Procurement – LINCS Supply Chain Management

Acceptance:
The second important phase of creating a contract after the offer phase. The receiver of the offer must accept the offer in order to move forward with creating a contract in the consideration phase.
Accessory Equipment:
Products used to facilitate production and includes products such as personal computers, hand tools, desktop printers, or tool boxes.
Administrative Lead Time:
The period or interval (usually measured in days) from the receipt of a requirement in procurement through purchase order award.
After-Market:
A market for parts and accessories used in the repair or enhancement of a product. A secondary market created after the original market sales are finished.
Agency Law:
Agency law is concerned with any principal-agent relationship. This involves a relationship in which one person has legal authority to act for another.
Amendments to Contracts:
Includes any agreed-upon changes to contracts.
Amendments to Solicitation Documents:
Any changes and/or additions to the RFI, RFB, RFQ, or RFP, as well as any other clarifications and correspondence with suppliers.
Asset Base:
The total value of a company’s or organization’s assets.
Benchmarking*:
The process of comparing performance against the practices of other leading companies for the purpose of improving performance. Companies also benchmark internally by tracking and comparing current performance with past performance.
Best Practice*:
A specific process or group of processes that have been recognized as the best method for conducting an action. Best practices may vary by industry or geography, depending on the environment being used. Best practice methodology may be applied with respect to resources, activities, cost object, or processes.
Bidding Automation:
Occurs when bid packages and specifications are made available online, bidders submit their bids and proposals online, and the bid opening and award are communicated electronically. Cycle time reductions and other cost savings can be significant if the automated process is efficient.
Bill of Lading*:
A transportation document that is the contract of carriage containing the terms and conditions between shippers and carriers.
Bill of Quantities (BOQ):
A document used in tendering in which parts, materials, labor, etc., are listed. A BOQ contains the terms and conditions of the work to be carried out and itemizes work to enable a supplier to price the work for which they are bidding.
Blanket Purchase Orders*:
An order customers make with suppliers that contains multiple delivery dates scheduled over a period of time, sometimes at predetermined prices. It is normally used when there is a recurring need for expendable goods.
BOQ:
Bill of Quantities.
Breach of Contract:
Involves the failure, without legal excuse, to perform the obligations of a contract.
Business Unit Strategy:
The guiding principles and planned objectives set by management to be followed by an autonomous division of a company.
Capital*:
The resources, or money, available for investing in assets that produce output.
Case Law:
Leads to lengthier and more detailed contracts than those that are found in countries that use code or civil law.
Categorical Measurement Systems:
Require simple check-offs that describe a supplier’s performance across different categories.
Centralization:
When procurement functions are centralized, this may support procurement execution efficiencies by allowing for the creation of well-defined commodity groups supported by commodity-specific professionals to handle large dollar spend amounts from narrow sets of materials, services, and suppliers.
Classification*:
An alphabetical listing of the commodities, the class or rating into which the commodity is placed, and the minimum weight necessary for the rate discount; used in the class rate structure.
Co-Destiny*:
A concept that begins with the idea of long-term, buyer-supplier relationships and assumes that organizations are uniquely and, in most cases, inextricably tied to their suppliers and customers.
Coercive Power:
A type of negotiation power that involves the use of punishment and, if overused, can lead to failed negotiations.
Collaborative Relationship:
Involves working with a limited group of suppliers who are strategically important to the success of the buying firm. A willingness to work jointly to identify better ways to operate or to compete is characteristic of a collaborative relationship. Collaborative relationships should, by definition, be win-win.
Co-Locate:
Occurs when two or more groups in a firm share the same office space.
Commercial Law:
The branch of study that handles how businesses enter into contracts with each other, execute contracts, and remedy problems that arise between them.
Commodity*:
Any physical item that is traded in commerce. The term usually implies an undifferentiated product competing primarily on price and availability.
Commodity Councils:
Cross-organizational entities established to leverage a firm’s purchasing power. Councils manage a well-defined set of goods or services and include the sharing of information, such as supplier information, contract terms, and even specific contracts across the firm’s global operations.
Commodity Families:
Used to facilitate the development of tailored procurement strategies by grouping materials or services by one or more common characteristics.
Commodity Profile Information:
Identifies the type and nature of a product or service, manufacturing or service delivery process, and quality requirements or standards.
Commodity Procurement Strategy*:
The practice of grouping like purchased items into common groups which are then managed by a single buyer / agent. This practice assumes that an individual who is more focused on a range of products or services can perform that function better than someone who is novice.
