Chapter 3

Question 1

Centralized

Answer 1

Authority and responsibility for most supply-related functions are assigned to a central organization

Question 2

Decentralized

Answer 2

Authority and responsibility for supply-related functions are dispersed throughout the organization

Question 3

Hybrid

Answer 3

• Authority and responsibility are shared between a central supply organization and business units, divisions, or operating plants.
  
  • Hybrid structures may lean more heavily toward centralized or decentralized depending division of decision-making authority.
  • One type of hybrid supply structure is a “center-led” organization in which strategic direction is centralized and execution is decentralized.

Question 4

Advantages of Centralization

Answer 4

• Greater buying specialization
• Ability to pay for talent
• Consolidation of requirements - clout
• Coordination of policies and procedures
• Effective planning and research
• Common suppliers
• Proximity to major organizational decision makers
• Critical mass
• Firm brand recognition and stature
• Reporting line - power
• Strategic focus
• Cost of purchasing low

Question 5

Disadvantages of Centralization

Answer 5

• Narrow specification and job boredom
• Lack of job flexibility
• Corporate staff appears excessive
• Tendency to minimize legitimate differences in requirements
• Lack of recognition of unique needs
• Focus on corporate requirements, not on business unit strategic requirements
• Even common suppliers behave differently in geographic and market segments
• Distance from users
• Tendency to create organizational silos
• Customer segments require adaptability to unique situations
• Top management not able to spend time on suppliers
• Lack of business unit focus
• High visibility of purchasing costs

Question 6

Advantages of Decentralization

Answer 6

• Easier coordination/communication with operating department
• Speed of response
• Effective use of local sources
• Business unit autonomy
• Reporting line simplicity
• Undivided authority and responsibility
• Suits purchasing personnel preference
• Broad job definition
• Geographical, cultural, political, environmental, social, language, currency appropriateness

Question 7

Disadvantages of Decentralization

Answer 7

• More difficult to communicate among business units
• Encourages users not to plan ahead
• Operational versus strategic focus
• Too much focus on local sources - ignores better supply opportunities
• No critical mass in organization for visibility/effectiveness - “whole person syndrome”
• lacks clout
• suboptimization
• Business unit preferences not congruent with corporate preferences
• Small differences magnified
• Reporting at low level in organization
• Limits functional advancement opportunities
• Ignores larger organizational considerations
• Limited expertise for requirements
• Lack of standardization
• Cost of supply relatively high

Question 8

Hybrid Centralized/Decentralized Structure Advantages

Answer 8

Implements all of the advantages of both centralization and decentralization, leaving out the disadvantages

Question 9

.gCPO trends

Answer 9

• Increasing education levels
• CPOs tend to report hire in the organization than they did in the 1980s and 1990s
• CPOs are increasingly being hired from outside the organization rather than promoted from within
• CPOs are increasingly being hired from functional areas other than supply
• When a new CPO replaces a current CPO, the current CPO is promoted or leaves the company for a similar position in another firm
• CPO reporting lines change every 2.5 years on average, which means that the typical CPO will have at least two different bosses during his or her tenure in the role
• The CPO role is still new in many organizations

Question 10

Keys for Successful Consortiums

Answer 10

• Reducing total costs for the consortium members
  
  • Through lower prices, higher quality and better services
• Eliminating and avoiding all real and perceived violations of anti-trust regulations
• Installing sufficient safeguards to avoid real and perceived threats concerning disclosure of confidential and proprietary information
• Mutual and equitable sharing of risks, costs and benefits to all stakeholders, including buying firms/members, suppliers and customers
• Maintaining a high degree of trust and professionalism
• Maintaining a strong similarity among consortium members and compatibility of needs, capabilities, philosophies and corporate cultures