Procurement Centralization Concept and Its Impact Specifically For the Commission of African Union
The concept and practice of centralized procurement system is not something new both to the public and private sectors. More especially in best-run businesses, such purchasing process integration brings about many advantages resulting in greater development. However, depending on the background of an organization, centralized procurement system could also bring certain disadvantages. This paper discusses the centralizing procurement concept, with its implications and impacts to those who adopt it. Also, specific ways on how it applies to the Commission of African Union will be given.
The term ‘centralize’ refers to taking everything into a specific location, while ‘procurement’ is about possessing or purchasing. Thus, centralized procurement in a public or private organization involves integrating all procurement processes, inventory, and service personnel into one entity. The purpose of this system is to reduce purchasing costs and risks in all levels of production and distribution. Certain advantages could be gained from this. With centralized procurement system, one can sustain savings, while having reduced operational costs and supply risk. Also, this brings greater flexibility and efficiency to the entire organization, since only one department is concerned with all of the procurement processes and transactions. While the said department takes control of it, other departments will have more time and capability to fulfill other tasks and necessities. In light of this, there is no need for large number of procurement service personnel. Another advantage in this system is standardization of operational procurement within the organization. With this, one can streamline procurement for every good and services, reduce purchasing errors, prevent irregular purchasing, and eliminate system redundancies. The department responsible for this will have [centralized] control over all procurement items. Another benefit in this is cost efficiency, since there will be quantity discount for large amount of purchases. Further, this results in better business relations. Since only one department will have to relate to suppliers (local or international), business transactions are easily handled. If only one department is responsible for this, procurement processes will be fulfilled faster and easier – which is also beneficial for suppliers. In general, centralized procurement process brings greater efficiency and flexibility in operations, less costs and risks, and better procurement transactions.
Applying it on the Commission of African Union (AU), centralized procurement system will also bring about the same benefits it has towards private organizations. If AU will assign one of its members to take responsibility for the procurement processes and items (i.e. food and fuel), they will be able to fulfill one significant part of their mission of driving African integration and development in close collaboration with all AU member states, African communities, and citizens. However, the only disadvantage of centralized procurement system in this context is the geographical dispersion of the member states. Goods and services needed by members located far from the ‘centralized procurement’ location could have problems with timely arrivals. Moreover, in case of emergencies, supplies can be hardly reached. In fact, replacement of goods and other supplies will be difficult. Thus, in order to deal with this problem, the AU should not adopt a ‘full’ centralized procurement system. Goods from international suppliers should indeed be centralized in one ‘main’ location. However, there should also be a ‘centralized’ branch for each state member or each specific area of coverage within Africa for local procurement processes.
Having a centralized procurement system is a necessary practice for any form of organization. However, it should also depend on the ‘context’ of the organization such as the African Union Commission. Such consideration is necessary to know whether an organization – public or private – needs to adopt a ‘full’ centralized procurement system or not.