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Ara Arslanian was named a 2020 Pro to Know by Supply and Demand Chain Executive for the sixth time overall. Arslanian was chosen for his thought leadership in supply chain management and dedication to expanding the scope of the group purchasing organization (GPO) model to deliver more effective solutions to direct and indirect procurement groups.
"The grass is always greener on the other side." It turns out this common proverb even rings true in the debate over whether purchasing operations benefit from centralized versus decentralized management.
If your company isn’t set up to accommodate a centralized purchasing structure, you probably long for the leveraged pricing that your current decentralized approach may never achieve.
If your company has a centralized structure, you probably lament the compliance challenges you face. After all, you may have built relationships with local vendors and prefer to continue those over using a vendor that 'corporate' suggests.
In reality, both vantage points are correct: Both decentralized and centralized purchasing structures offer benefits and disadvantages. Here's why.
Procurement is being tasked with achieving a greater ROI despite a smaller headcount. This challenge is further compounded by the fact that many companies are not entirely clear on how to attack their spend cube to achieve greater spend under management or compliance goals, particularly in decentralized environments.
“Procurement leaders should learn where their sourcing employees spend the most time and whether it is worth the investment.”
The quote is from a 2017 study by The Hackett Group, which goes on to explain that, as procurement's role becomes increasingly strategic, sourcing teams already stretched thin face new demands and procurement challenges. According to that same report, “Are Strategic Sourcing Resources Providing the Best Return?”, the overall strategy of procurement needs to change, particularly around work selection and prioritization.
According to The Hackett Group, "a decision not to use group purchasing organizations (GPOs) for specific indirect spend categories is the same as leaving money on the table." But, research by ProcureCon Indirect West found that 58% of organizations haven’t yet investigated or aren’t using a GPO.
Why the disconnect?
At the core, a traditional GPO provides value through three main elements: money, time and resources.
