Decentralized Procurement in Light of Strategic Inventories

The centralization versus decentralization choice is perhaps the quintessential organizational structure decision. In the operations realm, this choice is particularly critical when it comes to the procurement function. Why firms may opt to decentralize procurement has been often studied and confirmed to be a multifaceted choice. This paper complements existing studies by detailing the trade-offs in the centralization versus decentralization decision in light of firms' strategic use of inventories to influence supplier pricing. In particular, we demonstrate that a firm's decision to cede procurement choices to its individual divisions can help moderate inventory levels and provide a natural salve on supply chain frictions. This paper was accepted by Serguei Netessine, operations management.

• 저널Management Science · 61(3) · 578–585
• 토픽Supply Chain and Inventory Management · Management Information Systems
• DOI10.1287/mnsc.2014.1908
• 저자Anil Arya, Hans Frimor, Brian Mittendorf