Purchasing glossary
Are you unfamiliar with all the terms, acronyms and expressions used in the world of purchasing?
Our Purchasing Glossary has been designed to simplify the sometimes complex terms used in the world of purchasing, making it easier to understand this technical language.
In this glossary you will find :
💡 Clear, precise definitions
💡 In-depth explanations for optimum understanding.
💡 Frequent updates to stay ahead of the curve.
Purchasing glossary
A
Responsible purchasing
Responsible purchasing refers to a company's purchases that respect its social and environmental responsibilities.
Global buyer
Responsible for one or more product categories (other term: category manager), and initiates the purchasing strategy for them (gives local buyers the steps to follow).
Local buyer
Responsible for purchasing within a plant (multi-category, one plant) and manages relations with local suppliers.
AOP (Annual Operations Planning)
BUDGET (detailed projection of all estimated revenues and expenses).
Sourcing
Procurement is different from purchasing.
- Purchaser: order and inventory management
- Buyer: choice of suppliers, management of price conditions, lead times, etc.
B
Bill Of Material (BOM)
Nomenclature in French, designates all the elements (components) that make up a finished product. For example, the BOM of a car would be the list of all its components.
Purchase Order (PO)
Document managed by a supplier, enabling orders (volumes) of products to be placed in accordance with the terms of a contract.
C
Central purchasing
Organization that centralizes purchasing for other companies. By leveraging volume effects, a central purchasing group can obtain better commercial terms and conditions for its member customers.
Convenience
Term corresponding to a product and mainly used in the retail sector (e.g. butter, chocolate, sugar, plastic, etc.).
Contract
Document drawn up between a buyer and a supplier specifying the purchasing terms and conditions:
- Supplier details
- Product and specifications
- Volume
- Price (with or without cost model, indexed or not)
- Period of validity
D
Purchasing Manager
Purchasing function within the management committee. He defines (in collaboration with the global buyers) the company's purchasing policy and ensures that it is implemented.
E
European Article Number (EAN)
European article code for a given reference. It is used in industry and commerce to identify an article.
F
G
H
I
Incoterm
"International Commercial Terms" refers to the rules and terms applied to international trade. For example: EXW (Ex Works) corresponds to factory price.
K
Key Performance Indicator (KPI)
Performance indicators, also known as KPIs (Key Performance Indicators), can be defined as a means of measuring results against defined objectives.
L
Quantity smoothing
Smooth out the quantities ordered from a supplier over a given period (example: order 1,200 tonnes over 1 year, 100 tonnes per month).
M
Purchase currency
Pricing in 3 different currencies:
- Purchasing currency (I buy the commodity in USD)
- Local currency (my factory is based in Canada, CAD)
- Group currency (the head office is located in France, EUR)
Multi-commodity
Several raw materials assembled to create a product (e.g. chocolate is a blend of several commodities: sugar, butter, cocoa).
N
Non Disclosure Agreement (NDA)
Confidentiality agreement. This is a legal document between two parties, designed to ensure the confidentiality of an exchange, document or collaboration.
O
Price offer
A document sent by a supplier to its customer to present a price proposal (response to a call for tenders).
P
Supplier panel
All suppliers selected within a family or category, capable of producing identical or equivalent parts.
Purchasing policy
The set of objectives and strategies that a purchasing department sets itself to serve the company's project.
Price
It can be expressed in several ways, with or without a cost model, indexed or not:
- Cost model: breakdown of a product's final price (commodity price, processing price, transport price, etc.).
- Without cost model: the buyer has no visibility on the price breakdown (final price only).
- Indexed: dependent on market fluctuations
- Non-indexed: fixed price defined with the supplier
Purchasing Price Variance (PPV)
Purchase price variance refers to the difference between the actual purchase price of a product, component or material, compared with the standard price defined in the system.
Q
R
Buyer-supplier relations
The relationship between a buyer and a supplier has a specific character, since it combines :
- The need for trust (the buyer trusts the supplier to respect deadlines and quality, for example)
- An economic relationship (the supplier wishes to be paid for its products and/or services)
S
T
Dashboard (TB)
A performance monitoring and management tool that provides a global view of the company's activity (grouping of KPIs).
Purchasing coverage rate
Percentage of coverage in relation to production needs (e.g.: I need 1000 tons, I have contracted 800 tons, I am 80% covered, there is still 20% to cover).
V
Added value
Operations carried out by the company on raw materials (transport, production, assembly, packaging, labeling, etc.).
Supplier watch
Keeping abreast of new suppliers, technological advances, innovations, etc., in order to take advantage of them.
Market watch
The act of staying informed about a given market, its main players, its locations... in order to take advantage of it.
W
