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The appeal of partially centralised purchasing policies

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  • Charles L. Munson

Abstract

This paper provides a tool for managers to help them determine which items at which sites should be procured under some form of centralised purchasing scheme. Seven cost categories are analysed under three purchasing scenarios: (1) decentralised purchasing, (2) centralised purchasing, and (3) centralised pricing with decentralised purchasing. Numerical experimentation suggests that, most often, a hybrid combination of the three purchasing scenarios is best. For large problems, calculation of the optimal configuration becomes computationally cumbersome; therefore, an efficient heuristic ranking solution procedure is developed that performs well under experimentation. The relative simplicity of the heuristic allows managers to readily implement the model in this paper in order to help them make the important strategic decision regarding their degree of purchasing centralisation.

Suggested Citation

  • Charles L. Munson, 2007. "The appeal of partially centralised purchasing policies," International Journal of Procurement Management, Inderscience Enterprises Ltd, vol. 1(1/2), pages 117-143.
    • Handle: RePEc:ids:ijpman:v:1:y:2007:i:1/2:p:117-143
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    Citations

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    Cited by:

    1. Jozsef Sakovics & Lluis Bru & Daniel Cardona, 2018. "Block sourcing," Edinburgh School of Economics Discussion Paper Series 287, Edinburgh School of Economics, University of Edinburgh.
    2. Munson, C.L. & Hu, J., 2010. "Incorporating quantity discounts and their inventory impacts into the centralized purchasing decision," European Journal of Operational Research, Elsevier, vol. 201(2), pages 581-592, March.
    3. Simona Baldi & Davide Vannoni, 2014. "The Impact of Centralization, Corruption and Institutional Quality on Procurement Prices: An Application to Pharmaceutical Purchasing in Italy," Carlo Alberto Notebooks 379, Collegio Carlo Alberto.
    4. Jose L. Andrade-Pineda & David Canca & Pedro L. Gonzalez-R, 2017. "On modelling non-linear quantity discounts in a supplier selection problem by mixed linear integer optimization," Annals of Operations Research, Springer, vol. 258(2), pages 301-346, November.

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