Differentiate between centralised and decentralised systems of purchasing stationery. Compare their relative merits and demerits. Which method will you adopt for a big organisation whose branches are located in different cities?

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Centralized Purchase refers to purchasing all the requirements under the central point of the organization. Likewise, Decentralized Purchase refers to the purchasing of requirements of each production center in an organization.

Centralization and Decentralization are the two types of structures, that can find in the organization, government, management, and even in purchasing. Centralization of authority means the power of planning and decision making are exclusively in the hands of top management. It alludes to the concentration of all the powers at the apex level. On the other hand, Decentralization refers to the dissemination of powers by the top management to the middle or low-level management. It is the delegation of authority, at all levels of management.

 Centralized purchasing:-

Under centralized purchasing purchases are made at one central point for the whole organization and material is issued to respective departments or jobs as and when needed. Also, Centralized purchasing is suitable in cases where the organization runs one plant. It will bring about economies of purchasing and buying in small lots will avoid.

It ensures consistent buying policies in the future and purchasing powers are concentrated in the hands of one person, the in-charge of the purchasing department. This type of purchasing is very helpful in the quick implementation of decisions regarding purchasing. It also ensures bulk buying which ensures favorable prices. The staff requirements under this type are limited and specialists in buying may appoint.

 Decentralized purchasing:-

Decentralized purchasing is just the reverse of centralized purchasing. This is suitable for organizations running more than one plant. Under this type, each plant has its purchasing agents. In other words, every department makes its purchases. This also calls localized purchasing. Also, Decentralized purchasing is quite flexible and can quickly adjust following the requirements of a particular plant.

More attention can pay by the departmental head to buying problems as he will be carrying the limited number of activities in his department and he can hold responsible for the purchase of goods and the overall performance of the plant. The serious drawback which emerges from this type is the lack of uniformity in purchasing procedure in the organization.

Advantages of Centralised Purchasing:

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Degree : BACHELOR DEGREE PROGRAMMES
Course Name : Bachelor Degree Programmes
Course Code : BDP
Subject Name : Office Organization and Management
Subject Code : AOM 1
Year : 2022 2023