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86 CHAPTER 4 The Procurement Process

the labels of the storage locations are the same in different plants—for exam-
ple, location FG00 exists in all fi ve plants—they are distinct organizational
levels. The combination of plant and storage location must be unique. Thus,
the Dallas plant may not have another storage location with the label FG00. It
is common to use the same labels across plants and company codes if they rep-
resent the same type of storage, such as raw materials and fi nished materials.

PURCHASING ORGANIZATION
A purchasing organization is the unit within an enterprise that performs
strategic activities related to purchasing for one or more plants. It evaluates
and identifi es vendors, and it negotiates contracts and agreements, pricing, and
other terms. An enterprise may have one or more purchasing organizations.
Typically, there are three models of purchasing organizations: enterprise level,
company level, and plant level. These models range from highly centralized to
highly decentralized. We discuss each of these models in greater detail below.

Enterprise-Level Purchasing Organization

The enterprise-level purchasing organization, also known as the cross-
company code purchasing organization, is the most centralized model. There is
only one purchasing organization for the overall enterprise and all of the plants
within the enterprise. Figure 4-3 illustrates the GBI organizational structure
using the enterprise-level model. There is only one corporate purchasing orga-
nization, GL00, and it handles purchasing for all fi ve plants in both company
codes (US00 and DE00). In this model, the purchasing organization is assigned
to each plant, but not to the company code.

Figure 4-3: Enterprise-level purchasing organization

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