Procuropedia

Procurement Terms

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Make v Buy
Make v buy, also known as the make-or-buy decision, is a strategic choice organizations face when deciding whether to produce goods or services internally (make) or to outsource them from external suppliers or vendors (buy). It involves evaluating the costs, capabilities, risks, and benefits associated with both options. The make option offers greater control and customization but requires investment in infrastructure, resources, and expertise. The buy option offers cost savings, access to specialized expertise, and flexibility, but involves reliance on external suppliers. The make v buy decision helps organizations determine the most cost-effective and efficient approach to meet their needs while considering factors such as core competencies, capacity, cost structures, and market dynamics.
Specialism:
Category Management Sourcing
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Master Data Management (MDM)
Master Data Management (MDM) in procurement involves the systematic management of critical data elements related to suppliers, products, contracts, and organizational structures. It focuses on collecting, organizing, and maintaining accurate and consistent master data to support procurement operations. MDM ensures the integrity, standardization, and harmonization of data across systems and processes, enabling efficient supplier identification, evaluation, sourcing, and contract management. By implementing effective MDM practices, organizations can enhance data accuracy, streamline procurement processes, reduce risks, improve reporting capabilities, and make informed decisions to drive efficiency and value in procurement activities.
Specialism:
eProcurement
Master Services Agreement (MSA)
A Master Services Agreement (MSA) is a contract that establishes the terms and conditions between a company or organization and a service provider for the provision of services over a specified period. It serves as a framework agreement that outlines the general terms, responsibilities, pricing, intellectual property rights, confidentiality, and other key provisions governing the relationship between the parties.

The MSA typically covers multiple projects or engagements and provides a foundation for future statements of work or project-specific agreements. By establishing a comprehensive MSA, both parties can streamline the negotiation process, ensure consistency, and define the rights and obligations to govern their ongoing service provider-client relationship.
Specialism:
Contract Management
Related terms:
Maverick Spend

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.

Specialism:
Risk Management Spend Analysis
Minimum Order Quantity (MOQ)
Minimum order quantity (MOQ) is the minimum quantity of goods or products a supplier is willing to sell or requires a buyer to purchase in a single order. It is a common practice used in procurement and supply chain management to ensure that suppliers can meet their production requirements while also achieving economies of scale.
Specialism:
Sourcing
Most Desired Outcome (MDO)

In the context of a negotiation, the Most Desired Outcome (MDO) refers to the ideal or optimal result that a party hopes to achieve. It is the best possible outcome that the party can envision and is often used as a benchmark against which other potential outcomes are measured. The MDO is generally kept in mind by the negotiating party throughout the negotiation process and is used to guide the party's strategy and decision-making.

Identifying the MDO is important as it helps clarify the negotiating party's priorities and goals and provides a clear understanding of what is at stake in the negotiation. Once the MDO is established, the negotiating party can use it as a reference point to assess the viability of potential agreements, concessions, or compromises. Ultimately, the goal of a negotiation is to secure an outcome that is as close as possible to the MDO while also considering the other party's interests and objectives.

Specialism:
Negotiation Sourcing Supplier Management