Selecting the right purchasing structure is crucial for optimizing your process throughout your properties. Depending on your size and property spread, it may not be an easy, quick decision. There are pros and cons to any structure so it’s important to weigh each option. You may even decide that a hybrid structure is best for your needs.
Every multifamily housing portfolio is unique, so it makes sense that there isn’t a “one structure fits all”. Consider how your properties function alone and together to determine which type would benefit you the most.
Follow along as we explore the pros and cons of decentralized, centralized, and coordinated purchasing structures.
Decentralized purchasing allows multiple properties or employees to purchase the items they see as a need. This can be beneficial to the individual purchaser as it’s likely they understand their needs more closely than a Regional Manager or corporate-level decision maker. This may also lead to less wasted resources, as they are more attuned to actual needs versus assumed needs. On the flip side, this structure lacks consistency throughout the properties and selected suppliers and can be overwhelming to the individual purchaser because there are so many available solutions to choose from.
Centralized purchasing means there is a dedicated person or processes established at your organization that handles all purchase orders. This option is very standardized, regulated, and broadly communicated so that purchasers on the property level understand their allowances and responsibilities. Since all purchasing originates from a person or process, the management team is able to track and manage spend much easier. Conversely, a centralized purchasing structure can lead to a backup of purchase orders due to having a lean purchasing team and, at times, a surplus of goods that may go to waste.
Overall, the most effective structure tends to be a coordinated one that is neither centralized nor decentralized. A coordinated procurement structure is more effective at leveraging the best practices and suppliers to utilize across the property portfolio. It takes the pros of decentralized and centralized purchasing structures while avoiding the cons from both. By utilizing this hybrid structure of centralized and decentralized, your organization can craft a purchasing structure that works best for your success.
Adding a group purchasing organization (GPO) to your strategy can help you get the most out of your purchasing structure. Your GPO can help you assess and manage your spend as well as find opportunities to save time and money. As a member, you have access to a portfolio of industry-leading suppliers with solutions to fit your organization's needs. The GPO can help you choose the best solution, walk with you through implementation, and manage the contract on your behalf.