Cost analysis of suppliers is not the sole basis for the price determining. What else can be used for this? Much depends on the type purchased product.
Generally it is classified into 7 general categories:
1. Raw. This group includes the so -called sensitive products (sensitive commodities): copper, wheat, crude oil, steel, cement, the price of which can change dynamically.
2. Special products. This group includes products and materials required for the organization made its product lines.
3. Standardized products. This group includes such products as bolts and washers, many types of industrial steel products, valves and pipes for which prices are stable and are determined based on the «list price at a slight discount».
4. Products of small value. This group includes products with a low relative cost; the costs of any special inspection of the purchase prices are not justified. This category includes, for example, products for the maintenance and repair.
5. The means of production. It purchased products, which relate to capital assets and whose cost is reduced through the amortization process, instead of being consumed immediately, right at the time of purchase or use.
6. Services. This category of procurement is very broad and includes many types of services: advertising, auditing, consulting, legal, insurance, security, cleaning, waste disposal.
7. Goods for resale. This category can be divided into two groups:
a) production, which in the past produced in the company, but now transferred to the outsourcing vendor and bought off the shelf. An example of this can be called a major home appliance manufacturer that offers microwave ovens on the market, but the product does not produce more. But he sells the kiln under his own name.
b) products sold in the retail sector, in particular, the clothes sold in department stores , food sold in supermarkets , tools that can be purchased equipment.
Obviously, the total amount spent for the purchase of such resale of goods is enormous. Professionals buying similar products are commonly referred to as managers trade stocks because, first of all, they have to decide which products will sell their company. Based on this assessment, they take decisions upon purchases.
