Examining Your Purchasing Structure: What’s the Best Approach for Your Organization?

For any organization, finding the right purchasing structure is critical to success. The right structure can help you save time and money and develop a more efficient, responsive purchasing team. 

There are three types of procurement structures – decentralized, centralized, and hybrid. Let’s take a closer look at these three approaches and discuss how to optimize your structure, regardless of the approach you use.

Decentralized Purchasing 

In a decentralized procurement structure, multiple branches or departments are equipped to handle their own procurement needs. This structure, which is commonly used in university systems, works best for organizations that value flexibility and quick decision making.

Advantages

• End users have more control over their purchases, which can make it easier for buyers to find specialized goods.  
• Greater individual control means purchases can be made quickly. Shipping is usually faster with smaller purchases, too. 
• Buyers can develop more direct relationships with vendors, which allows greater flexibility in contracts and can lead to reduced prices.

Disadvantages

• Separate departments may purchase the same or similar items without consolidating them into a single purchase order. This can lead to inefficiencies as well as fewer opportunities to take advantage of quantity discounts. 
• Potential compliance pitfalls. Many purchasers can leave more room for error, especially if they haven’t had enough training opportunities. 

Efficiency Tips 

• With a decentralized structure, communication is key. Texas State University Director of Procurement Dan Alden says not being included in early conversations about vendors can create delays in purchasing. Providing up-to-date resources and tools to help buyers across the organization stay connected can help combat these inefficiencies. “We host a lot of trainings on a monthly and quarterly basis to help remind our buyers of our standard requirements and our threshold for competitive bids,” says Alden. 
• Providing department or individual buyers with a list of approved vendors improves coordination efforts. Identifying Historically Underutilized Business (HUB) vendors is especially important to ensure your organization meets the state agency HUB purchasing requirements. Alden’s team uses BuyBoard to help buyers quickly identify pre-approved HUBs. 
• Using a purchasing cooperative like BuyBoard helps departmental buyers stay coordinated, which can lead to cost savings through quantity discounts as well as greater efficiencies. “Awarding a contract through BuyBoard eliminates our need to go through that formal solicitation process, which can take a month or more,” says Alden.

Centralized Purchasing 

With a centralized procurement structure, purchases must go through a dedicated department or individual. This type of structure, which provides more oversight, is best suited to organizations that need greater control over their vendors and supply chain. 

Advantages

• Bigger purchases can lead to lower costs through quantity discounts. They also provide greater negotiating power with suppliers. 
• Streamlining purchasing practices makes it easier for organizations to stay compliant and up to date with regulations and organization-specific policies. 
• Batching purchases helps reduce or consolidate inventory, which can lead to cost savings. 

Disadvantages

• Purchasing and shipping may be slower, which can lead to backlogs in large organizations.  
• It may be harder for individual departments to find customized or specialty products when purchasing is more regulated. 

Efficiency Tips

• With slower purchasing timelines, it’s important to plan ahead as much as possible. BuyBoard Sales and Marketing Consultant Tim Williams, who has experience leading centralized purchasing departments, says developing clear timelines can help ease potential delays. “All requisitions that came in from departments across the district by 10am were processed by the purchasing department that same day,” says Williams. “And we made sure our users knew they could count on that level of service from our team.”  
• Communicating expectations and providing regular training helps end users work more effectively within a centralized system. Williams recommends providing annual trainings as well as making time for one-on-one meetings with users to help clarify timelines. “Meeting with individual departments to share timelines and expectations was critical to getting purchases made on time,” says Williams.  
• Relying on a cooperative like BuyBoard helps centralized purchasers save time by ensuring compliance and preparing purchasing departments for any potential audits. “Since BuyBoard had already competitively awarded vendor contracts, we knew we would save time going through them,” says Williams.

Hybrid Purchasing 

The hybrid approach to purchasing takes advantage of the benefits of centralized and decentralized structures and minimizes the disadvantages of each. Under this approach, an organization can choose to adopt a decentralized structure for some procurement needs and a centralized structure for others. The specifics of this approach will vary depending on the needs and setup of the individual organization. Typically, organizations will have a dedicated purchasing department and allow other areas of the organization the autonomy to make purchases on their own up to a certain dollar amount. 

How BuyBoard Can Help 

With easy access to millions of products and services from thousands of awarded vendors across the country and a focus on compliance, BuyBoard can help you get more out of your purchasing strategy. 

Membership in BuyBoard is free. Learn how to become a member at buyboard.com/join.