Thursday, 7 November 2013

To Centralize or Decentralize? (Part 4)

Authored by Paras Sood

To round off this week's short series of posts on whether to centralize or decentralize your procurement function, let's wrap up by looking at the longer term activities involved in this process:

Wave 3 – Long-term Activities:

Outcome-based Needs – Once all the terms mentioned in the previous posts have been considered, a more informed strategy can be developed for procurement operational needs. Ultimately, this will come down to how much the purchasing outcome effects the individual who requires it. For example, in complex public services, professionals with specialist knowledge of these services may need more empowerment to facilitate their buying process which may not warrant contractual coverage; therefore, the organization could implement processes and systems which enable independence such as workflows for low value quotes, line manager approvals, or e-marketplace.
To summarize, I argue that long-term cost management / ROI is often the primary driver for most strategic procurement functions, but this can only be achieved once you strip back the cultural composition of an individual organization. A ‘federalist’ (centre-led) approach tends to work better for organizations with process control needs and relies upon inherent trust between the centre and devolved business units. A ‘subsidiary’ (devolved control) approach may be more appropriate for specialist service based organizations. Once this is established, a plethora of team structures, policies, tools and systems can be implemented to provide the best possible outcomes.

I'd be interested in hearing your views on this topic, so please feel free to comment below.


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