The term "centralize" means bringing everything to one main location, which implies that centralized procurement involves bringing all procurement procedures, items and personnel to one place. In larger companies especially, procurement is not always handled in a centralized location, although there are a number of advantages of centralized procurement.
In companies that don't have a centralized system of procurement, a lot of time and money is spent through duplication. Every department will have to go through the same procedure over and over again instead of just having one specific department cater to all procurement needs. It takes more time for every department to process its own transactions compared to having them all processed as one.
In most cases where centralized procurement is not used, the heads of different departments have to handle purchases. If these organizations were to switch to centralized procurement, these employees would have more time to devote to their work thus increasing their efficiency.
Centralized procurement saves companies money since it centers all transactions in one location. This reduces the amount of capital the company needs to invest for storage and personnel, and also ensures added buying power by combining the needs of various departments together. Companies can also reduce their regulatory expenses, since all transactions can be easily monitored and recorded from one place.
Better Business Relations
The relationship between different vendors increases through centralized procurement. If a company regularly buys supplies from a certain business, the relationship is likely to improve with time. When all the company’s purchases are handled by one department, its head will form better ties with suppliers, something that may lead to faster processing and a better credit rating. The purchasing staff is also easily accessible if any of its suppliers has a complaint.