Glossary

K

KAIZEN

An approach involving continuous improvement. A long-term approach, that seeks to make small changes in processes to improve quality and efficiency.

KANBAN

A production method where instructions are sent from one operation to the next on a card, including specific items and quantities. (Translated from the Japanese, it literally means ‘signboard’ or ‘billboard’). The aim is to reduce waste through over-production.

KEY CUSTOMER SEGMENTS

A method of splitting a company’s clients into groups so that marketing efforts can be more focused. It is often based on demographics such as age or geographic location or on buying behavior.

KEY PERFORMANCE INDICATOR (KPI)

Values that can be measured or monitored to assess levels of achievement.

KYOTO PROTOCOL

International treaty which commits state parties to reduce greenhouse gas emissions.

L

LABOR SURPLUS AREA

A civil jurisdiction designated by the U.S. Department of Labor, usually updated annually in the late fall. Used as one of the criteria for designating economically disadvantaged (ED) vendors.

LAGGARDS

The last group of consumers who buy or use a new product or technology.

LANDED COST

Cost of a product plus the relevant logistics costs, such as transportation, warehousing, handling, etc.

LANDFILL

Landfill is a system of garbage disposal in which the waste is buried between layers of earth which has the effect of building up low-lying land.

LAST IN-FIRST OUT (LIFO)

Items purchased last are sold first. As these items are likely to be higher in value, the remaining inventory has a lower value.

LAW OF DEMAND

The quantity of an item purchased varies inversely with its price, other factors remaining constant.

LAW OF SUPPLY

As the price of an item increases the supply of the item will also increase, other factors remaining constant.

LEAD TIME

The lapse of time between placing an order with a supplier and receipt of the goods.

LEAN

A business methodology that aims to create more value with fewer resources.

LEAN MANUFACTURING

Processes that improve efficiency by reducing wasted time, materials and money.

LEARNING CURVE

A graphical representation of how when greater numbers of an item are produced, unit costs reduce.

LEASE

A contract conveying from one entity to another the use of real or personal property for a designated period of time in return for payment or other consideration.

LEDGER

A book or computer file used to balance accounting figures such as deposits and receipts.

LESS THAN CONTAINER LOAD (LCL)

A single delivery of goods that does not completely fill a container. This may incur additional charges.

LESS THAN TRUCKLOAD (LTL)

A shipment containing fewer items than are required for the shipment to be eligible for full truckload rates.

LESS-THAN-TRUCKLOAD (LTL)

A quantity of freight less than the amount necessary to constitute a truckload.

LESSEE

One to whom a lease is granted.

LESSOR

One who grants a lease.

LETTER OF CREDIT (LC)

A document used between a buyer’s and seller’s bank to facilitate a transfer of funds upon performance of the contract and presentation of specified documents, e.g., signed delivery note.

LGBT BUSINESS ENTERPRISES (LGBTBE)

Is business that is at least 51% owned by a lesbian, gay, bisexual, or transgender person or persons; or, in the case of any publicly owned business, at least 51% of the stock of which is owned by one or more lesbian, gay, bisexual, or transgender persons; and whose management and daily business operations are controlled by one or more of those individuals.

LIABILITIES

The amount a business owes, e.g., loans, debts, accounts payable.

LIABLE

Legally responsible for any actions taken that may have a negative consequence.

LIFE CYCLE COSTING

A procurement evaluation technique which determines the total cost of acquisition, operation, maintaining and disposal of the items acquired; the lowest ownership cost during the time the item is in use.

LIFE-CYCLE ASSESSMENT (LCA)

A technique to assess the environmental impact of each step in a product’s life from raw material extraction through to the use, repair and maintenance of the product (also called a life-cycle analysis or a cradle-to-grave analysis).

LIFE-CYCLE COST

The total cost involved in items of inventory, including purchasing price, inward delivery, receipt and handling, storage, packing and preparation, dispatch costs, insurance and overheads.

LIFE-CYCLE PLAN

A plan addressing the impacts on the various stages of staff, products and environment life cycles.

