Eskom Procurement Book 2015

THE PROCUREMENT PROCESS

2.4.2 SEMI-FINISHED PRODUCTS AND COMPONENTS

This category includes all the items purchased from a supplier that will support the sub-assembly/final assembly requirements of an organisation. This can include components, sub-assemblies, sub-systems and systems.

2.4.3 FINISHED PRODUCTS

Most organisations purchase finished items from a supplier, either for internal use or for possible resale to an end customer. An organisation may also re- brand an item, produced by and/or supplied by a supplier, for sale to its own customers. As mentioned earlier in this chapter, many firms are concentrating on their core competencies and, as an integral part of this, have outsourced to other firms the manufacture of items used in the final product they provide. In this case, procurement typically works closely with suppliers of engineered items to ensure conformance to specifications and to quality requirements [1].

2.4.4 MAINTENANCE, REPAIR AND OPERATING ITEMS

Maintenance, Repair and Operating (MRO) items include those items that do not go directly into a firm’s product or products. This category includes spare parts, office supplies, cleaning supplies, oils and grease and so on. A procurement group within an organisation would typically provide a blanket order for these types of supplies.

2.4.5 PRODUCTION SUPPORT ITEMS/PACKAGING SUPPLIES

These types of items include the materials required to protect products during the internal handling and/or shipping process and include pallets, boxes, containers, wrapping and other packaging materials. These materials are of key importance in directly supporting the production and shipping of items and help to ensure protection against damage while products are in transit, internal or external to the organisation. Capital equipment refers to assets that are intended for use for one year or more. There are several categories of capital equipment including standard equipment that has no special/tailored design requirements for the user, such as standard materials handling equipment (forklift trucks, conveyors, etc.), computers, office furniture and so on. A second category of capital equipment would be items that have specific design requirements for the end user, such as specialised trucks (for example, for a package transport firm like UPS or FedEx), specialised tools, machinery and so on. The purchase of these types of capital equipment typically requires close technical and engineering collaboration between the buyer and supplier.

2.4.6 CAPITAL EQUIPMENT

Capital equipment is distinguished from other types of purchases in that it may

37 CHAPTER 2