Commodity Strategies:
Commodity strategies (sometimes referred to as commodity sourcing strategies) are purchasing strategy plans that refer to items or groups of items procured by an organization.
Commodity Teams:
Teams of procurement professionals dedicated to the procurement of a specific commodity or groups of commodities. A commodity team is often formed from employees across the business who are familiar with the commodity being procured.
Communication*:
Communication involves the transfer of information among people and places. There are various methods of communication, and more than one may occur at a time. Communication involves sending and receiving information through different methods: written communication, verbal communication, nonverbal communication, and visual communication.
Competitive Advantage*:
Value created by a company for its customers that clearly distinguishes it from the competition and provides its customers a reason to remain loyal.
Competitive Analysis:
An assessment of the strengths and weaknesses of current and potential competitors. This assessment provides a firm with insights regarding their comparative positioning with competitors, suppliers, and potential suppliers in support of developing or reviewing a procurement strategy.
Competitive Bid*:
A price/service offering by a supplier that must compete with offerings from other suppliers.
Competitive Relationships:
Also known as win-lose relationships, they typically feature parties competing over a fixed amount of value. This contrasts with working jointly to create new opportunities that lead to new value for the parties. For many low-value, low-risk items required by a buyer, the relationship with suppliers should be competitive.
Components*:
Material that will contribute to a finished product but is not the finished product itself. Examples would include tires for an automobile, power supply for a personal computer, or a zipper for a ski parka. Components for manufacturers may be considered finished products for their suppliers.
Concessions:
A demonstrated willingness to move away from a given position. Parties involved in a negotiation must be willing to be flexible. Without a willingness to make concessions and/or to find alternative solutions, parties to a negotiation may become deadlocked.
Consideration:
A form of mutual obligation in which all parties are bound by contracts to perform at a certain level and agree to carry out their responsibilities. Considerations can hold value and give contracts legal validity.
Consolidation*:
Combining two or more shipments in order to realize lower transportation rates. Inbound consolidation from vendors is called make-bulk consolidation, and outbound consolidation to customers is called break-bulk consolidation.
Constraint*:
A bottleneck, obstacle, or planned control that limits throughput or the utilization of capacity. Constraints are things that the manager has little or no control over.
Container*:
1) A “box,” typically 10 to 40 feet long, that is primarily used for ocean freight shipments. For travel to and from ports, containers are loaded onto truck chassis or railroad flatcars. 2) The packaging, such as a carton, case, box, bucket, drum, bin, bottle, bundle, or bag, that an item is packed and shipped.
Contingency Plans*:
Preparations to deal with calamities (e.g., floods) and non-calamitous situations (e.g., strikes) before they occur.
Contract*:
A legally binding agreement between two or more parties to provide specific products or services.
Contract Law:
Includes the body of law that refers to how business firms enter into contracts with each other, execute contracts, and remedy problems that arise in the process (Scheuing, 1989).
Contract Management:
The process of ensuring and verifying that the parties to a legally agreed-to contract fulfill the requirements, expectations, terms, and conditions of the agreement.
Contract Relationship Manager:
A manager, typically from within the procurement organization, assigned to monitor the ongoing performance of the execution of a given contract.
Convention on the International Sale of Goods:
Documents maintained by the United Nations that provide a uniform text of law for the international sales of goods. The entire Convention on the International Sale of Goods can be found at http://www.uncitral.org/pdf/english/texts/sales/cisg/V1056997-CISG-e-book.pdf .
Cooperative Relationships:
Relationships in which buyers and suppliers work together, often over a long period of time, to achieve common goals. They often involve both supplier and buyer working together to reduce costs, improve quality, improve delivery, and improve service, all of which affect performance.
Core Competencies*:
A specific factor that a business sees as being central to the way it, or its employees, works. It provides consumer benefits, is not easy for competitors to imitate, and can be leveraged widely to many products and markets.
Cost Analytic Approach:
An approach to determining the costs of a material, product, or service by breaking down a cost summary into its constituents and then studying and reporting on each factor.
Cost Structure:
Suppliers’ total costs, including those associated with capital investment, raw materials, manufacturing, quality, storage, transportation, duties, export control, inventory carrying, taxes, insurance, port of entry, supplier development, energy, overhead, and profit.
