Agile procurement is managed by a small group of people within a company to handle procurement on a time-sensitive basis, combining the negotiation stage into the sourcing process.
Business Process Outsourcing (BPO)
Business Process Outsourcing is a business practice in which a company uses another company to source out a specific business task, such as indirect procurement. This action can be particularly helpful when another company specializes in a specific task that is more cost-effective for them to complete than it is for your company.
Central Request Entry
A central request entry is a requisition tool that provides a centralized location for all sourcing and requisition capabilities needed for the S2P process. This helps companies not only to manage this requisitions, but it makes it easier for the entirety of the company to work together and review each other's requisitions.
Centralized procurement is the formation of a company’s procurement department; whether it be all in one place (tangibly or intangibly) or in multiple locations, whether by type of procurement or by location.
With competitive bidding, customers are able to compare multiple offers from a range of suppliers, vendors or distributors to find the best price.
Contract Lifecycle Management (CLM)
Contract Lifecycle Management is the entire contract process that goes from request to renewal. Further steps include authorization, negotiation, approvals, signatures, obligation and compliance.
Direct and Indirect Spend
Direct procurement includes any purchase that is directly related to the business function such as Energizer purchasing lithium to manufacture their batteries.
Indirect procurement includes any purchase that supports the business without contributing to the manufacturing of the product itself. This includes HR costs, facility management, transportation costs, etc.
E-procurement includes any form of online purchase of supplies, work or services and includes requests for information, quotations, and proposals. E-procurement helps to streamline the entire source-to-pay process, which includes source-to-contract, contract-to-pay, analytics, and supplier relationship management.
ESGEnvironmental, Social and Corporate Governance metrics are measures of a company/organization’s efforts towards social and environmental factors. ESG factors are relevant to the procuring organization and as a supplier metric for organizations to manage. ESG can cover a wide range of elements, such as energy efficiency, green-house gas emissions, employee health and safety, supporting LGBTQ and womens rights, establishing a diverse board of directors, and establishing corporate transparency.
E-sourcing is the process of using online programs that provide support for specific stages of the sourcing process, such as supplier identification and selection. E-sourcing helps to expedite and simplify the soucing process by easily comparing providers and awarding contracts.
Maintenance, Repair, and Operations (MRO)
MRO is a form of procurement that covers any type of purchase regarding repairs and supporting production of an organization. This can include any item or service such as IT maintenance, tech procurement, or office furniture (chairs, desks, tables).
Maverick spending is the type of purchases that do not follow the standard procurement procedure according to company protocol. Maverick spend is usually conducted by members outside of an organization’s procurement department, and usually results in unrealized losses in savings. More information can be found here.
The Procure-to-Pay process covers every step of the S2P lifecycle after a requisition is approved. This is usually related to anything payment oriented, such as purchase order management, invoicing, receipts/processing, and payment management/accounts payable.
The process in which procurement data is evaluated; using quantitative and qualitative insights to map out action plans and insights to drive procurement success.
Procurement Center of Excellence
A Procurement Center of Excellence helps to show a procurement department’s value to the rest of the company/internal stakeholders. The CoE can help to bridge understanding of an organization’s procurement department, and show the value that their savings can bring to other departments of the company. A CoE can also support an organization’s goals by maintaining strong supplier management; promoting possible environmental or social responsibility goals through their suppliers.
An organization’s procurement cycle follows a set of continuous steps, from identifying a need, establishing a list of suppliers, creating a requisition, negotiating a contract, creating a purchase order, invoicing the customer, and working through the internal accounting details.
Purchase RequisitionA purchase requisition is the document created to define the good or service intended to purchase. It is the step that connects the Source-to-Contract and Procure-to-Pay processes.
Request for Information (RFI)
A request for information is a document that provides information on suppliers for the good or service they are selling prior to starting the official procurement process. By providing information on the capabilities of suppliers, procurement departments will be better informed to make their procurement decisions moving forward.
Request for Proposal (RFP)
A request for proposal is a document created that informs suppliers that an organization is intending to procure a given good or service. A RFP usually gets sent to many suppliers and informs them that there is competition for the service.
Request for Quote (RFQ)A request for quote is an inquiry about a certain good or service that asks a supplier or vendor about the price point, quantity, or potentially the contract length. Once an RFQ is submitted, it is up to the vendor or supplier to decide if they want to engage by providing their quote, with potential negotiations to follow.
