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CHAPTER 2
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.
2.4.6 CAPITAL EQUIPMENT
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.
Capital equipment is distinguished from other types of purchases in that it may