Centralized Purchasing Benefits for a Medium Size Organization, Capstone Project Example

Abstract

Internationally centralized purchasing as been one of the core economic up thrust of the daily activities by regulating the outflow and inflow of commodities within various marketing, financial and substantial money-wise environmental departments. The supply and purchased of goods is consolidated under purchasing as each group of suppliers negotiates and amends agreements that ensure that the overall activities of supplying have been carried on as agreed. A concrete plan is essential in ensuring that the purchasing departments have specialized in quantity and quality supplies.

Pragmatic solutions have been set out to ensure that in the purchasing level, beneficial activities are sort out and implementation of private capital investments maintained throughout the economic system. In this approach on finding sufficient benefits for the centralized purchasing system, I have applied the Single Buyers Model (SBA); that will assist in scrutinizing the purchasing perspectives and the positive attributes that Centralized purchasing as over the Decentralized Purchasing system. Centralized purchasing consists on deals of working capital as individuals try to maximize their private capital.

I have carried substantial studies pertaining to concepts of Single buyer motives and this assist in giving the baseline for benefits that are bestowed under the system of Centralized purchasing. Medium size organization is my current department that is subjected in this report. Purchasing (single persons) officer that underlines’ the concept of Centralized purchasing assist in identifying the core benefits and the overall findings that contemplate the formulation of key strategies for centralization; in addition strong recommendations are ordained in this paper to ensure strong purchasing decisions under the market mix system.

The case in this study gives the outline for centralized benefits based on; specialization, discounts resulted to the buyer as his/her purchase increases and influence that the buyer possesses on the purchasing product. In addition, the generalization on benefits includes the transport bulkiness utilities and cost activities. This report will mainly analyze on beneficial issues for the Medium size organization categorized under Centralized system (decision entrusted to single person). The overall findings for this report have been assessed and accepted by other Firms.

This research paper will supply Medium Size organizations with information relevant in purchasing fields and the core critique being under the analysis of Centralized Purchasing departments benefits over the decentralized Purchasing system benefits in accordance to World Bank regulations and World scientific Publishing co.

Introduction

In the commencement of this paper, we analyze on the background study of Centralized purchasing departments, which, entails on single entity method of supply and a pure system strategy needs to be developed in the prevailing market (Karjainen, 2009). Purchasing is an accounting procedure that assists in the movements of the raw materials from the source to various destinations through various channels of distribution. It gives the core requirements for substantial economic prosperity through provision of competent materials and resources that necessitate production of goods and particular service retention or provision (Meindl, 2002).

This study gives the clue on processes involved in the litigation services of economic purchases that yield to a greater level of production. Various techniques are involved in the game of purchasing as different departments are controlled and combined to ensure the liaison among them. Economic degradation can lead to lack of various goods in the market if proper and essential measures are not put in place to manage purchasing decisions. International practices are ensured to make sure the centralization of purchasing system is maintained under the current financial and economic variations (Beatriz Arizu, Defne Gencer, Luiz Maurer, 2006).

Research problems and centralized purchasing results are fully covered at the later part of this paper where, purchasing departments are necessitated by the availability of the relationships between the supplier and the buyer. Emphasizes on quality products is key to pure purchasing endeavors as it encourages higher purchases and increased sales (Beatriz Arizu, Defne Gencer, Luiz Maurer, 2006). The supply is analyzed on the aspects of manufacturing speed and quantity that can be produced within a given timeframe and this offers a competitive advantage in the market allocation networks (Meindl, 2002).

In addition, a full methodological review and design is discussed in the next part of this paper covering on Centralization of purchasing departments being essential in the economy progress for strategically business negotiations and formulations of strategies for commodity sourcing. The Foreign Direct Investments (FDI) also currently relies on the purchasing decision strategy that the seller chooses to make. Strategic strategies for development assist in evaluating external and internal system of purchasing, this sort out the application criteria of management and development goals (UN Conference on Trade and Development UNCTAD, 1999).