LIFETIME COST

The total cost of ownership over the life of an asset.

LINE ITEM

An item of supply or service specified in a solicitation for which the vendor must specify a separate price.

LINEAR PRICING

The unit price doesn’t change according to the quantity purchased.

LIQUIDATED DAMAGES

A set sum agreed by the organization and the supplier (the parties) and is included in the contract, which will be paid if one of the parties breaches a term of the contract.

LIQUIDATED DAMAGES

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.

LIQUIDATION

A form of insolvency when an organization is brought to an end.

LIST PRICE

The price of an article published in a catalog, advertisement or printed list from which discounts, if any, may be subtracted.

LOGISTICS

The control of the flow of goods or services between two points.

LONG TAIL SPEND

The part of an organization’s spend profile that isn’t managed directly by the procurement department.

LOSS LEADER

A product or service delivered at a price that makes a loss for the supplier in the hope of future gains; usually used to break into a new market or to increase market share.

LOW-COST COUNTRY (LCC)

Low-cost-country sourcing (LCCS). A procurement strategy to source from low-cost countries (LCC) either because of reduced production price, or improved capacity, quality, or logistics.

LOWEST RESPONSIBLE VENDOR

The vendor with the lowest price whose past performance, reputation and financial capability is deemed acceptable.

Q

QUALIFIED BID

A bid where the potential supplier has ‘exempted themselves’ from one or more of the requirements of the tender (i.e., the bid specifically states that it does not comply with one or more aspects of the specification or contract terms).

QUALIFIED PRODUCTS LIST (QPL)

A list of products that, because of the length of time required for test and evaluation, are tested in advance of procurement to determine which suppliers comply with the specification requirements. Also referred to as an “approved brands list.”

QUALIFIED VENDOR/RESPONSIBLE VENDOR

A vendor determined by a buying organization to meet minimum set standards of business competence, reputation, financial ability and product quality for placement on the vendor list.

QUALITATIVE

Measured in terms of quality.

QUALITATIVE RESEARCH

Research designed to gain insights into reasons why something happens.

QUALITY

The composite of material attributes, including performance features and characteristic, of a product or service to satisfy a given need.

QUALITY ASSURANCE

Processes put in place the ensure that quality requirements will be met.

QUALITY CONTROL

Checking a product against a set of criteria to ensure it meets quality standards.

QUALITY MANAGEMENT SYSTEM (QMS)

A formal system that includes documented processes and procedures that outline the responsibilities for achieving quality within an organization.

QUANTITATIVE

Measured in terms of numbers or quantity.

QUANTITATIVE RESEARCH

Research that uses statistics and mathematics as a means of analyzing data.

QUANTITY

Amount or number.

QUANTITY DISCOUNT

A reduction in the unit price offered for large volume contracts.

QUOTA

A limit on the quantity or value of a particular type of import or export.

R

RADIO FREQUENCY IDENTIFICATION (RFID) TAG

Data chips that are attached to products and contain a signal for tracking and identification.

RATIONALIZATION

The process of reviewing products and consolidating variety to reduce inventory costs.

RE-ENGINEERING

Redesigning existing products and services.

REACTIVE

Responding to needs when they present themselves.

READ RECEIPT

A response from an e-mail recipient that indicates the message was opened.

REBATE

An amount paid back on top of any discounts that have previously been agreed.

RECIPROCAL

Something that is the same on both sides.

RECRUITMENT

The act of finding a person or persons to do a role within an organization.

RECYCLED CONTENT

The portion of a product that is made from materials directed from the waste stream; usually stated as a percentage by weight.

RECYCLED PRODUCT

A product that contains the highest amount of post-consumer material practicable, or when post-consumer material is impracticable for a specific type of product, contains substantial amounts of pre-consumer material.

REDUNDANT STOCK

Excess stock that is not required.

REGRESSION ANALYSIS

Statistical methods used for predicting what will happen in one variable as a result of a change in another – e.g., will quality improve by X amount if the price is increased by Y amount? Quality is not a direct function of price, so it may do so, or it may not. Regression analysis looks at probabilities.

