2. “Individuals and organizations that acquire goods
and services to be used, directly or indirectly, in
the production of other goods and services or to
be resold.”
INDUSTRIAL PRODUCTS
3. Classification is done on the basis of
three broad groups:
• Material and Parts
• Capital Items
• Supplies and Services
4. 1. MATERIAL AND PARTS
Goods that enter the product directly. The cost of
these items are treated by the purchasing company
as the part of manufacturing cost. Material and
parts are further segregated into three parts that
are:
Raw Materials
Manufacturing Materials
Component Parts
5. Raw Material: These are the basic products which enter
into the production process with little or no alterations.
They may be marked to user customers or OEMs
(Original Equipment Manufactures). Such as iron ore,
crude oil, vegetables.
Manufactured Materials: That also includes those raw
materials that are subjected to some amount of
processing before entering the production process. Such
as acids, fuel oil, steel and chemicals.
Component parts: These are the semi finished parts
that can installed directly into the products with little or
no additional change. Such as small motors, batteries
and tires.
6. 2. CAPITAL ITEMS
Capital items are those which are used in the
production process. They are normally treated as
user customers. Capital items are classified into
three groups:
Heavy equipments
Light Equipments
Plant and Buildings
7. Heavy Equipments: These are the major and long term
investments such as general purpose and special purpose
machines, turbines, generators and earth moving
equipments.
Light Equipments: Light equipments and tools which have
lower purchase prices and are not considered as the part of
heavy equipment such as typewriters, computers and small
electric motors.
Plants and Buildings: These are the real estate property
of the company. It includes the firm offices, plant,
warehouses, warehouses and parking lots.
8. 3. SUPPLIES AND SERVICES
Supplies and services support the operations of the
purchasing organization. They are not consider as
the part of the finished goods. They are further
segregated into two parts:
Supplies
Services
9. Supplies: These items are generally standardized and
are marketed to a wide cross section of industrial
users. Such as paints, oils, greases, pencils,
stationary etc.
Services: Company needs a wide range of services like
building maintenance services, auditing services, legal
services, courier services and many more.
10. 10
Materials and parts
1. Raw materials ( natural gas, HDPE etc.)
2. Manufactured materials ( copper wire, steel sheets )
3. Component parts ( switches, motors or customized gears )
Characteristics : Normally large custom made orders are sold
By the manufacturers & standard products by industrial distributors.
Organizational Customer
Based on Type of products purchased
11. 11
Capital Items
1. Installations ( buildings, computers, machinery etc.)
2. Accessories ( PC, Office furniture)
Characteristics: Normally major installations, because of
extensive interaction required and long negotiation time required,
the manufacturers deal directly with the customer & accessories are
sold by industrial. distributors.
Organizational Customer
Based on Type of products purchased
12. 12
Supplies and services
1. Supplies ( soaps, stationery etc.)
2. Services ( maintenance, canteen etc.)
Characteristics : Normally industrial distributors are used &
services are provided by the individual contractors ).
Organizational Customer
Based on Type of products purchased
13. 13
Industrial Market Vs Consumer Market
Market Structure
Industrial Market
Geographically concentrated
Fewer buyers (relatively)
Big buyers
( small number of large buyers)
Consumer Markets
Geographically dispersed
Mass markets
Free Market
(large number of buyers)
14. 14
Industrial Market Vs Consumer
MarketBuyer Behavior
Industrial Market
*Evaluated for functionality
rational/task motive to buying.
*Purchasers are experts & focus
is more on performance/service.
*Higher interaction with the
supplier.
* Formal processes.
Consumer Market
*Social / psychological
factors are important.
*Family involvement & focus
more on product per se.
*Nor personal relationship
with the supplier.
* Less of formal processes.
15. 15
Industrial Market Vs Consumer
MarketProducts
Industrial Market
* Technical complexity and
customized.
* Service, delivery and
availability is very
important.
Customer Markets
* Standardized.
*. Service, delivery and
availability is somewhat
important.
16. 16
Industrial Market Vs Consumer Market
Distribution channel characteristics
Industrial Markets
* Shorter, more direct &
fewer linkages between seller
and buyers.
Consumer Markets
* Indirect and multiple
linkages
17. 17
Industrial Market Vs Consumer Market
Promotion
Industrial Markets
* Emphasis on personal selling
or one to one dealing.
Example : Selling fridges
with new technology.
You go and deal
with Coke or Pepsi H.O.
Consumer Markets
* Emphasis on mass market
promotion.
Example : You plan an adv.
campaign to highlight decaf
coffee
18. 18
Industrial Market Vs Consumer Market
Pricing
Industrial Markets
* Competitive bidding &
multistage negotiation.
* Sharing of cost data &
budgeting of acceptable
profits in many cases.
Consumer Markets
* Normally MRP & MOQ
* Concept of list price & its
implementation.
