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Buying and selling in a complex world - Purchasing in the value chain

5 important questions on Buying and selling in a complex world - Purchasing in the value chain

What is the difference between direct and indirect purchases?

Direct purchases are the acquisition of goods, raw materials, services that are directly applied to an organisation own production, bought in big quantities. E.G. Drinks in shops, fruit and vegetables for direct consumption. (product-related)

Indirect purchases are non product-related, purchase of products/services for internal use. Necessary goods to keep the business alive. 15 to 27% of total revenues goes to this. E.G. Travel, office supplies, repairing equipment.

Which 3 criteria needs to kept in mind when investing in something?

- The payback period= The amount of time it takes an investment to reach the break-even point.

- The average rate of return= Measures the profitability of the investments, is taken from the financial statements.

- Discounted cash flow= A way to calculate the value of the company.