Is centralization of purchasing in a large company a step to greater efficiency?

Answer 1

It can be but the answer is going to always be - it depends. If the organization makes homogeneous purchases it may make sense because of bulk purchase discounts and loss of overhead (local purchasing labor). If the large company has operations world-wide it may make more sense to make some purchases locally while other purchases should be made corporately and shipped to each location. If you are referring to the centralization of purchasing to one department in a large company because purchases are made in many departments then I would posit it is much more efficient to have purchases made in the purchasing department. Without going into details purchasing departments are ripe for fraudulent activity. Without the details of the company it is difficult to answer the question. There is a balancing act to maximize the potential discounts one would receive for purchases, overhead (additional resources) to make purchases outside of corporate purchasing, shipping costs, potential for fraud, excess inventory levels, operational requirements (lead time). It just depends on the specific situation.