Supply Management: Strategic Sourcing and Procurement

Vocabulary flashcards covering key strategic sourcing concepts, evaluation models, contract types, the procure-to-pay cycle, ethical and sustainable sourcing, and Kraljic's portfolio analysis.

Strategic Sourcing

The process of identifying ways to improve long-term business performance by better understanding sourcing needs, developing long-term sourcing strategies, selecting suppliers, and managing the supply base.

SSQDC

A qualitative screening framework used by supply chain recruiters and managers to evaluate suppliers across five key dimensions: Safety, Sustainability, Quality, Delivery, and Cost.

Weighted-Point Evaluation System

A multi-criteria analytical model used in supplier selection to calculate an overall supplier score: $\text{Score}_X = \sum_{Y=1}^{n} \text{Performance}_{XY} \times W_Y$, where performance on each dimension is multiplied by its assigned importance weight.

Competitive Bidding

A supplier selection approach in which a buyer requests formal bids from multiple potential suppliers using an RFQ, typically used when price is a dominant criterion and product requirements are straightforward.

Request for Quotation (RFQ)

A formal procurement document requesting supplier bids that details required specifications, descriptions, quantities, delivery requirements, payment terms, and contract length.

Negotiating

An interactive, iterative communication process used to determine purchase terms when exact specifications or performance criteria are unknown (such as in new product development) and supplier input or collaboration is required.

Fixed-Price Contract

A legally binding contract in which the stated price for a good or service does not change throughout the term of the agreement.

Cost-Based Contract

A contract structure in which the final price paid for a good or service fluctuates based on the cost of key inputs or specified economic factors.

Purchase Order (PO)

A formal document authorizing a supplier to deliver a specific product or service under specified terms (such as price, quality, and delivery), which becomes a legally binding contract once formally accepted by the supplier.

Statement of Work (SOW)

The terms and conditions for a purchased service detailing the specific tasks to be performed and the criteria used to evaluate the service provider.

100% Incoming Inspection

A quality-control practice within the procure-to-pay cycle in which every single incoming item is inspected, typically reserved for new suppliers or new purchases.

Sample Inspection

A receiving inspection method that evaluates a statistically determined representative portion of incoming goods, commonly used for established suppliers and regular purchases.

No Inspection

A streamlined receiving process where incoming goods bypass inspection entirely, applicable only to certified suppliers with proven quality conformance.

Supplier Relationship Management (SRM) Software

An enterprise software application used in the procure-to-pay cycle to maintain supplier records, manage supplier data, and track long-term vendor performance.

Ethical Sourcing

The procurement practice of ensuring fair worker treatment (addressing diversity, child labor, worker abuse, human rights, safety, and equitable wages) and purchasing fair trade goods.

Fair Trade Products

Goods purchased at guaranteed fair prices to directly support disadvantaged producers and workers located in developing nations.

Green Purchasing

A sustainable sourcing practice targeted at reducing packaging, raw materials, waste, and manufacturing byproducts to achieve environmental sustainability.

Sustainability

In supply chain management, the ongoing replenishment and preservation of natural resources to maintain environmental balance for future generations.

Bottleneck Items

Items in Kraljic's Portfolio Matrix defined by high supply risk/complexity and low cost/value potential; they have complex specifications, few alternative sources, and a large impact on operations or maintenance.

Critical or Strategic Items

Items in Kraljic's Portfolio Matrix characterized by high supply risk/complexity and high cost/value potential, requiring long-term partnerships, intensive negotiations, and contingency planning.

Routine or Arms-Length Items

Items in Kraljic's Portfolio Matrix characterized by low supply risk/complexity and low cost/value potential (such as office supplies), managed primarily through automation and supplier rationalization.

Leverage or Preferred Items

Items in Kraljic's Portfolio Matrix with low supply risk/complexity and high cost/value potential; these are high-expenditure commodities with large marketplace capacity, where buyers maximize advantage through competitive pressure.

Request for Information (RFI)

An initial screening document sent to a broad pool of potential suppliers to gather general information and develop an initial supplier long list.

Request for Proposal (RFP)

A detailed sourcing document issued to a shortlisted group of potential suppliers requiring capability justifications, presentations, site visits, and comprehensive pricing analyses.