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This chapter is from the book

Types of Purchases

Organizations buy many different goods and services. As previously indicated, the challenge for purchasing is deciding on the supplier that offers the best opportunity for items an organization must purchase externally. Table 1-5 lists and describes many of the items that a purchasing department is responsible for buying. Services are a special category of spend and the involvement of purchasing depends on the organization.

Table 1-5 Different Types of Purchases

Type of Purchase

Description

Examples

Raw materials

Items with a lack of processing by the supplier into a newly formed product. Often these raw materials are not of equal quality and are purchased by “grade.”

Petroleum, coal, lumber, copper, zinc, gold, and silver

Semi-finished products and components

All items purchased from a supplier required to support an organization’s final that are production.

Components, subassemblies, assemblies, subsystems, and systems (seat assembly, steering assembly, doors, and posts)

Finished products

Products for internal use or products that require no major processing before resale to the end customer.

Furniture, computers, cars, and carts

Maintenance, repair, and operating items (MRO)

Items that do not go directly into an organization’s product but are required to run the business.

Spare parts, office and cleaning supplies

Production support items

Materials required for packaging and shipping.

Tape, bags, inserts, and shrink-wrap

Services

Services required to support the facility or the business.

Customer support, temporary labor, facilities, and legal

Capital equipment

Assets intended to be used for more than one year.

Machinery, computer systems, and material-handling equipment

Transportation and third-party purchasing

A specialized type of service buying to manage inbound and outbound material flows.

Rail, truck, ocean, 3PL, and multimodal

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