Production Management

5 Advantages of Decentralization of Purchasing

Decentralization is desirable under certain situations. Thus, in company with plants widely scattered there is considerable justification for a degree of decentralization of procurement function. In the same way, purchasing of certain components in technically oriented firms requires high quality of technical skill in their procurement and may well be left to the departments concerned.

Decentralization of Purchasing :

Decentralization of purchasing signifies the existence of purchasing power entrusted to each branch or department of any enterprise. in this process each branch or department determines its own requirements of goods from time to time and makes its purchases accordingly.

However, the advantages of decentralized purchasing may be enumerated as follows :

1. Benefit of time : It is an accepted fact that the actual purchase in centralized purchasing system consumes a lot of time due to procedural requirements of bulk purchase. Decentralization aims at dispersing and distributing this function to individual units. In consequence, time consumption in purchasing is reduced consider-ably.

2. Fosters better coordination : Decentralization fosters better coordination between the purchasing activity and the working of departments or branches since the units are authorized to make necessary purchases according to their specific requirements, as and when necessary.

3. Fosters correlation between input and output : Since units are allowed to make their own purchases, the system helps to establish a profit correlation between input of resources and output of products. And it is needless to mention that such correlation facilitates effective cost control in the ultimate analysis.

4. Benefit of choice : Decentralization gives more autonomy to the units concerned to purchase goods of their direct choice. The system, as such, facilitates effective purchase and utilization of the inputs.

5. Effective Control : Decentralization of purchasing not only reduces the problem relating to maintenance and recording of stocks and stores but also makes the inventory valuation easy. Moreover quality testing with minute attention is also made feasible. Thus, we observe that centralization and decentralization of purchasing have their own merits and demerits. The decision should be taken by the management keeping all factors in mind.

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