Procurement Glossary
Lot formation: Strategic allocation of procurement volumes in Procurement
November 19, 2025
Lot formation refers to the strategic division of procurement volumes into individual award units in order to optimize tendering procedures. This method enables companies to promote competition, minimize risks, and target specific groups of suppliers. Read on to find out what lot formation is, how it works, and what advantages it Procurement for your Procurement .
Key Facts
- Strategic division of procurement volume into separate award units
- Promoting competition by involving small and medium-sized enterprises
- Risk minimization through diversification of the supplier base
- Legal obligation in public tenders under public procurement law
- Optimization of cost-benefit ratio and security of supply
Contents
What is bubble formation?
Lot formation is a central component of strategic procurement processes, enabling the targeted structuring of tenders.
Basics and core aspects
When forming lots, the entire procurement volume is divided into units that can be defined thematically or geographically. This division is based on various criteria:
- Product categories or types of services
- Geographic regions or locations
- Time phases or project stages
- Technical requirements or degrees of complexity
Lot formation vs. overall award
In contrast to awarding the entire contract to a single provider, dividing it into lots allows for a differentiated approach. While awarding the entire contract often appears to be more cost-effective, dividing it into lots offers greater flexibility and risk diversification.
The importance of lot formation in Procurement
Strategic lot formation helps purchasing organizations optimize their tendering strategy and target specific market segments. It is particularly relevant for complex procurement projects with heterogeneous requirements.
Procedure: How lot formation works
Systematic lot formation follows a structured process that ranges from analysis to implementation.
Needs analysis and market assessment
The first step involves a detailed analysis of procurement requirements and market structure. This includes an assessment of supplier capabilities, market capacities, and technical requirements. A well-founded service description forms the basis for the subsequent division of lots.
Criteria development and lot delimitation
The development of differentiation criteria is based on economic and technical factors:
- Minimum volume per lot for economic efficiency
- Technical interfaces and dependencies
- Geographical proximity and logistics aspects
- Supplier capacities and specializations
Implementation and contract management
Practical implementation requires coordinated tender management with uniform evaluation criteria and synchronized schedules. Legal requirements and internal compliance requirements must be taken into account.
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Important KPIs and targets
Measuring the success of lot formation requires specific key figures to evaluate efficiency and target achievement.
Competitive intensity and bidder participation
The number of bidders per lot and the overall participation in the tendering process are key indicators of successful lot formation. A high bidder density signals attractive lot sizes and appropriate requirements. Target values are typically at least three qualified bidders per lot.
Cost efficiency and savings
Cost efficiency is assessed by comparing the prices achieved with market benchmarks and previous procurements:
- Average cost savings per lot
- Total savings compared to individual contracts
- Transaction costs per award unit
- Price-performance ratio by ticket category
Supplier diversity and risk diversification
Measuring supplier diversity reveals risk distribution and market development. Key figures include the proportion of small and medium-sized enterprises, regional distribution of contracts, and degrees of dependency on individual suppliers. A balanced portfolio significantly reduces supply risks.
Risks, dependencies and countermeasures
The formation of lots involves specific risks that can be minimized by taking appropriate measures.
Coordination risks and interfaces
Complex lot structures can lead to coordination problems between different suppliers. Unclear responsibilities and interface problems jeopardize project deadlines and quality standards. Preventive measures include detailed interface definitions and regular coordination meetings.
losses in profitability
Excessive lot splitting can lead to economies of scale losses and increased transaction costs. Small lots are often uneconomical and deter qualified suppliers. A balance between promoting competition and economic efficiency is crucial for success.
Legal and compliance risks
Incorrect lot formation can lead to legal challenges and delays in the award process. Strict award guidelines must be observed, especially in public tenders. Regular legal advice and documented decision-making processes minimize these risks.
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Practical example
An automobile manufacturer divides the procurement of facility management services into four strategic lots: cleaning services (lot 1), security services (lot 2), catering (lot 3), and technical maintenance (lot 4). This division allows specialized providers to focus on their core competencies, while the client benefits from optimized prices and higher service quality. The geographical division into north, south, and west regions creates additional competitive advantages.
- 30% cost savings through increased competition
- Integration of 12 regional providers instead of 3 generalists
- Reduced default risks through a diversified supplier base
Current developments and effects
The formation of lots is subject to continuous change due to technological innovations and changing market conditions.
Digitalization and AI support
Artificial intelligence is revolutionizing batch formation through automated market analyses and optimization algorithms. AI systems can identify complex dependencies between different batches and suggest optimal allocation scenarios. This leads to more precise decisions and reduced processing times.
Sustainability-oriented lot design
Environmental and social criteria are becoming increasingly important in the formation of lots. Companies are integrating CO2 footprints, regional value creation, and social standards as differentiation criteria. This development requires new evaluation models and expanded award criteria.
Agile loose structures
Flexible lot design enables rapid adaptation to changing market conditions. Modular approaches and optional lot extensions create responsiveness to unpredictable developments. This supports resilient supply chains and reduces procurement risks.
Conclusion
Lot formation is a strategic tool for optimizing procurement processes that promotes competition and minimizes risks. The systematic division of procurement volumes enables companies to target different supplier segments and realize cost advantages. Successful lot formation requires a balance between economic efficiency, competitive intensity, and operational complexity. With increasing digitalization and AI support, lot formation processes are becoming more precise and efficient, Procurement enhancing their strategic importance in modern Procurement .
FAQ
What is the difference between lot formation and lot allocation?
Lot formation refers to the strategic planning process for structuring procurement volumes, while lot allocation represents the practical implementation of this planning in concrete award units. Lot formation is the overarching process, lot allocation the operational result.
When is lot formation legally mandatory?
In public tenders, lot formation must always be reviewed and justified if it is not carried out. Private companies are free to decide, but should consider economic and strategic advantages. In both cases, it is advisable to document the reasons for the decision.
How do you determine the optimal number of lots?
The optimal number of lots depends on market structure, procurement volume, and complexity. Too many lots increase coordination efforts and transaction costs, while too few reduce competition. A market analysis of available supplier capacities and their specializations provides important guidance for the decision.
What role does sustainability play in lot formation?
Sustainability criteria are becoming increasingly important and can serve as a distinguishing feature for lots. Regional suppliers, low-carbon logistics, or social standards can influence lot structures. This requires expanded evaluation models and can lead to changes in award decisions.
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