Resources availability is a core assessment criterion for modification of purchasing investments activities. Reassessments of energy crisis assist well in portraying the Single Buyer Model (SBM) that is associated with Centralized purchasing system. Diversity of economic outlook gives sufficient transfers of information technology that raise purchasing performances through management skill application and purchasing mix mechanisms (Karjainen, 2009).  Optimum level of resource of particular American countries and other international countries should be maintain whole heartedly to ensure a constant purchasing strategy that is less expensive and consumer friendly (Ling, 2011).  This analytical approach on energy sector by Small Medium Organization has been the driving factor in this study and has lengthily assisted in assessment of benefits of centralized purchasing theory and direction of purchasing system growth.

In the last part of this paper, it stipulates on recommendations and conclusions that needs to be articulated by various Medium size organizations. In this level the centralized purchasing activities, large sums of money transfer is involved and these funds could be invested in Greenfield investment, which involves building a new business concern like factory in a foreign country. Funds could also be used in mergers and acquisitions in exchange of royalties in product production. Mergers and acquisitions involve the amalgamation of two or more firms or the purchase that is directed to current firm within the foreign country but for our study a centralized method of purchasing is involved.

Background of the study

According to traditional norms of purchasing, various enterprises sort out to find stable transactions in exchange for goods and services. In international surveys, various purchased materials account for 60% of what is produced cost during the manufacturing era (Leenders, M.R., Johnson, P.F., Flynn, A.E., Fearon, H.E., 2006). Purchasing in wholesales and retails may exceed the 90% mark as it more consist of maximization of profits.

Centralized purchasing assessments accounts for the choice made by the Medium size organization sorting out to consolidate their purchasing needs. A medium size organization can opt to choose a pure decentralized system of purchasing or a pure centralized system of purchasing (Karjainen, 2009).  Centralized purchasing entails on recovery of potential suppliers under one arm of control and gives implementation plans for the analysis of the market and purchase plan. As accustomed, the centralized department tends to have enough services that allow for core control and specialization in particular supplies and on target customers (Karjainen, 2009). All companies are in need to achieve constant capital supply in their departments.

In this regard, energy sector act under the Single Buyer Model (SBM) to ensure free flow of capital. In Medium size organization, limited resources and lack of sufficient technological advancements hinder the process of fast growth and development. Centralization of purchasing departments helps in the process of allocation of sufficient resources and in management of mix of purchase. Centralization helps one to keep the company in high alert of opportunities for external drivers like multitude consultants to ensure financial functionality of the organization (O’Reilly, 2006).

In Centralized, purchasing various groups of medium size organization can achieve better financial stability through joint purchases and single supplier utilities. The expenses of purchase can be shared along the lines of single suppliers as better sourcing opportunities come up. The benefits of Centralized Purchasing choice by the Medium size organization give many opportunities to instill less purchasing burden and sufficient trade discount as one buys in bulk (Leenders, M.R., Johnson, P.F., Flynn, A.E., Fearon, H.E., 2006).

Decentralization of purchasing system deals with the activities of various departments of local Small size organization the chain of supplier to use in the purchasing strategy and the specification of products. In contrast to Centralized department of purchasing, the decentralized system of purchase has shorter sourcing activities occurrence (Ling, 2011). Sometimes the decentralized system offer better opportunities, but the determinant of this economic prolongs matters with the types of organization; Centralization is more evident in Medium size organization as compared to Decentralized system of purchasing. Centralization offers dynamic approaches to supply of quality goods that are leveraged. It is beneficial to use the centralized system due to the specialization volume it offers over the Decentralization Purchasing strategy (Karjainen, 2009).

The choice of strategy in determining the beneficial rate of centralized purchasing in this study has been based on the prevalent factors of energy crisis and how Medium Size Organization substitute the single buyer model (Beatriz Arizu, Defne Gencer, Luiz Maurer, 2006). All this gives concrete measures and recommendation that should be carried forward for centralized Advantages and for sufficient arrangements for purchasing. My choice of beneficial strategies of centralized purchasing system advantage over the decentralized regards most of the technological and economical conditions. These will give as evidential analysis on the cost, discount and overall Investments savings associated with the centralized purchasing.

