CENTRALIZED VERSUS DECENTRALIZED PURCHASING

Text     : Siti Aisah Binti Ehsan Helmi & 
              Nurul Shahirah Binti Daud
Images : Google Images

In the name of ALLAH, The Most Gracious and The Most Merciful, 

Assalamualaikum. For the fifth post, we would like to share about centralized versus decentralized purchasing. 

Centralized

First of all, centralized purchasing is coordinating all purchasing activities for the entire plant through one central location. The purchasing department is the one and only place in the firm where the suppliers are selected by the purchasing manager and the raw materials, assembly part and business capital product are processed to be purchase then. 

Example of the company which applies centralized purchasing are Apple, General Motors (GM) and Microsoft.

Microsoft

General Motors

Apple

  The advantages of centralized

The advantages of centralized purchasing are cost control.

 

All the material needed to be purchase will be coordinated into a major purchase, therefore the supplier will be easier to satisfy the order and try their best to please the requirements.

The second advantages are easy to purchase.

When the material needed by each department being centralized to the single purchasing department, the purchasing activities can be handle easily. There will be no redundancy happens at the organization.


The third advantages are get to purchase with quantity discount.

Discount give more satisfaction to buyer

The purchase of goods in bulk and large volume allows buyers to reduce the cost by the availability of quantity discount. Discount will be given by the selling firm to the buying firm in case they are buying in large volume. It helps the selling firm to be able to move more goods and materials, and the buying firm will receives a more favorable price for the goods been bought.

The disadvantages of centralized

The disadvantages of centralized are high communication are needed.

Communication can be a bless and also barriers

A department cannot make the decision on their own. They need to communicate about their department requirement with other department before the purchasing decision is being taken. Thus, high involvement are needed between these department in an organization.

Decentralized

Meanwhile, decentralized purchasing are the distribution of authority and responsibility for supply-related functions throughout the organization or company.

Example of company which applies decentralized purchasing are Amazon and General Electrics (GE).

Amazon

Advantages of decentralized 

The advantages of decentralized purchasing are saving more time.

 

Each department can make up their own decision whether to buy or not to buy their requirement needed by their own. There are no other department needed to get involve in the decision making process. They can simply contact the supplier and place the order whenever it needed.


Disadvantages of decentralized

The disadvantages of decentralized purchasing are the increase of the purchasing cost.

Reduce the cost to gain more profits

The purchasing cost will be increased due to the transportation and postage cost that needed to be paid by the company to the selling firm and carrier in order to obtain the goods at the exact time. It can be reduced if the company is using the centralized purchasing as the products or raw materials ordered from each department can be consolidate together to gain fully utilize container other than need to pay for full load but not fully utilized.


The second disadvantages of decentralized purchasing are less communication between department.

No communication can bring harm to the company

When there is no communication being make between the department, it will affect the relationship between those department in the organization. In addition, if there are any fraud or mistake while handling the purchase, the department will be liable to the losses being bear. Other department can't be simply asked to be liable as they didn't know the exact purchasing event we are dealing with.

The third disadvantages of decentralized purchasing is increase the lead time.

The production might face problem to satistfy the customer at the right time delivery if the lead time are high. There are possibilities that the selling firm and carrier cannot fulfill the buying firm's need if they are performing decentralized purchasing.

Lead time is the total time taken from the order placement being made by the buying firm until the goods ordered are delivered to the buying firm's doors by the selling firm.

In a nutshell, centralized purchasing are giving much more potential to the company to keep on survive in the field of business. Purchasing need to be manage wisely by the purchasing department as all the logistics activities involved in the company are vital to maintain the company performances.

LOGISTICS AND SUPPLY CHAIN PROCESS IN MANUFACTURING PORSCHE PANAMERA

Text : Haris Fadhillah Bin Shahril
Images : Google Image

In the name of ALLAH, The Most Gracious and The Most Merciful.

Assalamualaikum, for the fourth post we will discuss on the logistics and supply chain in manufacturing Porsche Panamera. We might be able to see this car on the road but did you ever think of how does the supply chain and logistics activity that had been done to build this awesome car?

Porsche Panamera are divided into different type. For example Panamera,  Panamera 4, Panamera Diesel, Panamera S, Panamera 4S, Panamera GTS, Panamera S Hybrid, Panamera Turbo and Panamera Turbo S. Today, we would like to discuss about Porsche Panamera Turbo.

Porsche Panamera Turbo is the first release of the combined Malaysian and overseas company. This car is  a luxury car that has a front-engine with a rear-wheel drive, with a four-wheel drive versions also available. The assemble of this car went to a three different stages at three different locations for the installation of the car. 

The first stage is at Stuttgart, Germany where the engine is install to the car.

After that, the car is send to Volkswagen Group facility in Hannover, Germany for the body built and painted. 

Lastly it will be send to Leipzig, Germany for the final assemble of the vehicle.

There are a lot of advantages as Porsche took this action of separating the process. They could focus more on their field of assembly and this could maximize the quality of the car. As we know, Porsche have a really great reputation for their car's quality. This is mainly to satisfy all of the customer and make them loyal to Porsche.

Car manufacturing process begin with the installation of the cables in the car. The cables are to be installed to facilitate the installation of the engine and other accessories. This will really need a specialized worker to focus on an exact part of the car.

In a nutshell, the purchasing and logistics department for the Porsche is divided. This will ensure a maximum level of work quality because they can really focus on a single part of the car only. This concept is known as decentralized purchasing. 

