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The strange words of purchasing
The EP TLA Task Force purchasing profession, for example, even basic terms like British playwright George Bernard Shaw once referred to America and Britain as “two countries separated by a common language.” But English is generally a second or even third language with the international business community where the chances of misunderstanding each other increase with the square of new expressions introduced in any industry jargon. Within the procurement and purchasing mean different things either side of the Atlantic. So don’t be distressed if you come across expressions or TLAs (three-letter acronyms) that you don’t understand. Look to the list below or ask your colleagues – though they probably won’t have a clue, either. This glossary will be continually updated on our website. Don’t hesitate to e-mail us your own findings.
goods and services to identify underlying cost drivers, align purchases with business needs, and eliminate unnecessary consumption. CSR Corporate social responsibility. C-suite Collective expression for members of the executive leadership team: CEO (Chief executive officer), CFO (Chief Financial officer), COO (Chief Operations Officer), CIO (Chief Information Officer), CMO (Chief Marketing Officer), CPO (Chief Procurement Officer) and so on. Direct goods/services Goods or services that are part of the production process. Dynamic commerce Commerce with no set price. This is the big promise of B2B for more efficient pricing. Examples can be found in auctions and reverse auctions. E2E Exchange-to-exchange or enterprise-to-enterprise. Enterprise application integration. Generally refers to the ability to share information between software systems at different companies, specifically transmitting data. Electronic data interchange. The transmission of trade documents electronically using standardized formatting.
Exchange Also known as an e-marketplace. A Web site for buying and selling goods and services, usually via auctions. FMA Financial management and accountability. FSP Fulfillment service provider. An organization that manages and executes part or all of a company’s fulfillment process, using its own assets and resources.
Logistics The processes involved in transferring goods through manufacture, storage and transportation to business customers and end consumers. Logistics visibility provider An Internet-based service that provides integration to and captures data from logistics service providers; cleanses, verifies and analyzes the data; and reports on logistics activities to facilitate supply chain visibility. Maverick buying Any company or employee purchase that does not meet a company’s purchasing policy. This includes using off-contract methods of procurement and non-authorized purchases. Also called rogue purchasing. MRO Maintenance, repair and operations. MRO products are goods and services purchased by a company that are not used in production or offered for resale. Typical MRO purchases include manufacturing supplies, computers and office supplies. MSA Master service agreement. Neutral exchange An exchange run by a company that claims to have no vested interest in an industry. NPC Non-price criteria. OEM Original equipment manufacturers. Order/demand capture These systems obtain information about a specific customer order as it happens. The software aggregates and evaluates customer orders and calculates how much of what product should be made in the future. OTS Off the shelf products Peer-to-peer: Electronic file swapping systems that allow users to share files, computing capabilities, networks, bandwidth and storage.
Fulfillment In the world of e-business, fulfillment refers to the process of shipping an order to a customer, and the automation of that process. Horizontal exchange An e-marketplace that facilitates transactions for goods and services across several industries. Host An organization that installs and maintains software on behalf of a separate organization. Indirect goods/services Goods or services that are not part of the production process. Industry consortium An exchange run by several companies within the same industry, that are attempting to streamline the supply chain and aggregate buying power. Typically, members of the consortium are rivals in the “old economy.” Covisint, for example, comprises General Motors, Ford and DaimlerChrysler. According to Federal Trade Commission anti-trust laws, industry consortia must not discriminate against qualified participants. IPO Initial public offering. Also international purchasing office. Just-in-time inventory. An inventory system model based on the idea that demand and supply channels can be coordinated to the point that desired items arrive just in time for use, thereby significantly reducing inventory levels. Key performance indicator.
negotiated terms. BPAs are usually annualized contracts. Bullwhip effect A pervasive supply chain problem whereby order variability grows as demand signals propagate upstream. Essentially, demand spikes as orders flow back from retailer to distributor to original equipment manufacturers to tier one suppliers, and so on. BSC Balanced scorecard. A variant is X-BSC, cross-balanced scorecard. Buyer-driven auctions A price-centric auction where buyers list what they are interested in purchasing and sellers enter competing bids. Cash-to-cash cycles The time difference between the monetary expenditure for raw and direct materials and supplies, and the receipt of payment from the customer for finished goods. e-commerce software companies often claim to reduce cash-to-cash cycle times. CEM Contract electronic manufacturer. Collaboration The use of Web-based software for the purpose of sharing information between businesses or organizations. Design collaboration, for example, allows engineers at different companies to share plans and data in real time.
