: Raw materials for making the products A spare part for the manufacturing machine Office stationary (Pens, papers etc) Minor urgent repair work in the factory building A office photocopier An air ticket for business travel Recommend your approach of purchasing - centralised or discentralised? Why?
Discuss Look at your assignment case. Identify the purchasing needs and suggest your approach of purchasing – centralised or descentralised. Why?
Organizational Structure Purchasing as a functional department Cross-functional purchasing team Divisional purchasing structures Centralized coordinator model Market segmentation model
Advantages and disadvantages Advantages In functional structure, purchasing specialists are available Operational efficiency, Ease of control Disadvantages Closely guards his “big picture” view More concerned about reporting relationships than on the flow of work to create value for customers (More -> Page 160)
Advantages of CF team Speed Customer focus Solve complicated problems Creativity Organizational learning Single point of contact
Disadvantages of CF team People spend less time within their function leading to less dept of knowledge within function Standardization suffered Investment in training of team leaders Many meetings Confusing line of reporting
Discuss Identify appropriate structures to manage the purchasing function for the company in your assignment 1