Council of Supply Chain Management Professionals (CSCMP)*:
The CSCMP is a not-for-profit, professional business organization consisting of individuals throughout the world who have interests and/or responsibilities in logistics and supply chain management as well as the related functions that make up these professions. Its purpose is to enhance the development of the logistics and supply chain management professions by providing these individuals with educational opportunities and relevant information through a variety of programs, services, and activities.
Counter-Productive Relationship:
Involves the parties working against each other. In this kind of relationship, neither party feels the need to take responsibility for what happens in the relationship.
Critical Success Factors (CSF)*:
Necessary conditions for success that can be measured quantitatively for effectiveness, economy, and efficiency. Describes those few areas where satisfactory performance is essential in order for a business to succeed. Characteristics, conditions, or variables that have a direct influence on a customer’s satisfaction with a specific business process. The set of things that must be done right if a vision is to be achieved.
Critical Quadrant:
Includes goods and services that have a high value and consume a large relative proportion of overall supply spend. Products in this quadrant are essential to a service or product’s function, or the end customer highly values the differentiation offered by the good or service.
Cross-Functional Sourcing Team:
Teams comprised of individuals from multiple business functions who have a vested interest in the successful sourcing of materials or services.
CSF*:
Critical Success Factors.
Customer*:
1) In distribution, the trading partner or reseller. 2) In direct-to-consumer, the end customer or user.
Customer Order Fulfillment*:
The typical business process that includes receiving and processing customer orders through delivery.
DC*:
Distribution Center.
Contract Management:
The process of ensuring and verifying that the parties to a legally agreed-to contract fulfill the requirements, expectations, terms, and conditions of the agreement.
Deadlock:
The inability to come to an agreement during a negotiation.
Defect Rate:
An indicator of supplier quality. An item is defective when it does not perform within a predefined set of specifications. To calculate a defect rate, divide the number of defective units (or service occasions) by the total amount of units (or service occasions) purchased.
Demand*:
What customers or users actually want. It is typically associated with the consumption of products or services as opposed to a prediction or forecast.
Differential*:
A discount offered by a carrier that faces a service time disadvantage over a route.
Direct Spend:
Generally recognized as purchases of goods and services that are directly incorporated into a product being manufactured. Examples include raw materials, components, and subcontracted manufacturing services.
Discrepancy Report:
A document that details any discrepancies on a shipment or shipments noted by the receiving department of the buyer organization. The procurement group or inventory management personnel often become involved in following up on, and resolving, discrepancies with the selling organization.
Distribution Center (DC)*:
The warehouse facility that holds inventory from manufacturing pending distribution to the appropriate stores.
Domestic Supplier:
A supplier that can serve any location within a country. The database must note the country(s) the supplier can competitively serve.
Domestic Supply Base:
Characterizes a firm’s set of suppliers who are located within the same country as the firm.
Early Involvement:
The process of working with suppliers early during the design of a current or new product that a company wishes to purchase. Early supplier design involvement includes working with key suppliers in the concept or design phase of new products and/or service development.
EDI*:
Electronic Data Interchange.
Electronic Catalogues:
Provide a user-friendly way of accessing information about a seller’s products and/or services. The key benefit of using electronic catalogues is their low-cost search capability, and if users order directly from these catalogues (using a procurement card, for instance), cycle times and ordering costs can also be reduced.
Electronic Data Interchange (EDI)*:
Intercompany, computer-to-computer transmission of business information in a standard format.
Electronic Sourcing:
A way of using the Internet to make it easier and less costly to purchase goods and services. An important benefit of e-sourcing is that it can be used to help companies find the ideal suppliers for their materials.
Embedded Services:
Term used to describe an organizational approach where the procurement functions and personnel are a part of, and located with, the broader supply-chain organization.
End Customer:
The final consumer who purchases the product.
e-Procurement and Electronic Purchasing:
A way of using the ERP systems Internet to make it easier, faster, and less expensive for businesses to purchase goods and services. The overall goal is to streamline the purchasing process so businesses can focus more management time on earning revenue and serving customers.
Enterprise Resource Planning (ERP) Systems:
e-Procurement and Electronic Purchasing.
ERP:
Enterprise Resource Planning Systems.
Ethical Standards*:
Principals, which when followed, promote values, such as trust, good behavior, fairness, and/or kindness.
Evaluation Report:
Developed based on a review of the information submitted by suppliers in response to an RFI, RFB, RFQ, or RFP and comprises an assessment of potential suppliers’ capabilities in relation to the work required or products and/or services to be provided.
Executive Sourcing Manager:
An upper level manager with sourcing responsibilities.
