The Procurement Debate - Centralised vs Decentralised

A recent article in the Procurement Professional magazine reignited the common procurement debate of whether a centralised model is more effective than a decentralised model.

The article contained data from the latest CPO Agenda and KPMG Global Procurement Excellent Benchmarking Survey that showed that 50% of the organisations surveyed have adopted a centralised operating model.

A centralised model, where all procurement operations are managed under the same roof in a coordinated way has obvious benefits. The article stated that centralised purchasing allows organisations to "maximise buying power, gain control of spend, and build core standard business processes", therefore delivering the greatest value from a cost-saving perspective. In addition, the improved management that results from a centralised model raises the profile of procurement within the organisation.

The other side of the debate argues that decentralised models are more effective, as they can "encourage agility and innovation, which are vital attributes for a successful business".

The cause of this shift towards a centralised model is unknown - it could be a trend that was always likely to develop, or alternatively, it could be a response to the tougher economic climate which demands an emphasis on cost control.

If the latter is true, it does beg the question, which model is the most effective in a growth economy?