Centralized Purchasing departments can offer economic maintenance activities, as recording is accustomed or bestowed to a single officer. The single source of recording in customized business offer a variety of economic benefits as supervision is retained under one power necessitating full control and sufficient record keeping (Karjainen, 2009). The purchase officer is able to diligently deal with the inflow and outflows of products without encountering miscellaneous results in transaction managements. Centralized offer this wide range of proper documentation in contrast to decentralized departments that gives insufficient information flowing from different departments and recording by various departments’ officers.

The purchasing theory attributes centralized purchasing departments with offering sufficient supply mechanisms and the hustle associated with purchasing is lessened (Leenders, M.R., Johnson, P.F., Flynn, A.E., Fearon, H.E., 2006). Decentralization in Medium size Organization give less discount that every organization is in rush to meet; the quantity discount is not possible due the economic decentralization nature thus more discount is lost as compared to centralized purchasing departments that utilizes the  trade discounts (Karjainen, 2009). A supply chain management is obtained in the centralized system of purchasing; the control of supplies from in department to various departments is consolidated on the single momentum economies.

One is able to apply economies of scale under the centralized department though market mix and production retention activities, the supply chain is continuous and less tedious (Leenders, M.R., Johnson, P.F., Flynn, A.E., Fearon, H.E., 2006). In this study we conceptualize on the literature review of the centralize Purchasing department as a beneficial strategy in the day-to-day business endeavors. The centralization has been one of the significant economic progresses in history and more emphasis has been made on the continuity of centralization states.

In past more decentralized business, strategy had lead to losses and economic downturn as more than 40% of Medium size organization failed to meet the international economical sustainability programs. The background of centralization date constitute mostly on early stages of organization development, sufficient arrangements of purchasing are rendered in the strategically approaching of commercial arrangements (Beatriz Arizu, Defne Gencer, Luiz Maurer, 2006). A previous study carried out by World Bank stipulates that, centralization is the mere implementation of co-corporate investments partners in need of sufficient purchasing discount and trade negotiations opportunities.

The analysis on these studies have been based on the previous concepts majorly the Single Buyer concept that is a source of quality arrangements in centralized purchasing theory (Beatriz Arizu, Defne Gencer, Luiz Maurer, 2006). In centralized purchasing strategy, its drawbacks of lack of localized purchasing advantages and the misunderstanding between various purchasing departments can be managed through design and methodological control at the outset. Flexible centralization procedures are built up to foster a long-term investment in purchasing activities; Investment in supply management is motivated under the course of purchasing (Ling, 2011).

To ensure a continuous flow of information in the centralized purchasing department, procurement of sufficient flexible arrangements under purchasing contracts, this gives purchasing department a competitive advantage to envisage a transition that is smooth and materialistic. Centralization is a monopolistic system of centralized purchasing but in early stage, it is good to maintain the distance between the processes of reformation (Beatriz Arizu, Defne Gencer, Luiz Maurer, 2006). If this take s place it may hinder the growth process and result to prices that are not affordable.

A single buyer concept provides good variations in the centralized stages of purchasing; it assists in outlining the benefits associated with the use of a centralized Purchasing department over the use of decentralized department (Leenders, M.R., Johnson, P.F., Flynn, A.E., Fearon, H.E., 2006). The creation of a wide review of Centralized purchasing gives a forefront in the financial crisis that may encounter the Medium size organization as more opportunities of discount and transport cost regulation is more prune in this system than the decentralized system of purchasing.

Centralization offers standard material flow into the market and the aid in constant stable policies on purchasing that instill a sense of purchasing responsibilities within the Medium size organizations. According to Karjainen (2009), Decentralization cannot provide ample space for growth of economies of scale or low prices as well as provide sufficient communication platform within the organizations. Integration within the Medium size organization (MORG) is critical and diligence is required in the choice of purchasing mechanism to employ in an organization; that facilitate more savings and constant flow of beneficial credits to the firm. The centralized purchasing department operates under the framework of Organizations agreements to operate their purchasing strategy through preferred suppliers (Karjainen, 2009).

