Organizational Structure for Procurement

Procurement department organizational structures often -- but not always -- reflect the organizational structure of your business. Additional factors, such as communication patterns, the size of your procurement department and the degree of centralization, also influence procurement’s underlying structure.

New Business Start-Ups

Small-business start-ups generally have flat, informal organizational structures. The same is true for start-up procurement departments. A one-person operation or a department having only a few employees typically has no formal hierarchy and little formal division of responsibilities. Because communication patterns typically follow a multi-directional flow with few to no barriers, everyone takes responsibility for making purchasing decisions and carrying out purchasing duties. However, a single person or a department having few employees usually lasts only until a start-up business begins to grow.

Growing Businesses

Growing purchasing departments often evolve into a less-flat, but still relatively simple organizational structure. At this point, the purchasing department typically has a department manager, a few key employees and a shared or dedicated administrative assistant. This organizational structure shows a high degree of centralization. Information tends to flow in a more top-down fashion, from the business owner to the purchasing manager to department employees. Key employees have clearly defined responsibilities. Centralized purchasing departments -- and a less-formal organizational structure -- not only increase the degree of internal control, but also increase purchasing process efficiencies.

Formal and Hierarchical

Small businesses that expand to multiple locations or divide into independently functioning divisions typically take on a more formal and hierarchical organizational structure the larger the business grows. The same is true of larger-business procurement departments. A matrix-style procurement organizational structure, characterized by a highly complex, double hierarchy, is common in businesses that permit each department or division to run and manage their own procurement departments. Although decentralizing procurement management eliminates purchasing bottlenecks, it often becomes less efficient, because different departments or divisions have no options for sharing systems, knowledge or resources.

Networked Procurement Structure

A highly evolved procurement department often adopts a network organizational structure. In a network organizational structure, purchasing department policies and standard operating procedures flow from the home office -- the network hub -- to each department or location. In addition, the home office is a central location for sharing systems, knowledge and resources. Each location or division is a node in the network. Although each node relies on and is accountable to the home office, each is responsible for carrying out its own purchasing duties.


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