There are several procurement models that can be used by industrial businesses. These include the maturity model, centralized procurement, decentralized procurement and the center-led or hybrid models. Each one has its own advantages and disadvantages.
1. The maturity model. This model follows a maturity starting from a decentralized then to a centralized function. After centralization, organizations may trend back towards decentralization or evolve into a hybrid model. When adopting this model, organizations must be flexible to adjust their model to stay aligned with overall business objectives.
2. Decentralized procurement. This model allows each division or office to make their own purchasing decisions. It is beneficial in emergency sourcing, addressing cultural challenges and in organizations where local sourcing is prioritized. However, it is not ideal for bulk purchasing. It also raises risk and compliance issues and makes spend analysis more difficult.
3. Centralized procurement. Under this model, purchasing is handed only by one department in one location. It provides cost-saving through consolidated spending, reduces the chance of redundancy and involves skilled procurement specialists. But this model makes purchase decisions more complicated and slows down procurement processing and delivery times.
4. Center-led or hybrid procurement. This model allows some purchases to be centralized and others to be locally sourced. Some regions or business units are authorized to make their own purchasing decisions. An example in the restaurant setting is the decentralized sourcing of locally grown produce such as fish and centralized purchasing of staples like sugar and flour.
For organizations considering a move from a decentralized to centralized procurement, it is important to ensure the support of top leadership. Organizations must also provide sufficient training for procurement staff and keep in mind that some managers or business units may not readily give up budget control.