Literature review

There were conducted a literature review of the  previous internationally recognized system of purchasing that gave clue evidence on the benefits that summarize the centralized system of purchasing. In accordance to past regulations on the flow of services and goods among various Medium Size organizations, a sufficient search was more acceptable to underlying the values of centralization. The cost analyses are good for discount analyzing for centralized purchasing system over the decentralized system of purchasing. Discount variations give the overall review of purchasing centralization.

Economic variation in the past, according to the Prevailing market stipulations addressed that the discount ratios increased as more purchase of goods was encouraged (Leenders, M.R., Johnson, P.F., Flynn, A.E., Fearon, H.E., 2006). Bulky purchases lead to a good turnover effects on the trade discount within the past 20 years in the Medium size Organization, this issue was eminent due to increased in more centralized Medium Size Organization in the purchasing strategy. The trend of purchasing is normally geared towards the overall centralized function and the consolidation of suppliers in the Purchasing department.

In the organizational resolution of Medium organizations, emphasis has been put on personal and economical satisfactions, and experienced is being highly regarded in the human capital and performance activities. Organizational goals and strategic evaluations tend to focus on organizational performance in the centralized purchasing system. The literature behind centralized purchasing has been formulated by various Economists. Optimal centralized purchasing degree in the international market has been stipulated (Arnold, 1999).

Sustainable competency in leadership has categorized most of Medium size Organization (Karjainen, 2009). Employments opportunities have increased in India and better policies have been deployed to allow centralized purchasing system and other related investments system activities. In the study of aspects of decentralizations and the centralization purchasing mechanism strategically all the activities within these two perspectives are not been common in the market has the centralization and decentralization in the medium size Organization were recently launched (Leenders, M.R., Johnson, P.F., Flynn, A.E., Fearon, H.E., 2006).

Most large organization and few of Medium size organization grew up with a decentralized structure that needed to be evaluated and reformed to Centralized purchasing systems. This is due to need firms to manage the company expenses and to promote a better liaison with efficiency of purchasing system (Karjainen, 2009).

By use of preferred supplies through centralized purchasing firms can  gain savings, According to Pricewaterhousecoopers (PWC) 30-405 savings can be obtained in non-direct spending (Karjainen, 2009); this only applies in centralized system of purchasing and not in decentralized firms whose savings are constant. In literature, the Medium Size Organizations SMEs provides high compliance nature in centralized system of purchasing with a chain of supply (Leenders, M.R., Johnson, P.F., Flynn, A.E., Fearon, H.E., 2006).

High-level participation in the Medium size Organization by various members enables reductions in prices and fosters a commitment strategy by the centralized system of managers. Most organizations sort out to maintain a relevant study of corporate synergy through centralized purchasing contracts and the core behaviors of departments that are limited to practice of centralizations (Karjainen, 2009).

Little research and review has been done on centralized purchasing as more individual and organizations relied on non-compliance contracts. We have to look keenly at the overall supply management techniques that necessitated the centralization process of Purchasing in the Medium size Organizations. Empirical framework of purchasing needed examination and investigation to portray the benefits achieved from the upcoming and continuous process of Centralized purchasing. In this context, consolidation processes were observed and the formal e-systems evolved with the supply reducing due to compliance (Karjainen, 2009).

Centralization increases the technological knowhow in the process of single purchasing and in the company day in day out activities (Beatriz Arizu, Defne Gencer, Luiz Maurer, 2006). Technology gives a an up ground I the advancement process ensuring that the more company supply goods and centralize to the preferred supplies the encounter the innovation process in term of economic upgrade and through e-procurement process.