Expert Power:
A source of power in negotiations that comes from an expert in a particular field, who may also be acknowledged by others as being an expert in this field.
External Customers:
External customers tend to be consumers of products and services that a company sells.
Financial Managers:
Procurement professionals, in some contexts, who are tasked with conducting transactions that require a substantial amount of a firm’s finances.
Finished Goods*:
Products completely manufactured, packaged, stored, and ready for distribution.
Forecast Material Requirements:
Predictions of how much of a specific material or materials will be required to produce and supply products which will be purchased by customers. Relies on both quantitative and qualitative methods.
Forecasting*:
Predictions of how much of a product will be purchased by customers. Relies on both quantitative and qualitative methods.
Fulfillment*:
The act of fulfilling customer orders. Fulfillment includes order managing, picking, packaging, and shipping.
Gap Analysis*:
The process of determining and documenting the variance, or gap, between goals and current performance.
Global Commodity Councils:
Commodity Councils.
Global Sourcing:
Describes procurement strategies that utilize suppliers from a variety of countries.
Goal:
An observable and measurable end result that has one or more objectives to be achieved within a relatively fixed timeframe.
Growth*:
In this stage the sales of products are expanding. Changes to product design, manufacturing processes, and quality are all evolving to maximize this revenue stream. Also, the supply chain is monitored and evaluated to make sure production capacity can be maintained or even expanded.
Hazardous Material*:
A substance or material that the USDOT has determined to be capable of posing a risk to health, safety, and property when stored or transported in commerce.
ICC*:
Interstate Commerce Commission.
Indemnify:
To make someone whole by compensating for any damage or loss sustained or expense incurred.
Indirect Spend:
Generally recognized as purchases of goods and services that are not directly incorporated into a product being manufactured. Examples include janitorial services, real estate services, travel services, equipment, computers, office products, safety gear, and furniture.
Informational Power:
A source of power in negotiations that uses facts and data.
Institute for Supply Management:
The leading professional association for purchasing and supply managers; it provides some recommended guidelines for understanding and complying with applicable laws, regulations, and trade agreements. Many categories of laws and regulations exist that procurement professionals should be aware of, but this unit focuses on agency law and contract law.
Intellectual Property (IP)*:
Property of an enterprise or individual that is typically maintained in a digital form. This may include software program codes, digital documents, music, videos, etc.
Internal Customer*:
An individual or department that is part of supplying companies as opposed to the companies’ external customers.
International Standards Organization (ISO)*:
An organization within the United Nations to which all national and other standard-setting bodies should defer. The organization develops and monitors international standards, including OSI, EDIFACT, and X.400.
Internet*:
A computer term that refers to an interconnected group of computer networks from all parts of the world (i.e., a network of networks). Accessed via a modem and an online service provider, it contains many information resources and acts as a giant electronic message routing system.
Interstate Commerce Commission (ICC)*:
An independent regulatory agency that implements federal economic regulations controlling railroads, motor carriers, pipelines, domestic water carriers, domestic surface freight forwarders, and brokers.
Introduction:
The summation of many months and/or years of market evaluation, product designs, testing, and packaging. This will also require designing and setting up the supply chain.
Inventory*:
Components, raw materials, works in process, finished goods, and supplies required for the creation of goods and services. It can also refer to the number of units and/or value of the stock of goods held by a company.
Inventory Management*:
The process of ensuring the availability of products through inventory administration.
Inventory System:
An inventory control in which a running total of all inventory is kept by regularly adding all purchases to, and subtracting all sales from, the quantity at hand.
Invoice*:
A detailed statement showing goods sold and amounts for orders. The invoice is prepared by sellers and acts is the document that buyers use to make payments.
IP*:
Intellectual Property.
ISO*:
International Standards Organization.
Just-In-Time*:
An inventory control system that controls material flow into assembly and manufacturing plants by coordinating demand and supply to the point where desired materials arrive just in time for use.
Kaizen*:
Taken from the Japanese words “kai” (change) and “zen” (good), Kaizen literally translates to “changes that make our product better.” The popular meaning has grown to include continual improvement of all areas of a company and not just quality. A business philosophy of continuous cost, quality problems, and delivery time reductions through rapid, team-based improvement activities.
Key Performance Indicators*:
A measure that is of strategic importance to companies or departments.
Kickback:
A payment or gift made to someone who has facilitated an illicit or, otherwise, improperly conducted transaction.
