Procurement Terminology Practice

A set of flashcards focused on procurement definitions, chain management concepts, and financial metrics based on the provided lecture notes.

Direct Procurement

Procurement directly associated with the product or service for the customer, such as raw materials for a final product or wood for a furniture manufacturer.

Indirect Procurement

Procurement that supports business operations but does not end up in the final product, such as office supplies or cleaning supplies for an office.

Primary Procurement

Procurement necessary for the core activity of an organization, such as medical supplies or an externally hired doctor for a hospital.

MRO

Stands for Maintenance, Repair, and Operations; these are goods used for maintenance, repair, and daily operations like reserve parts and lubricants.

Purchasing

The executory part of procurement focused on supplier selection, negotiation, contracting, and ordering.

Procurement

The broad professional process encompassing strategy, needs analysis, contract management, and supplier management.

Specifying

The process of recording what the organization needs and identifying the requirements a product or service must meet.

Stakeholder Management

Recognizing, weighing, and managing the interests and influence of various involved parties.

Chain Perspective

Looking at the entire chain involving suppliers, the organization itself, distribution, and customers.

Chain Management

The collaborative management and alignment of the different links within a chain.

Supply Chain Management (SCM)

The control and alignment of flow regarding goods, information, and money within the chain.

Supply Chain Visibility

Having insight into chain events, including inventory levels, deliveries, and potential disruptions.

Value Chain Management

Organizing activities so that they collectively add the maximum amount of value.

Value Perspective

Assessing the specific value a purchase provides for different stakeholders.

Procurement Quote

The percentage of turnover spent on procurement, calculated using the formula: $\frac{\text{procurement value}}{\text{turnover}} \times 100\%$.

DuPont Method

A method showing how a reduction in procurement costs directly leads to an increase in profit and return on investment.

Impact of Procurement Savings

Savings that significantly influence profit because they are added directly to the profit, provided turnover and other costs remain constant.

Procurement Process

The sequence of steps including: determining needs, analyzing, determining strategy, specifying, selecting suppliers, contracting, implementing, ordering, monitoring, evaluating, and improving.

Sourcing

The specific term used for the activity of searching for and finding suppliers.