Market and supply consolidation assists to avoid the market imperfections between various Medium size Organizations. In international business literature, Karjainen (2009), the explanation of centralization assists in removing the factors affecting construction market from working perfectly. The marketing imperfection approach the internalization theory ensures that centralized purchasing is encouraged as it increases the profitability in the host country.

In centralized purchasing as the officers negotiate and practice supply management practices the administrative offices are relived on burdensomeness of paper work (O’Reilly, 2006). The cost reduces greatly due to the simplified centralized process and the human resources provision. Medium size organization can follow development direction though exploiting competence in the supply and demand market. CSFs (change in critical success factors) are greatly encouraged to ensure that emphasis is put in the success of the company; Centralized purchasing can ensure short life cycles of the product they have so to establish the condition of the Medium Size organization.

In past provisions of purchasing, literature processes outline decentralized purchasing system giving a structure that was short lived as the entire different department had different say on purchasing process and the negotiation process was very different among various departments and organizations. The Medium size organization was more prone to this behavior but with time, they grew and formulated policies that will assist in utilizing economies of scale and in the end contractual arrangements that were of central and simplified nature.

The complexity of decentralization was replaced by endeavors by various Medium size organizations to ensure a pure process of supplier selection and on the continuity of consolidation of the purchasing department. The formalization was developed as centralization caved in and the purchasing structure was organized and the Medium size organization was able to foster a competitive element in the market. The purchasing synergy was promoted and consolidation process capacity lifted in the departments that were centralized, a clean and pure communication process was established under the procurement where the investment endeavors and capital equity were well leveraged.

The advantages of capital investment due to centralization of purchasing lead to foreign direct investment (FDI) that promoted National Economy Simulations. According to Earth summit, (2002) FDI can contribute to Gross Domestic Product (GDP), Gross Fixed Capital Formation (total investment in a host economy) and balance of payments. Subsidiaries of Trans-National Corporations (TNCs), which bring the vast portion of centralized purchasing, are estimated to produce around a third of total global exports in international market due to single buyer concept through sufficient supply centralization process (Beatriz Arizu, Defne Gencer, Luiz Maurer, 2006).

Centralized purchasing department as a greater advantage over the decentralized purchasing method in regards to communication and social mobility. Medium Size organizations are able to increase their social movement’s treads through increased wages and better increases in the employment sectors. Culturally advance and they can as well foster good economic relations. Investments has promoted the social impacts in the organizations through the opportunities for social communication and sharing of ideas.

In centralized purchasing departments, current assets are cash and other assets expected to be converted into cash, sold or consumed in one year or in the operating cycle whichever is longer. Working capital in centralized purchasing departments needs to be tabulated and its benefit over decentralized purchasing system evaluated. They are presented in the balance sheet in order of their liquidity and the costs for the benefits can be calculated. Purchases departments need to have a competitive advantage that will enable the consolidation of Centralized markets.

A constant supply chain is maintained and managed properly in centralized system instilling a sourcing advantage over the system that is decentralized (Karjainen, 2009). Commodities needs to be utilized fully to ensure they provide consumer wants; commodities varieties include leveraged, key , non –critical and strategic commodities that are regarded in the purchasing mix (Ling, 2011). A culture consumerism is encouraged through these various impacts of social opportunities. This assessment assisted in determining the discounting figured ratio and the current ratio for the supply market.

This category includes cash, investments in marketable securities, receivables, loans, inventories (deposits) and prepaid expenses. To qualify as a current asset, an asset must already be cash, capable of being converted to cash or used up within a relatively short period without interfering with normal business supply operations (Meindl, 2002). They are tied to an enterprise’s operating cycle. Mostly one year is the period used to identify current assets, so any asset expected to be converted into cash within one year is classified as a current asset in the enterprise’s balance sheet. In a balance sheet, current assets are listed in order of liquidity (the closer an asset is to be coming cash, the greater its liquidity) (Meindl, 2002).