Legitimate Power:
The source of power in negotiations that involves the organizations’ individual positions. For example, a vice president at a supplier would have legitimate power to make decisions or commitments during a negotiation with a buyer.
Leverage Quadrant:
Includes items in which consolidating purchase volumes and reducing the size of the supply base should lead to a range of benefits. This quadrant features the extensive use of long-term contracts.
Local Supplier:
A local supplier serves only a limited number of sites or buying locations (often only one) within a country. The database should include information about the country and the sites within that country that the supplier is capable of serving.
Logistics*:
The process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from point-of-origin to point-of-consumption for the purpose of conforming to customer requirements.
Long-Term Purchasing Agreement:
Involves contracts that are generally set in place for a year or more. These types of agreements are set up to cover the purchase of higher value/cost items over a long period of time. Long-term purchase agreements can reduce transaction costs by eliminating the need for time-consuming renewal for each purchase and/or group of purchases.
Maintenance, Repair, and Operating Materials (MRO)*:
Any activity—such as tests, measurements, replacements, adjustments, and repairs—intended to retain or restore a functional unit in or to a specified state in which the unit can perform its required functions. It is also a category of software designed to support asset maintenance and management.
Manufacturing:
The phase of the product life cycle in which a prototype is built and tested, and then the mass production of the product is completed.
Market Information:
Part of market intelligence that identifies supply and demand price drivers, capacity utilization, and other factors that determine price and availability for the commodities in question, as well as the market size and predicted growth rate.
Market Intelligence*:
The process of gathering and analyzing information about companies’ markets to better understand customers’ wants and needs and to identify possible threats and opportunities.
Market Quadrant:
Includes standard items or services that have an active supply market with items comprised of medium-to-low value. Any negotiation that occurs in this quadrant is lower level and focuses on price and delivery.
Master Purchase of Goods Agreement:
A key part of commercial contracts that contains the essential legal terms governing the sale and purchase of commercial goods. This is usually not to be modified without the approval of the legal department.
Master Service Agreement:
Similar to the Master Purchase of Goods Agreement but applies to services instead of sales and purchases of commercial goods.
Material Packing Slip:
Travels with goods and is used to describe the contents of shipments.
Material Re-Work Costs:
Standard or actual cost of correcting defective materials or work that increases overall operating costs. The material re-work cost is a preventable cost.
Material Release:
Often used to provide visibility to the supplier ahead of forecast material requirements as well as actual requirements. It specifies the required part number, quantity required, unit and quantity price, required receipt date, ship to address, and method of shipment.
Model Code:
Defines the UCC and means that states do not have to follow the code unless UCC provisions are enacted by the individual legislatures as state statutes.
MRO*:
Maintenance, Repair and Operating Materials.
Multi-Regional Supplier:
A supply classification that can competitively serve two or more regions.
Negotiating Tactics:
The plans and actions used to carry out a negotiation plan. An understanding of tactics is important, particularly because the other party has likely thought about its tactics during its negotiation planning.
Negotiation:
A counteroffer to an individual’s or group’s original offer.
Objective:
The goal that the manager is ultimately interested in achieving for the company.
OEM*:
Original Equipment Manufacturers.
Offer*:
A document that describes a business transaction to be performed. An example would be a request to a carrier to pick up goods for shipment.
Offers Received (Technical and Financial):
These comprise the various offers received from potential suppliers to a request for tender and would contain the necessary information on the technical and financial capabilities and strengths of a supplier or suppliers in relation to the work required by the buyer.
Ombudsman:
A person who investigates and attempts to resolve complaints, problems, and concerns.
Operations:
The planning and manufacturing (conversion) of goods.
Organizational Spend:
The total value of products, materials, and services purchased by a firm in a given timeframe (typically a year).
Original Equipment Manufacturers (OEM)*:
The rebranding of equipment and selling it under another name, or as a component of another product. OEM refers to the company that made the products (the “original” manufacturer), but with the growth of outsourcing, eventually became widely used to refer to the organization that buys the products and resells them.
Outsourcing*:
To utilize a third-party provider to perform services previously performed in-house. Examples include manufacturing of products and call center/customer support.
Performance Measures*:
Indicators of the work performed and the results achieved in an activity, process, or organizational unit. Performance measures should be both non-financial and financial. Performance measures enable periodic comparisons and benchmarking.
PO*:
Purchase Order.
