RFPRequest for Proposal (often used interchangeably with RFQ, request for quote, or RFT, request for tender). The stage in a sourcing and procurement process where invited suppliers are asked to respond to a documented set of requirements for goods and/or services sought for purchase.

RFxRefers to any "request for" process or document in a sourcing and procurement process, including RFI (request for information), RFP (request for proposal), RFQ (request for quote), and RFT (request for tender).

Sealed BidTraditionally, a sealed bid is a response to an invitation to bid on an item or service, where the bidder seals their bid response so that the information is not revealed until a specific time when all bids are opened to then determine the winning bidder. In a business procurement context, a sealed bid is the approach of inviting suppliers to respond to a request for bid/request for proposal in a way that the suppliers' responses are not revealed until a determined date and time. This approach is in contrast to a reverse auction, where suppliers' bids are openly shared with each other.

CommoditiesA good for which there is a supply demand but has little to no differentiation across a market of suppliers. Price of a commodity is generally determined by its overall market availability and demand characteristics at a particular point in time. Examples of commodities include energy (petroleum, crude oil, electricity), metals (coal, copper, gold, platinum, palladium, aluminum, iron ore), and agriculture (paper, corn, cotton, salt, coffee beans, tea, wheat). However, buyers may choose to consider other factors that may or may not influence the supplier's price on that commodity, such as sustainability and environmental impact, animal welfare practices, method of generation, and other criteria.

Direct MaterialsA direct material is any component (raw materials, ingredients, standard parts, specialized parts) that goes into the manufacture of a finished good. Direct Materials is one of the major spend categories managed by procurement and sourcing teams.

Direct SpendRefers to the costs to procure direct materials.

[Refer to : Direct Material & Commodity Sourcing Strategies]

Indirect MaterialsMaterials and consumables purchased that do not become part of produced goods or services that a company delivers to the market, but are necessary for the supporting operations of a business. Examples of indirect materials include office supplies, computer and phone equipment, furnishings, cleaning supplies, tools and manufacturing equipment, fleet vehicles, uniforms, etc.

Indirect SpendRefers to the cost to procure Indirect Materials as well as costs to cover other services and expenses not part of raw/direct materials, such as personnel costs, marketing, legal, financial, healthcare, housekeeping, travel, MRO (maintenance, repair, and operating costs) and other such expenses.

Spend CategoryA grouping of types of spend/expense. The two primary examples of different spend categories include direct materials (or direct spend) and indirect spend (including indirect materials and services). Further category breakdowns may include transportation/logistics, corporate services, IT sourcing, and packaging. An organization may also have custom category names specific to their business.

CPO (Chief Procurement Officer)An executive-level role that oversees the sourcing, procurement, and acquisition of goods and services from suppliers. The role of the CPO generally has grown in importance in the past decade, and is increasingly seen as a strategic influence within the company.

ProcurementThe process and activities involved in the acquisition of goods and services. Within a corporate organization, the Chief Procurement Officer and procurement personnel are responsible for the purchase of those goods and services in a way that balances best possible costs, best supplier sources, lowest risk, and reliable quality and performance.

[Refer to : White Paper on Procurement Transformation - 5 Sourcing Excellence Initiatives Propelled by Next-Generation Technology]

Sourcing Center of ExcellenceA group, either formal or informal, of sourcing and procurement professionals within an organization having the goal of developing, instituting, and promoting best practices in sourcing strategy, processes, tools and technologies, education and training, and management, as well as tracking, measurement, and reporting. A sourcing center of excellence is also often chartered with standardizing sourcing procedures across many or all spend categories within the organization. A company having a sourcing center of excellence team is often considered as having a "center-led" sourcing culture.

Expressive FeedbackThe act of a buyer sharing both quantitative and qualitative feedback to potential suppliers during a bidding process or sourcing event, in order to increase both the level of response to the bid event and the competitiveness of the bids. Unlike an open, public reverse auction where the purpose of feedback is to drive supplier bids down to the lowest possible price, Expressive Feedback seeks to widen the potential number of qualified suppliers providing competitive pricing and commercial terms, ultimately to select the best supplier based on a combination of price and overall value to the buyer.

Supplier Relationship ManagementManaging supplier relationships in order to further develop the supply base's potential for creating value and cost savings.

Supply Chain ManagementManaging the overall network of those businesses, and locations connected in the provision of goods needed by end customers or consumers. Supply chain management spans the process of sourcing raw materials, manufacture, assembly, finishing, packaging, and then the distributing, storing, and delivering of those goods from point of origin to points of sale or consumption.

Spend AnalysisThe activity of collecting corporate spend data from various data systems, including ERP, accounts payable, invoices, etc., to provide an understanding of what a company spends on materials and services, with whom, and for what. This is often accomplished through a combination of technology and professional services to normalize and classify data for reporting.

Spend ReportingA formal documentation and sharing of spend activities, which may include historic, current, and forecasted spend activities.

[Refer to : Spend Analysis and Reporting Solutions from SciQuest]

Spend Under ManagementCorporate spend (excluding payroll and taxes) that is managed by a formal sourcing/procurement process. Often used to describe the level of spend that a company is managing through a sourcing or procurement technology solution.

Spend VisibilityIn sourcing and procurement terms, a reporting function that provides visibility into what a company spends on direct and indirect materials and services, including how much, with whom, and for what. Spend Visibility is often used interchangeably with Spend Analysis, though it is often Spend Analysis that delivers the data in a format with which to provide Spend Visibility.