REGULATORY FRAMEWORK

A model that policy makers and others can use to reform and apply regulations in an effective and logical way.

REMANUFACTURED PRODUCT

Any product diverted from the supply of discarded materials by refurbishing and marketing said product without substantial change to its original form.

REMEDIES

Contractual remedies are the provisions in a contract that enable the injured party to take action when the other party does not comply with the contract terms.

REMITTANCE ADVICE

A document confirming that payment has been made.

RENT

A rental contract giving the right to use real estate or property for a specified time in return for rent or other compensation.

REPROCUREMENT

To procure again – put in place a new contract when a previous one expires or is terminated.

REQUEST FOR BID (RFB)

A solicitation in which the terms, conditions, and specifications are described and responses are not subject to negotiation.

REQUEST FOR INFORMATION (RFI)

A document used to gather information about suppliers and their capabilities prior to a formal procurement process.

REQUEST FOR PROPOSAL (RFP)

A solicitation in which it is not advantageous to set forth all the actual, detailed requirements at the time of solicitation and responses are subject to negotiation. Price must be a factor in the award but not the sole factor.

REQUEST FOR QUOTATION (RFQ)

An invitation to suppliers to bid on specific products or services.

REQUEST FOR TENDER (RFT)

Document inviting potential suppliers to quote for business.

REQUIREMENT

Materials, personnel or services needed for a specific period of time.

REQUIREMENTS CONTRACT

A form or contract that is used when the total long-term quantity required cannot be definitely fixed but can be stated as an estimate or within maximum and minimum limits with deliveries on demand.

REQUISITION

An internal document that a functional department (stores, maintenance, production, etc.) sends to the purchasing department containing details of materials to meet its needs, replenish stocks or obtain materials for specific jobs or contracts.

REQUISITION

Paper or electronic document stating a need for procurement to supply a product or service.

RESIDENT VENDOR

A person, firm, or corporation authorized to conduct business in the State of Minnesota on the date a solicitation for a contract is first advertised or announced. It includes a foreign corporation duly authorized to engage in business in Minnesota.

RESIDUAL WASTE

Waste that is not able to be recycled or re-used and which ends up in garbage dumps called landfills.

RESPONDER

One who submits a response to a solicitation document.

RESPONSE

The offer received from a vendor in response to a solicitation. A response includes submissions commonly referred to as “offers,” “bids,” “quotes,” or “proposals.”

RESPONSIBLE BIDDER

A bidder whose reputation, past performance, and business and financial capabilities are such that the bidder would be judged by an appropriate authority as capable of satisfying an organization’s needs for a specific contract.

RESPONSIVE BIDDER

A bidder whose bid does not vary from the specifications and terms set out in the invitation for bids.

RESTRICTIVE SPECIFICATIONS

Specifications that unnecessarily limit competition by eliminating items capable of satisfactorily meeting actual needs. See Performance Specification.

RETURN ON INVESTMENT (ROI)

A measure of profitability that indicates whether a gain or loss has been generated compared with the initial cost.

REUSED PRODUCT

Any product designed to be used many times for the same or other purpose without additional processing other than specific requirements, such as cleaning, painting or minor repairs.

REVENUE

The amount of income that has come into a business.

RFP OR RFB CONFERENCE

A meeting arranged by a procurement office to help potential bidders understand the requirements of an RFB or an RFP.

RISK ASSESSMENT

An assessment that considers the severity of a hazard and its potential outcome in conjunction with other factors including the level of exposure, the number of individuals exposed and the risk of the hazard being realized.

RISK REGISTER

A document that sets out identified risks, the likelihood and impact of them materializing and who is responsible for dealing with them.

ROAD SAFETY IMPACT ASSESSMENT (RSIA)

A formal, independent assessment of the impact of new or altered layouts and entry points on the safety of a road.

ROLL-OVER CONTRACT

Contract that automatically renews on expiry unless notice is given that it is not to do so.

ROLLER-STACKER SHELF MECHANISM

A set of rotating decks or shelves within a secure container that eliminates wasted space between racks and improves security.

