Explain with example from any manufacturing set up differences between Operational
Materials and Capital Material. Describe how challenging & different is to procure
Capital Material
There are many costs associated with running and running an enterprise. They can be classified into various categories. The two most popular kinds of expenses are operating costs and capital expenditures. Operating material is operating expense is a cost that is essential to run the day-to-day operations of a company. It is the reason that a company incurs operating expenses on a regular basis. Operating materials include things such as insurance as well as payroll and marketing. Capital material on the other hand is capital expenses are any costs that provide future benefits to a business. For example, if an oil company buys a new drilling rig, the transaction would be a capital expenditure.
The following are are the challenges to procure capital material; firstly, there is risk mitigation. Supply risk is always a major challenge in the procurement process. Market risks, potential frauds, cost, quality, and delivery risks constitute the most common type of risks. Secondly, we have dark purchasing as another challenge. Purchases that are made outside the defined procurement process fall under dark purchasing. Such uncontrolled spending can ultimately be expensive for businesses. Finally, there is supplier-related issues. One of the greatest challenges in procurement is supplier management. From identifying the right supplier to keeping track of vendor performance and ensuring a stable supply of quality products, the whole process is filled with complications.
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