The procurement function in an organization essay

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A project based organization with project-based procurement

Organizational fit refers to the readiness of an organization to maximize success through various functionalities among them being procured. The organization must plan adequately to ensure they have clarity of activities to be carried out, the purpose and process while procuring goods and services to be used in the organization (Keller 2010).           

Project based organizations are initiated to undertake a certain project and once the project is complete, they are dissolved or restructured to undertake another project. The project based organizations work best when the projects are relatively long term. These organizations deploy specific skills relevant to the project; and this helps in maximizing staff efficiency. They carry out their procurement based on the needs of that particular project which can be customized and reduce wastage. The project based organizations have the ability to make decisions locally on vendor selection among others; thus reducing on the turnaround time. Also the cost involved can be minimized since the invoices do not have to be vetted by complex panels which have hefty pays, rather a simple approval by project managers can be satisfactory. However due to their nature these organizations at times turn out to be rigid in terms of their supplies and skill requirement. Again these organizations create loopholes for dishonesty due to the simplicity of decision making in the project. They also face a major challenge in terms of staff insecurity. Staffs are concerned of their destiny once the project is complete and this can cause low morale, especially when the project is just about to be completed (Fawcett 2008).

Large multinational organization with centralized corporate procurement

Centralized corporate procurement refers to where an organization has a single business unit that is involved in procuring for the whole organization. Quite often it is done at the headquarters of the organization. An organization highly benefits from economies of scale through centralized corporate procurement (Keller 2010 p. 112).  These organizations are able to make satisfactory research to get the best vendors in terms of pricing, quality, delivery channels among others. Since they provide a big deal of business to their vendors, these organizations have a strong bargaining power, if a single vendor who is selected in turn offers personalized and improved relationship. These organizations also have a better stand in ensuring that the contract-agreements are adhered to. It also becomes easier to monitor the whole process when it is centralized as opposed to having multiple locations (Weele 2009). On the other hand centralized corporate procurement can be time consuming due to the strict procedures which have to be followed. They may also not meet the exact needs of the units due to generalization of the requirements. ( Claassen 2009 p. 66). Harmonizing the decisions is a major challenge faced by these organizations due to the diversity of the decision makers.

A large multinational organization with centralized business unit procurement

This is whereby the organization gives the mandate to individual business units to procure their needs. However this has to be done by the unit as a whole other than by each department or individual within the business unit. A unit can be a certain line of product or a branch. Here decisions can easily be made locally and save on time ( Chopra 2009 p. 99).  The vendors can be sourced within the locality thus poor infrastructure such as roads has no effect on business functioning. The business unit also creates a soft landing when it comes to marketing its products since it has already made goodwill by procuring locally. The setback of this design is that it becomes difficult and expensive to keep track of vendors for various business units and also maintain a formal procurement department in each unit. Depending on various circumstances, each organization must carefully select the appropriate organizational design.

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