In the Aberdeen Group report “CPO Rising: The CPO’s Agenda for 2008,” of the 350 respondents, 48 percent of the best-in-class operations had adopted the center-led approach. The corresponding result for the laggards was 28 percent. Today, I think few, if any, would argue the merits of a center-led purchasing function.
In a turbulent climate, the center-led organization is better suited to take advantage of local markets as well as streamlining and leveraging company size and processes. It provides a flexible platform that retains control and enables the implementation of modern processes and support tools.
The center-led organization is a hybrid that borrows from both the centralized and decentralized models. In the process of transforming the purchasing organization to fit this model, it is critical to define and outline the roles and responsibilities for all major interfaces and stakeholders. But in order to succeed, it is vital that the division of responsibilities is clear and concise. In the book Purchasing Transformation Björn Stenecker argues that the best way of doing this is to divide purchasing activities into three segments.
The first set includes activities that are the responsibility of the center-led organization. The second set pertains to customized decisions involving both centralized and local purchasing, and the third set is the responsibility of the local purchasing organization (such as a division or a business unit).
In the book, Björn breaks down the responsibilities of the organization in the following way:
Typical center-led purchasing areas of responsibility
- Create and be responsible for the sourcing strategy
- Ensure that the company leverages its buying power by aggregating the purchasing volume
- Define general terms and conditions
- Negotiate and sign agreements
- Monitor contract compliance
- Allocate decisions
Areas requiring customized decisions of responsibility
- Supplier selections
- Supplier assessment
- Supplier approval
- Audits
- Quality audits
- Supplier development
- Securing capacity
- Last time buy process
- Logistics and supply chain setup
- Engineer change order process
Typical local purchasing areas of responsibility
- Measure and report contract compliance
- Define functional and technical specifications
- Handle claims
- Call off
- Issue purchase order
- Ensure that a goods receipt is created and filed
- Ensure the efficiency of the invoicing process
