Procurement Terms
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Procurement Operating Model
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B
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.
Specialism:
Procurement Operating Model
C
Centralized procurement is a strategic approach that consolidates an organization's purchasing decisions and transactions into a single central department or team. This centralized group is responsible for acquiring goods and services on behalf of the entire organization instead of leaving the process to individual departments or employees. The primary goal of centralized procurement is to enhance procurement outcomes, streamline the purchasing process, and reduce costs through standardized procedures, increased purchasing power, and improved supplier relationships.
Specialism:
Procurement Operating Model
Procurement Strategy
Related terms:
D
Decentralized procurement is a procurement approach in which the authority and responsibility for purchasing decisions and transactions are distributed across various departments or business units within an organization. In this approach, each department or unit is responsible for its own procurement decisions and transactions, including identifying suppliers, negotiating prices, and finalizing contracts.
The goal of decentralized procurement is to provide departments or units with greater autonomy and flexibility in their procurement activities, enabling them to respond more quickly to their specific needs and requirements. However, this approach can also lead to inefficiencies, duplication of efforts, and reduced purchasing power due to the organization's lack of coordination and standardization.
Specialism:
Procurement Operating Model
Procurement Process
Procurement Strategy
Related terms:
Delegation of Authority in procurement refers to the process of assigning decision-making power and responsibility to individuals or roles within an organization. It involves authorizing specific individuals or positions to make procurement-related decisions, such as approving purchase requisitions, negotiating contracts, or selecting suppliers. Delegation of Authority streamlines the procurement process, enhances efficiency, and ensures that appropriate individuals have the necessary authority to carry out procurement activities within defined limits and guidelines.
Specialism:
Procurement Operating Model
Procurement Strategy
Related terms:
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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 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:
P
A purchase catalog, sometimes procurement catalog, is a centralized database or system that contains detailed information about the pre-agreed products and services available for purchase within an organization. It serves as a comprehensive listing of items that can be procured, including descriptions, specifications, pricing, availability, and any associated terms and conditions. The procurement catalog is used by buyers and other stakeholders to browse, search, and select the desired items for procurement purposes. It helps streamline the purchasing process, ensures purchase are made following the correct channels and policies, standardize procurement practices, and ensure accurate and up-to-date information for efficient procurement decision-making.
Specialism:
eProcurement
Procurement Operating Model
Procurement Process
Related terms:
A purchase catalog, sometimes procurement catalog, is a centralized database or system that contains detailed information about the pre-agreed products and services available for purchase within an organization. It serves as a comprehensive listing of items that can be procured, including descriptions, specifications, pricing, availability, and any associated terms and conditions. The procurement catalog is used by buyers and other stakeholders to browse, search, and select the desired items for procurement purposes. It helps streamline the purchasing process, ensures purchase are made following the correct channels and policies, standardize procurement practices, and ensure accurate and up-to-date information for efficient procurement decision-making.
Specialism:
eProcurement
Procurement Operating Model
Procurement Process
Related terms:
S
Source to Pay (S2P) refers to the end-to-end procurement process encompassing activities from strategic to transactional. Source to Contract involves the activities of sourcing, negotiating and contracting with a supplier, whilst Procure to Pay refers to the process of raising a Purchase Requisition and Purchase Order through to the payment of the supplier. Managed effectively, Source to Pay can integrate a large proportion of procurement stages into one streamlined workflow, enabling organizations to optimize supplier relationships, control costs, ensure compliance, and achieve greater visibility and efficiency throughout the entire procurement lifecycle.
Specialism:
eProcurement
Procurement Operating Model
Procurement Process
Procurement Strategy