Procurement Glossary

All terms (A–Z)

Sourcing

The strategic process of identifying, evaluating, and engaging suppliers who can provide the materials, components, or finished goods a company needs at the best combination of quality, cost, and reliability.

supply-chain

Supply Chain

The entire network of organizations, resources, activities, and processes involved in creating and delivering a product from raw materials to the end customer.

sku-stock-keeping-unit

Stock Keeping Unit (SKU)

A unique alphanumeric code assigned to each distinct product variant for inventory tracking, warehouse management, and sales analytics.

good-manufacturing-practice-gmp

Good Manufacturing Practice (GMP)

A set of regulatory guidelines ensuring products are consistently produced and controlled according to quality standards, primarily used in pharmaceutical, food, and cosmetics manufacturing.

incoterms

Incoterms

Internationally recognized trade terms published by the ICC that define the responsibilities, costs, and risks between buyers and sellers for the delivery of goods.

erp-enterprise-resource-planning

Enterprise Resource Planning (ERP)

Integrated software systems that manage core manufacturing and business processes including production planning, inventory, procurement, finance, and quality control.

white-label-manufacturing

White Label Manufacturing

The production of generic, unbranded products by a manufacturer that are then rebranded and sold by other companies under their own brand names.

due-diligence

Due Diligence

A thorough investigation and evaluation of a potential manufacturing partner's financial health, legal standing, capabilities, and ethical practices before entering a business relationship.

vendor-management

Vendor Management

The end-to-end process of selecting, onboarding, monitoring, and optimizing relationships with suppliers to ensure quality, cost-effectiveness, and reliable delivery.

just-in-time-jit

Just-in-Time (JIT)

An inventory management strategy where materials and components are ordered and received only as needed for production, minimizing storage costs and waste.

lean-manufacturing

Lean Manufacturing

A production methodology focused on minimizing waste and maximizing value by streamlining processes, reducing inventory, and continuously improving operational efficiency.

six-sigma

Six Sigma

A data-driven quality management methodology that aims to reduce defects to fewer than 3.4 per million opportunities through systematic process improvement.

first-article-inspection-fai

First Article Inspection (FAI)

A detailed quality verification of the first production unit against design specifications, conducted before approving full-scale manufacturing to proceed.

compliance

Compliance

The adherence to laws, regulations, industry standards, and contractual requirements that govern how products are manufactured, labeled, and distributed.

production-run

Production Run

A specific batch of products manufactured in a single continuous production cycle, defined by quantity, timeline, and product specifications.

ce-marking

CE Marking

A mandatory conformity marking for products sold in the European Economic Area, indicating compliance with EU health, safety, and environmental protection standards.

prototype

Prototype

An initial sample or model of a product built to test and validate the design, functionality, and manufacturability before committing to full-scale production.

mass-production

Mass Production

The manufacturing of large quantities of standardized products using assembly lines, automation, and repeatable processes to achieve low per-unit costs.

cnc-machining

CNC Machining

A subtractive manufacturing process using computer-controlled cutting tools to remove material from a solid block, producing precision parts from metals, plastics, or composites.

injection-molding

Injection Molding

A manufacturing process where molten material (typically plastic) is injected into a custom mold cavity to produce high volumes of identical parts with tight tolerances.

tooling

Tooling

The custom molds, dies, jigs, and fixtures required to manufacture a specific product, typically representing a significant upfront investment before mass production begins.

iso-certification

ISO Certification

An internationally recognized accreditation confirming that a manufacturer's quality management system meets the standards set by the International Organization for Standardization.

quality-assurance-qa

Quality Assurance (QA)

A systematic process of verifying that manufactured products meet defined quality standards and specifications through planned inspections, testing, and process controls.

bill-of-materials-bom

Bill of Materials (BOM)

A comprehensive list of all raw materials, components, sub-assemblies, and quantities required to manufacture a finished product.

moq-minimum-order-quantity

Minimum Order Quantity (MOQ)

The smallest number of units a manufacturer is willing to produce in a single order, set to ensure production costs are covered and the run is economically viable.

