Now that we have computer and communication systems to facilitate the management of the areas outlined previously, the question becomes: What is being purchased? The following chart outlines the different types of purchases that an organization makes.
What businesses are buying
Type | Definition | Example |
Direct materials | Raw materials and components that end up being part of the organization's final product. | Aluminum and other parts to make an airplane; fabric for a clothes manufacturer; computer parts for a computer maker. |
Capital equipment | Items that have substantial value and an extended life. | Computers, machinery, office furniture. |
Operating supplies | Supplies consumed for business purposes, but not used in the manufacture of the final products or the maintenance of facilities. | Paper, toner, office supplies, travel expenses. |
Maintenance and repair supplies | Supplies consumed to maintain the manufacturing process, equipment, and facilities. | Lubricants, motors, janitorial supplies, filters, paint. |
Services | Labor provided to the organization by people who are not employees of the organization. | Contract legal, IT, and other professional and temporary people. |
Facilities and equipment rental and lease. | Facilities and equipment that are rented or leased for an extended period of time. | Warehouse space, additional office space, vehicles, large equipment items. |
Other | General category. | Sale or purchase of surplus items or infrequent spot purchases. |
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