Dictionary of Procurement Terms

A calculation used to determine the overall cost of a good or service throughout its lifecycle by adding to the initial purchase price all fixed and variable costs to own and operate that good or service, minus any residual value, if any.

A management approach based on the principle that all employees must maintain high work standards in every aspect to achieve longterm success through customer satisfaction. See also: Continuous Improvement.

A concept of purchasing, the objective of which is to plan as much in advance and provide for the broadest scope of purchasing and purchasing-related activities as possible to minimize costs, increase managerial effectiveness, and improve operational efficiency. This concept can also apply to requirements planning, logistics, and general procurement management.

Determining the status of a shipment that has been reported as undelivered.

A non-interest bearing, negotiable bill of exchange or draft covering the sale of goods drawn by the contractor and accepted by the purchaser; may include the purchaser’s specifications in place of payment.

A discount or reduction from a list price based on the position of the purchaser in the distribution channel, for example, as a distributor, retailer, or original equipment manufacturer.

Information that a company retains internally to maintain an economic advantage over its competitors. See also: Proprietary (Information), Confidential Information

An agreement between a buyer and seller about the meaning of certain phrases, words, and characteristics of a specific good or service.

The broadest classification applicable to purchase transactions with reference to understandings between buyer and supplier, either as to the meanings of certain abbreviations, words, or phrases, or to customs applicable to transactions as established by agreement between the parties, or as established by general usage.