Spot Buying
Definition:
Spot buying, also known as spot purchasing, refers to the procurement of goods or services on an as-needed basis, often in response to an urgent or unexpected demand. Unlike strategic sourcing, which involves long-term contracts and relationships with suppliers, spot buying focuses on fulfilling immediate, short-term needs at the best available price and terms.
Example:
Acme Corporation's production line experiences an unexpected breakdown, and the maintenance team urgently needs a specific type of valve to make the repair. Rather than going through the normal procurement process, which could take weeks, the procurement team authorizes a spot buy. They quickly search for suppliers that have the valve in stock and can deliver it within 24 hours. They compare prices and lead times from multiple suppliers and select the one that offers the best combination of price, availability, and speed. The valve is purchased and delivered the next day, allowing the production line to resume operation with minimal downtime.
Why is Spot Buying important to Procurement?
Spot buying can be a useful tool for procurement teams to address urgent or unexpected needs that cannot be met through the normal sourcing process. By being able to quickly find and purchase needed items on the open market, procurement teams can help their organizations to avoid costly downtime, stock-outs, or delays. However, spot buying should be used judiciously, as it can be more expensive and risky than strategic sourcing. When done frequently, it can lead to higher overall costs, inconsistent quality, and a lack of visibility and control over spend. Therefore, procurement teams should strive to minimize the need for spot buying by implementing effective planning, forecasting, and inventory management practices, and by developing a network of reliable, flexible suppliers that can respond quickly to unexpected needs.