APP Annual procurement plan. APR Advance purchasing request. Public request for quote/proposal (Rfx) for new products or services not yet in production (see PCR). Auction Matches buyers and sellers in any marketplace (or exchange) to transact in any quantity at any time. Allows users to submit a request for goods and services to be bid on by suppliers. B2B B2C B2D B2E B2G Batna Best alternative to negotiated agreement. Batna is often referred to as the lowest acceptable level for a buyer in a negotiation. Bid/quote process Another term for reverse auctions. BPA Blanket purchase agreement. A procurement vehicle that allows buyers to purchase goods or services at a pre-negotiated price with preBusiness-to-business Business-to-consumer Business-to-distributor Business-to-employee Business-to-government
Collaborative commerce B2B systems that enable companies to interactively share data, develop plans and create products online. Content Online materials including publications and catalog data. Content management Sometimes called “knowledge management”, content management is a term often used to refer to the process of handling information presented in either buy- or sell-side catalogs, including part numbers, descriptions and unit sizes. It also refers to the process of capturing, storing, sorting, codifying, integrating, updating and protecting any and information. CPFR Collaborative planning, forecasting and replenishment. A type of software system that enables businesses to interactively share production, inventory and order information online with their partners. CRM Customer relationship management. The use of Web-based software to analyze customer behavior. CRM systems generally store customer information that is aggregated from sales calls, purchases and customer service centers. CSM Consumption and specification management. CSM is the assessment of internal demand for external
End-to-end solution A common e-business buzzword, end-to-end refers to a streamlined, seamless and real-time flow of information and linkages across a value chain. EP Efficient Purchasing magazine
E-procurement The act of acquiring/procuring/ purchasing via an electronic format. ERP Enterprise resource planning. A set of applications that automate human resources and finances as well as handles tasks such as order processing and production scheduling. For example, orders can be entered directly into a company’s planning system, for example, and manufacturing is automatically coordinated.
LCCS Low-cost country sourcing. LLP Lead logistics provider. An organization that manages a full scope of logistics services for a company by aggregating and coordinating the services of multiple logistics service providers.
PCR Purchasing change request. RFx for an existing service or product for a potential renegotiation with current supplier. PPT Purchasing productivity tracking.
E-sourcing Web-based execution of the sourcing process for goods and services.
Private exchange An exchange run by a single entity/ company.
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Procurement In the US, this term often covers all aspects of purchasing. It can mean both the act of finding and selecting a supplier, as well as the act or process of ordering and buying necessary commodities. In the UK, procurement has a stricter definition and means the act or process of ordering and buying. Public exchange An industry consortium or third party-owned exchange that offers a many-to-many model. Purchasing General term that covers all activities connected with sourcing and procurement. Recurring revenue model Revenue model based on subscription fees rather than up-front licensing fees. Reverse auction Also called a buyer’s auction, a reverse auction empowers buyers, allowing them to find the lowest bidder among suppliers/sellers. Reverse logistics The supply chain that flows contrary to the traditional process of order acceptance and fulfillment. For example, reverse logistics includes the handling of customer returns, the disposal of excess inventory and the return journey of empty trucks and freight waggons. Reverse supply chain management The process of tracking items returned by customers and accounting for them in inventory; also includes resolving customer credit lines, automating return policies and curbing unauthorized returns. RFI Request for information. When a buyer asks a seller for information about its business and capabilities. Request for proposal. A request sent by a buyer to one or more suppliers for contract pricing and/or services for a specified period of time. Also used as request for price.
Return on investment. The sell-source-ship model for distributors, as opposed to the traditional buy-hold-sell (BHS) model. Dell Computers is the best-known example.
Strategic sourcing The process of determining longterm supply requirements, finding sources to fulfill those needs, selecting suppliers, negotiating purchase agreements and managing suppliers’ performance. T&Cs Terms and conditions. TCO Total cost of ownership. In the the facility management world, this can also mean total cost of occupancy. Third-party logistics provider. An organization that manages and executes a particular logistics function, utilizing its own assets and resources on behalf of another company. Theory of constraints. According to TOC principles, an operation is a chain of inter-dependent resources, in which only a few elements – called constraints – control the output of the entire operation
SBR Supply base reduction. SCEM Supply chain event management. A term coined to describe software that proactively alerts users when a supply chain issue arises. SCL Supply chain leadership.
SCM Supply Chain Management. Refers to the analysis of and effort to improve a company’s processes for product and service design, purchasing, invoicing, inventory management, distribution, customer satisfaction and other elements of the supply chain. SCM usually refers to an effort to redesign supply chain processes in order to achieve streamlining. SCP Supply chain planning.
Seller-driven auctions Sellers post goods for sale and buyers bid on them. SG Sourcing group.
Value-added services Any product offering that extends beyond simple buy-and-sell capabilities. This includes logistics, collaborative design, payment, verification and settlement. Value chain analysis Method to analyze potential for improved efficiency in several companies and production steps. Vertical exchanges An e-marketplace that serves a particular industry. Visibility, or total visibility The ability to receive real-time information and view data from all tiers of a company’s supply chain, from the raw materials all the way to the needs of consumers. VLP Volume leveraged purchase. Vendor managed inventory. When sellers maintain the inventory they own on the buyers’ premises. This helps minimize the buyer’s investment in inventory.
SKU Stock keeping unit is an identification, usually alphanumeric, of a particular product that allows it to be tracked for inventory purposes. Typically, an SKU is associated with any purchasable item in a store or catalog. An SKU is not the same as a product model number from a manufacturer, although the model number could form all or part of the SKU. The SKU is established by the merchant. SOI Supplier-owned inventory.
Spot buys Purchases from a non-contracted, nonstrategic supplier. Spot buys usually occur in emergency situations, when a buyer’s strategic suppliers are unable to provide the required product. SPM Supplier performance measurement.
RFQ Request for quote. A request sent by a buyer to one or more sellers for the pricing and availability of a defined quantity of specific items. Rogue purchasing See maverick buying.
SRM Supplier relationship management. Strategic Partner What all your suppliers would like to be; no matter if they own the Genome database or sell rubber bands. Source: Efficient Purchasing (www.efficientpurchasing.com) and Supply-Demand Chain Executive (www.sdcexec.com).
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