Glossary of Key Sourcing Terms

We believe that procurement teams should leave behind the acronyms and speak the language of the entire business. However, here are key sourcing terms that are useful to know.

Autonomous sourcing – the use of Artificial Intelligence (AI) and Machine Learning technology to automate and streamline the procurement process

CPO – Chief Procurement Officer

CSRD or Corporate Sustainability Reporting Directive – legislation adoptedin the European Union (EU) that sets the standards for global sustainability reporting

CSR or Corporate Social Responsibility – an organisational sustainability framework aimed at having a positive global impact through business strategy, operations and supply chains,

Direct procurement – the purchase of an input (such as raw material) that a company needs to produce its end product

eAuction – covers reverse and forward auctions, open, ranked, Japanese and weighted auctions

eProcurement – software system that covers all phases in the procurement cycle from contract award to asset management

ESG or Environmental, Social, and Governance – a measurable company-wide sustainability assessment, term often used interchangeably with CSR

Forward auction – type of eAuction where buyers compete to purchase assets and the price increases over time

Indirect procurement – a service or input that’s not directly used in producing the corporation’s product but is vital for their everyday operations

Japanese auction – type of eAuction that operates as an elimination process led by the buyer, with suppliers matching an increasing/decreasing sum until a single bidder remains

Open auction – type of eAuction where suppliers see competitors’ bids, fostering an open playing field

Pareto Principle – similar to the 80/20 rule, the Pareto principle states that approximately 80% of the effects of a thing come from 20% of the causes

Ranked auction – type of eAuction that assigns suppliers a rank based on bid comparison, encouraging competitive bidding

Reverse auction – type of eAuction where vendors compete for contracts, and the price decreases over time

RFx – includes a buyer’s Request for Proposal (RFP), Request for Quotation (RFQ), or Request for Information (RFI) from selected suppliers

Sourcing event – see eAuction

Supplier diversity – refers to a strategy of seeking out and welcoming diverse-owned suppliers, also called supplier inclusion strategy

Tailspend – the bottom 20% of a company’s spend, which usually accounts for 80% of its suppliers, made up of low-value, one-off purchases

TCO or Total Cost of Ownership – the purchase price of an asset plus the operation costs, representing the complete cost through its entire life cycle

Weighted auction – type of eAuction where certain attributes, such asquality or delivery lead times, are given a priority score which results in the winning bid not always being the vendor with the cheapest price

Why not download, print & share a Cheat Sheet of these key terms.
Click on image for PDF.

MORE RESOURCES:

• The Ultimate Sourcing Starter Kit – For new sourcing teams starting their procurement journey, this guidebook pulls together our expertise and top resources on how to leverage sourcing to extract business value
• The Ultimate Guide to Power-Up Sourcing – For existing sourcing teams looking to take things to the next stage by building an enterprise-scale sourcing function, this guidebook pulls together our expertise and top resources to propel you to procurement excellence
• 7 Ways eSourcing Can Save You Time & Money – Under pressure to improve performance and save both time and money in your procurement process? Whether you’re a seasoned professional or just starting out, we understand the challenges you face. Download our short eBook to discover how!
• ‘Which eAuction Should I Use?’ Cheat Sheet – a simple infographic to help you decide which type of eAuction is best for your needs