Procurement Glossary
Key terms and definitions for procurement professionals.
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Bill of Materials (BOM)
A comprehensive list of all raw materials, components, sub-assemblies, and quantities required to manufacture a finished product, serving as the found...
Blanket Order
A long-term purchase agreement with a supplier for repeated delivery of goods or services at pre-negotiated prices over a set period, without requirin...
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Incoterms
A set of internationally recognized trade terms published by the International Chamber of Commerce (ICC) that define the responsibilities of buyers an...
Indirect Spend
Expenditure on goods and services that support business operations but are not directly incorporated into the products or services sold to customers, ...
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Lead Time
The total elapsed time between placing a purchase order with a supplier and receiving the goods or services, including manufacturing, processing, ship...
Lifecycle Costing
A procurement evaluation approach that considers the total cost of ownership over an asset's entire lifespan — including acquisition, operation, maint...
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Procure-to-Pay (P2P)
The end-to-end process from requisition through purchase order, goods receipt, invoice matching, and payment. P2P automation reduces cycle times, impr...
Purchase Order (PO)
A legally binding document issued by a buyer to a supplier, specifying the goods or services to be purchased, quantities, agreed prices, and delivery ...
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Request for Proposal (RFP)
A formal document sent to potential suppliers inviting them to submit a detailed proposal for goods or services. RFPs typically include requirements, ...
Request for Quotation (RFQ)
A document requesting suppliers to provide pricing for specific goods or services. More focused than an RFP — typically used when requirements are wel...
Reverse Auction
A competitive bidding process where suppliers bid against each other to win a contract, with prices typically decreasing over successive rounds until ...
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Service Level Agreement (SLA)
A contractual commitment defining the expected level of service a supplier will deliver, including specific metrics, measurement methods, and remedies...
Source-to-Pay (S2P)
A broader process than P2P that includes strategic sourcing activities — supplier discovery, RFP management, contract negotiation, and supplier manage...
Spend Analysis
The process of collecting, cleansing, classifying, and analysing procurement spend data to identify savings opportunities, improve compliance, and sup...
Supplier Relationship Management (SRM)
A systematic approach to evaluating, managing, and developing relationships with key suppliers to maximise value and minimise risk. Goes beyond transa...
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Tail Spend
The large volume of low-value transactions that typically make up 80% of purchase orders but only 20% of total spend. Tail spend is often unmanaged, f...
Three-Way Match
An accounts payable control that compares the purchase order, goods receipt, and supplier invoice to ensure all three documents agree before authorisi...
Total Cost of Ownership (TCO)
A financial estimate that includes all direct and indirect costs associated with purchasing and using a product or service over its entire lifecycle —...
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Value Analysis
A systematic method for improving the value of goods or services by examining their function and identifying ways to achieve the same function at lowe...
Vendor Managed Inventory (VMI)
A supply chain arrangement where the supplier takes responsibility for maintaining agreed inventory levels at the buyer's location, using shared deman...