Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy
Spot Buying — Definition + Examples
As taught in the Annual Procurement Strategy Course / ★★★★★ 4.9 rating
What is spot buying?
- Spot buying are the unplanned purchases made to address immediate needs to for emergencies.
- Spot buying can be expensive and a frustrating process which results in higher costs if not handled well.
- Spoit buying are seen by many businesses and consumers that are impractical and unreliable.
What is Spot Buying?
Spot buying is a purchase that is unplanned, which is usually considered an emergency cost or a one-time buy. Just like with any other type of spend, spot buys must be kept in check.
Spot buying typically includes at least one of the defining features that are listed below:
- Low-value — The low value is usually related to small purchases that, if left unchecked, can add up over time, which eats away at the bottom line.
- One-off deals — One-off deals typically refer to emergencies that need an immediate solution.
- Forgo the RFP process — These spot buys are often less formal and made in a short time.
- Unique purchases — These spot buys are typically last-minute purchases that are necessary to continue a specific event.
Spot buys can add up over time, which can be difficult to identify as they rarely follow an RFP process. Almost 40% of an organization’s direct spending consists of spot purchases.
How Does Spot Buying Happen?
Spot purchasing happens all the time in the business world, even if organizations plan their purchases in advance. There are many reasons why spot purchasing happens.
The most common one is that the item is bought where the transaction is not complicated, as it is inexpensive. Another is that it can be in the event of an emergency.
Example 1: Emergency Replacement of Office Equipment
At a law firm, the primary scanner breaks down just hours before an urgent filing deadline. With no time to follow standard procurement channels, the office administrator heads to a nearby tech store and purchases a new scanner on the spot. This kind of quick, unplanned buying due to an urgent operational need is a classic example of spot purchasing.
Example 2: Last-Minute Purchase for an Unexpected Opportunity
A company’s public relations team learns that a major industry event is allowing last-minute sponsorships. To take advantage of the exposure, they quickly buy promotional flyers, branded merchandise, and a display banner from a local supplier. Because there’s no time for a full vendor selection process, this unplanned and fast-tracked procurement becomes a clear instance of spot buying.
What are Spot Buy Catalogs?
A spot buy catalog is an online marketplace that gathers low-value deals and purchases. Its goal is to capture emergency searches that help organizations make quick spot purchases without taking a long time in comparing prices.
Although spot buying catalogs are beneficial, nowadays it is seen as ineffective, costly, and a waste of time. This is due to the fact that it should be used as a tool and not a solution.
Issues Regarding Spot Buy Catalogs
Spot buying is typically hard to manage due to the fact that organizations depend on the wrong tools to bring it under control. Here are the few challenges that are present in spot buy catalogs:
1. Find an item takes too much time
Spot buy catalogs require users to delve through an endless list of items before making a purchase. Additionally, catalogs are updated regularly to ensure that prices are up to date.
2. Often miss discounts
A procurement team or department uniquely positioned to take advantage of bulk buying. However, in spot buying, there is no opportunity to take advantage of full inventory replenishments.
3. Can make purchases more pricey
Some employees of an organization may think that bulk buying a pot purchase is a good idea, thinking they are getting a good deal.
However, this is not the case. The employees who bulk buy spot purchases are at risk of overbuying. Thus, the procurement team has the upper hand in negotiating better deal as they know better.
The Advantages and Disadvantages of Spot Buying
Having to use spot buying spontaneously because of an emergency is different from having to use spot buying as planned. See the table below for common distinctions between when spot buying is useful versus when it is better to use:
Conclusion
Spot buys are purchases business organizations make when emergencies or last-minute costs arise. So, even if you have planned all your purchases, it is inevitable to happen.
Furthermore, to tactically plan out purchases, there are various types of sourcing you can use: tactical sourcing, strategic sourcing, and spot sourcing.
However, it is important to keep in mind that spot buying is never easy. There are a few issues regarding spot buy catalogs you should look out for.
Frequentlyasked questions
What is spot buying?
Spot buying is a purchase that is unplanned which is usually considered an emergency cost or a one-time buy. It can add up over time as they rarely follow an RFP process.
How does spot buying work?
One of the reasons why it happens is when the transaction is not complicated as it is inexpensive. It can also be used in the event of an emergency.
Is spot buying useful?
Spot buying is useful for one-time buying goods or services and when an emergency arises.
About the author
My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.