S

SAFETY STOCK

Extra stock that is held in case it is needed in unexpected situations, such as demand rising or suppliers being unable to deliver.

SALES AND OPERATIONS PLANNING (S&OP)

A multi-department planning process based on factors including expected levels of demand and supply.

SALES TAX

A tax collected by the retailer at the final stage of the supply chain.

SAMPLES

Examples of the product that is required.

SCALABILITY

An organization’s ability to increase its production profitability.

SCANNER

A device that optically scans images.

SCHEDULE OF RATES

An itemized list of component parts within a lump-sum contract, or a list of individual products, giving a price for each unit.

SCHEMATIC

A diagram showing the main form and features of something to help people to understand it.

SCORECARDS

Reports used to track the achievement of, or progress towards, targets or goals that can include quantitative and qualitative data.

SEALED

A method determined by the commissioner to prevent the contents being revealed or known before the deadline for submission of responses.

SEARCH ENGINE

A software system or program that is designed to search for information on the Internet.

SECOND SOURCING

A business practice wherein a supplier shares information about his product with his competitors in order to increase the supply of the product in the market.

SECOND-PARTY AUDIT

An inspection of a supplier by an organization/ company contracted by the organization (otherwise known as an external or supplier audit).

SECONDARY SECTOR

The second stage of the production and manufacturing process, e.g., manufacturing industries.

SELF-ASSESSMENT TOOL

An evaluation method that an organization will use to assess performance.

SENSITIVE RECEPTORS

People or living things that are more readily affected by exposure to contaminants or toxic materials, e.g., people in schools, day-care centers, hospitals and nursing homes.

SERVICE CREDITS

A deduction against fees payable as compensation for poor service, usually a pre-determined percentage derived from a contractual performance management framework.

SERVICE LEVEL AGREEMENT (SLA)

An agreement between a supplier and a buyer based on quality, delivery, availability and other measurable criteria.

SERVICE SECTOR

The third of three sectors recognized by economists. The first sector covers farming and raw materials, the second is manufacturing and the third covers the production and delivery of services.

SERVICE-DISABLED VETERAN (SDV)

A Service-Disabled Veteran Business (SDV) must be at least 51% owned, operated and controlled by a veteran with a service-connected disability of at least 10% and must be certified by the U. Department of Veteran Affairs or the Department of Defense.

SERVICE-DISABLED VETERAN-OWNED SMALL BUSINESS

Service-Disabled Veteran-Owned Small Business Means a small business that is at least 51% owned, operated and managed by one or more service-disabled veterans. In the case of any publicly owned business, at least 51% of the stock must be owned by one or more service-disabled veterans and whose management and daily business operations are controlled by one or more service-disabled veterans or in the case of a veteran with permanent and severe disability, the spouse or permanent caregiver of such veteran. A Service-disabled veteran is defined in 38 U.S.C. 101(2) with a disability that is service-connected. (Service-Disabled Veteran-Owned Small Business).

SERVICE-DISABLED VETERAN’S BUSINESS ENTERPRISES (SDVBE)

A business concern that is (a) at least fifty-one percent (51%) owned by one or more service-disabled veterans or, in the case of any publicly owned business, at least fifty-one percent (51%) of the stock of which is owned by one or more service-disabled veterans or, in the case of a veteran with a permanent and severe disability, the spouse or permanent caregiver of such veteran.

SERVICES

Unless otherwise indicated, both professional or technical services and services performed under a service contract.

SHARES

The means by which a business is apportioned among its owners.

SHIFT

A change in either the quantity supplied, or the quantity demanded while the price remains the same.

SHIPPING ADDRESS

The address to which deliveries are to be sent.

SHOP FLOOR

Within manufacturing, the area where the goods are made.

SIGNED OFF

A process of approving a sample so that orders can be placed or produced.

SILO THINKING

When people within a department do not share their knowledge or ideas with others outside the department.

SINGLE ADMINISTRATIVE DOCUMENT (SAD)

A standardized customs form used to control goods being moved in and out of the EU, Switzerland, Norway, Iceland, Turkey, Macedonia and Serbia.

