Which of the following are significant downsides to a centralized sourcing structure?
O Creates distance between decision makers
O Reduces flexibility
O Instills silo mindset
O Reduce material costs
All of the above
A, B, and C only
Based on the provided problem statement, the significant downsides to a centralized sourcing
structure are as follows:
1. Creates distance between decision makers: Centralized sourcing structures often involve decision-
making authority being concentrated in a central location or department. This can result in less direct
involvement and communication with decision makers from other areas of the organization,
potentially leading to slower decision-making processes and decreased responsiveness to local
needs.
2. Reduces flexibility: Centralized sourcing structures typically involve standardized processes and
procedures for sourcing and procurement activities. While this may promote consistency and
efficiency, it can also limit the ability to adapt quickly to changing market conditions, individual
customer requirements, or unique local opportunities.
3. Instills silo mindset: In a centralized sourcing structure, different functions or departments may
operate independently, focusing solely on their specific responsibilities without considering the
broader organizational goals or collaborating effectively with other functions. This silo mentality can
hinder cross-functional communication, coordination, and collaboration, leading to missed
opportunities for improvement and innovation.
Based on the options provided, the correct answer would be option "A, B, and C only" since it
includes the downsides mentioned above (option O creates distance between decision makers,
option O reduces flexibility, and option O instills silo mindset). Option "O Reduce material costs" does
not represent a downside but rather a potential advantage of a centralized sourcing structure.