odm-original-design-manufacturer

Original Design Manufacturer (ODM)

A manufacturer that designs and produces products which are then branded and sold by other companies, offering a faster route to market than custom OEM production.

oem-original-equipment-manufacturer

Original Equipment Manufacturer (OEM)

A company that manufactures products or components that are sold under another company's brand name, following the buyer's exact design and specifications.

contract-manufacturing

Contract Manufacturing

A business arrangement where a company hires a third-party manufacturer to produce goods on its behalf, using the hiring company's specifications and designs.

supplier-data-management

Supplier Data Management

The governance, collection, cleansing, and maintenance of supplier master data across systems to ensure accuracy, completeness, and consistency for procurement decisions.

guided-procurement

Guided Procurement

A compliance-first purchasing approach that uses automated rules and workflows to steer employees toward approved suppliers, contracts, and catalog items.

scope-3-emissions

Scope 3 Emissions

Indirect greenhouse gas emissions occurring in a company's value chain, including supplier manufacturing, transportation, and end-of-life treatment of products.

lead-time

Lead Time

The total elapsed time from placing a purchase order to receiving the goods, including manufacturing time, quality inspection, and shipping.

supplier-qualification

Supplier Qualification

The formal process of evaluating a potential supplier's technical capability, financial stability, quality systems, and compliance before approving them for procurement.

dual-sourcing

Dual Sourcing

A risk mitigation strategy where a buyer qualifies and maintains at least two suppliers for each critical component or service to protect against single-source dependency.

maverick-spend

Maverick Spend

Purchases made outside of established procurement contracts and processes, typically resulting in higher costs, compliance risks, and lost negotiating leverage.

total-cost-of-ownership

Total Cost of Ownership

A comprehensive cost assessment that includes purchase price plus all costs of acquiring, operating, and disposing of an item over its entire lifecycle.

supplier-segmentation

Supplier Segmentation

Classifying suppliers into strategic tiers based on spend volume, criticality, risk profile, and performance to allocate management effort proportionally.

procurement-automation

Procurement Automation

Using software and AI to automate repetitive procurement tasks such as purchase order creation, invoice matching, supplier onboarding, and spend classification.

supply-chain-resilience

Supply Chain Resilience

A supply chain's ability to anticipate disruptions, adapt to changing conditions, and recover quickly from adverse events while maintaining continuity of supply.

supplier-risk-management

Supplier Risk Management

The practice of identifying, assessing, and mitigating risks associated with the supplier base including financial instability, compliance failures, and operational disruptions.

rfi-rfp-rfq

RFI / RFP / RFQ

Request for Information, Proposal, and Quotation — three sequential procurement documents used to evaluate supplier capabilities, solutions, and pricing.

spend-analysis

Spend Analysis

The process of collecting, cleansing, classifying, and analyzing procurement expenditure data to identify savings opportunities and improve supplier management.

category-management

Category Management

A strategic approach that segments procurement spend into categories of similar products or services, each managed with its own sourcing strategy and supplier base.

reshoring

Reshoring

Bringing manufacturing or sourcing back to the buyer's domestic market after previously offshoring to lower-cost regions.

nearshoring

Nearshoring

Relocating manufacturing or sourcing to countries geographically close to the buyer's home market to reduce lead times, logistics costs, and supply chain risk.

esg-scoring

ESG Scoring

A standardized assessment of a supplier's environmental, social, and governance practices used to evaluate risk and alignment with sustainability mandates.

cbam

Carbon Border Adjustment Mechanism (CBAM)

The EU Carbon Border Adjustment Mechanism — a tariff on carbon-intensive imports designed to prevent carbon leakage and incentivize cleaner production globally.

strategic-sourcing

Strategic Sourcing

A procurement methodology that analyzes total spend, maps supply markets, and selects suppliers based on total cost of ownership rather than unit price alone.

supplier-discovery

Supplier Discovery

The systematic process of identifying, evaluating, and qualifying new suppliers to meet specific procurement requirements.

agentic-procurement

Agentic Procurement

Procurement processes where autonomous AI agents independently discover, evaluate, and monitor suppliers with minimal human intervention.