Benefits of Purchasing Organization include all sterling points listed below:
- It eliminates duplication of effort thus reducing cost and enhancing efficient management in buying.
- It provides for specialization in skill for the group in the purchasing organization.
- It enables the development and maintenance of good relations with vendors.
- Bargaining power can be strengthened through bulk buying. This would lead to quantity discounts while Stock is maintained centrally thus reducing carrying and stockholding costs.
- The idea of processing orders in large quantities reduces cost associated with the processing of orders.
- In cases of errors or wrong decisions in the purchasing organizations, centralized purchasing eliminates the shifting of accountability for wrong decisions.
Disadvantages of Purchasing Organization enumerate several stated as under:
- The purchasing organization may not bear all the necessary skills required for their underlying functions.
- It may be difficult, sometimes impossible, to utilize local resources where a number of plants receive their requirements from one purchasing organization.
- Employing one purchase organization may result in purchasing wrong items due to mismatch of the level involved with buying and the one requiring the items to be purchased.
From the above judgment, centralized purchasing organization is of much benefit as it allows for central management that may result to favorable prices and terms while building a better relationship with suppliers.