1. Discuss the 2 or 3 most important benefits to centralized purchasing authorit

Question

1. Discuss the 2 or 3 most important benefits to centralized purchasing authority. Justify your choices. Discuss the 2 most important benefits to decentralized purchasing authority. Justify your choices.

2. Duscuss the role of consortiums and group purchasing organizations

3. Dicsuss the advantages, barriers and applications of cross functional teams in purchasing/supply management both internally and externally

Please put your answers in short essay form and put the source of your information thanks

Explanation / Answer

1. The centralized purchasing avails the following advantages:

1) As the duplication of efforts in buying function is eliminated, its cost will be relatively less and it will be managed efficiently
2) The Manager of manufacturing departments, departmental heads and office managers are relieved from the responsibility of purchasing their own requirements. They can concentrate in their assigned areas of activities in a better way.
3) It is possible to tap the advantage of the specialized skill of the buying staff.
4) Bulk buying strengthens the bargaining position of the buyer. Moreover, the advantage of the quantity discount can be tapped. Direct contact with the suppliers will be possible which will eliminate the link of the intermediaries
5) It enables to develop and maintain good relations with the suppliers. Moreover, it facilitates the supplier to maintain relations with few buyers and thus it enables him to pass over some benefits on buyers.
6) It will enable the purchase of standardized items through standardized procedure.
7) It will reduce the inventory carrying costs. 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.
8) The receiving of large supply through consolidated orders reduces the transport cost per unit.
9) The cost of order processing such as order placing, receiving, inspection, accounts etc are reduced substantially due to few orders of large quantities
10) As the responsibility center is fixed on one departmental head, the shifting of responsibility for wrong decisions is eliminated.
11) The inter-section requirements of the materials can be easily adjusted. Scarce materials can be allocated according to the economical advantage.

Benefits of Decentralization. Characteristics  * Decision-making: democratic, participative, detailed. * Organizational change: emerging from interactions, organizational dynamics. * Execution: evolutionary, emergent. Flexible to adapt to minor issues and changes. Participation, accountability. Low risk of not-invented-here behavior.

2. The fundamental role of group purchasing organizations is to allow its members to join together to leverage their purchasing strength in order to purchase goods and services at lower prices, which in turn should enable them to lower their costs and become more competitive in the provision of their own services. In its basic form, a GPO is a cooperative of buyers. Over time, however, GPOs have evolved significantly to offer other competition-enhancing programs such as networking, benchmarking, and educational quality improvement programs.2 These functions are procompetitive and consistent with antitrust policy

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