2. Type of purchase
• Capital equipment
• Raw materials
• Original equipment part (OEP)
• Maintenance, repair and operating (MRO)
• Services
3. Discuss
• Describe the types of goods IBM purchased
for its operations?
Types Items
1
2
3
4
4. Purchase of capital equipment
• Item may be physically
large
• May be in single or
multiple units
• The way it is handled is
not affected by accounting
classification
• Usually need approval
from top management
5. Purchase of OEP
• Usually a standardized component of a
finished product
• Needed continuously in manufacturing
• Components likely to remain the same over
years
• Same items may be purchased over many
years and for different purpose
• High volume
6. Pricing of OEP
• Usually substantially Low
• Factors that influence pricing
– Quality
– Delivery
– Packaging
– Additional features
7. Discuss
• Can IBM leverage on its power for its purchase
of OEP? Explain
8. Purchase of MRO
• Usually purchase in low volume, sometimes in
one or two pieces
• In low value
– But a repair item may require the entire plant to
shut down, causing thousands of dollars, for the
repair work
• Frequency: Can be low, maybe once in a life
time of the machine
9. MRO buyers
• Under pressure to meet urgent needs
• Not too concerned about pricing
• The objective: To satisfy the requestor
• Most cost is with placing the order and
documentation
• Modern purchasing use EDI or system
contracts to reduce cost of transaction
10. Small value purchase
• Delegate order placement to users
• Methods
– Telephone orders
– Petty cash purchase
– Standing order, e.g. Electric fitting contractor
• Stockless buying
11. Discuss
• Recommend the efficient purchasing system
for the following:
– a) Standard ‘Original Equipment Parts’ orders;
– b) MRO items (small orders)
