Purchasing and procurement is a vast landscape involving multitudes of processes and operations. Defining this overwhelming number of processes, functions, and operations would need an entire glossary.
In this 3-part series, we will try to cover some of the latest, relevant, and significant purchasing and procurement terms that every supply chain and sourcing team should be aware of.
An ad-hoc purchase represents an item brought bought for one-off use. Ad-hoc purchases are non-recurrent and may not follow a particular PO/RFQ template.
In procurement, benchmarking represents a process where an enterprise runs a comparison of a group of suppliers based on similar attributes (quality of service, capacity, price, etc.).
Also known as call-off orders, buyers place such orders to leverage predetermined pricing on the expandable goods they need. They can change the number of items needed over time in line with their production requirements, schedule, and capacity.
The capital purchase represents items meant for improving the production/manufacturing processes. Buying a new facility or equipment will be termed as a capital purchase.
An open-book contract is an agreement between a buyer and a supplier where they share all financial information associated with the transaction with each other. This might also include information that is otherwise considered confidential (e.g. profit margins).
It is a contract that automatically renews or expires on a particular date unless a new contract overrides it.
It is a limited bid by the supplier that might not fulfill all the terms and conditions stated on the tender by the buyer.
A variant bid is that innovative and alternative bid by the supplier that offers a unique solution to the buyer’s demand.