Ans; Small and large organizations both can benefit from the implementation of centralized purchasing. Centralized purchasing has several advantages. It helps in getting lower prices on products/components compared to decentralized units by combining orders into a large order. Centralized purchasing is handled by specialists in purchasing department and these specilists are able to concentrate their efforts on relatively few items instead of spreading themselves across many items. Small organizations as well as large organizations can benefit from the economies of scale in ordering. The duplication of efforts in buying function is eliminated with the centralized purchasing, its cost will be relatively less and it will be managed efficiently. This is possible in both smaller and larger organizations with the centralized purchasing. Bulk buying by the organizations give the bargaining position of the buyer. It also reduces the inventory carrying costs. Through centralized purchasing, the minimum level of inventory are not maintained at different centers but at centralized center which reduce investments in inventories along with the other incidental storing costs. The central buying staff manages the stock levels, recording material usage, lead time and prices effectively. The receiving of large supply through consolidated orders reduces the transport cost per unit. The cost of order processing such as order placing, receiving, inspection, accounts etc are reduced substantially due to few orders of large quantities. The inter departmental requirements of the materials can be easily adjusted. Scarce materials can be allocated according to the economical advantage. So, the centralized purchasing is beneficial to both large and small organizations.
Can both small and large organizations implement centralized purchasing, or is that a function of organization size? Explain your answer.