One of the great privileges of working with so many world class customers is that we get to see many different approaches in action over a long period of time. It gives us a unique view into what works and what doesn’t.
When determining the best team structure fit for your procurement organization it's essential to consider the benefits, pro's and con's between Centralized vs. Decentralized or Hybrid Procurement team structures. A recent article in Spend Matters about Centralized, Decentralized and Hybrid Sourcing Structures does a good job summarizing the differences and developments.
Where you stand on this topic almost certainly depends on where you sit. To make the best decision about your procurement team structure, ask yourself these five questions:
- Mind the essential tension. The core tension between centralization and decentralization is control vs. flexibility. A more centralized structure means more corporate control and the ability to apply corporate level priorities. The more decentralized a structure, the more local teams are able to cater to their customers. At the end of the day, it’s always a balance.
- Beware of buzzwords and trends. Terms such as “hybrid structure” or “center of excellence” gain currency at times without really providing actual prescriptions. If you think about it, any place that has unique skills could be termed a “center of excellence." My barber is a “center of excellence” at cutting hair, but that doesn’t necessarily provide him with a durable competitive advantage. Above all, resist the urge to move to the newest shiny object.
- Technology helps. But it doesn’t solve everything. One of the great benefits of automating your procurement systems is that it allows you to reduce the wild swings on the pendulum between central control and local flexibility. Technology improves visibility and compliance while still keeping decision making authority where it belongs.
- Do what works for you. Many organizations increased centralization after the 2008 financial crisis to respond to risks. This might have been the right answer for you, but maybe not. Keep your focus squarely on what matters rather than what’s going on around you.
- Everything’s a mix. Unless everything is being purchased at the corporate or local level, your structure is likely a mixture of centralized and decentralized, as it should be.
Learn more about Scanmarket's implementation process here, and be sure to leverage the collective experience when working with your Scanmarket team. As always, don't hesitate to contact us or visit our website for further information.