The working capital of centralized systems is of purchasing are utilized and one would not find inventory, accounts receivable, or accounts payable; Instead, under assets, you will see mostly loans and investments, and on the liabilities side, you will see deposits and borrowings. The operating cycle of the business is where value is created from the non-monetary assets of the business and cash and other monetary assets are generated. However, different Medium size Organization have different policies with respect to the management of their working capital, which are partly a matter of choice and partly a consequence of their financial characteristics of the purchasing systems in which the firm is engaged.

The models of Single Buyer Model have been formulated through diversified means of optimal allocation of purchases savings and the centralization costs investigation mitigated (Karjainen, 2009).  Organization will grow and develop well in this system as the supply rule (Maverick buying) rule applied for developing countries (Leenders, M.R., Johnson, P.F., Flynn, A.E., Fearon, H.E., 2006).

Centralized purchasing system is quickly gaining over decentralized purchasing system due to its strong economical operations and better investments reforms. The working cycle has a critical role to play in the internal financing of capital investments. The presence of substantial equity reserves in the balance sheet does not necessarily mean that a Medium size Organization is able to engage in capital investment unless there is sufficient liquidity within the Organization to finance the acquaintances (Karjainen, 2009).

Acquisitions are sorted out in the course of assessing the strategy to choose in between the centralized and decentralized systems of purchasing.  The Single seller (Centralized Purchasing) has the wholesale energy regarding the consumption of the products; more emphasis in centralized purchasing system is given to the commercialization of an entity (Beatriz Arizu, Defne Gencer, Luiz Maurer, 2006). Better products are produced and sufficient quality services are offered as one socially engages with the other and a supply chain is created to enable continuity of businesses.

The models of Single Buyer Model (SAB) have been formulated through diversified means of optimal allocation of purchases savings and the centralization costs investigation mitigated (Karjainen, 2009).  Organization will grow and develop well in this system as the supply rule (Maverick buying) rule applied for developing countries (Leenders, M.R., Johnson, P.F., Flynn, A.E., Fearon, H.E., 2006). Centralized purchasing system is quickly gaining over decentralized purchasing system due to its strong economical operations and better investments reforms.

Research Questions

Under Medium size, Organization (MORG) various departments are analyzed and review is pointed to the organizations that have obliged from certain economic obligations with an annual turnover of less than $30 million (O’Reilly, 2006). The review behind the literature aspect and analysis of Medium size organization benefits for Centralized Purchasing is a complex issue and sufficient study needs to be assessed fruitfully to ensure core beneficial objectives and a constant purchasing chain of supplies (Leenders, M.R., Johnson, P.F., Flynn, A.E., Fearon, H.E., 2006).

The research question was on the benefits yielded by centralized system of purchasing over the decentralized system of purchasing; more research is focused on the overall functions of the study of Medium size organization; and how the systems of purchasing work under them. All the systems of purchasing are supposed to be focused on a more centralized supply format of organization to ensure that savings have been achieved and formal policies adopted by the firms (Leenders, M.R., Johnson, P.F., Flynn, A.E., Fearon, H.E., 2006). $40-50% purchasing cost is more on private sector and the rule is to achieve a constant supply of investment and capital in the end.

In this research, our endeavors is to find out more about the procurement industry where consolidation processes are utilized and major assessment is done in updates of price ,the catalogs and the administration/ product data. This presumes the Single buyer model (SAB) and Maverick buying (MB) where centralized purchasing strategy is implemented (Karjainen, 2009); this ensures the economies of scale are readily used. The questioner behind this research is on the percentage growth rate that needs to be examined is the ability to mitigate the initial benefits that can be achieved from the resources of the centralized purchasing department.

Research Hypothesis, Design and Methodology

The centralize system of purchasing is surrounded with various concept of designs evaluation as the benefits of centralization on cost and trade discount are analyzed. The supply benefit outcomes for this research centre on the implementation of the centralized purchasing departments (Meindl, 2002). The literature analysis on the working capital gives the evaluated data of benefits associated with centralization process. To maintain the equation of cost and trade discount analysis of the medium size organization we will look at the framework arrangements that are stipulated by the Medium Size organization policies. We support the design of centralized Purchasing system by use of models referred to as (Karjainen, 2009).

