types of purchases

8/7/2019 Types of Purchases

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Done by h Richard Dsilva


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Types1. Raw materials

2. Semi finished Products and Components

3. Finished Products

4. Maintenance, Repair, and Operating Items

5. Production Support Items

6. Services

7. Capital Equipment

8. Transportation and 3rd party Purchasing


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Raw materials The raw materials purchase category includes items such

as Petroleum, coal, and lumber, and metals such as copper

and zinc. A Key Characteristic of a raw material is a lack of

processing by the supplier into a newly formed product.

Another Characteristic is that Raw Materials are not of

equal quality. Raw materials are categorized in Quality levels according

to their grades.


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Semi-finished Products and ComponentsThey include all items purchased from suppliers required to

support an organizations final production.

Managing the purchase of semi-finished components is a

critical purchasing responsibility.For ex Hewlett-Packard buys its laser jet printing engines from

canon.

Outsourcing product requirements increases the burden on

purchasing to select qualified suppliers not only for basiccomponents but also for complex assemblies and systems.


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Finished Products

This category includes items that require no majorprocessing before resale to the final customers.

An organization may may market the product under

its own name which is produced by anothermanufacturer.

yWhy would a company Purchase finished items forresale ?

Even Though the buying company does not producethe final product, it must make sure the product meetsthe technical quality and specifications demanded by acustomer.


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Maintenance, Repair, and Operating Items (MRO)

Maintenance, repair, and operating items include anything that

does not go directly in to an organization's product.

It includes spare machine parts, office and computer supplies.

Mostly, Most organizations have paid minimal attention to

MRO items.

With the Development of computer inventory systems firms

have begun to take active interest in controlling MRO

inventory.

For ex FedEx has an agreement with staples.


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Production Support itemsProduction support items include the materials required to

pack and ship final Products.

Production support items directly support an organization's

Production Operation.

ServicesAll firms rely on external contractors for certain activities or

services.

Like MRO items, the purchase of services occurs throughout theorganization.

More & more Cos are negotiating longer term contracts withService providers.


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Capital Equipment

y Capital equipment Purchasing involves buying assetsintended for use over one year.

1. Standard Equipment2. Capital Equipment

Several Features separate Capital equipment fromStandard Equipment.


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Transportation and 3rd party

PurchasingTransportation is a specialized and important type of

service buying.

Few purchasing depts. involve themselves in Transportingissues before the early 1980s.

Purchasing has become involved with transportation.

Buyers are now selecting suppliers who are capable of

providing coordinated transportation and logistic services.The Consequences of getting a poor qualified supplier of

capital equipment can last for many years, The reverse isalso true.


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types of purchases

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