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. Stewardship Grade

    An evaluative data point in Morningstar's fund and stock reports ...
  4. Internal Controls

    Methods put in place by a company to ensure the integrity of ...
  5. Corporate Governance

    The system of rules, practices and processes by which a company ...
  6. Per Transaction Fees

    An expense a business must pay each time it processes a customer’s ...
RELATED FAQS
  1. Do any markets not exhibit asymmetric information?

    Asymmetric information, when interpreted literally, means that two parties to an economic transaction have different information ... Read Full Answer >>
  2. How can a nation adopt an export policy based on the economies of scope?

    A nation as a whole can adopt an export policy based on the economies of scope by focusing production on goods and services ... Read Full Answer >>
  3. What are the benefits of using ceteris paribus assumptions in economics?

    Most, though not all, economists rely on ceteris paribus conditions to build and test economic models. The reason they do ... Read Full Answer >>
  4. What is the difference between marginal benefit and marginal revenue?

    Marginal benefit measures the consumer's benefit of consuming an additional unit of a good or service, while marginal revenue ... Read Full Answer >>
  5. What are some good resources to help entrepreneurs develop a business model?

    There are a number of resources available for entrepreneurs developing business models. Online resources provided by bloggers, ... Read Full Answer >>
  6. What is the difference between marginal benefit and marginal cost?

    Marginal benefit is the incremental increase in a benefit to a consumer caused by the consumption of an additional unit of ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Measuring Company Efficiency

    Three useful indicators for measuring a retail company's efficiency are its inventory turnaround times, its receivables and its collection period.
  2. Investing Basics

    The Basics Of Corporate Structure

    CEOs, CFOs, presidents and vice presidents: learn how to tell the difference.
  3. Options & Futures

    Governance Pays

    Learn about how the way a company keeps its management in check can affect the bottom line.
  4. Active Trading

    Economic Moats: A Successful Company's Best Defense

    Find out why some companies thrive while others flounder.
  5. Economics

    What Are Economies Of Scale?

    Is bigger always better? Read up on the important and often misunderstood concept of economies of scale.
  6. Entrepreneurship

    Should I Have An IPO on My Business

    The ultimate outside investment opportunity is going public through an initial public offering. However, IPOs come with costs that you may want to avoid.
  7. Entrepreneurship

    Why Small Business Owners Need Financial Advisors

    Small business owners are too busy to effectively manage their own money. That's why a financial advisor can be a big help.
  8. Economics

    The Big Chill: What’s Wrong With The U.S. Consumer

    Based on the most recent April data, investors may, once again, be disappointed when the second-quarter gross domestic product (GDP) report comes in.
  9. Economics

    What is a Business Model?

    Business model is the term for a company’s plan as to how it will earn revenue.
  10. Economics

    Explaining Tier 1 Capital

    Tier 1 capital refers to the core capital a bank must maintain in relation to its assets.

You May Also Like

Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  3. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  4. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  5. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
  6. Risk Premium

    The return in excess of the risk-free rate of return that an investment is expected to yield. An asset's risk premium is ...
Trading Center