36
procurement Definitions
you need to know as a procurement pro
SOURCING
THE PROCESS OF IDENTIFYING
POTENTIAL SUPPLIERS OR VENDORS
FROM WHICH GOODS OR SERVICES CAN
BE PURCHASED.
STRATEGIC
SOURCING
STRATEGIC SOURCING IS ABOUT SMART
PROCUREMENT. YOU NEED A PLAN TO GET
THE BEST VALUE FOR YOUR MONEY THAT
ALIGNS WITH YOUR ORGANISATION'S
LONG-TERM GOALS.
IT'S AN ONGOING PROCESS THAT
REQUIRES CONSTANT MARKET
MONITORING AND EVALUATION TO STAY
COMPETITIVE.
PURCHASING
THE PROCESS OF ACQUIRING GOODS OR
SERVICES FROM A SUPPLIER OR VENDOR.
TENDER
A FORMAL, STRUCTURED PROCESS FOR
INVITING SUPPLIERS OR VENDORS TO
SUBMIT A PROPOSAL OR BID TO PROVIDE
A SPECIFIC PRODUCT OR SERVICE.
USED IN PUBLIC SECTOR PROCUREMENT.
REQUEST FOR
INFORMATION
USED TO GATHER INFORMATION ABOUT
POTENTIAL SUPPLIERS OR VENDORS
REQUEST FOR
QUOTATION
USED TO SOLICIT A FORMAL QUOTE FROM
A SUPPLIER OR VENDOR.
REQUEST FOR
PROPOSAL
USED TO SOLICIT A FORMAL PROPOSAL
FROM A SUPPLIER OR VENDOR. USUALLY
AN OUTCOME BASED SPECIFICATION.
SINGLE SOURCE
A SOURCING APPROACH IN WHICH AN
ORGANISATION PURCHASES ALL OF ITS
GOODS OR SERVICES FROM A SINGLE
SUPPLIER OR VENDOR.
SOLE SOURCE
A SOURCING APPROACH IN WHICH AN
ORGANISATION PURCHASES GOODS OR
SERVICES FROM A SINGLE SUPPLIER OR
VENDOR BECAUSE THEY ARE THE ONLY
ONE THAT CAN PROVIDE THE REQUIRED
PRODUCT OR SERVICE.
SUPPLIER
ONBOARDING
PROCESS OF BRINGING A NEW SUPPLIER
OR VENDOR INTO AN ORGANISATION,
INCLUDING TASKS SUCH AS DUE
DILIGENCE, CONTRACT NEGOTIATION,
AND SETTING UP COMMUNICATION
CHANNELS.
CONTRACT
MANAGEMENT
THE PROCESS OF MANAGING CONTRACTS
WITH SUPPLIERS OR VENDORS. INCLUDES
PRE-SIGNATURE AND POST-SIGNATURE
CONTRACT MANAGEMENT ACTIVITIES.
SUPPLIER
RELATIONSHIP
MANAGEMENT
THE PROCESS OF BUILDING AND
MAINTAINING POSITIVE RELATIONSHIPS
WITH SUPPLIERS OR VENDORS.
A FOCUS ON PARTNERING WITH THE MOST
STRATEGIC SUPPLIERS YOU ARE
ENGAGED WITH.
THIRD PARTY RISK
MANAGEMENT
THE PROCESS OF IDENTIFYING,
ASSESSING, AND MITIGATING RISKS
ASSOCIATED WITH WORKING WITH
THIRD-PARTY SUPPLIERS OR VENDORS.
WIN-WIN
NEGOTIATION
A NEGOTIATION APPROACH IN WHICH
BOTH PARTIES WORK TOGETHER TO FIND
A SOLUTION THAT BENEFITS THEM BOTH.
SUSTAINABILITY
THE PRACTICE OF MEETING THE NEEDS
OF THE PRESENT WITHOUT
COMPROMISING THE ABILITY OF FUTURE
GENERATIONS TO MEET THEIR OWN
NEEDS.
ENVIRONMENTAL,
SOCIAL, AND
GOVERNANCE (ESG)
FACTORS USED TO EVALUATE A
COMPANY'S SUSTAINABILITY AND
ETHICAL PRACTICES.
INCLUDES ELEMENTS SUCH AS SCOPE 3,
EQUALITY OF PAY, AND MODERN
SLAVERY.
PROCUREMENT
DINOSAUR
A PERSON OR ORGANISATION THAT IS
RESISTANT TO CHANGE AND INNOVATION
IN THE PROCUREMENT INDUSTRY.
