Advantages And Disadvantages Of Decentralized Purchasing

Accounting , Business
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.

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.
advantages disadvantages decentralized purchasing
3. Not Suitable For Small Firms

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.
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Advantages And Disadvantages Of Centralized Purchasing

Accounting , Business
Merits or Advantages Of Centralized Purchasing

The main advantages of centralized purchasing can be expressed as follows:

1. Lower Purchase Price

In centralized purchasing, materials are purchased by central department. So, company can enjoy the benefit of economies of scale, cash discount and quantity discount. Bulk buying also reduces ordering and carrying costs that lowers the purchase price of materials.

2. Better Supervision And Control

It eliminates recklessness, overlapping and duplication in the process of purchasing. It ensures uniform procurement and effective storing of materials. So, centralized purchasing helps to establish better material supervision and control system in the organization.

3. Systematic Recording

All buying functions are performed through purchase department which is properly managed by procurement manager and skilled buying staffs. So, material related records (purchasing, supply, inventory etc.) can be properly and systematically.

4. Better Relationship

It helps to maintain better relationship with suppliers/sellers which increases the bargaining power. It is also helpful at the time of shortage and emergency.

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5. Relief To The Managers

All the materials are purchased and supplied by a purchase department. Managers of other branches, departments and units do not have purchasing responsibility. So, they can focus on their main duties and responsibilities.

Demerits Or Disadvantages Of Centralized Purchasing

The main disadvantages of centralized purchasing can be expressed as follows:

1. Requirement Of High Investment

The main drawback of centralized purchasing is that it requires huge amount of initial investment to purchase materials for all branches and departments. 

2. Complexity

It is very difficult to purchase and supply materials to different branches and departments according to their needs and requirements. Buying staff cannot handle purchasing activity properly if the organization is very large with  several branches located at different geographical regions. So, this procurement is more complex than decentralized purchasing.

3. Chance Of Delay

In this system, procurement process is longer than decentralized purchasing. So, it is difficult for the branches to receive materials in time.
advantages disadvantages centralized purchasing
4. Not Suitable For Large Companies

It is not suitable for large companies with many branches located far from the headquarter.

5. Emergency Situation

Branches and departments are not allowed to purchase materials from local market. So, organizational activities can be delayed at the time of emergency because of the shortage of materials.

Pros And Cons Of Centralized Purchasing In Short

Pros:
- It minimizes purchasing price because of large scale buying and less carrying costs
- It ensures supervision and better material control system
- It eliminates recklessness and duplication in purchasing
- Inventory records can be maintained properly and systematically
- It maintains better relationship with seller

Cons:
- It requires high initial investment
- It is not suitable for large firms having several departments and branches because there is a chance of delay in receiving materials
- It will be difficult to replace defective materials
- This procurement system is not suitable at the time of emergency
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Advantages And Disadvantages of International Trade

Business , Marketing
Benefits Or Advantages Of International Trade

Some of the major advantages of international trade are as follows:

1. Promotes Specialization And Division Of Labor

International trade encourages the country to produce unique and quality products that can be easily exported in foreign countries. It requires specialization and division of labor for innovation and production of quality goods at lower price. So, it promotes specialization and division of labor.

2. Maximum Utilization Of Resources

Countries produce goods according to their available resources like natural resources, technological resources, financial resources etc. So, it helps to utilize country's resources properly.

3. Availability Of Products

Necessary goods can be imported from other countries to fulfill the demand of domestic country. So, international trade helps to obtain required products to satisfy country's demand.
4. Elimination Of Monopoly

Foreign trade discourages monopoly in the market because required commodities can be easily imported and surplus products can be exported in different countries. So, traders have no chance to create monopoly.

advantages disadvantages international trade

5. Industrial Development

Raw materials, technology, machinery and skills can be acquired from abroad because of international trade. This promotes industrial development in the country.

6. Lower Cost

International trade promotes specialization, division of labor and optimum utilization of resources by which large scale production with minimum wastage and leakage is possible. So, it helps to lower the cost of production.

7. Employment Opportunity

Because of international trade, large scale industries are established in the country. So, many people get job in the country. So, it creates employment opportunity.

Drawbacks Or Disadvantages Of International Trade

The main disadvantages of international trade are as follows:

1. Threat To Domestic Industries

Foreign trade may create threat to domestic industries because of the import of cheap products. Small industries may suffer due to unfair competition with big foreign companies.

2. Over Exhaustion Of Resources

Unrestricted export of minerals and raw material may lead to exhaustion of resources in the country. This may create environmental, social and economic problems in the future.

3. Shortage Of Goods

Producers try to export more products to expand market share and to earn more profit. This may create shortage of good in the domestic market.

4. Supply Of Harmful Products

Due to international trade, harmful goods may be imported in the country. Supply of these products in local market may effect people's health. Import of unnecessary goods negatively effects the economy.

Pros And Cons Of International Trade In Short

Pros:
- Ensures Maximum Use Of Country's Resources
- It helps to eliminate monopoly in the market
- It helps to bring specialization in the production process
- It minimizes the cost of production because of large scale production
- It generates employment opportunity because of industrial development in the country

Cons:
- High possibility of over exhaustion of natural resources
- It may create threat for domestic industries because of unfair competition
- Increases the risk of import of inferior and harmful products 
- It may increase economic dependence due to the loss of self sufficiency
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Importance Or Advantages Of Office Management

Business , General
Importance and advantages of office management can be expressed as follows:

1. Goal Attainment

Office management directs the efforts of all staffs (top level to bottom level) towards the achievement of company's goals and objectives. Planning, organizing, coordinating, directing and controlling are the major functions of management which helps to achieve organizational goals effectively.

