Assignment - Supply Organization - Case 3.1: Donovan Valley Purchasing Consortium

Four (4) school districts in Donovan Valley are evaluating an opportunity to combine their purchasing groups and establish a formal consortium.

If the consortium model is adopted, the four districts would see their current purchasing departments replaced by a larger, centralized supply services organization. While the consortium model promises cost savings, important questions remain regarding its appropriateness for the four school districts. Differences exist among the districts in terms of their size and management philosophy.

Furthermore, there are concerns regarding the level of service sacrificed in the pursuit of economies of scale. Bob Hamilton, manager district operations (role) for the Lowe School District, must evaluate the implications of participating in the consortium from the perspective of his district.

He must share his recommendations with Rick Lewis, secretary treasurer (role) for the district, in preparation for an Executive Steering Committee meeting (intended use/intended user) the following week.

Central Issue:

The central issue in the case involves organizational design issues in purchasing. Bob Hamilton is facing a familiar purchasing problem: Should supply be centralized or decentralized?

However, there are also a number of other important issues raised in the case. There are issues related to reengineering and management of change. It reflects an opportunity to analyze and plan for change in a complex environment.

Finally, there are a substantial number of unresolved issues that force you to consider a range of contingencies as part of their analysis.

Topics covered in the case include:

Centralized versus decentralized purchasing organizational structures. Public sector purchasing. Consortium buying. Leading change. Role of purchasing as a service organization.

Questions for Response:

1. As Bob Hamilton, what is your evaluation of the proposal to establish a centralized purchasing consortium? What would be your estimate of potential savings?
2. What are the implications for the required skills and capabilities of the purchasing staff if the centralized model is adopted?
3. As Bob Hamilton, what would you say to Rick Lewis and why?
4. What issues does Bob Hamilton have to resolve?
5. What are the advantages and disadvantages of centralizing purchasing?
6. What is a purchasing consortium? How does a formal consortium function?
7. What are the similarities and differences among the districts?
8. Do you believe the consultant's cost savings estimate? Where will the savings come from?
9. Who are the real winners here if the consortium model is adopted? Who are the losers?
10. What do you want to do next and why?
11. Do you have a better alternative?
12. Do you think you can convince all (4) four of the districts to adopt the consortium model? What would you do if only two or three of the districts wanted to proceed?