Procurement and Sourcing Strategies
Expert-defined terms from the Professional Certificate in Supply Chain Logistics course at London School of Business and Administration. Free to read, free to share, paired with a globally recognised certification pathway.
Procurement and Sourcing Strategies Glossary #
Procurement and Sourcing Strategies Glossary
1 #
Agile Procurement
Agile procurement is a strategy that involves adapting to changing market condit… #
It focuses on flexibility, collaboration, and innovation to respond to evolving requirements efficiently. Agile procurement often involves short-term contracts, rapid decision-making, and close communication with suppliers.
2 #
Benchmarking
Benchmarking is the process of comparing an organization's performance metrics,… #
It helps identify areas for improvement, set performance goals, and track progress over time. Benchmarking can be used in procurement to evaluate supplier performance, pricing, and quality.
3 #
Contract Management
Contract management refers to the process of creating, negotiating, monitoring,… #
It involves defining the terms and conditions of the agreement, ensuring compliance with legal requirements, monitoring performance, and resolving disputes. Effective contract management is essential for minimizing risks and maximizing value in procurement.
4 #
Demand Forecasting
Demand forecasting is the process of predicting future customer demand for produ… #
It involves analyzing historical data, market trends, and other factors to estimate future sales volumes accurately. Demand forecasting helps procurement teams plan inventory levels, order quantities, and sourcing strategies to meet customer needs efficiently.
5. E #
Procurement
E-procurement, or electronic procurement, refers to the use of digital tools and… #
It includes online sourcing, purchasing, invoicing, and payment systems that enable organizations to conduct procurement activities electronically. E-procurement can improve efficiency, transparency, and collaboration in supply chain management.
6 #
Global Sourcing
Global sourcing is a procurement strategy that involves sourcing goods and servi… #
It allows organizations to access a wider range of suppliers, lower costs, and leverage global market opportunities. Global sourcing requires careful consideration of factors such as geopolitical risks, cultural differences, and logistics challenges.
7 #
Inventory Management
Inventory management is the process of overseeing the flow of goods into and out… #
It involves maintaining optimal stock levels, tracking inventory turnover, and minimizing carrying costs. Effective inventory management helps procurement teams balance supply and demand, reduce stockouts, and optimize working capital.
8. Just #
in-Time (JIT) Procurement
Just #
in-time (JIT) procurement is a strategy that involves ordering and receiving goods only when they are needed for production or sale. It aims to minimize inventory holding costs, reduce waste, and improve efficiency in the supply chain. JIT procurement requires close coordination with suppliers, reliable logistics, and robust demand forecasting.
9 #
Key Performance Indicators (KPIs)
Key performance indicators (KPIs) are quantifiable metrics used to evaluate the… #
In procurement, KPIs may include metrics such as cost savings, supplier performance, lead times, and contract compliance. Monitoring KPIs helps procurement professionals track progress, identify areas for improvement, and drive strategic decision-making.
10 #
Lead Time
Lead time is the period between placing an order with a supplier and receiving t… #
It includes the time required for processing the order, manufacturing or sourcing the product, and transportation to the buyer. Lead time is a critical factor in procurement planning, inventory management, and customer service.
11. Make #
or-Buy Decision
A make #
or-buy decision is a strategic choice between producing a product or service in-house (make) or outsourcing it to a supplier (buy). Organizations consider factors such as cost, quality, capacity, expertise, and strategic alignment when making make-or-buy decisions. The goal is to optimize resources, reduce risks, and enhance competitiveness in the market.
12 #
Negotiation
Negotiation is the process of reaching a mutually beneficial agreement between t… #
In procurement, negotiation often involves price, terms and conditions, delivery schedules, and other aspects of the contract. Effective negotiation skills are essential for securing favorable deals, building relationships with suppliers, and achieving cost savings.
13 #
Outsourcing
Outsourcing is the practice of contracting out specific business functions or pr… #
It allows organizations to focus on core competencies, reduce costs, and access specialized expertise. Outsourcing in procurement may include activities such as sourcing, warehousing, transportation, and logistics management.
14 #
Performance Management
Performance management involves setting goals, monitoring progress, and evaluati… #
In procurement, performance management includes assessing supplier performance, tracking key metrics, and implementing improvement initiatives. Effective performance management helps drive continuous improvement, enhance supplier relationships, and deliver value to the organization.
15 #
Quality Management
Quality management is the process of ensuring that products or services meet or… #
It involves quality planning, quality control, and quality assurance activities to prevent defects, improve processes, and deliver consistent results. Quality management is critical in procurement to ensure that suppliers deliver high-quality goods and services that meet requirements.
16 #
Request for Proposal (RFP)
A request for proposal (RFP) is a formal document used to solicit bids from pote… #
It outlines the requirements, specifications, terms, and evaluation criteria for the procurement project. RFPs help organizations compare supplier proposals, negotiate contracts, and select the best supplier based on price, quality, and other factors.
17 #
Risk Management
Risk management is the process of identifying, assessing, and mitigating risks t… #
In procurement, risk management involves analyzing supply chain risks, developing risk mitigation strategies, and monitoring risk factors to protect against disruptions. Effective risk management helps organizations anticipate challenges, reduce vulnerabilities, and ensure business continuity.
18 #
Supplier Relationship Management (SRM)
Supplier relationship management (SRM) is the practice of building and maintaini… #
It involves segmenting suppliers based on their strategic importance, fostering open communication, and sharing information to drive innovation and continuous improvement. SRM helps organizations strengthen supplier partnerships, reduce costs, and enhance supply chain resilience.
19 #
Total Cost of Ownership (TCO)
Total cost of ownership (TCO) is a financial analysis that considers all costs a… #
In procurement, TCO includes not only the purchase price but also costs such as maintenance, training, transportation, and disposal. Calculating TCO helps organizations make informed sourcing decisions, identify cost-saving opportunities, and optimize value for money.
20 #
Vendor Managed Inventory (VMI)
Vendor managed inventory (VMI) is a supply chain management practice in which th… #
The supplier uses data such as sales forecasts, consumption patterns, and lead times to ensure that the customer has the right amount of stock at the right time. VMI can reduce stockouts, improve inventory turns, and enhance collaboration between buyers and suppliers.
21 #
Warehouse Management
Warehouse management involves the planning, organizing, and controlling of wareh… #
It includes activities such as inventory management, order picking, packing, and shipping to ensure efficient and accurate handling of products. Effective warehouse management is essential for reducing costs, improving customer service, and streamlining supply chain operations.
22. X #
Docking
X-docking is a cross-docking strategy that involves transferring goods directly… #
It allows for fast and efficient consolidation and distribution of products to customers, reducing handling costs and lead times. X-docking is commonly used in industries with high-volume, time-sensitive shipments such as retail and e-commerce.
23 #
Yield Management
Yield management is a pricing strategy that involves adjusting prices based on d… #
It is commonly used in industries such as airlines, hotels, and rental cars to optimize capacity utilization and pricing. Yield management can help procurement teams optimize pricing strategies, manage inventory levels, and improve overall financial performance.
24. Zero #
Based Budgeting (ZBB)
Zero #
based budgeting (ZBB) is a budgeting approach that requires organizations to justify all expenses from scratch each budget cycle, rather than basing them on previous budgets. It involves analyzing costs, identifying needs, and prioritizing spending based on strategic objectives. ZBB can help procurement teams align resources with business priorities, eliminate waste, and drive cost savings initiatives.