2. Smooth Functioning

It maintains proper balance and relationship between staffs, jobs, departments and units. Effective communication is maintained between one person to another person, one department to another department and one job to another job. Proper command, direction, supervision, and instructions are supplied to ensure smooth functioning of office activities.

3. Optimum Utilization Of Resources

Office management always tries to utilize available resources like human resources, physical resources, financial resources and technological resources in proper way that helps to increase productivity and decrease wastage and unnecessary costs.

4. Better Coordination

Better coordination is required to link different office activities, departments and people in the organization. Office management maintains unity of action, proper communication and harmony by using different coordination mechanisms.

5. Cost Minimization

Office management encourages better utilization of resources, effective communication, better coordination and employee motivation in the office. It helps to increase productivity and reduce wastage, leakage that minimizes the cost of production. Reduction in the cost of production helps to increase profitability of the business.
advantages of office management
6. Goodwill And Public Relation

Office works are performed effectively and smoothly because of better management. Motivated employees can deal properly with customers and public. It helps to increase goodwill and maintain public relations.

7. Promotion Of Leadership

Office management provides good working environment in the office. Authority and responsibility are delegated according to the skill, qualification and capability of employees. Top level managers use their skills to motivate others for better performance so employees can develop leadership and managerial qualities.
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Advantages And Disadvantages Of Deflation

Business , Education
Positive Impacts, Benefits Or Advantages Of Deflation

The main advantages of deflation can be expressed as follows:

1. Increase In Purchasing Power

Negative inflation or deflation increases the value of money. So, purchasing power increases and price of goods and services decreases.

2. Lower Monthly Budget

As we know that deflation causes fall in the price of commodities, so people can satisfy their needs by spending less amount of money. So, it reduces the monthly budget which benefits middle and lower level consumers.

3. Increase In Saving

Due to fall in price of goods and less spending of money, people's saving will be increased at the period of deflation.

4. Higher Living Standard

Deflation helps to maintain better living standard because of lower expenditure and increase in saving.

5. Beneficial For Creditors

Deflation increases the real value of existing debt. So, creditors are benefited in this situation.

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6. Lower Business Costs

Deflation lowers the cost of business because of  decrease in the price of raw materials, machinery, technology and fixed assets. So, this period is appropriate for long-term investment.

Negative Impacts, Drawbacks Or Disadvantages Of Deflation

The major disadvantages of deflation can be described as follows:

1. Lower Consumer Spending

People may stop spending on luxurious and expensive products with the expectation of more decrease in price in the future. So deflation may encourage lower consumer spending which is not good for the economy.

2. Loss For Investors

At the time of deflation, investors and producers who hold large quantity of inventory suffer because of the decrease in the value of stock.

3. Increase Value Of Debt

As we know that deflation increases the value of debt, it makes difficult for the existing debtors to repay their loan.
advantages disadvantages of deflation
4. Possibility Of Unemployment

Business profit decreases because of decrease in the price which force the producers to stop production or reduce their production capacity. It may create unemployment problem.

5. Lower Economic Growth

Limited production, less consumer spending, increased value of debt and unemployment lead to lower economic growth and instability in the country.

Pros And Cons Of Deflation In Short

Pros:
- It lowers the monthly budget of because of decrease in the price of goods and services
- It helps to improve living standard of because of improved purchasing power
- It is beneficial for creditors because banks reduce the interest rate
- Suitable period for investment

Cons:
- It may lead to lower consumer spending
- It may create unemployment problem
- It negatively affect economic growth of the country
- It increases the real value of debt

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Advantages And Disadvantages Of Inflation

Business , Education
Benefits or Advantages Of Inflation

Positive impacts or advantages of inflation can be expressed as follows:

1. Beneficial For Investors

Price of commodities increases because of inflation. In this situation investors and producers can be benefited because of the increase in the value of stock.

2. Economic Growth

Producers try to increase their production capacity because of increase in the price of goods. It helps to utilize unused resources and labor. Inflation also helps to adjust relative price and wages. So, mild inflation is useful for the economic growth of the country.

3. Devaluation Of Debt

Value of debt will be decreased at the time of inflation because of the decrease in the value of money. So, debtors can repay their loan easily.

4. Easy Borrowing

Financial institutions get more money because of increase in wage and sufficient deposit. It makes easy for the people to borrow money from banks.

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5. Better Than Deflation

Deflation causes decease in the price of goods and services which stops the circulation of money. It increases the value of debt and discourages borrowings. So, inflation is far better than deflation.

Drawbacks Or Disadvantages Of Inflation

Negative effects or disadvantages of inflation can be expressed as follows:

1. Discourage Saving

Due to the decrease in the value of money, more money is required to satisfy the daily needs of people. It makes high cost of living. So, inflation discourages saving.

2. Decrease In Investment

Because of more expenditure and less saving, capital formation will be reduced which leads to decrease in investment.

3. Unemployment Problem

Due to inflation, cost of production become high. On the other hand, investment capacity is decreased. So, unemployment problem may arise because of decrease in production.
advantages disadvantages of inflation
4. Business Uncertainty

Inflation discourages foreign investment in the country. It also effects import and export business. So, it creates business uncertainty.

5. Economic Instability

Inflation is responsible for high cost of living, reduction in saving, investment and unemployment which may encourage black marketing, robbery, theft etc. So, it may create economic instability.

Pros And Cons Of Inflation In Short

Pros:
- It increases the value of stock
- It is useful for economic growth
- It becomes easy for debtors to repay loan
- It encourages maximum utilization of factors of production because of increase in the market price of products
-  It becomes easy to borrow money from financial institutions

Cons:
- It lowers saving because of high cost of living
- It discourages investment because of less saving
- It may create unemployment problem
- It brings economic instability in the country
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