Types of Purchasing Organizations
Updated: Jul 9, 2021
In the construction industry, organization types of purchasing units, which are in the position of heart of the projects, show differences due to distinctive structures of every company. I will try to examine the various pros and cons of purchasing organizations in which many variables are effectual.
This type of organization is the one in which all purchase activities are conducted by a single central unit. This is an organization created by firms that perform buying/selling for more than one project/workplace to make purchases in better conditions (price, delivery time, transportation fee, etc.). There is no purchasing agent in the projects. This type is used more when a number of purchasing item is low but the budgets are large.
However, some Group Companies / Holdings can choose to establish a separate firm for their purchases with common subjects. The most familiar example of this is “Zer Central Services and Trade Inc.” (https://www.koczer.com/) established by Koç Holding in 2003. Thus, they provide better conditions for purchase by benefiting from the economy of scale and enabling the group companies to focus on their business by clearing of businesses that do not create value.
Coordinated (Combined) Purchase
This type, intending to minimize the cons of the central purchase organization and to provide quick response times, is applied by making big-budget purchases by the central group, and small purchases by the project. The majority of purchase activity is performed by the purchasing agents in projects but is constantly coordinated and controlled by the central purchase.
Independent (Local/Separate) Purchase
As the generally-used organization type, this one is conducted entirely by the project (except for the Procurement unit in energy projects). In this organization, bureaucracy is at a minimal level as there are not procedures such as sending documents to the central group and receiving approval.
Independent + Active Consultant Style Purchase (Regional)
In my opinion, this is the type of organization that large-scale, project-based firms should use. I have combined the Coordinated and Independent purchase approaches here. In this type of organization, there is a regional active consultant along with the independent purchase type. The role of the active consultant here is to link the contracts of big-budget purchases with high discount rates according to ABC analysis by using the firm-wide control opportunity and to constantly investigate purchase activities of the projects remotely in coordination with the central quality group.
Comparison table of purchase organization types
April 17, 2016 - Istanbul