Spot Buying — Everything You Should Know

We are sure that many of you have heard the term spot buying. However, not all of the people who heard it know what spot buying is. 

For this article, we will discuss the definition of spot buying. We will also check how it occurs and the issues with spot buying. 

After you finish reading this article, you will have a deeper understanding of spot buying. You will know how to use it effectively and avoid any issues that may come when you utilize spot buying. Furthermore, once you know it, you will be able to decide if spot buying is for you. 

What is Spot Buying? 

In doing business, there will always come a time when emergencies will arise or last-minute costs will just pop up. The purchases that arise from these situations are what we call spot buys. 

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 buy 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 Purchasing 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.

Editor's note:

Hi there! My name is Marijn Overvest, I'm the founder of Procurement Tactics.
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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. Finding 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 is 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 a better deal as they know better. 

When is it useful and when is it Better to use Spot Buying?

When is it Useful?
Spot buying is usually useful and required when there is an immediate need for a good or service.
When spot buying is sometimes an emergency purchase.
When the organization needs something fast and easy to obtain. Also, purchases that do not need an ongoing contract.
When is it Better?
When there is a complete management platform that can fix the inefficiency problems of spot buying. Then, the entire process can be handled with one system so you can take advantage of spot buying opportunities.
When there are LTL, LTC, and spot freight platforms that will allow you to take advantage of using the vast amount of available space on containers and trucks.
Having a spot freight platform that lets organizations be more alert to their freight. As data can be integrated into a global freight industry, it makes it ahead of the game as they are analyzing how much spots freight cost in multiple situations.

Frequently Asked Questions

1. What is spot buying?

Spot buying is a purchase that is unplanned which is usually considered an emergency cost or a one-time buy.

2. How does it work?

One of the reasons why it happens is when the transaction is not complicated as it is inexpensive.

3. Is it useful?

Spot buying is useful for one-time buying goods or services and when an emergency arises. 

 

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