Exercise 2: Centralization vs. Decentralization
Identify whether your organization has a centralized or decentralized approach to procurement.
My organization has a decentralized approach in which our stores play a big part in procurement. Even though purchasing makes all the decisions on product, the stores and the field operators make the final call. In comparison with other retail chains, decisions are mainly dealt at head office and the field would not have input on what is shipped to stores. Although my department (purchasing) has main control of the procurement process, we still need to advise our stores of what product has been ordered and shipped.
When purchasing prepares ...view middle of the document...
Are they ordering for customers? Are they replenishment orders? Are they ordering correctly? Are they tagging orders properly? Without theses controls, it will cause problems in the purchasing department and may lead to complaints by customers if product doesn’t arrive in stores, wrong product has been ordered etc. How can decentralize affect other business units in my organization? In general, departments are losing their sense of team spirit and putting their own priorities first instead of those of our company as a whole. Working in the purchasing department, I feel we are “the glue the binds all the departments together”. Without a purchasing department, there would be no sales at stores, no product for marketing to advertise, no invoices to pay, no inventory to receive etc. All of our departments are like a “domino effect”, our jobs affect each other. Therefore, areas such as productivity and serving stores/customers may suffer as a result.
If you organization is decentralized, how could it move towards centralization?
If our company could move into a centralized approach, it will benefit our stores and overall business. Being able to make full decisions on behalf of our stores will definitely help in our procurement process. More decisions made in our department will be efficient and therefore lead to achieving our company’s overall goal. By looking at store’s overall inventory, we can have the ability to order product based on what the stores need and ensuring that their inventory is managed by the expertise of our department. Our...