Definition: Bulk purchasing is the process of buying a large number of commodities at a considerably reduced price. It uses the economy of scale, meaning the more the business buys, the less each unit costs.
Bulk purchasing is also known as bulk buying or mass buying.
Bulk purchasing is primarily a business-to-business (B2B) transaction and involves procuring the same item in large quantities. The seller prices the item based on the order quantity. If the quantity is more, the price will be lower.
Bulk purchasing helps buyers get the item at a lower price, and sellers get the guaranteed high order.
Example of Bulk Purchasing
Bulk purchasing is used for frequently used items.
Large organizations can purchase consumables and raw materials through bulk purchasing.
Pharmaceutical companies buy raw materials used in medicines in bulk. Retailers purchase groceries in bulk to get them at a lower price.
Advantages of Bulk Purchasing
- It saves costs for buyers.
- It provides guaranteed business to the seller.
- It provides low-cost items to users.
- It saves time on repeat orders.
Summary
Bulk purchasing helps organizations buy a large supply of items at a lower cost. This helps them save costs, and it is a competitive advantage for the business. Bulk purchasing provides consistent business to buyers and is an excellent tool for building long-term relationships.