What does central purchasing mean?
Definition: Central purchasing is used in franchise systems to bundle purchasing power through the joint procurement of goods and services for all affiliated companies. For example, you can save costs through volume or other discounts when purchasing office supplies, services or other consumer goods.
What are the advantages of central purchasing?
Franchisors can offer their franchise partners a centrally organized purchasing often offer advantages. Larger quantities, lower prices, better delivery conditions and automated processes: With advantages like these, central purchasing is one of the most important success factors of franchise systems compared to sole proprietorships. It makes starting a business in an established system particularly attractive.
Every single franchisee is an independent entrepreneur and usually a small business per se. Alone he needs small quantities of goods for which he could never negotiate optimal prices and delivery conditions. With the central Purchasing for the entire network the franchisee benefits from Conditions that are often similar to those of large companies are comparable. It is more competitive in terms of price and is largely relieved of the time and logistics expenditure for ordering, purchasing and storage.
Bundling of market power through the system headquarters
Franchise systems are purchasing associations. Similar to the purchasing cooperatives bundle your market power for operational purchasing, that is, the procurement of goods. They have to procure all goods and services that they do not produce themselves but resell or need for their end products and service provision – from raw materials to commercial items to office supplies.
The purchasing advantages for the franchisee lie in the cost savings, in the reliability of the delivery and in the lower effort. The favorable conditions arise, for example, from considerable Volume discounts. Often ensure reliability Exclusive contracts with specialized suppliers, which are thus firmly tied to the franchise network and make correspondingly high capacities available. Modern logistics systems support you in this.
Since the franchise system headquarters usually takes over the entire purchasing process up to delivery, the franchisee gains manpower for his core business.
Especially in retail and catering franchise companies POS systems and in almost all industries ERP systems used. Modern cash register systems automate the ordering and sales processes at the POS electronically and forward the data to the merchandise management systems. The merchandise management systems control the flow of goods in the entire network – from stock levels to incoming goods and warehouse movements to billing – between the head office and the franchise partners on site as well as between the partners and the end customers.
The central purchasing and logistics systems allow for Take just-in-time deliveries, for example. They result in minimal capital commitments and little or no storage costs for the franchisee.