What Is a Group Purchasing Organization?

Organizational Purchasing Center, also known as Organizational Purchasing Center, refers to the individuals and collectives involved in the purchasing decision-making process in the organization. An organization's purchasing center includes all members of the organization who share some common goals and share various risks arising from decision-making. They play six different roles in the purchase decision process. According to the specific circumstances of each purchase, each role of the purchase center will be performed by different individuals and senior management personnel at different levels. Not all characters are involved in the purchase process. There will be relatively few roles in some minor purchases, at least formally.

Organizational Purchasing Center

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Organizational Purchasing Center, also known as Organizational Purchasing Center, refers to

Organizational Purchasing Center, also known as Organizational Purchasing Center, refers to

An organization's purchasing center includes all members of the organization who share some common goals

The organization purchasing center should consider two key issues, one is how much of the resources the organization needs to invest must be its own manufacturing (such as the degree of vertical integration), and the other is how it is related to suppliers (such as the number of suppliers and Relationship characteristics with different suppliers).

1.Homemade or outsourced decisions

For any organization, the decision to make or buy is a key, strategic issue. Vertical integration is one of many strategies for gaining important resources. The first problem of self-manufacturing is that the market demand is changing rapidly, but the technology update speed of the enterprise is relatively slow. Another problem is that highly backward vertically integrated enterprises will ignore the innovation ability of employees, and the employee's innovation ability is obtained by the enterprise. Prerequisites for market competitiveness.

There has been a period when the use of vertical integration in the industry has fallen sharply, and a large number of organizations are increasingly relying on innovative suppliers. Practice has proven that suppliers are helpful for the effective development and promotion of products. If an organization decides to use outsourcing, losing control of its suppliers is considered a major disadvantage. However, after years of exploration, the organization has found some methods to control suppliers, such as strategic alliances, joint investment, cooperative development projects, loans and credit guarantees. These "quasi-integrations" play the same role as vertical integrations.

2. Decisions on relationship with suppliers

How to deal with the relationship with suppliers is another key issue facing the purchasing center of the organization. When dealing with supplier relationships, there are two opposite and effective approaches.

One of them is a hostile relationship, that is, the relationship between the organization and the supplier is a zero-sum relationship (that is, one side wins, the other fails, and there is no intermediate state). Therefore, a major problem in organizational purchase management is the competition between suppliers. The organization moves from one supplier to another to obtain the lowest possible price.

Organizations adopting similar strategies should avoid relying too heavily on a single supplier and frequently switch suppliers. Using a strategy of working with suppliers from multiple channels and sources is an effective purchasing strategy. Organizations adopting this procurement strategy must maintain a considerable distance from their suppliers. The relationship with suppliers is a hostile relationship rather than a cooperative relationship. This is called the traditional concept of effective procurement.

Another type of relationship with suppliers is a cooperative relationship, that is, the relationship between the organization and the supplier is not a zero-sum relationship, and the two sides can obtain benefits through mutual adaptation and achieve a win-win situation. This procurement strategy is completely opposite to the traditional procurement strategy, and the main reason it can be recognized is that by cooperating with suppliers, it can also have the advantages of the traditional procurement strategy and even achieve more efficient procurement. Price is only one cost in the procurement process, but through cooperation with suppliers, other related costs can be reduced.

3. Decision of supplier network

Developing good relations with suppliers can achieve many economic benefits. If suppliers can coordinate their activities, they can gain more potential benefits. Each relationship is reflected in a network of relationships that contains many different relationships, and changes in each relationship will lead to a chain reaction of other relationships. Therefore, how to coordinate the relationship between suppliers and form an effective supplier network is another key issue facing the purchasing center of the organization. It is good for the organization to analyze the supply market in the organization's supplier and relationship network. Japanese automakers provide examples of this. They rely on only a few suppliers and group their suppliers at different levels into a hierarchical structure. For example, Toyota Motor Corporation directly establishes relationships with a few first-tier suppliers (not more than 200 suppliers), and these suppliers are responsible for establishing a network structure that includes many suppliers at other levels (about 4,000 suppliers). The formation of the supplier network structure is one of the key factors for Japanese automakers to gain market competitive position.