28 Location of the Procurement department

Location of the Procurement department

A firm’s organisational structure reflects the management’s basic attitudes toward the major activities involved in its operation. Where should the Procurement function fit into a firm’s organisational structure? A study funded by the National Association of Purchasing Management (NAPM) among the Fortune 1000 firms reveals the reporting relationships shown below:

Percent of firms Procurement function reporting to
34% President or Executive Vice President
25% Vice-President or Manufacturing
29% Other Functional Vice-President
12% Other Units

Table 2.1  Reporting relationships survey

The two most commonly found alternatives are shown schematically in Figure 2.2 and Figure 2.3.


Figure 2.2  Skeleton organisation for a medium-sized firm, with Procurement function as a top-level function


Figure 2.3  Skeleton organisation for a medium-sized firm, with Procurement function as a second-level function

In a given firm, how does one tell whether Procurement function is a top-level function that should report to a general management executive, as do Marketing and Finance, or a sub-function that should report to one of the top functional executives? This is just one of the several questions that must be answered when organising a Procurement department. We will next explore the various key influencing factors.

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