Centralized procurement is a system where a single department or team manages all purchasing for an organization to gain cost savings, improve efficiency, and ensure consistency. Centralizing direct procurement isn’t just about structure; it’s about results. APQC’s data show that when organizations streamline procurement under a unified model, they can make faster procurement decisions and more easily align their procurement strategy with business strategy.
Here are the top four advantages identified in APQC’s article: Centralize Direct Procurement for Best Results.
1. Lower Costs
Organizations with centralized direct procurement achieve lower overall procurement costs. They also spend less on specific processes such as ordering materials and services, thanks to streamlined operations and more substantial supplier leverage.
2. Fewer FTEs
When procurement is centralized, organizations require fewer full-time equivalents (FTEs) to manage sourcing and purchasing. By consolidating work and reducing duplication, teams operate more efficiently across subprocesses.
3. Faster Cycle Times
Centralization drives quicker turnaround across procurement activities:
- Suppliers are set up faster.
- Contracts are established more quickly.
- Sourcing and procure-to-pay steps move at a brisker pace.
4. Greater Efficiency & Productivity
Centralized procurement teams demonstrate higher productivity and automation:
- More purchase orders processed per FTE.
- Greater use of electronic approvals.
- Fewer manual transmissions of POs for materials and services.
- Lower rates of maverick buying—ensuring spend stays on contract.
Learn more and explore the average cost to perform procurement materials and business services in APQC’s Centralize Direct Procurement for Best Results.