Portfolio Analysis:
Recognizes that an effective supply organization must apply a variety, or portfolio, of strategies and approaches for the various products and/or services procured and is based on the value of these products and/or services procured, including the number of qualified suppliers available for these products and/or services.
Portfolio Matrix:
A tool presented in a 2×2 format that recognizes that an effective supply organization must apply a variety, or portfolio, of strategies and approaches different supply requirements.
Postponement*:
The delay of final activities (e.g., assembly, production, and packaging) until the latest possible time. A strategy used to eliminate excess inventory in the form of finished goods which may be packaged in a variety of configurations and to maximize the opportunity to provide a customized end product to the customer.
Power:
The ability of those involved in negotiation to influence the position of others.
Price Creep:
Price creep refers to the practice of suppliers who gradually increase prices over time outside of agreed contract terms.
Principles and Standards of Ethical Supply Management Conduct:
Set of guiding principles from which the professional body—the Institute of Supply Management—has derived standards of supply management conduct.
Process*:
A series of time-based activities that are linked to complete a specific output.
Procurement*:
The activities associated with acquiring products or services. The range of activities can vary widely between organizations to include all of parts of the functions of procurement planning, purchasing, inventory control, traffic, receiving, incoming inspection, and salvage operations.
Procurement Cards:
A card provided for internal users to purchase low-cost items without going through the procurement group.
Procurement Cycle Time:
A process efficiency metric that may be defined a number of ways. For example, the average time it takes between requisition submission and purchase order placement.
Procurement Executive:
The highest level of management within the procurement function of a firm.
Procurement Function:
The function within an organization concerned with the acquisition of goods, services, or works from an external source.
Procurement Lead Time:
The combination of administrative lead time and production lead time.
Procurement Officers:
Individuals or roles in the procurement function who have authority to enter into contracts with suppliers.
Procurement Spend:
Corporate spend the procurement department actively controls or influences.
Production Lead Time:
The period or interval (usually measured in days) from the placement of the purchase order through receipt of the material.
Progress Reports:
Reports about progress in fulfilling contracts or proofs of delivery of goods and services at the required times, in the required quantities, and at the acceptable levels of quality.
Project Procurement:
The systematic process of identifying and procuring goods and services for a project.
Proof of Payment:
A document indicating that payment has been made to a supplier or suppliers.
Proof of Receipt of Goods:
A document signed by the buyer to indicate that they have received the goods. A copy of this document is normally kept by the buyer, and a copy of the document is returned to the supplier
Purchase Agreement:
It contains the essential legal terms governing the sale and purchase of commercial goods. This is usually not to be modified without the approval of the legal department.
Purchase Contract:
Purchase Agreement.
Purchase Order (PO)*:
The purchaser’s authorization used to formalize a purchase transaction with a supplier. The physical form or electronic transaction that buyers use when placing orders for merchandise.
Purchase Order Cost:
A process efficiency metric that takes into account holistic costs associated with elements of creating, managing, and closing out a purchase order divided by the total number of purchase orders.
Purchasing*:
The functions associated with buying the goods and services required by the firm.
Purchasing Agents:
A role within the procurement function that assists in the selection and purchase of goods and services by gathering and screening information about suppliers and their products or services.
Purchasing Group:
This section of an organization must work to ensure that the sourcing process is carried out efficiently and effectively.
Purchasing Standard Requisition:
A document used to communicate to the procurement function that the need for products and services is rising. The information contained in the requisition includes the date, originating department, account to be charged, complete description of the material or service required and quantity, date material or service needed, special shipping or service delivery instructions, and the signature of the authorized requisitioner.
Raw Materials*:
Crude or processed material that can be converted by manufacturing, processing, or both, into new and useful products.
Receipt and Inspection Reports:
These reports relate to inspection of goods delivered to the buyer by the supplier and present the quality of the goods received.
Referent Power:
A source of power in negotiations with some attribute(s) that attract another party
Regional Supplier:
A supplier that competitively serves the countries within a single region. Examples of regions include North America, Latin America, Asia-Pacific, and Europe. Some suppliers may also serve only a portion of a region.
Regulation:
An important guideline that must be followed in transportation industries in order to remain lawful, conduct business smoothly, and keep everyone in the transportation industry safe.
Reporting:
Occurs when TMS helps a shipping manager by tracking carrier performance, customer service, cost, and other measures of carrier quality.
Reporting Structures:
Defines the authority relationships in a company and describes who reports to whom.
Repository:
A place that stores a large quantity of an item. Specifically, in the procurement industry, a repository is an IT-based system that stores contracts electronically.
