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Supply Chain Optimization

Decentralized Purchasing

Organizations with multiple locations may adopt a decentralized purchasing model, that lets each facility or a group of facilities carry out their own purchasing activities. This model can benefit organizations with multiple profit centers and various business lines. This system is also advised for companies that acquire businesses divergent from their core operations. Decentralized purchasing helps companies deal with local vendors, who can make sudden deliveries at a moment’s notice, in order to keep the manufacturing process flowing smoothly.

Contrarily, centralized purchasing desks often transact with national vendors who may not be able to nimbly fulfill sudden purchase orders.

Some companies have adopted a hybridized centralized/decentralized purchasing approach. In these cases, certain facilities have the purchasing responsibility for some critical production items, while the central purchasing organization is tasked with purchasing non-critical or shared services items.

This article has been updated by Gary Marion, Logistics and Supply Chain Expert at The Balance.