Supply Chain Jargons

1. Strategic Sourcing:
Strategic sourcing is the process to continuously assess and improve the value created from
procurement activities to a business or an organization. Strategic Sourcing takes into
consideration a broader view of balancing factors like competitive market conditions, supply risk
mitigation, negotiation power and supplier relationships.

2. Procure to Pay (P2P):

Procure-to-pay (P2P) is a set of processes used in larger organizations to request and pay for
goods or services. P2P integrates procurement operations with financial processes, such as
accounts payable to ensure costs are controlled and aligned with accounting reporting
practices. 
3. Agile Procurement:
Agile procurement is the ability to react to supply and demand changes in sourcing activities.
Agile procurement often relies on lean-agile workflow methods popularized by just in time
productions and software development.

4. Balanced Scorecard:
A balanced scorecard is a strategic performance management framework to identify and
improve various functions, including financial and non-financial metrics. A balanced scorecard in
procurement helps managers and teams keep track of activities' execution and the
consequences of these actions.

5. BATNA:
The best alternative to a negotiated agreement (BATNA) refers to the best alternative option if
no agreement can be reached during the negotiations. Creating such alternatives beforehand
strengthens one's negotiating position and protects against unintentionally exceeding or falling
below an internally defined threshold.

6. Blanket Order:
A blanket (purchase) order is a long-term agreement between the company and a supplier. The
business partner delivers materials, goods, products, or services over a certain period (several
times) at a fixed price.

7. Bottleneck Item:
In procurement, the bottleneck refers to a weak spot where high potential supply risk may
occur. Identifying these organizational weaknesses early is essential to avoid interruptions in the
production or supply of key products or services. 
8. Category Management:
Category management in procurement is the segmentation of spend into groups of similar
goods or services in order to identify potential value creation opportunities.

9. Business Process Outsourcing (BPO):

Companies outsource certain non-business critical tasks of the secondary sector to external
service providers to focus on their core business. For instance, payroll, accounting, HR,
customer care, IT, and logistics can be outsourced.

10. Categorization:
Categorization is the activity of categorizing items into a pre-defined order, such as a hierarchy
or taxonomy. 

11. Contract Life Cycle Management:

Contract Life Cycle Management is the proactive control of supplier relationships and
performance through the strategic use of contracts. 

12. Cost Avoidance:

Cost avoidance is any action taken to avoid future costs. In procurement, these are often
referred to as "soft savings" because they can't be measured as "hard savings" or cost
reductions reflected in financial statements.

13. Cost of Goods Sold (COGS):

Refers to costs directly related to the goods and services produced. 

14. Demand Management:

Demand management is the process of planning and forecasting the demand for goods or
services in a supply chain. Demand management aims to ensure efficient production and
predictable cash flow needs.

15. Digital Transformation:

Digital transformation in procurement uses digital technologies to change how procurement
operates to meet changing business and supply market requirements. Digital transformation
includes three equally important areas: processes, tools, and organizational culture.

16. Digitalization:
Digitalization in procurement is a sub-area of digital transformation where procurement
information is converted into a digital form that can be processed, analyzed, and shared. 
17. Dynamic Discounting:
Dynamic discounting is a service for a buyer. Both buyer and the seller determine discounts
automatically applied in case of early payment. Buyers can flexibly decide from case to case
which invoice they want to release for early payment.

18. e-Auction:
Online auctions are used to negotiate and determine market prices for given objects based on
individual price limits set by the participants. 

19. Economic Order Quantity:

With the optimum order quantity, the sum of the ordering and storage costs for a given service
level in the planning period is as low as possible.

20. Economies of Scale:

Economies of scale are the cost advantages that enterprises obtain due to their scale of
operation, and are typically measured by the amount of output produced per unit of time. A
decrease in cost per unit of output enables an increase in scale.

21. e-Procurement:
Electronic procurement is the generic term for the purchase of products and
services via digital networks or platforms. With the help of integrated systems and
tools, buyers can carry out operational and tactical tasks (such as catalog
procurement, auctions, and tenders). Some tools also provide support for strategic
objectives.