SINGLE SOURCE

An acquisition where, after a search, only one supplier is determined to be reasonably available for the required product, service or construction item.

SLOTTING (OR PROFILING)

The process of identifying the most efficient placement for each item in a warehouse.

SMALL BUSINESS

A designation for certain statutory purposes referring to a firm, corporation or establishment having a small number of employees, low volume of sales, small amount of assets or limited impact on the market.

SMALL BUSINESS ENTERPRISE (SBE)

A business independently owned, operated and in accordance with the definitions and size standards established by the SBA, available at http://www.sba.gov/size. The most common
size standards are listed in the following section.

SMALL DISADVANTAGED BUSINESS CONCERN (SDB)

Small disadvantaged business concern means a small business concern that is at least 51 percent unconditionally owned by one or more individuals who are both socially and economically disadvantaged, or a publicly owned business that has at least 51% of its stock unconditionally owned by one or more socially and economically disadvantaged individuals and that has its management and daily business controlled by one or more such individuals. This term also means a small business concern that is at least 51%unconditionally owned by an economically disadvantaged Indian tribe or Native Hawaiian Organization, or a publicly owned business that has at least 51 percent of its stock unconditionally owned by one of these
entities, that has its management and daily business controlled by members of an economically disadvantaged Indian tribe or Native Hawaiian Organization, and that meets the requirements of 13 CFR 124.

SMALL- AND MEDIUM-SIZED ENTERPRISE (SME)

A small- or medium-sized enterprise that is independent of other companies and is defined in terms of the number of employees it has.

SMART

SMART objectives are: Specific, Measurable, Achievable, Realistic, and Time bound.

SOCIAL SUSTAINABILITY

The impact a business can have on people and communities and actions to make this a positive impact.

SOFT SKILLS

Skills that may be taught but are more likely to develop with time and practice, for example, team working and good communication.

SOFTWARE

Programmed code that makes computers (hardware) operate.

SOLE TRADER

Someone who has exclusive ownership of a business and can keep any surplus profits but is responsible for any losses.

SOLICITATION

The process used to communicate procurement requirements and to request responses from interested vendors. A solicitation may be, but is not limited to a request for bid and request for proposal.

SOURCE REDUCTION PRODUCT

A product that results in a net reduction in the generation of waste, and includes durable, reusable and remanufactured products; products with no packaging or reduced packaging.

SOURCING

Sourcing is the process of vetting, selecting, and managing suppliers who can provide the inputs an organization needs for day-to-day running. Sourcing is tasked with carrying out research, creating and executing strategy, defining quality and quantity metrics, and choosing suppliers that meet these criteria.

SPECIFICATION

A concise statement of a set of requirements to be satisfied by a product, material or process that indicates whenever appropriate the procedures to determine whether the requirements are satisfied. As far as practicable, it is desirable that the requirements are expressed numerically in terms of appropriate units, together with their limits. A specification may be a standard, a part of a standard, or independent of a standard.

SPEND ANALYTICS

Gathering, cleansing, classifying and assessing spend data, with the aim of making efficiencies and reducing costs.

SPOT BUYING

One-off purchases or immediate requirements, common in domestic buying.

STAGED PRICING

Payment split into installments across the period of the contract.

STAGGERED DELIVERY

This is where a full order is broken down into smaller loads and delivered against a schedule, e.g., 40% delivered in Month 1, 60% delivered in Month 2.

STAKEHOLDER

Anyone with an interest, or stake, in the organization or project.

STANDARD

An item’s characteristic or set of characteristics generally accepted by the manufacturers and users of the item as a required characteristic for all such items.

STANDARD DEVIATION

A statistical measure that captures the difference between the average and the outliers in a set of data.

STANDARDIZATION

The process of defining and applying the conditions necessary to ensure that a given range of requirements can normally be met, with a minimum of variety, in a reproducible and economic manner based on the best current techniques.

STANDING ORDERS

Document setting out the internal rules of an organization.

STATUTORY

An action that is required by and controlled by law.

