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. 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. ogether, management and the board of directors have the ultimate goal of maximizing shareholder value.
    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. Investing News

    Looking to Open a Franchise? These Topped The List In 2014

    These franchise businesses stood out in 2014.
  7. Economics

    What are the major differences between a monopoly and an oligopoly?

    The major differences between a monopoly and an oligopoly include the number of firms in the market, type of barriers to entry and presence of close substitutes.
  8. How do you figure out which franchise is the best for you and your budget? Read on.
    Investing Basics

    What's The Best Franchise Investment For You?

    How do you figure out which franchise is the best for you and your budget? Read on.
  9. Taxes

    What are examples of cost of goods sold (COGS) for businesses that sell through eBay or Etsy?

    Read how online retailers that operate through eBay or Etsy can list certain expenses as cost of goods sold and even claim a tax deduction for these costs.
  10. Bonds & Fixed Income

    Can I invest my IRA in an entity, business or LLC?

    Explore different types of businesses, entities, corporations and limited liability companies, and the types IRA-eligible securities they offer.

You May Also Like

Hot Definitions
  1. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  2. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  3. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  4. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  5. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
  6. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
Trading Center