Types of Purchases

Organizations buy many different goods and services. All purchases represent a tradeoff between what an organization can either produce or service internally versus what it must purchase externally. For many items, the make-or-buy decision is actually quite simple. Few firms could manufacture their own production equipment, computers, or pencils. However, all firms require these items to support continued operations. The challenge is deciding which suppliers offer the best opportunity for items an organization must purchase externally. The following sections outline the variety of goods and services a typical purchasing department is responsible for buying. Please note that for each category, organizations should establish measures that track the amount of goods in physical inventory.