Requirement Definitions:
Takes form of a formal document and presents clear definitions of the products and/or services required and include, for example, product specifications, performance requirements, and quality specifications.
Requisitioner:
Along with the procurement professionals, they confirm that the material/service specifications in requisitions have been captured correctly.
Request for Bid (RFB):
A document that a company will send to potential suppliers requesting them to bid on supplying products or services to the requesting buyer.
Request for Information (RFI)*:
A document used to solicit information about vendors, products, and services prior to a formal RFQ/RFP process.
Request for Proposal (RFP)*:
A document, which provides information concerning needs and requirements for a manufacturer. This document is created in order to solicit proposals from potential suppliers.
Request for Quote (RFQ)*:
A formal document requesting vendor responses with pricing and availability of products. RQFs are typically solicited from a broad group of suppliers from which a narrower group will be selected and asked to provide a more detailed Request for Proposal.
Return:
Material that has been rejected by customers or buyers’ inspection department and is awaiting shipment back to the supplier for repair or replacement.
Reward Power:
A source of power in negotiations in which one of the parties involved is able to offer something of value to the other party (e.g., offering a purchase contract).
RFB*:
Request for Bid.
RFI*:
Request for Information.
RFP*:
Request for Proposal.
Risk:
A cost consideration in transportation that sometimes increases the cost of shipping for products that are at higher risk of being damaged in transit than other products.
Scorecard*:
A performance measurement tool used to capture a summary of the key performance indicators (KPIs) of a company. Metric scorecards should be easy to read and usually have indicators to flag when the company is not meeting its targets for its metrics.
Second-Party Logistics Provider (2PL):
Larger shippers or companies with a substantial volume of freight that sometimes deal directly with the freight carrier themselves.
Shared Services*:
Consolidation of a company’s back-office processes to form a spinout (i.e., a separate shared services unit to be run like a separate business), providing services to the parent company and, sometimes, to external customers. Shared services typically lower overall cost due to the consolidation and may improve support as a result of focus.
Short List:
A list of candidates, normally potential suppliers, who have been selected for further review or, for final consideration, prior to awarding a contract.
Shipping*:
1) The act of conveying materials from one point to another. 2) The functional area that prepares the outgoing shipment for transport.
SMI:
Supply Market Intelligence.
Social Responsibility*:
The continuing commitment by businesses to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as that of the local community and society at large.
Sourcing:
The process of purchasing or procuring products and services.
Sourcing Information and Justification:
Documents that include reasons for the procurement method and types of organizations from which required products and services can be sourced (e.g., if buying from a monopoly where there is only one supplier).
Sourcing Manager:
The position in which the main role is to continually research the market, identify alternative suppliers, and analyze organization spend.
Sourcing Process:
The process used to identify users’ requirements, identify and qualify suppliers, bid to suppliers, negotiate with and select suppliers, approve purchases, release and receive purchase requirements, and monitor and measure supplier performance.
Spare Parts Procurement:
The procurement of interchangeable parts that are kept in inventory and used for repairing or replacing failed units or machinery.
Spend Analysis:
Entails identifying what products and/or services each business unit is buying and spending on these products and/or services.
Spot Demand*:
Unusual demand for a product with a corresponding short lead time. An example of this is during a disaster when certain materials are immediately needed in larger than normal quantities.
Statement of Work (SOW):
A document that captures and acknowledges mutual agreement on the work activities, deliverables, and timeline that a vendor will execute against in performance of work for a customer. Detailed requirements and pricing are usually specified in a Statement of Work, along with various other terms and conditions.
Stock Out:
A situation in which no stock was available to fill a customer or production order during a pick operation. Stock outs can be costly, including the profit lost for not having the item available for sale, lost goodwill, substitutions, or lost customer.
Strategic Alliance*:
Business relationship in which two or more independent organizations cooperate and willingly modify their business objectives and practices to help achieve long-term goals and objectives.
Strategic Sourcing*:
The process of determining long-term supply requirements, finding sources to fulfill those needs, selecting suppliers to provide the services, negotiating the purchase agreements and managing the suppliers’ performance.
Sub-Assemblies:
A unit comprised of multiple components and is designed to be incorporated with other units into a larger manufactured product.
Summary Supplier Evaluation Matrix:
A matrix used to compare the merits of alternative potential suppliers. Specific criteria are listed and weighted according to their perceived relative merits. Companies are then evaluated in each of the criteria and weighted scores are tallied across all criteria to determine the “best” potential suppler.