To illustrates this in the table on the benefits achieved by both parties (centralized purchasing system and decentralized purchasing system) we create a model and identify the key issues. We will analyze on how the Benefits framework works in the process of centralized and decentralized though Contract Compliance (CC) centralization and on Cohesive buying (CB) decentralization. At the end of discussion, we will analyze on the Maverick buying (MB) model where centralization is implemented.

Contract Compliance (CC) Purchasing Behavior

Centralized Purchasing Systems   

Under this model, the benefits include the utilization of economies of scale and the low rate of the External control costs. Medium Size Organization (MORG) though use of a centralized purchasing department they can sustain their level of finances and control the internal costs that may be incurred (Karjainen, 2009). The supply of purchases is continuous in contract compliance model, which ensures that formal processes are carried on and procurement is used (Karjainen, 2009).

Cohesive Buying (Cb) Purchasing Behavior

Decentralized purchasing system

Under the model of Cohesive buying, (Decentralized purchasing system) there is high external costs that are accounted by the MORG’s in this system. The level of procurement is low and there is less usage of economies of scale (Karjainen, 2009). A decentralized purchasing system is more disadvantaged in the Medium Size Organization than the centralized purchasing system.

Maverick Buying (Mb) Purchasing Behavior

Centralized Purchasing Systems   

Maverick buying (MB), has low economies of scale  that are not sufficient utilized thus the centralized purchasing system plays the role of trying to manage its economies of scale and to regulate the external coordination and internal control costs (Karjainen, 2009). With this, all models can be able to achieve beneficial discounts on trade and can fulfill the necessities of overall efficient centralized purchasing system.

Limitations of the Research

According to this study, Research design is the plan and structure of investigation so conceived to obtain answers to research questions that entail on the centralized benefits of purchasing (Leenders, M.R., Johnson, P.F., Flynn, A.E., Fearon, H.E., 2006). The study will follow an analytical research design, which will use facts and information already available and analyze them to make a critical evaluation of the data. In this process of research, there were some hindrances.

These limitations are:

Time The research process requires adequate time for it to be effectively carried out. It is quite challenging since there is little time and a lot to be covered during this time. Time is essential to ensure one can term the total benefits that have been achieved through the centralized purchasing department. A good duration is essential to ensure that the overall benefits of the purchasing department that is centralized have been evaluated over the purchasing department that is decentralized for the medium size organization.

Solution: Time will be spared during this coming holiday to collect data and use the first weeks of the next semester before classes resume ensuring purchasing concepts have been well analyzed and the critique of decentralization purchasing departments evaluated collecting more data.

Finances There is a lot of monetary input required in carrying out of a research as various Medium Size organizations have different departments under different purchasing systems. The finances assist in the diverse evaluation of the Benefits of average Medium Size Organization in the required locations.

Solution: Funds will be contributed towards the research by the university finance sector to ensure efficiency of research and on the dynamic research project. Funds will allow for the statistical analysis of the Medium size organization and on the direct spending when one tries to buy from the suppliers that are preferred to calculate the turnover of centralized purchasing costs (Karjainen, 2009).

Disclosure of the information Managers of Medium Size Organizations might be reluctant to allow the overall access their financial statements to determine the benefits that were recorded in the process of centralized purchasing and the benefits resulted over the decentralized Purchasing system.

Solution: The researchers will ask the University for Introduction Letters and for permissions to inquire various medium size organizations that have Centralized system of Purchasing and with those with Decentralized systems of purchasing

Strengths of the Research

Its features allow researchers to engage in Medium Size Organizations feedback and self-assessment criteria that give centralized purchasing department a self-relation with the researchers. This creates conducive learning environment for research of centralized purchasing departments. In gathering up sufficient information for the process of consolidating the centralized benefits for the purchasing department the area of expertise is well observed and more vivid in the Medium Size Organization due to the open competition (Karjainen, 2009).