[Refer to : Improve Spend Visibility]

Logistics ManagementThe overall management of the flow of goods and services across the supply chain, involving transportation, warehousing, inventory, packaging, material handling, security, pricing/cost analysis, suppliers/shippers, and staffing.

Transportation Management System (TMS)A technology solution that provides functionality to help manage an organization's distribution and shipping functions, by automating various transportation processes that may include load planning, pickup/delivery scheduling, creation of bills of lading or shipping manifests, communicating with transportation carriers to schedule freight services, shipment tracking, and managing freight invoices and payment. Also referred to as TMS software or TMS application.

Transportation ProcurementThe process of sourcing transportation services from carriers for the shipment of goods. Transportation procurement may involve any or all modes of transportation, including ground transportation (truckload, less-than-truckload, rail); ocean or water-based transport; air freight; or inter-modal which includes any combination of those. Transportation procurement is often considered one of the more complex spend areas to source, due to the numerous price and non-price requirements from the shipping company, such as gas and diesel price volatility, lanes and routes, material handling (i.e. hazardous materials), capacity, service level agreements, certifications, inter-state and international shipping regulations, and more.

[Refer to : White Paper on Transportation Procurement and Carrier Analysis]

RFIRequest for Information. Part of a business's sourcing and procurement process involving the collection of documented information from potential suppliers, to evaluate them as candidates for providing goods and services to the consuming business.

Reverse AuctionA bidding event or process where the role of buyers and sellers in an auction are reversed, typically utilized in a business-to-business procurement function. Rather than having one supplier with multiple buyers competing to pay more to obtain the good or service for sale, a reverse auction involves a buyer inviting numerous suppliers to compete on who can provide the desired good or service at the lowest price while meeting the necessary requirements. A reverse auction is typically a time-sensitive event and involves an open bid forum, where suppliers have visibility into each other's bids and can submit descending-price bids in reaction.

Expressive BiddingA term that is a registered trademark of SciQuest in the U.S., Expressive Bidding enables buyers and suppliers to conduct business in a flexible bidding environment, which allows suppliers to bid to their strengths and buyers to analyze sourcing scenarios based on this expressive data. Expressive Bidding involves and encourages the collection and analysis of price and non-price bid data, acknowledging that a buyer's decision is not often based solely on lowest cost.

Bid SheetA document or online list of items that a buyer needs to procure, which is presented to potential suppliers to respond with their bids based on the buyer's requirements and preferences for those items. Bid sheets typically include item names, item specifications and descriptive attributes, pricing considerations, quantities, delivery timeframe, location, packaging, shipment modes, alternative/substitute items considered, certification requirements, and more. Bid Sheets may also be referred to as an RFP (request for proposal) or RFQ (request for quote) and are part of an online bidding/sourcing event.

Tender/TenderingThe bidding process used in procurement to help determine from which suppliers to source goods or services. A tender is the bid; tendering is the activity of collecting and submitting bids.

Strategic SourcingThe act of taking a strategic approach to sourcing activities, rather than simply collecting pricing or bids from existing suppliers on standard items. Strategic Sourcing can include any number of sourcing strategies, including the pooling or aggregation of spend categories across different business units or stakeholders; combining different items with a common supply base to create leverage within the supply base; and encouraging suppliers to introduce innovation and efficiency to the buying company through a flexible proposal or bidding process. Strategic Sourcing also involved the development and promotion of standardized processes, best practices, training/skills development, and other organizational issues to help better align buying teams across the enterprise. The term "Strategic Sourcing" is often misused to describe any electronic or online bidding activity conducted through an eSourcing technology, even when there is little strategic effort included.

Sourcing OptimizationInvolves the application of powerful optimization algorithms to evaluate extensive data inputs and scenario constraints to generate the "optimal" decision on which supplier(s) should be awarded the business. Sourcing Optimization is best utilized in sourcing activities where the buying organization is focused on the total value delivered to the organization, rather than just achieving a lowest price for supply.

Global SourcingThe sourcing and procurement of goods and services from various geographical locations with the goal of obtaining additional cost savings, efficiencies, or other benefits from suppliers in those regions. Low-Cost Country Sourcing - The activity of procuring goods or services from countries having lower labor and production costs, as a cost-cutting measure. Low-cost country sourcing is a component of an overall global sourcing strategy.

eSourcingShort for "electronic sourcing", it is enabling the sourcing process via an online, web-based application. eSourcing allows buyers to submit their items for bid through a web-based interface, then invite suppliers to view, enter, and submit their bids through that interface. Many types of eSourcing tools and applications exist in the market, ranging from basic functionality to robust, best-in-class and more advanced eSourcing capabilities.

Collaborative SourcingAn emerging partnership approach where disparate buying teams (from within the same organization or from different companies), who are sourcing the same or similar goods and services from the same types of suppliers, combine their RFPs and sourcing needs into the same sourcing event. Goals of collaborative sourcing may include enhancing overall supply chain efficiencies, driving greater cost reductions through more volume-based discounts and indirect cost savings, and optimizing the supplier network.

Advanced SourcingSourcing that is further enhanced by involving greater collaboration with suppliers, analysis of bids that consider both price and non-price factors, applying optimization to arrive at the best sourcing decision across all items and suppliers, and deploying a process that is more centralized and makes use of best practices.

[Refer to : Advanced Sourcing Results Page]

SourcingIn business, the process and set of activities related to researching, evaluating, and selecting suppliers from which to procure goods and services. Sourcing is related to both the procurement and supply chain management functions within an organization.

[Refer to : SciQuest's Advanced Sourcing white paper]