Merits Or Advantages Of Decentralized Purchasing
The main advantages of decentralized purchasing system can be expressed as follows:
1. Less Investment
In decentralized purchasing system, branches or departments can buy materials according to their needs and requirements. It does not require huge initial investment like in centralized purchasing.
2. Right Quality And Quantity
Materials are purchased to fulfill the current needs of the department or branch. In this procurement system, only required materials are purchased that ensures right quantity and quality.
3. Quick Process
Because of prompt buying decision, quick purchase orders and local suppliers, this process is easier and quicker than centralized procurement.
4. Easy Replacement
Defective materials can be replaced immediately in decentralized procurement system.
5. Better Relation With Local Supplier
Branches purchases their needed materials from local market which helps to establish better relation with local suppliers or sellers.
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6. Smooth Functioning
Materials can be obtained locally at any time without any difficulty. Because of easy and quick procurement process organizational activities can be run smoothly without any delay.
7. Suitable For Large Companies
This purchasing system is suitable for large manufacturing companies with several branches and departments.
3. Not Suitable For Small Firms
Demerits Or Disadvantages Of Decentralized Purchasing
The main drawbacks or disadvantages of decentralized purchasing system can be expressed as follows:
1. High Purchasing Cost
In this purchasing system, company cannot enjoy the benefit of economies of scale. It may lose cash discount and quantity discount because of less quantity purchasing. So, purchase price of materials becomes high.
2. Knowledge Of Buying Staff
Decentralized purchase depends on the knowledge, skills and specialization of buying staff. Lack of appropriate knowledge and skills of staff may lead to over or under purchasing and may lack proper control and supervision of materials or inventory.
This procurement system is not suitable for small and medium sized companies with less investment, less production capacity, fewer branches and less operational activities.
Pros And Cons Of Decentralized Purchasing In Short
Pros:
- It does not require huge initial investment
- Goods can be purchased in right quantity as per the requirement
- It is easy and quick purchasing process
- It is applicable for large companies having several branches and units
- Purchasing decisions can be made quickly
Cons:
- It is not appropriate for small business firms
- Company does not enjoy the benefit of bulk buying
- There exists a possibility of over or under purchasing of goods due to the lack of knowledge of staff.
