Procurement Terms



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Best Alternative to a Negotiated Agreement (BATNA)

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.

Negotiation Sourcing Supplier Management
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Best and Final Offer (BAFO)
The BAFO is normally the final step of most negotiations. It represents the final position of either the Supplier or Buyer. If that offer is not accepted the negotiations are concluded and potential other options are considered.
Bill of Material (BOM)

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.

Buy-Sell Operating Model
The Buy-Sell model is a variant of the Centralised Procurement model. Under this, a central Procurement company (a ‘ProCo’) is formed within the Group and buys goods to sell them on to the operating companies (often at a profit). Under this model, Procurement is both the budget holder and procurer and has total control of inbound supply.
Procurement Operating Model