System Contracting involves the development of a corporate agreement with a supplier to purchase a large quantity of items or raw materials on a continuous basis. The goal is to reduce cost and streamline these procurements. These contracts can range from one to five years in length. The items to be purchases are usually detailed in a catalog that becomes part of the contract. 
This type of contracting system usually requires close coordination between buyer and supplier. If done properly, each side can reduce administrative cost substantially. This is sometimes called “Stockless Purchasing”.
AcqLinks and References:
-  Burt, Petcavage, and Pinkerton, “Supply Management” McGraw-Hill 2010