Debates over centralised and decentralised procurement, and the linked issue of how much purchasing authority can and should be delegated to respective branch offices/sites, have been going on for years. In fact, every organisation needs to look at its specific needs, and indeed the right approach may differ across different spend categories as well.
Select a multinational or a local company in the manufacturing industry that you are familiar with to answer the following questions.
- Illustrate the factors influencing the organisation as to whether to adopt centralised or decentralised procurement with relevant examples [25 marks]
- Propose an appropriate procurement organisational design (centralised or decentralised) for the selected company. [25 marks]
Read the article below and answer the following questions: KHIND Holdings Berhad
Khind Holdings Berhad is a producer and marketer of home consumer electrical appliances and industrial electrical company established in Malaysia in 1961. The company has recently celebrated its 60-year anniversary. KHIND has steadily grown in solidity over the years, evolving from a small homegrown setup to a global enterprise. Today, KHIND has become a successful Malaysian brand well-known in the international scene with presence in over 58 countries around the globe.
In order to maintain competitiveness in the market, the company ensures orders are fulfilled within the stipulated timeframe, or earlier if possible. The quick turnaround time arises from expectations by customers and consumers who are accustomed with increasingly efficient supply chains made possible by technology advancement.
As such, a range of sourcing options for its products, with a balanced mix of sourcing externally from original equipment manufacturers (“OEMs”) and manufacturing in- house, while maintaining stringent control over the quality of products.
In order to strengthen their supply chain and to better manage risks associated to single sourcing, Khind has during the years, embarked on engaging new global suppliers. The company announced that it has recently engaged a new supplier from India and will continue to explore other sourcing options.
The article was adapted from Khind Holdings annual report 2021. Accessed on 20th November 2022.
- Evaluate the criteria that Khind Holdings could use to assess potential suppliers in its global sourcing [25 marks]
- Examine the procurement practices that Khind Holdings could to better manage its supply risks. [25 marks]
Answers to Above Questions on Procurement Management
Answer 1: The decision in relation to procurement of raw materials in case of a manufacturing firm or finished products in case of businesses is highly dependent on their mode of operation. Businesses can implement centralised procurement or decentralised procurement strategy depending on the business requirement. In this relation, a manufacturing organisation that is selected for the purpose of evaluating the factors that affects its procurement strategy is Shinsho Malaysia Sdn Bhd.
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