At times, it may result in absence of matching of mind between the needy section and the buying section resulting in wrong buying.Ģ) The centralized standard procedure may result in delays in receiving the materials.ģ) It is likely that the centralized buying staff may not be expert in buying varied types of items.Ĥ) In case of multi-plant units located at distant places and receiving their requirements from centralized storing, it may not be possible to tap the local resources. The centralized purchasing suffers from the following limitations:ġ) The specific requirements of the individual items may not be attended successfully.
Scarce materials can be allocated according to the economical advantage. The central buying staff manages the stock levels, recording material usage, lead time and prices effectively.Ĩ) The receiving of large supply through consolidated orders reduces the transport cost per unit.ĩ) The cost of order processing such as order placing, receiving, inspection, accounts etc are reduced substantially due to few orders of large quantitiesġ0)Ěs the responsibility center is fixed on one departmental head, the shifting of responsibility for wrong decisions is eliminated.ġ1) The inter-section requirements of the materials can be easily adjusted. The minimum level of inventory are not maintained at different centers but at centralized center which reduce investments in inventories along with the other incidental storing costs. Moreover, it facilitates the supplier to maintain relations with few buyers and thus it enables him to pass over some benefits on buyers.Ħ) It will enable the purchase of standardized items through standardized procedure.ħ) It will reduce the inventory carrying costs. Direct contact with the suppliers will be possible which will eliminate the link of the intermediariesĥ) It enables to develop and maintain good relations with the suppliers. Moreover, the advantage of the quantity discount can be tapped. They can concentrate in their assigned areas of activities in a better way.ģ) It is possible to tap the advantage of the specialized skill of the buying staff.Ĥ)ěulk buying strengthens the bargaining position of the buyer.
The centralized purchasing avails the following advantages:ġ)Ěs the duplication of efforts in buying function is eliminated, its cost will be relatively less and it will be managed efficientlyĢ) The Manager of manufacturing departments, departmental heads and office managers are relieved from the responsibility of purchasing their own requirements.