There are two basic types of industrial products. – expense items
and capital items. Expense items are relatively inexpensive goods and
services that are generally used within a year of purchase. Those that
are more expensive and have a longer useful life are considered capital
items. Another classification of organizational or industrial products is
the most commonly used classification system which outlines the basic
characteristics of each class of organizational product:
· Raw materials: basic ingredients that undergo processing in the
factory;
· Component parts: items used in the assembly of the finished product;
· Installations: major capital purchases, such as a new factory building
or an airport’s computerized baggage system;
· Accessory equipment: equipment that aids in the operation of the
business, such as cash registers, photocopiers, forklift trucks;
· Operating supplies: paper, pencils, brooms, and other short-lived
items that are routinely purchased and used up in the organization’s ope-
rations;
· Services: work provided by others, such as janitorial services, repair
and maintenance services, and the services of lawyers and accountants.
All organizational products have one thing in common: derived de-
mand. Derived demand means the demand for every organizational
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product depends on the demand for some other product. The demand
for tempera paints, water colors, and chalk sold to the art departments
of public schools is derived from the demand of students or their parents
for a basic, well-rounded education. Ultimately the demand for all or-
ganizational products depends on consumer demand for finished goods
and services.
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