This platform allows communicative context that encourage interaction between researcher without the process overtaking the role of the meditation in the organizations that have a centralized system of purchasing and the other department of purchasing with the decentralized system of purchasing (Meindl, 2002).

The fact that this platform is available to researchers and they are interested parties in an unrestricted timeframe means that the researching process is not hindered in any way. The project is more exciting and a constant fieldwork problem is absorbed among the various researcher accounted for this task and supply management (Beatriz Arizu, Defne Gencer, Luiz Maurer, 2006).  Most of the Medium Size Organization choices have a good prevalent of the researcher’s field of study (centralized purchasing).

Total cost of research in the Medium size organizations adoption of centralized system of purchasing is expanded as more information is shared among various consolidated platforms of purchasing (Beatriz Arizu, Defne Gencer, Luiz Maurer, 2006). The strengths are more formalized in the major centralized state organization and in the formation of the purchasing structure that accounts for a more vivid study of financial institutions (O’Reilly, 2006).

Results interpretation of centralized Purchasing

According to the literature review and research methodology, centralized purchasing is more beneficial than the decentralized system of purchasing. The explanation of the process plus the working capital for the overall Medium Size Organization is based on the concept of purchasing behavior in regards to the suppliers preferred. Centralization of purchasing system as improved due to the numerous studies that have been examined. Most firms are eager to engage in a pure centralized form of purchasing to ensure they consolidate their activities and to ensure that a complete cost analysis that is advantageous to the organization has been adopted.

In accordance to Maverick review in the methodology tables, depth on purchasing has some significant problems that need to be addressed. The economies of scale in the Medium size organization need to be efficiently utilized and the external coordination costs and internal control costs minimized. The criteria of purchasing behavior provides as with evidential analysis on the operational of the market through resources allocation and the number of suppliers that are willing to engage in a certain level of purchasing. The centralization and decentralization are very different in aspect that decentralization of purchasing department neither do nor utilize the economies of scale.

Procurement is the other aspect of concrete use of centralized purchasing department, which assist in developing and maintaining steadfast market segmentation, and to provide Medium Size Organization (MORG) with sufficient transparency and a competitive advantage that is genuine. The centralization give firm an upper hand in consolidation and improvement of communication within the groups of organization that have converged to ensure they utilize the market retention capacities.

Conclusions

In conclusion, this paper gives as the core issue involved in the centralization of purchasing departments and the decentralized departments. The benefits associated with the centralized purchasing department are more pointed to the trade discount, the total internal control costs and external control costs, plus the level of buying as there in no duplication in centralized purchasing.

This paper provide theoretical evidence that the centralization process of purchasing department is more benefits over the decentralized purchasing system in the Medium Size organizations. The benefits of trade discount are increased due to the bulk purchase made and the constant prefers suppliers buying. Transformational cost and the cost involved in caring are minimized because of large purchase made within one turn of events. The consolidation process in centralized purchasing department offer concentration in the organization and avoids the burden associated with purchasing. Economies of scale result in the centralized system where recording is carried by a single officer and a method of single Buyer model is followed.

In the end all a company wants is the maximization of its company sales and in the utilization of economies of scale that is more into the centralized purchasing system than the decentralized purchasing system of purchasing in the Medium size organizations.

Recommendations

My recommendation is that the entire upcoming medium sized Organization to develop a compliance model of purchasing that is centralized. The organization should upgrade their system of decentralization to a more contact compliance (centralized) purchasing theorem. The centralized purchasing department is more prunes to better Economies of scale and consolidation purchasing reducing the overall company expenses.

Summary

As a financial and economic analyst, I would point that the centralized system of purchasing is the only solution for the Medium sized organization and with proper implementation; the economies of scale will be utilized by the firms. The decentralization process is not an accommodative strategy, should be dealt away with to ensure economic progress. Centralization of purchasing department is beneficial to the general community and Medium Size Organization (MORG) had should be implemented.

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