DEFINITION of 'Central Purchasing'

A department within a business or organization that is responsible for making all procurements. Central purchasing works with other departments and agencies to consolidate orders for products, and then use economies of scale in order to exact cheaper prices. Additionally, organizations use a central purchasing department in order to simplify a procurement budget or to keep the organization's spending in a centralized location that can be checked for discrepancies easily.

BREAKING DOWN 'Central Purchasing'

Using a central purchasing department is part of an organizational strategy aimed at efficiency. While consolidating may allow the organization to order goods in larger quantities and reduce costs, it may also slow down the procurement process and prevent employees from getting the materials they need in a timely manner. Centralized planning may result in more bureaucratic red tape that can stymie innovation by preventing emerging departments from obtaining the materials that they need.

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