RequisitionA requisition is an internal request from a department of an organization to the procurement department defining the good or service they want purchased. The procurement department will then strategically manage and source the requisition to leverage possible savings.
Requisition-to-pay (R2P) covers the entire purchase-to-pay timeline, while including the requisition stage of the S2P process. This includes requisition creation and approval, purchase order management, invoicing processing and receipts, and payments management.
Should-Cost AnalysisA should-cost analysis provides a full explanation as to why a certain good or service costs as much as it does for the quantity and delivery time provided. This can be thought of as an in-depth receipt, which includes the cost of materials, labor, market saturation impact, profit margins, and market supply/demand.
Smart ProcurementSmart procurement is the concept of using certain technology to make the S2P process smoother, such as using AI/ML, IoT, or data analytics to automatically source suppliers or negotiate contracts.
Source-to-contract is the first few steps of the source-to-pay process that include sourcing, contract management, and supplier management. Organizations must use the proper tools and technology to source and negotiate contracts properly in order to ensure maximum cost savings.
Source-to-Contract Process TimeUsing the right procurement tools are crucial not to just optimize cost savings during the contract negotiation stages of the S2C period, but by optimizing these steps it can save vital labor time and costs.
Source-to-pay is the definition of the entire procurement process that includes sourcing, supplier management, contract negotiation, requisition creation, purchase order management, invoicing, and payment management. Features such as data analytics and external data inputs can help to strengthen and smoothen the S2P process.
Spend analytics is the process in which procurement departments collect and utilize transactional data that shows procurement departments and internal stakeholders how they can best save costs and improve sourcing techniques.
Spend Under Management
Spending under management is the portion of a company/organization's spending that is managed within their procurement department. Managed spending is strategically and competitively sourced while all other spending outside the procurement department is unmanaged and at risk to possible maverick spending and missed savings.
Spot BuyingStrategic and managed spending/sourcing includes long-term procurement contracts and commitments, whereas spot buying is conducted when an immediate purchase is needed. Spot buying is mostly unplanned, small-scale purchases that are subject to high-risk missed savings.
Strategic procurement is the process in which an entire organization cooperates to ensure that the entirety of their procurement is in line with their business goals. This often means that maverick spending and unmanaged spot buying is decreased, and all procurement decisions are passed by the procurement department.
Supplier consolidation is the process of focusing on the most efficient suppliers within a specific supply market. Establishing an efficient supplier list helps to reduce supply chain costs by having fewer supplier relationships to manage.
Supplier diversity is the inclusion of minority, female, LGBT, veteran, or disability led/owned businesses into an organization’s supplier database. Many organizations have certain supplier diversity goals that require them to only use suppliers that maintain certain ESG ratings.
Supplier Relationship Management (SRM)Supplier Relationship Management in simple terms is a procurement department’s HR for their suppliers. The goal is to keep them up to speed on company goals and values, ensuring suppliers are heard and respected, and evaluating their performance and their customer impact.
Sustainable procurement is the aspect of procurement in which ESG goals are incorporated into procurement strategies. Sustainable procurement can be enforced by consolidating suppliers to only include suppliers that are ESG compliant.
Tactical SourcingTactical sourcing is the strategy of efficient procurement for low-profile, small scale purchases. Tactical sourcing often does not need the collaboration or approval of the entire company, as it focuses on routine purchases. Organizations must use both tactical and strategic sourcing to effectively carry out their procurement needs.
Tail spend is the type of spending that usually covers around 80% of total purchases within an organization, and also 20% of the total expenditure quantity. Tail spend is loosely defined as a purchase from any vendor/supplier that is not actively managed. Tail spend is relatively broad in terms of purchase categories and number of suppliers, and the frequency of these purchases usually stays proportionately low.
Unmanaged spend is any form of spend that is of low priority for an organization to strategize. Whether that is because it is an infrequent purchase or too difficult to manage. Therefore, it becomes a risk for an organization with any form of unmanaged spend due to possible financial loss or wasted resourced.
Vendor Managed Inventory
Vendor-Managed Inventory is a practice in which the vendor or supplier is responsible for managing all inventory that they are intending to sell, whether that is of a specific product or of adequately trained staff for a service they are selling.