Dictionary of Procurement Terms

A company that adds a feature or service to an existing good or service bought from another source and resells it as an integrated good or improved service.

A tax based on the value added during each stage of a product’s production or distribution. Common throughout the European Union.

A business strategy that sets a product or service price based on the benefit it provides the customer, rather than on the cost of the product, market price, competitor, or historical price. Value-based pricing includes advertising or surveying to determine or measure the anticipated benefit the customer will receive and align the value delivered. Pricing is based on the perceived or actual value that the end user will receive.

An insurance policy in which the sum to be paid in case of loss is fixed by the terms of the policy; especially relating to fire insurance.

A business expense such as raw materials, utilities, or payment to hourly employees that changes in proportion to the level of output.

A pricing strategy in which a supplier is willing to sell a good or service to a buyer at a lower profit margin or even at a loss in the hope that the buyer will purchase other goods or services at a higher profit margin for the seller.

The minimization and control of new materials, parts, equipment, procedures, and methods used to produce a good or service through standardization, simplification, and specialization.

A seller of goods or services whereby the exchange is solely transactional. “Supplier” is the preferred term when a longer-term or strategic relationship is involved. See also: Supplier.