Resources
Glossary
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A
Accounts Payable (AP)
The department or function responsible for processing invoices and making payments to suppliers.
Approval Workflow
The process by which purchase orders, invoices, or other documents are reviewed and approved by the necessary stakeholders.
Auction
A procurement method where suppliers bid competitively to win business.
B
Backorder
An order for a product that is temporarily out of stock and will be fulfilled when the product becomes available.
Bill of Materials (BOM)
A comprehensive list of raw materials, components, and assemblies needed to manufacture a product.
Blanket Order
A long-term agreement between a buyer and supplier for the supply of goods or services at predetermined prices.
Bid
A proposal submitted by a supplier in response to an invitation to tender or request for proposal.
C
Category Management
A strategic approach to procurement where products or services are grouped into categories to improve efficiency and value.
Contract Management
The process of managing contract creation, execution, and analysis to maximize operational and financial performance.
Cost Avoidance
Measures taken to avoid future costs, such as negotiating lower rates to prevent price increases.
Cost Savings
Actual reduction in spending as a result of procurement actions.
E
eAuction
An online auction where suppliers bid in real-time to win contracts.
Earnest Money Deposit (EMD)
A sum of money deposited by a buyer as a token of their serious intention to enter into a business transaction.
Electronic Data Interchange (EDI)
The electronic exchange of business information in a standardized format.
Enterprise Resource Planning (ERP)
Integrated management of main business processes, often in real-time and mediated by software and technology.
Evaluation Criteria
The standards and benchmarks used to assess and compare supplier proposals.
F
Free On Board (FOB)
A shipping term that indicates whether the seller or the buyer has responsibility for goods that are damaged or destroyed during shipping.
G
Goods Receipt
The process of receiving goods in the warehouse or other receiving area and updating inventory records.
I
Incoterms
International Commercial Terms that define the responsibilities of buyers and sellers for the delivery of goods.
Invitation to Tender (ITT)
A formal invitation to suppliers to submit a bid to supply products or services.
J
Just-in-Time (JIT)
An inventory strategy companies use to increase efficiency and decrease waste by receiving goods only as they are needed in the production process.
K
Key Performance Indicator (KPI)
A measurable value that demonstrates how effectively a company is achieving key business objectives.
L
Lead Time
The time it takes from placing an order until it is received and ready for use or sale.
Letter of Credit (LC)
A document from a bank guaranteeing that a seller will receive payment as long as certain delivery conditions have been met.
Logistics
The detailed coordination of a complex operation involving many people, facilities, or supplies.
M
Make-or-Buy Decision
The act of choosing between manufacturing a product in-house or purchasing it from an external supplier.
Material Requirements Planning (MRP)
A production planning, scheduling, and inventory control system used to manage manufacturing processes.
N
Negotiation
The process of discussing terms and conditions of a purchase agreement with the goal of reaching a mutually beneficial outcome.
Non-Disclosure Agreement (NDA)
A legal contract establishing a confidential relationship between parties.
O
Open Purchase Order
An order that remains open for a period of time, allowing for multiple deliveries or releases of goods or services.
P
Procure-to-Pay (P2P)
The process of requisitioning, purchasing, receiving, paying for, and accounting for goods and services.
Purchase Order (PO)
A document sent from a buyer to a supplier to request products or services.
R
Request for Information (RFI)
A standard business process to collect written information about the capabilities of various suppliers.
Request for Proposal (RFP)
A document that solicits proposal, often through a bidding process, by an agency or company interested in procurement of a commodity, service, or valuable asset.
Request for Quotation (RFQ)
A process in which a company seeks written price quotes from multiple suppliers for the purchase of a specific product or service.
Requisition
A formal request to acquire goods or services.
S
Supplier Relationship Management (SRM)
A comprehensive approach to managing an enterprise's interactions with the organizations that supply the goods and services it uses.
Supply Chain Management (SCM)
The management of the flow of goods and services and includes all processes that transform raw materials into final products.
T
Technical Evaluation
The assessment of a supplier's technical capabilities and the quality of their proposed solution.
Total Cost of Ownership (TCO)
The purchase price of an asset plus the costs of operation.
V
Value Analysis
A systematic approach to improving the "value" of a product or process by understanding its functions and reducing its cost.
Vendor Managed Inventory (VMI)
A family of business models in which the buyer of a product provides certain information to a supplier of that product and the supplier takes full responsibility for maintaining an agreed inventory of the material, usually at the buyer's consumption location.
W
Warehouse Management System (WMS)
Software and processes that allow organizations to control and administer warehouse operations from the time goods or materials enter a warehouse until they move out.