CONTENT IN THE OLD WAYS...
DESTINED TO BE FOSSILISED.
SUBCONTRACT
MANAGEMENT
THE PROCESS OF MANAGING CONTRACTS
WITH SUBCONTRACTORS, INCLUDING
TASKS SUCH AS NEGOTIATION, DRAFTING,
FLOW DOWN TERMS, REVIEW, AND
EXECUTION.
SUPPLY CHAIN
TRANSPARENCY
THE PRACTICE OF MAKING INFORMATION
ABOUT A COMPANY'S SUPPLY CHAIN
AVAILABLE TO STAKEHOLDERS,
INCLUDING CUSTOMERS, EMPLOYEES,
AND INVESTORS.
INCOTERMS
STANDARDISED TERMS USED IN
INTERNATIONAL TRADE TO DEFINE THE
RESPONSIBILITIES OF BUYERS AND
SELLERS.
CATEGORY
MANAGEMENT
THE PROCESS OF GROUPING GOODS OR
SERVICES INTO CATEGORIES BASED ON
SHARED CHARACTERISTICS, AND MANAGING
THOSE CATEGORIES AS INDIVIDUAL UNITS.
CONTRACT REVIEWS
THE PROCESS OF REVIEWING CONTRACTS
WITH SUPPLIERS OR VENDORS TO
ENSURE THAT THEY ARE COMPLETE,
WITHIN YOUR RISK TOLERANCE, LEGAL,
AND ACCURATE.
CONTRACT
EXECUTION
THE PROCESS OF SIGNING AND FINALISING
A CONTRACT WITH A SUPPLIER OR VENDOR.
CONTRACT REDLINES
HE PROCESS OF MARKING UP A CONTRACT
WITH SUGGESTED CHANGES OR
REVISIONS.
TRADITIONALLY DONE USING A RED PEN
PRIOR TO THE USE OF WORD AND GOOGLE
DOCS.
SUPPLIER
PERFORMANCE
MANAGEMENT
THE PROCESS OF MEASURING AND EVALUATING
THE PERFORMANCE OF SUPPLIERS OR VENDORS
AGAINST ESTABLISHED CRITERIA.
Negotiation
Strategy
This is a pre-planned approach or set of
tactics used to achieve desired outcomes
in a negotiation. It involves considering
factors like the objectives, the
relationship with the other party, and
the surrounding circumstances to guide
how you negotiate.
Financial Due
Diligence
Thoroughly checking and analysing a
company's financial records before a
business transaction, to ensure
everything is in order and assess
financial health. usually via a credit
check.
Environmental Due
Diligence
This evaluates environmental risks and
liabilities, such as pollution or waste
management issues, associated with a
supplier and their subcontractors.
Human Rights Due
Diligence:
This means investigating to ensure that a
business’s practices and supply chains do
not violate human rights, such as
ensuring fair labour practices and
preventing child or forced labour.
Too many women and children are
exploited in our supply chains.
Spend Analysis
This is collecting, cleansing, classifying,
and analysing expenditure data to
decrease procurement costs, improve
efficiency, and monitor compliance.
It helps in understanding where the
money is going and identifying potential
savings.
BAFO (Best and Final
Offer)
This term is used in procurement,
especially during the bidding process. It
refers to the last and most favourable
offer submitted by a supplier after all
negotiations and bid iterations have been
considered.
It's essentially the supplier's last chance
to put their best terms on the table.
Total Cost of
Ownership (TCO)
The comprehensive assessment of the
total cost of a product or service over its
entire lifecycle, including acquisition,
operation, maintenance, and disposal
costs.
Too often neglected in the pursuit of
short-term savings.
Purchase Requisition
n internal document in which a
department or user formally requests the
procurement team to purchase goods or
services. It outlines the requirements and
specifications of the needed items.
It is usually digitised and part of a
digital process.
Purchase Order
A formal, external document sent from a
buyer to a supplier, officially ordering
goods or services. It includes quantities,
descriptions, prices, and delivery
instructions.
It’s often used alongside a formal
contract.
Invoice
A document issued by a supplier to a
buyer, detailing products or services
provided, their quantities, and the price
owed.
It's a request for payment.
The invoice must match the contractual
agreement/po.
3-Way Matching
A process used in accounts payable that
ensures a purchase order, the received
goods/services, and the supplier's invoice
all match before payment is made. It's a
control measure to prevent overpayment
or fraud.
Requires effective vendor/supplier &
contract management.
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