Daily Archives: June 28, 2006

Center Led Purchasing Models

Last month, the ISM awarded a number of individuals and organizations the R. Gene Richter Award for Leadership and Innovation in Supply Management. The recipients were primarily organizations that had demonstrated massive improvements in their sourcing and procurement functions which came about through concentrated improvement efforts. These improvements were the direct result of the adoption and consistent implementation of best practices across the sourcing and procurement functions in the organization. This week we are discussing the best practices that helped one or more of the recipients transform their organizations and win these coveted awards.

Today we are going to talk about center led procurement and review how it helped DaimlerChrysler transform their sourcing organization, as described in the article “Consolidating Global Procurement” in the latest issue of Inside Supply Management.

Whereas a classic decentralized model of procurement has each business, function, or geographic unit responsible for its own purchases, and a classic centralized model of procurement has all purchases routed through a single central organization, a center led model of procurement has a central organization that focuses on corporate supply chain strategies and strategic commodities, best practices, and knowledge sharing that handles major common buys and guides the individual units in minor uncommon buys. Center led models have most of the advantages of both the centralized and decentralized models without many of the disadvantages. Considering that this is one of the topics slated for the e-Sourcing Forum Summer Series (WayBackMachine), I’m going to forego an extensive discussion on center led models today and simply re-iterate some of the results achieved by DaimlerChrysler.

In brief, over a six year period, the International Procurement Services volume grew by more than 400%. It yielded

  • an 80% increase in purchasing results in spot buys,
  • a 30% increase in the manufacturing facilities’ purchasing results, and
  • a 77%+ increase in internal customer satisfaction.