Standardized Purchasing

A term denoting a process of selecting a supplier whereby corporate headquarters provides field offices with a definitive list of suppliers from whom the field may choose to purchase. The field office then decides the number of suppliers and the volume to be purchased from each supplier.

Example 1:

AT&T saved on costs with contract computer programming. Three years ago, it did business with 300 firms, paying their advertised rates. AT&T has pared that number down to 75 contractors that offer discounts.
(SIC 4813-Year 1995)

Explanation: AT&T has implemented Standardized Purchasing. Purchasers throughout AT&T may only purchase from one of the 75 contractors approved by headquarters.

Example 2:

Booksellers Association has its own subsidiary, Booksellers Order Service Inc., which sells small orders of books to independent book stores at bulk rates.
(SIC 2731-Year 1990)

Explanation: The Booksellers Association has established a list of "approved" suppliers. Independent book stores that purchase from those suppliers receive lower prices on their purchases.

Example 3:

Independent optometrists in Michigan have formed a buying group in hopes of getting volume discounts from lens manufacturers and other suppliers.
(SIC 3851-Year 1989)

Explanation: The optometrists' buying group has established a set of "approved" suppliers for its members. If the members purchase from this set of suppliers, their prices will be lower.

Example 4:

Shell replaced all 25 of its suppliers with a single firm, Pool Energy Services. Pipe replacement costs are down significantly.
(SIC 3498-Year 1995)

Explanation: As long as Shell had 25 "approved" suppliers, the company was following a Standardized approach to purchasing, where each buying location could purchase from one of the 25 suppliers. The company then moved to Centralized Purchasing.

Example 5:

UPS has signed a five-year contract to become the preferred carrier for JC Penney's small package air deliveries. UPS will handle 98% of residential deliveries for JC Penney's catalog division and about one-third of the shipments between JC Penney and its merchandise vendors.
(SIC 4513-Year 1995)

Explanation: JC Penny uses Standardized Purchasing, giving its employees a list of approved suppliers for small package air deliveries and then encouraging them to use UPS first.