Methods of purchasing

Methods of purchasing describe how an organization buys its materials. The main methods are:

1. Hand-to-mouth (as-needed) purchasing: Buying small quantities only when needed. Suitable for perishable or expensive items and when storage cost is high.
2. Purchase on requirement: Buying exactly what is needed for a specific job or order, after getting a requisition; common in project work.
3. Contract purchasing: A fixed contract is made with a supplier for a certain period for a regular supply at a set price. Example: annual contract for fuel or stationery.
4. Forward (speculative) buying: Buying large quantities in advance expecting prices to rise. Risky if prices fall.
5. Bulk (quantity) buying: Buying in large lots to get quantity discounts and lower unit cost, but it needs storage space.
6. Scheduled buying: Purchasing at fixed intervals according to a delivery schedule, useful for continuous production.
7. Group or centralized purchasing: One central office buys for all units to get economies of scale (for example, ministries or bank branches).
8. Tender / bidding (competitive) method: Suppliers submit sealed bids and the lowest evaluated bidder gets the contract. It is required for larger government purchases (above set value limits) under the Public Procurement Act, 2063, with e-bidding through the e-GP system.
9. Quotation method: Prices are asked from several suppliers for smaller purchases.
10. Direct purchase: Directly from a sole supplier for emergencies or small value items.
11. Just-in-time (JIT): Receive goods only as required in production, minimising inventory.

Choice depends on cost, value, demand, storage, shelf life and legal rules.