Central Purchasing

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Bureaucracy

    An administrative or social system that relies on a set of rules ...
  2. Silo Mentality

    An attitude found in some organizations that occurs when several ...
  3. Corporate Governance

    The system of rules, practices and processes by which a company ...
  4. Internal Controls

    Methods put in place by a company to ensure the integrity of ...
  5. Stewardship Grade

    An evaluative data point in Morningstar's fund and stock reports ...
  6. Cottage Industry

    A small-scale industry often operated out of a home, rather than ...
Related Articles
  1. Measuring Company Efficiency
    Fundamental Analysis

    Measuring Company Efficiency

  2. The Basics Of Corporate Structure
    Investing Basics

    The Basics Of Corporate Structure

  3. Governance Pays
    Options & Futures

    Governance Pays

  4. Economic Moats: A Successful Company's ...
    Active Trading

    Economic Moats: A Successful Company's ...

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center