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Procurement Terms

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D
Direct Procurement
Direct procurement refers to the acquisition of goods, materials, and services that are directly related to the production of a company's end product. These are typically items that are used in the manufacturing process, such as raw materials, components, and sub-assemblies. Direct procurement is a critical aspect of supply chain management and is important to ensure that a company can produce its products efficiently and effectively. Effective management of direct procurement can help a company control costs, improve quality, and increase efficiency in its manufacturing process.
Specialism:
Procurement Management Procurement Operating Model Procurement Strategy
I
Indirect Procurement
Indirect procurement refers to the acquisition of goods and services that are not directly related to the production of a company's end product but are necessary to support the business's operations. These can include items such as office supplies, IT equipment, marketing services, travel, and facility management services. Indirect procurement is also known as non-core procurement or indirect spend. Effective management of indirect procurement can help a company control costs, increase efficiency, and improve supplier relationships. Indirect procurement is an important aspect of overall procurement management, and effective management can help a company improve its bottom line.
Specialism:
Procurement Management Procurement Operating Model Procurement Strategy
Related terms:
Category Management
P
Preferred Supplier

A preferred supplier is a supplier or group of suppliers that an organization has identified as its first choice for a particular product or service. This is typically based on the supplier's ability to meet the company's needs in terms of price, quality, delivery time, and other criteria.

A preferred supplier is usually selected after an evaluation process with the status typically granted for a specified period, often with the option to renew or extend the agreement.

Having a preferred supplier can offer several benefits for the company, such as cost savings through volume discounts or negotiated pricing, improved supply chain efficiency through better communication and collaboration, and reduced risk through a more stable and reliable supplier relationship. Equally, having preferred suppliers can streamline the procurement process through automation reducing administrative burden.

It is important for the organization to continuously monitor and evaluate the performance of its preferred suppliers to ensure that they continue to meet the organization's needs and expectations.

Specialism:
Category Management eProcurement Procurement Management Procurement Process Sourcing Supplier Management
Related terms:
No Purchase Order (PO), No Pay Maverick Spend
Procurement Strategy
A procurement strategy is a plan of action designed to guide an organization's procurement process and decision-making. It outlines an organization's approach to acquire the goods, services, and resources it needs to operate and achieve its objectives. A well-defined procurement strategy considers the organization's overall goals, budget, risk tolerance, and market conditions. It outlines the types of suppliers to target, how to engage with them, and how to manage relationships to ensure a steady supply of goods and services at a competitive price.
Specialism:
Procurement Management
S
Spend Management
A procurement strategy is a plan of action designed to guide an organization's procurement process and decision-making. It outlines an organization's approach to acquire the goods, services, and resources it needs to operate and achieve its objectives. A well-defined procurement strategy considers the organization's overall goals, budget, risk tolerance, and market conditions. It outlines the types of suppliers to target, how to engage with them, and how to manage relationships to ensure a steady supply of goods and services at a competitive price.
Specialism:
Procurement Management Procurement Strategy
Spend under Management

Spend under Management refers to the total amount of money an organization spends on goods and services that are being actively managed by the procurement function. This includes all spending that is subject to procurement policies, procedures, and controls, such as negotiated contracts, supplier management programs, and procurement technology systems.

Spend under management is a key performance indicator for procurement organizations and is used to measure the effectiveness and efficiency of procurement activities. Procurement professionals can drive cost savings, improve supplier performance, increase compliance, and reduce organizational risk by increasing the amount of spend under management.

To calculate spend under management, procurement professionals typically begin by identifying all of the spend categories that are being actively managed. They then use procurement technology systems and spend analytics tools to analyze spending data and identify opportunities for cost savings and process improvements. By actively managing more of the organization's spend, procurement professionals can improve their strategic impact and contribute more to the organization's overall success.

Specialism:
Category Management Procurement Management Procurement Strategy Risk Management Spend Analysis
Related terms:
Spend Analysis Spend Analytics Spend Profiling