types of purchases
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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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