Supplier*:
An individual or an organization who supplies goods or services to companies. This is also sometimes referred to as a vendor.
Supplier Analysis:
The process of gathering and analyzing data regarding individual supplier performance conducted to typically measure, reward, and penalize suppliers.
Supplier Development:
Represents any activity or effort on the part of a buying firm to improve the performance of its suppliers. Working with existing suppliers through supplier development activities is a logical way to pursue continuous improvement.
Supplier Evaluation:
The process of reducing risk and maximizing overall value.
Supplier Performance Measurement:
Collecting information on how well a supplier is performing over a period of time in a structured way (Monczka, Trent, & Handfield, 2005)
Supplier Relationship Management:
A broad-based management methodology describing how a firm interacts with its strategic supply base.
Supplier’s Supplier Network:
The nature and extent of the network and the potential risk exposure to the target supplier from its own suppliers as well as second- and third-tier suppliers.
Supply Base Information:
Current and potential suppliers, their characteristics, and country location.
Supply Base Rationalization:
Involves an analysis of the number of suppliers required for current and future needs for purchased items and/or services and focuses on developing the best blend of suppliers, given the requirements of the organization.
Supply Chain*:
Starting with unprocessed raw materials and ending with the final customer using the finished goods, the supply chain links many companies together. The material and informational interchanges in the logistical process, stretching from acquisition of raw materials to delivery of finished products to the end user.
Supply Chain Management:
The design and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers.
Supply Chain Risk Managers:
Describes the various roles in supply chain management (including the procurement function) that impact the amount of risk involved in the overall supply chain and a firm’s ability to respond to adverse situations.
Supply Market Intelligence (SMI):
The result of obtaining and analyzing information relevant to a company’s current and potential supply markets with the objective of supporting effective decision-making.
Sustainability*:
Refers to efforts a company makes related to conducting business in a socially and environmentally responsible manner. It includes elements such as sustainable development, corporate social responsibility (CSR), stakeholder concerns, and corporate accountability.
Tender*:
The document that describes a business transaction to be performed. An example would be a request to a carrier to pick up goods for shipment.
Terms and Conditions*:
The provisions and agreements of a contract.
Third-Party Operator (Provider)*:
A firm that provides multiple logistics services for use by customers. Preferably, these services are integrated, or bundled, together by the provider. These firms facilitate the movement of parts and materials from suppliers to manufacturers, as well as finished products from manufacturers to distributors and retailers.
Total Landed Cost*:
Usually referred to as the total cost of a landed shipment, it includes purchase price, freight, insurance, and other costs up to the port of destination. In some instances, it may also include the customs duties and other taxes levied on the shipment.
Total Quality Management (TQM)*:
A management approach in which managers constantly communicate with organizational stakeholders to emphasize the importance of continuous quality improvement.
TQM:
Total Quality Management.
Transaction Quadrant:
The quadrant with an overall lower value of goods and services. Reducing the cost of the purchase transaction is important in creating value here, usually through electronic systems or procurement cards. Even when an item has many potential suppliers, the cost of supplier research to compare prices outweighs the value of this research. Any price analysis that happens is typically not carried out in great depth.
Transactional Procurement Execution:
Describes the elements of the procurement process that are focused on efficiently conducting basic procurement transactions.
Transportation:
The physical movement of people and goods between origin and destination points, thereby creating time and place utilities.
UCC:
Uniform Commercial Code.
Uniform Commercial Code (UCC):
Provides the legal basis for the terminology used in domestic U.S. transactions between parties in a transaction.
User Functions:
The special purpose or activity for which a thing exists or is used as defined by the user.
Value Analysis:
The systematic effort to improve upon cost and performance of products and services (purchased or produced through examining the materials, processes, information systems, and the flow of materials involved) in order to determine if a product/item can be produced using cheaper materials but still maintain the same quality and functionality.
Warranty:
An obligation or guarantee that a product or service sold is as factually stated or legally implied by the seller. Oftentimes, warranties provide a specific remedy, such as repair or replacement, in the event that the product or service fails to meet the warranty.
Win-Lose Negotiation:
Occurs when the parties of a negotiation compete over how to divide value that is fixed. It features adversarial or competitive relationships played out at the negotiation table.
Win-Win Negotiation:
By cooperating or collaborating, rather than trying to beat the other parties, the amount of value derived from a negotiation and business relationship can increase.