Procurement Terms
Subject
A-Z
This simplified matching method is commonly employed when there is no need to verify the receipt of goods or services through a receiving report. The 2-way match helps ensure accuracy in invoice processing and assists in preventing errors or discrepancies in financial transactions.
The quantities and amounts on the receiving report and the vendor's invoice are compared against the purchase order. If all three documents align and match, the invoice is considered valid for payment. The 3-way match helps prevent errors, fraud, and discrepancies in financial transactions.
The accounts payable process includes activities such as invoice verification, matching purchase orders and receiving reports, initiating payments, and maintaining vendor records. Effective management of accounts payable is essential for maintaining good relationships with suppliers, managing cash flow, and ensuring the financial health of the organization.
Maverick spend, sometimes Rogue Spending, Non-compliant Purchasing, Off-contract Buying, Ad-hoc Purchasing or Independent Sourcing, refers to the practice of purchasing goods or services outside of the established procurement policies, procedures, and controls of an organization. This can include purchases made without proper authorization, outside of approved supplier contracts, or without the use of preferred suppliers.
Maverick spend can lead to a range of negative outcomes for an organization, including higher costs, reduced process efficiency, decreased compliance, and increased risk. When purchases are made outside of the established procurement process, it can be difficult for procurement professionals to manage supplier performance effectively, negotiate favorable pricing, or identify opportunities for cost savings.
To address maverick spend, organizations typically implement policies and procedures to promote compliance with procurement policies, and specialized software to help monitor and manage procurement activities. This can include the use of spend analytics, supplier management systems, and e-procurement platforms to streamline the procurement process and improve visibility into purchasing activities.
By reducing maverick spend and increasing compliance with procurement policies, organizations can improve their financial performance, reduce waste and inefficiency, and better manage risk.
Best Alternative to a Negotiated Agreement (BATNA) is a term used in negotiation theory to describe a party's course of action if a negotiation fails to produce an agreement. In other words, BATNA is the next best option available to a party if a negotiation does not result in a satisfactory outcome.
BATNA is important in negotiations because it provides a standard against which the proposed agreement can be evaluated. If the proposed agreement is better than a party's BATNA, it may be in that party's interest to accept it. If the proposed agreement is worse than a party's BATNA, then it may be in that party's interest to reject the agreement and pursue their BATNA instead.
A strong BATNA is considered an important negotiation skill, as it gives a party more leverage in negotiations and improves their chances of achieving a favorable outcome. Therefore, it is recommended that parties identify and evaluate their BATNAs before entering into a negotiation.
A Bill of Materials (BOM) is a comprehensive list of all the components, raw materials, sub-assemblies, and parts needed to manufacture a finished product. It is an essential document used in manufacturing and production planning, outlining the quantities required to produce a single product unit.
The BOM includes detailed information about each item, including part numbers, descriptions, quantities, and unit costs. It also includes information on how the components are assembled, including the order of assembly and any special instructions or processes that are required.
BOMs help manufacturers plan and manage inventory, purchase materials, and schedule production activities. They also serve as a reference for quality control, allowing manufacturers to verify that all components are present and accounted for before assembly and to ensure that finished products meet their design specifications.
BOMs can be used for many products, from simple assemblies to complex products with thousands of components. They are an essential tool for manufacturers and are used in various industries, including automotive, electronics, aerospace, and consumer goods.
Business Requirement Analysis involves the systematic identification, evaluation, and documentation of a company's fundamental needs. These needs may pertain to a customer-oriented product or service, known as Direct Procurement, or to the operational necessities of the business itself, referred to as Indirect Procurement. A well-executed analysis outlines the essential business criteria, leading to quantifiable outcomes and guiding the specifications for suppliers to streamline the procurement process.