What Is A Central Purchasing Office?

A purchasing center is a company that is responsible for acquiring the supplies or services that other companies need in a centralized way.

You can negotiate with suppliers more advantageously by ordering larger quantities, achieving considerable savings for your customers. In recent years it has become more and more common to opt for this solution in the private sector.

The savings that can be achieved are quite considerable and allow many companies to invest in other improvements that make them achieve better competitiveness.

In some cases, it chooses to reduce the price of the product or service to the end customer, getting other Important improved competition against the competition.

Characteristics Of A Purchasing Center

Yes, a purchasing center is a company that, by centralizing the purchases of other companies, obtains better prices, but what exactly do they have? What is its operation? We will analyze those aspects that make a purchasing center an excellent option to save money in your company.

Of course, not all companies can save in the same ways. Depending on their needs, they will need a particular service or another. The most advisable thing is to first opt ​​for a purchasing consultancy in which the company’s situation is analyzed in depth.

These are the characteristics of the purchasing centers :

Independent External Company

The purchasing center is always an external company utterly independent of its customers. It has its organization chart, staff, operation, etc. It is an entirely different company that offers a B2B service.

You mustn’t belong to a conglomerate if you have external clients to offer its members independence and the same conditions. The confidence in the work of the shopping center is also essential so that it can carry out its work.

It also offers independence from providers. In this way, you can get the best option on the market, not just choose between one or two providers. It must be taken into account that no supplier is part of the shareholding or has any relationship with the purchasing center. The center is entirely free to choose the best possible option.

Members Willing To Cooperate

Members or customers of the purchasing center should bear in mind that it is a service that benefits everyone. Therefore, they must be willing to cooperate.

It is not recommended that a company enter the same purchasing center as its main competitors since it can generate tensions and problems in the medium and long term.

Having your purchasing and service center should differentiate yourself and achieve better conditions than the competition. It is essential that all members feel that they can benefit from its work.

All members must row in the same direction for the business to work. And without giving up the independence of having your purchasing department.

Own Resources To Do Your Job

The purchasing center must have its resources, and it must have its facilities and resources to carry out its work independently. It is also essential that they have negotiation experience and many clients.

The more experience and clients they accumulate, the better conditions from the suppliers, especially in cases where companies have the same material or service needs.

The purchasing center works as a mediator between suppliers and customers, and both benefit from its work. Customers get better conditions in acquiring their supplies while suppliers guarantee a higher quantity and reduce production costs.

Regulated Procedures And Obligations

Another of the fundamental characteristics of the purchasing center is that all its processes are very well regulated. The different client companies of the plant have a series of rights and obligations, similar for all, which must be apparent from the first moment.

Of course, it is necessary to sign a contract with a specific term in which the purchasing center will be in charge of making all the company’s acquisitions.

Like any contract, it can be broken, but the consequences of failing it will be established in it.They will have to pay the penalty for not meeting the commitment in most cases.

At the end of the day, if one of the customers of the purchasing center leaves, it harms the entire group of associated companies that lose part of their influence vis-à-vis the supplier by having to also readjust the contract with the supplier.

For this reason, it is so crucial for everyone, suppliers, clients, and the purchasing department, that the obligations and rights are well clear in the contract. 

Advantages Of A Central Purchasing Office

The advantages of having a central purchasing office are innumerable, but we will focus on the most important ones. To summarize why it is good to have a purchasing center, we have to separate between customers and suppliers. On the one hand, customers reach a much higher bargaining force, wanting more significant amounts.

Likewise, they also manage to save the costs of having those essential supplies for the proper functioning of the business. On the other hand, suppliers get a better demand forecast, unifying deliveries and reducing management expenses.

Having to waste time managing deliveries for ten clients is not the same as doing it with just one, which would be purchasing management. All parts of the business process win.

Greater Bargaining Force

The main advantage of having a purchasing center is the bargaining power. Any entrepreneur knows that the larger the orders, the better prices from any supplier.

By ordering our supplies or services from a purchasing center, we will exert much greater pressure to achieve the best possible purchasing conditions.

Cost Savings For Companies

This point is an obvious consequence of the previous one. Larger orders and greater bargaining force achieve much lower prices.The main reason companies decide to have a purchasing center is to save costs.

Keep in mind that you don’t have to be a large company to enter a purchasing center. SMEs can save a lot of money by being part of one of these or with the help of a purchasing consultancy like Smart Buys. 

When we have a small or medium-sized company, we have to take care of everything spent and find a balance between the quality of supplies and the expense that is made.

Savings In Business Structure

Having a purchasing center also means outsourcing the purchasing department. For an SME, it is a great advantage because it may not even have enough volume to have a contracted person or a complete department with the associated expenses.

With the purchasing center, he manages to have the best professionals in this regard, but for an infinitely lower price than what it would cost to have him on staff—one more advantage to consider.

Likewise, if you want to terminate the relationship with the purchasing department, it will also be cheaper than firing and replacing the members of the purchasing department.

Better Forecasting For Suppliers

On the part of the suppliers, having a purchasing center among their clients also provides them with essential advantages. Perhaps the most important has to do with your forecast of supplies and demand. 

Having a client who asks for a greater quantity more securely (as it is more difficult to break the contract than if it were different individual clients), allows you to make more adequate forecasts of personnel and material, being better prepared to give your service.

This will also give you the possibility of buying in larger quantities by having a higher volume of purchase committed and, therefore, getting better prices.

Fewer Management Costs

Finally, we have to highlight the savings in management costs for both customers and suppliers. It is not the same to negotiate ten small supply contracts with ten different departments to negotiate a single one for a volume greater than ten.

Clients don’t even have to waste a single second of their time on it. The purchasing center is already in charge, which, as we have mentioned, has the independence to make decisions and achieve the most advantageous agreement for all.

What Sectors Need A Purchasing Center?

Although in our country, the public administrations have begun to use the purchasing and service centers, in reality, it is an ally for any company, be it small, medium, or even a large multinational.

Hospitals, offices, multinationals with different stores, companies that share the same business space, and small businesses can significantly improve their accounting if they start using this option.

Procurement Consulting To Identify Problems

How do we know if we need a purchasing center? What alternatives do we have? The best option to identify our needs is to have a purchasing consultancy.

The purchasing consultancy will analyze all the expenses in services and supplies that we carry out and identify new savings opportunities.

Thus, we will know in advance if this service will benefit us or if we have already optimized all our business processes to the maximum.

Also Read: What Is The Employee Experience?