What is a key benefit of bulk purchasing in materials management?

What is a key benefit of bulk purchasing in materials management?

• A. Higher unit costs
• B. Longer lead times
• C. Economies of scale and better pricing
• D. More frequent supplier audits

Answer: (C)

Bulk purchasing leverages economies of scale to reduce costs per unit. By buying in larger quantities, the fixed costs of ordering, receiving, and handling are spread over more units, and suppliers often provide volume discounts, resulting in a lower unit price. This can also cut the number of orders you place, simplifying procurement and potentially improving terms. However, holding more stock increases carrying costs and the risk of obsolescence, so the savings depend on steady demand and good inventory management. The other options describe outcomes that aren’t benefits of buying in bulk: higher unit costs with small purchases, lead times not inherently improved by bulk, and audits aren’t a direct result of bulk buying.

Bulk purchasing leverages economies of scale to reduce costs per unit. By buying in larger quantities, the fixed costs of ordering, receiving, and handling are spread over more units, and suppliers often provide volume discounts, resulting in a lower unit price. This can also cut the number of orders you place, simplifying procurement and potentially improving terms. However, holding more stock increases carrying costs and the risk of obsolescence, so the savings depend on steady demand and good inventory management. The other options describe outcomes that aren’t benefits of buying in bulk: higher unit costs with small purchases, lead times not inherently improved by bulk, and audits aren’t a direct result of bulk buying.