Choosing a centralized versus decentralized purchasing structure

Written by Barry Victor, PROS Parts Founder and President  

Operating a large enterprise with multiple laundry or drycleaning plants in operation presents the managers of the business an opportunity to decide which purchasing decisions are made by the staff at the local plant and which purchasing decisions are the responsibility of the central or regional buying office.  Each system has inherent benefits.  

Centralized Purchasing   

Reduced Cost

Central purchasing for an organization with a large number of facilities can help the business reduce costs by using the combined requirements of all plants to allow central office purchasing agents the ability to negotiate more favorable prices and terms of payment and delivery.   

Staff Expertise 

Staff at the central office may have more skills in negotiating, and a better understanding of the cash flow impacts of scheduled deliveries and extended payment terms.    

Consistency 

Purchasing done by a central office can have the added benefit of consistency of products used throughout the entire organization.  This can help minimize stock requirements and simplify maintenance and process adjustments. 

Supplier Relationships 

A central office can forge stronger relationships with fewer suppliers, which can lead to better service, faster response times, and more favorable terms. 

Types of items Purchased 

Some types of purchasing lend themselves well to central office buying such as big capital investments like machinery.  Supplies can also be a good item to defer to the central office if shipping costs are considered in the cost savings. 

Decentralized Purchasing  

Accurate and Timely Communications 

Staff of the operating plant can have a better understanding of the specs or special requirements of the items they need.   In this case, the plant staff can have direct communication with the supplier and determine the exact item they need after discussing the requirement with the supplier in depth.  Delays are minimized since no questions and answers need to be relayed between staff at local and central offices.  

Delivery Speed 

Often the time span between the initial inquiry by the plant staff to the arrival of the item can be accomplished in a day or even less if the local supplier has the item in stock.  This is not always possible in centralized purchasing where the process may require multiple authorized signatures or get stuck in a long queue of other items that need to be ordered.  Urgency can be determined by local staff. 

Empowerment 

Empowers local managers to make purchasing decisions, which can improve morale and accountability. 

Types of Items Purchased 

One item is particularly well suited to decentralized purchasing and that is replacement parts for equipment.  If a critical piece of machinery is offline due to a broken or malfunctioning part, the cost of the part is often inconsequential compared to the cost of the entire process being shut down.  In this case the most critical decision point is how soon the correct part can be delivered. 

PROS Parts is here to help ensure you get your part as quickly and efficiently as possible. There are pros and cons to centralized and decentralized purchasing structures. Let us know if you want to talk through ideas on what might be best for your facility.

About Barry Victor
Barry founded PROS Parts in the spring of 1988. Before starting PROS, Barry worked in the sales and engineering departments of Vic Manufacturing, one of the largest manufacturers of dry cleaning equipment in the U.S. At Vic, Barry launched a parts sales division that supported dry cleaning equipment imported from Italy and Germany. In its early years, PROS manufactured dry cleaning machinery and then evolved into an industrial and commercial laundry equipment and drycleaning operations parts supplier. Barry lives in Plymouth, MN with his wife. He has two sons, a stepson, a stepdaughter and his dog, Sora. 

Barry can be reached at 763-231-7379 or barryv@prosparts.com.