File Name: procurement terminology and definitions .zip
- 51 Terms Every Procurement Professional Should Know
- Glossary of Procurement Terms
- Dictionary of Procurement Terms
51 Terms Every Procurement Professional Should Know
The topic of procurement is receiving significant attention because companies are constantly attempting to improve the overall effectiveness and efficiency of their supply networks. Every procurement professional should know the meaning of key terminology used throughout procurement documents in order to have better understanding of supply process. Here are some of the basic terms and a brief definition of each:. Addendum is an addition or supplement to a document.
It can be item or information added to a procurement document. Alternate response is substitute response, an intentional substantive variation to a basic provision or clause of a solicitation by a vendor. Amendment or change order is written modification to a contract or purchase order or other agreements. A bill of lading is a written receipt or contract that carrier must give, showing a list of goods delivered to it for transportation. The order bill of lading is negotiable and it enables a shipper to collect for a shipment before it reaches its destination.
The original bill of lading should be sent along with a draft drawn on the consignee through a bank. When the consignee receives the lading indicating that payment has been made, the lading will be surrendered to the carrier's agent, the carrier will then ship the goods to the consignee, and the bill of lading will be surrendered to the carrier. The blanket order is a contract under which a vendor agrees to provide goods or services on a purchase-on-demand basis. The prices, terms, conditions and the period covered are often established by contract no quantities are specified.
Cash flow is the amount of money moving into and out of a business. It can be positive and negative. Positive cash flow indicates that a company's liquid assets are increasing. In that case, company can settle debts, reinvest in its business, return money to shareholders, pay expenses, and provide a buffer against future financial challenges.
Negative cash flow indicates that a company's liquid assets are decreasing. Cost avoidance represents reductions that cause future spending to fall, but not below the level of current spending. It often involves slowing the rate of cost increases. In other words, future spending would have increased even more in the absence of cost avoidance measures. Cost savings happen when there is a reduction that causes future spending to fall below the level of current spending.
These cost savings may then be removed from budgets, reinvested, or redirected to other spending priorities. Debarment means the disqualification of a person to receive invitations for bids or requests for proposals. It also includes the award of a contract by a government body, for a specified time proportional with the seriousness of the offense, the failure, or the inadequacy of performance.
Direct spend represents the purchases of goods and services that are directly incorporated into a product being manufactured, such as raw materials, subcontracted manufacturing services, components, hardware, etc. It enables buyers to locate potential suppliers, review product choices, select products and make purchasing transactions directly over the Internet. Typical e-Procurement applications include web-based ERP solutions that automate transactional procurement processes.
Besides the automation of workflows such as requisitioning, the significance of e-Procurement is also creating purchase orders, and receiving and paying for goods.
Escalation clause represents a contract provision that permits the adjustment of contract prices by an amount or percent but only if certain specified contingencies occur, such as changes in the vendor's raw material or labor costs. The fiscal year is the 12 months period between two annual settlements of financial accounts it's from October 1 to September 30 when we are talking about the U. Fixed assets represent state property that is in one of four categories:.
Indirect spend represents the purchases of goods and services that are not directly incorporated into a product being manufactured, such as computers, safety goggles, printed forms, office supplies, janitorial services, equipment, furniture, etc. Life cycle costing represents a procurement evaluation technique that designates the total cost of acquisition, operation, maintenance, and disposal of the items acquired.
The line item is an item of supply or service specified in a solicitation for which the vendor must specify a separate price. A specific sum of money, agreed to as part of a contract to be paid by one party to the other in the event of a breach of contract in lieu of actual damages, unless otherwise provided by law. MPC is a publication approved by the American Bar Association that sets forth procurement statutory principles and policy guidelines for:. It represents the classification of business established by type of activity for the purpose of facilitating the collection, tabulation, presentation, and analysis of data collected by various agencies of the United States government, state agencies, trade associations, and private research organizations for promoting uniformity and comparability in the presentation of statistical data relating to those establishments and their fields of endeavor.
This is a nonprofit educational and technical organization of purchasing and materials management personnel and buying agencies from the public and private sectors.
