By Paras Sood
For many organisations, procurement functions undergo numerous transitions over their lifespan. Purchasing may originate reactively or tactically through stock purchasing rooms and localised buying, but as the procurement organisation matures the driver swiftly becomes 'strategic sourcing' from the centre, identifying the best innovations from the supply-base, leveraging economies of scale.
But then comes the reversal... the impact of centralised sourcing is only answering certain supply management needs, but not responding to local demand and specialist requirements. Inevitably, control goes back out to the regions to prevent supply chain ostracism and keep the peace amongst end customers.
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ReplyDeleteIt is a well known fact that 20% of all your spend is largely C class low value products. These are normally generic and used across most of the production plants in a global organisation. Centralisation of this element of spend is transparent and can deliver real savings. As the value of the purchase increases centralisation is a bigger challenge due to the complexity of the categories. Centralisation is still possible but it requires a worldwide category council for each group of products to be set up. Hence the council can focus on market intelligence, new process(lean - 6 sigma) and share MIS reports for each category, However it is essential to allow each unit the option to 'go it alone' if it is custom made or if they can source a high value part cheaper locally. But the CPO must be presented with a business case before the purchase is made. This ensures that the overall leverage of the category council is not diluted by maverick purchases unneccessarily.
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