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.
Cons of a decentralized purchasing structure include:
- Lacks leverage (too many solutions)
- Lacks consistency
Centralized purchasing means there is a dedicated person or process established at your organization that handles all purchase orders. This option is 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.
Cons of a centralized purchasing structure include:
- Limited resources
- Barriers to compliance
Coordinated Purchasing: Leverage the Best of Both Models
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 of both. By utilizing this hybrid structure of centralized and decentralized, your organization can craft a purchasing structure that works best for your success.
Pros of a coordinated purchasing structure include the following:
- Standardized Methods
- Leveraged Pricing
- User level-buy-in (compliance)
- More resources
- Increased field knowledge
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 you through implementation, and manage the contract on your behalf.