Types of Purchases: Direct, Indirect, MRO, Capital A direct purchase involves purchasing a good or service from the same company or supplier. For example...
A direct purchase involves purchasing a good or service from the same company or supplier. For example, a company may purchase raw materials directly from a supplier, or they may purchase a finished product from another company.
A indirect purchase involves purchasing a good or service from a third-party supplier. For example, a company may purchase office supplies from a distributor, or they may purchase insurance through an insurance broker.
A manufacturing, research and development (MRO) purchase involves purchasing goods and services that are used in the production of a good or service. For example, a software company may purchase programming services from a software development company, or a pharmaceutical company may purchase raw materials from a chemical supplier.
A capital purchase involves purchasing a long-term asset that will be used in the production of a good or service. For example, a company may purchase a machine that will be used to produce a product, or they may purchase land that will be used for a new factory.
Here's a table summarizing the key differences between these types of purchases:
| Feature | Direct Purchase | Indirect Purchase | MRO Purchase | Capital Purchase |
|---|---|---|---|---|
| Buyer | Same company or supplier | Third-party supplier | Supplier | Company or organization |
| Goods or services purchased | From the same company or supplier | From a third-party supplier | From a third-party supplier | From a company or organization |
| Use | Production of a good or service | Production of a good or service | Production of a good or service | Production of a long-term asset |