Nowadays, spot purchases represent a large part of productivity in the procurement area.
Unlike long-term contracts with suppliers, with recurring and high-value purchases, spot purchases are small transactions, and have low added value for the business.
Keep on reading to know everything about this procurement, process and negotiation term.
Spot purchases = instant purchases
The word ‘spot’ has different meanings and can be used in many situations. For the procurement universe, the expression that comes closest is ‘on the spot’, which means ‘immediately’.
Typically, the full corporate procurement cycle is complex and time-consuming, with contracts that must be planned in advance. Additionally, costs are directly linked to the company’s key activity. This doesn’t happen in spot purchases, precisely because they are non-strategic items and with lower values.
Both the purchase and delivery of such products are made with shorter deadlines, as many of the purchased items are required to maintain or expand the company’s activities. Despite their more sporadic nature, spot purchases must be made strategically, in order to avoid excessive costs and impairment to the results of procurement – and the whole company.
How does the spot purchase process work?
The spot purchase process is similar to regular purchases: the buyer receives a purchase request, makes a quotation with suppliers (with one or more suppliers, depending on the policies of each company), approves the order and closes the purchase process.
The difference is that, in this mode, there’s no need to sign a contract and formalize the partnership with a specific supplier. Most of the time, spot purchases are made with suppliers from the company’s own base, which makes the whole process easier. Another way to find suppliers who can meet spot purchase demands is through a marketplace.
Spot purchase orders are usually flagged in the category selection itself, at request time. Therefore, upon receiving the order, the buyer identifies it as an indirect purchase order, with low added value.
Although it is less complex and with more immediate need, it’s crucial to detail the item to be purchased.
Spot procurement negotiation
When compared to a strategic purchase – that is, one of high added value to the company – the spot purchase negotiation process is agile. That’s because the buyers understand that they don’t need to spend so much energy for non-strategic items.
However, the procurement area has the challenge of decreasing costs for businesses; after all, $1 saved means $1 profit for the company. For this reason, the ideal is to negotiate even spot purchases with suppliers, in order to achieve the best offers and savings.
To save time and increase the chances of closing good negotiations, businesses can choose an outsourcing service. As a newly launched service, BPO Free is Mercado Eletrônico’s solution for spot purchases.
Spot purchases vs. KPIs
For some time now, the procurement area is no longer a support department, and has become essential for business strategy. Consequently, it must have its performance measured constantly.
Despite being occasional and sporadic in nature, the performance of spot purchases must be monitored, so the area can achieve the desired performance. The most used KPIs in spot purchases are:
- Savings: shows the savings achieved in purchases – that is, the gain of buyers in negotiations.
- Lead time: it enables calculating the overall purchase time, from request to the delivery of products.
- TMA: it indicates the average service/interaction time to complete a purchase.
Having access to these indicators allows procurement professionals to make more assertive decisions, in a short time period.
Now that you understood what spot purchases are and their characteristics, keep on browsing ME’s Blog and improve your knowledge in the sector.
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