WHY PURCHASING MANAGEMENT TODAY MORE COMPLICATED COMPARED TO THE PAST?

Text     : Muhammad Syahmi Bin Mohd Zaludin
Images : Google Images

In the name of ALLAH, The Most Gracious and The Most Merciful,


Assalamualaikum. For the third post, we would like to discuss about the purchasing challenges.

Do you know anything related to the challenges in purchasing?

There are five purchasing challenges as shown below :

1. Increase in Transportation Cost
2. Increase in Material Cost
3. Economy and Political Environment Change
4. Globalization
5. Environmental Issues

First of all, the increasement in the transportation cost.

Transportation modes!

Transportation can be defined as the facilitation of raw materials and component parts from supplier through the firm's manufacturing process to the ultimate customers.

Transportation is often the most costly and time-consuming component of purchasing management. Thus, we need to handle the transportation cost in order to meet the manufacturing and customer delivery schedulling requirements. 

The cost is constantly increasing due to the increasement of the diesel and gasoline price, highway toll fees, road taxes and other contributing factor such as the distance, the size of the products and the mode of transportation choosen to deliver the finished goods to customer.

There are 5 transportation modes such as motor, rail, air, water and pipeline. Air transportation mode is higher in cost compared to the other 4 modes.

Air transportation

 

Rail transportation

 

Pipelines

Water transportation

 

Road transportation

Second, the increasement in material cost.

Increasement in price of oil

The natural resources in the earth mostly are non-renewable. We are actually running out of of these natural resources such as timber, coal, ore and oil. Thus, the cost to consume this raw material are slightly higher nowadays compared to past.

It might be even higher in the next 5 years as the natural resources are getting lower while the demand are high in number.

Third, the economy and political environment change.

Custom clearance

As the purchasing manager, we'll need to get involved in the import and export activities. The activities are related to the laws and customs of the country you are. There might be differences in the law and regulations on certain items. 

Laws and regulation at each country are different

The documentation and certificates needed by the country also might be differ from each other as each country has their own laws and regulation.

Fourth, the globalization. 

Globalization can bring good and disaster

The globalization can be define as the growth to the worldwide scale or going international in market and sources. Most of the time the company who aspired to expand their business and establish sub-company outside the origin country are referred to go global. 

The best company will win the battle!

To go global, those company need to make research from the trusted source in order to enable them to make the best strategy while expanding their business there.

Fifth, the environmental issues.  

Go green!

Nowadays, the company are focusing on the environmental issues sensitivity and awareness.



 Thus, the purchasing management need to come out with their strategy to become an eco-friendly products and services supplier as the customer are more eco-friendly-oriented.

In a nutshell, the purchasing management are important to the organization in order to maintain their existence in the field of business. 

THE IMPORTANCE OF PURCHASING MANAGEMENT

Text     : Muhammad Syahmi Bin Mohd Zaludin
Images : Google Images

In the name of ALLAH, The Most Gracious and The Most Merciful,

Manage the purchasing wisely!

Assalamualaikum. For the second post, we would like to discuss about the importance of purchasing management.

Purchasing management is considered by many organization as an important and essential component for any business. Those companies recognize the cost savings that can be obtained from an effective purchasing decisions that will lead their companies to rise more and become prominent in the field of business nowadays.

The main importance of a purchasing management is the cost control. 

Control the cost efficiently!

The purchasing manager will eventually analyze which suppliers are supplying the best quality of raw materials and assembly parts at the reasonable prices. Starting from this point of advantages, they will review the background of the supplier in form of their on-time shipments, reputation and warranties.
 
Switching suppliers is costly and finding the best suppliers is a must to all company who would like to meet the customer requirement and at the same time grab the opportunities to become the leader in the industries. 

Second, the purchasing management need to secure their supply chain.

 

Supply chain!

The company who act as the buyer from another supplying firm need to ensure  that all of the necessary raw materials and assembly parts  appears on time with expected quality and quantities according to the order. 

Delay of shipment will bring disaster

In case there are any delay of shipment, the effect will eventually affect the whole supply chain. It will create loses to be bear by the company and gives bad experiences to the customer whom we are dealing with.

Third, the purchasing management is playing the role in ensuring the customer satisfaction.

In most companies, the purchasing managers have two typical obligation in their minds which are the quality of the product and also the on-time deliveries.

Customer satisfaction is the key towards success!

 

Good quality product gives great satisfaction!

Poor quality of products or services will give bad reputation to the company. It leads towards rejection of any further demand from customers. They may change their supplier if we happen to deliver the goods not according to their requirement. Thus, the purchasing manager and purchasing team need to play a critical role in shaping the customer's experience with the company they are dealing with.

Put this smile on your customer faces!

Don't annoy your own customer!

In a nutshells, purchasing management are playing essential roles in an organization. In order for them to generate more profitable gains, they need to start it with a great team of purchasing management. Through purchasing, we are able to create anything and delivered them to the customer according to the right price, right quality, right quantity, right place and right time.

Assalamualaikum :)

In the name of ALLAH, The Most Gracious and The Most Merciful.

Bismillahirrahmanirrahim, this will be the 1st of many post for our assignment of Purchasing and Supply Chain Management, LOG 2063. 

We will provide a lot of information related to purchasing and logistics through out the year. Please add any recommendation in the comment box. Thank you :)