STEWARDSHIP

Care and responsibility for minimizing a product’s environmental impact throughout all stages of the product life cycle, including end of life management.

STOCK

Goods, products or materials held for future use or supply, often called inventory.

STOCK KEEPING UNIT (SKU)

An identification code for an item of inventory, usually displayed as a bar code linked to a database.

STOCKHOLDER

American term for shareholder.

STOCKOUT

When an inventory item is unavailable.

STOCKTAKE

The process of physically counting products in a warehouse to match them to the computerized inventory.

STRATEGIC

High-level planning, usually related to long-term goals.

STRATEGIC BUSINESS DECISIONS

Long-term decisions often made by senior management which affect the future and direction of an organization.

STRATEGIC CORE

A category of a buyer’s portfolio in which items have major consequences for the company if they are not available when needed.

STRATEGIC PLAN

A document that includes details of the organization’s goals and the actions to be taken to achieve them.

STRATEGIC PROCUREMENT

The practice of focusing on building long-term relationships with suppliers that could lead to a source of competitive advantage.

SUBJECTIVE

In the context of data, something is subjective if it is a matter of opinion, which may differ from one person to another.

SUBSTITUTES

Goods which, as a result of changed conditions, may replace each other in the market.

SUBTRACT OR OUTSOURCE

To employ another organization to fulfill a contract or part of a contract.

SUPPLIER DATABASE

All of the Seller’s supplier and vendor lists, records, telephone and fax numbers, email addresses and publications and marketing material relating to the purchase of goods or the provision of services to the Seller in connection with the Business.

SUPPLIER DISCOVERY

The process of an organization of located and sourcing new Tier I and Tier II suppliers.

SUPPLIER DIVERSITY PROGRAM

A supplier diversity program is a proactive business program which encourages the use of minority-owned, women owned, veteran owned, LGBT-owned, service-disabled veteran owned, historically underutilized business, and Small Business Administration (SBA)-defined small business concerns as suppliers.

SUPPLIER INSPECTION

A way of testing a supplier’s product or service to confirm compliance with the standard set by the organization.

SUPPLIER MASTER

A framework that a company uses to manage a comprehensive set of records about a company’s suppliers.

SUPPLIER MASTER DATA

The Supplier Master Data is a paper or digital document containing every information related to a supplier such as: contact person, location related information, range of products, legal form of the company and different collected certificates.

SUPPLIER RANKING

A priority order of suppliers that can be used for sourcing.

SUPPLIER RELATIONSHIP MANAGEMENT (SRM)

Process for identifying all interactions with key suppliers and then managing them in a way that increases the value from the relationship for both parties.

SUPPLIER RELATIONSHIP MANAGER (SRM)

The role responsible for developing and maintaining supplier relationships.

SUPPLY

How much or how many of a product or service an organization has to sell, or the act of physically getting something from the supplier to the buyer.

SUPPLY CHAIN

A network of individuals, organizations, technology, activities and resources working together to make sure goods or services reach the end user.

SUPPLY ORGANIZATION

A supplier.

SURPLUS PROPERTY

Property in excess of the needs of an organization and not required for its foreseeable use. Surplus may be used or new, but it possesses some usefulness for the purpose it was intended or for some other purpose.

SUSTAINABILITY

Supporting future ecological balance by not harming the environment or depleting natural resources.

SUSTAINABILITY DEVELOPMENT GOALS (SDG)

17 goals introduced by the United Nations General Assembly to achieve a better and more sustainable future for all.

SUSTAINABLY

In a way that avoids the destruction of nature and helps to keep a good ecological balance.

SYNCHRONISATION

The process of precisely coordinating or matching two or more activities, devices or processes in time.

SYSTEM-GENERATED REFERENCE NUMBER

A reference number automatically assigned to a record in a computer system.

SYSTEMIC

An attribute that applies to a whole system rather than one particular part of it.

Unleash procurement possibilities.

Whether you’re looking to maximize diversity spend, optimize supplier diversification, or identify emergency sourcing options, the best available supplier data makes all the difference.

Learn More
man