This represents an organization of state procurement representatives for the purpose of promoting efficient and effective public purchasing policies and procedures at the state level. Per Diem means by the day - a daily allowance for expenses, a specific amount of money an organization gives an individual, often an employee, per day to cover living expenses when traveling for work.
In other words, the per diem allowance is a daily payment based on government calculated rates instead of reimbursement for actual expenses. This is a product which renewable resources derivatives, including fiber crops, such as chemical extracts from oilseeds, nuts, fruits and vegetables corn and soybeans etc.
The bio-based products stand in contrast to those made from fossil fuels petroleum and other less renewable resources virgin timber.
The point of origin or shipping point is the location where a shipment received by a transportation line from the shipper. The post -consumer material is a finished material that would normally be disposed of as a solid waste after its life cycle as a consumer item is completed. It doesn't include manufacturing or converting wastes. This refers to material collected for recycling from office buildings, homes, retail stores, etc.
The pre-consumer material represents the material or by-products generated after the manufacture of a product but before the product reaches the consumer, such as damaged or obsolete products. Prequalification of vendors represents the process of screening of potential vendors in which considers factors such as financial capability, reputation, and management when developing a list of qualified vendors.
Proprietary is the only items which can perform a function and satisfy a need. It shouldn't be confused with "single source" because an item can be proprietary and yet available from more than one source. Qualified vendor or responsible vendor is a vendor that buying organization is determined to meet minimum set standards of product quality, financial ability, business competence, and reputation for placement on the vendor list.
QPL is a list of products which are tested in advance of procurement to determine which suppliers comply with the specification requirements, because of the length of time required for test and evaluation. Some procurement professionals also refer it as an "approved brands list. Requisition represents an internal document that a functional department stores, maintenance, etc. This document contains the details of materials to meet its needs, replenish stocks or obtain materials for specific jobs or contracts.
This specification unnecessarily limits competition by eliminating items capable of satisfactorily meeting actual needs. Reused product is any product made for many times usage for the same or other purpose without additional processing other than specific requirements, such as regular maintenance cleaning, painting or minor repairs.
This represents a meeting arranged to help potential bidders understand the requirements of an RFB or an RFP by a procurement office. Solicitation is the process that procurement professionals use to communicate their requirements and to request responses from interested vendors. This represents a product that results in a net reduction in the generation of waste and includes durable, reusable, and remanufactured products. Source reduction product is also a product with no packaging or reduced packaging.
Surplus property is the property in excess of the needs of an organization and not required for its foreseeable use. Surplus can be used or new, but it has some usefulness for the purpose it was intended or for some other purposes.
Essentially, you are behaving as if you were responsible for manufacturing the item yourself. So, you need to use well researched model and that is the only way to have the credibility you need to negotiate successfully.
Bottom line, you need to have more knowledge about the supplier's business than the supplier himself does. Spend analysis represents the process of collecting, cleansing, classifying and analyzing expenditure data with the purpose of decreasing procurement costs, improving efficiency, and monitoring compliance.
It's very important process for procurement professionals because spend analysis means analyzing the historical purchasing data of a company to provide answers to questions concerning spend visibility, compliance and control. In other words, the spend analysis aims to inform strategies that realise savings on total spend and better purchasing and supply management outcomes.
Strategic sourcing represents an institutional procurement process that continuously improves and re-evaluates the purchasing activities of a company. Objectives of strategic sourcing are the reduction of cost while maintaining or improving quality. A tort is a wrongful act, o. UCC is a comprehensive modernization of various statutes relating to commercial transactions, including sales, lease, negotiable instruments, bank deposits and collections, funds transfers, letters of credit, bulk sales, documents of title, investment securities, and secured transactions.
It has a four-level hierarchy coded as an eight-digit number, with an optional fifth level adding two more digits. The four primary levels of the code are: Segment, Family, Class and Commodity. Each level is coded in two decimal digits, with '00' treated specially to give segments, families and classes their own eight-digit codes. Hope that list of these basic terms and a brief definition of each will help you to have the better understanding of supply process.
If you want to be the procurement professional, you should know the meaning of key terminology used in the procurement industry. For more topics about procurement, visit Hireo Procurement section.
DIRECT SPEND Direct spend represents the purchases of goods and services that are directly incorporated into a product being manufactured, such as raw materials, subcontracted manufacturing services, components, hardware, etc. INDIRECT SPEND Indirect spend represents the purchases of goods and services that are not directly incorporated into a product being manufactured, such as computers, safety goggles, printed forms, office supplies, janitorial services, equipment, furniture, etc.
NAPM National Association of Purchasing Management This is a nonprofit educational and technical organization of purchasing and materials management personnel and buying agencies from the public and private sectors. NASPO National Association of State Purchasing Officials This represents an organization of state procurement representatives for the purpose of promoting efficient and effective public purchasing policies and procedures at the state level.
PER DIEM Per Diem means by the day - a daily allowance for expenses, a specific amount of money an organization gives an individual, often an employee, per day to cover living expenses when traveling for work.
TORT A tort is a wrongful act, o ther than a breach of contract, such that the law permits compensation of damages.
Glossary of Procurement Terms
Abbreviations Shortened forms of a set of words, consisting of initial letters pronounced separately, for example, invitation to tender ITT. ABC classification A system of prioritising different types of inventory based on their value or importance to the business. Acceptance criteria Indicators or measures used to assess whether a product or service meets the standard required. Acceptance sampling A measure, using the number of defects detected, that determines whether a batch of manufactured products meets the standard required. Accreditation A process of external verification to provide evidence that a standard of quality has been achieved, for example, competency, authority or credibility. Accruals An adjustment made to the accounts of a company that has the effect of putting aside money for future use.
Do you have content to recommend? Let us know. Accessible IT : People using UW services and websites have a wide range of abilities and use many different technologies. Information about Procurement of IT is available here. No partial fulfillment opportunities are available as a result of the Solicitation. Alternate : 1 A substitute offer of goods and services which is not at least a functional equal in features, performance and use and which materially deviates from one or more of the specifications in a competitive solicitation.
Terms used in procurement can be quite complex and there are many concepts to familiarize oneself with. For this reason, we decided to make a list of key terms and abbreviations in procurement. The glossary provides an overview of the most common terms used in procurement, logistics, supply chain management, and finance and works as a useful reference for procurement leaders explaining activities to other stakeholders or professionals who are looking to grow into a role in procurement. We're planning on making this the ultimate procurement glossary and are continuously expanding the list of terms. There are different methods for allocating the indirect costs or overhead to the products, but the core idea is that both variable and fixed costs are allocated to the end products in full on a per produced unit basis. A company's liabilities accounts payable are what it owes to suppliers and service providers etc. Subareas of accounts payable are, for example, also document processing, invoice verification and posting procedures.
Dictionary of Procurement Terms
Procurement is the act of obtaining goods or services, typically for business purposes. Procurement is most commonly associated with businesses because companies need to solicit services or purchase goods, usually on a relatively large scale. Procurement generally refers to the final act of purchasing but it can also include the procurement process overall which can be critically important for companies leading up to their final purchasing decision. Companies can be on both sides of the procurement process as buyers or sellers though here we mainly focus on the side of the soliciting company. Procurement budgets typically provide managers with a specific value they can spend to procure the goods or services they need.
A method that is agreed to in advance by the parties to a contract to resolve a dispute by submission to one or more neutral third party arbitrators for a binding judgement; arbitration is normally used to avoid litigation, i. The action taken by the buyer based on the evaluation of offers, to approve the selection of the supplier for a specific contract. A tool that can be used during the final evaluation phase of a procurement using an RFP when at least two qualified suppliers remain within a competitive range.
The topic of procurement is receiving significant attention because companies are constantly attempting to improve the overall effectiveness and efficiency of their supply networks.
Acknowledgement A communication indicating that something has been received or understood. In purchasing it usually refers to a form that is received from a supplier that accepts or sometimes modifies the purchase order. Amortization a method used to lower the cost value of a product incrementally through scheduled charges to income or amortization is also the paying off of debt with a fixed repayment schedule in regular installments over time.
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