Procurement Terms You Need to Know

Procurement terms are everywhere in a supply chain operation. Learn some key purchasing and procurement words that every supply chain and sourcing team should be familiar with by reading this article.

Procurement is garnering a lot of attention as companies strive to improve the overall efficacy and efficiency of their supply networks. Every procurement expert should understand the meaning of key language used throughout procurement documents to gain a better understanding of the supply process.

Supply Chain Sourcing

Sourcing is the process of procuring commodities to support a company’s operations. When creating a sourcing strategy, there are several factors to consider, not only pricing.

Procurement professionals, for example, should be aware of the “Price Iceberg,” which encompasses delivery, delays, and handling, among other things.

Companies that wish to stay competitive need a well-structured supply chain sourcing strategy. It will save money, eliminate negative consequences, and provide high-quality goods and services.

Key Performance Indicator

KPIs, or Key Performance Indicators, are a way to gauge how well a task is performing. It determines whether or not the aspect is successful, as well as how successful it is. Every company process needs evaluation to see if it is effective or not.

Procurement has its own set of requirements and procedures. As a result, creating proper KPIs is critical for developing a strategy. It’s also critical to keep an objective eye on and discuss developments.

Spend Analysis

The approach and practice of acquiring and evaluating data from a company’s expenses with the goal of enhancing monetary performance, spending less, and leveraging optimal orders is the spend analysis.

Managers can use a spend analysis to answer queries like: what are my biggest expenses? What are the contracts that require the greatest money? Is the performance worth the money?

Expend analysis is primarily concerned with increasing profitability. Reduced lead times, optimized contracts, improved strategic sourcing, and improved supplier management can all help.


E-procurement is a procedure in which businesses use the internet to order and purchase materials and services. It uses a closed system, which is only accessible to registered consumers and users, as opposed to e-commerce. As a result, the main benefit of e-procurement is that it allows buyers and suppliers to establish a direct connection, making it easier to engage and conduct activities such as bids, orders, and e-mails.

Lead Time

The time it takes for a product to arrive at its destination after a corporation places an order is known as Purchase Order Lead Time (POLT). To put it another way, this is the expected time it will take to receive an order after it has been placed.

The time it takes for a purchase order to be fulfilled varies greatly, depending on a variety of circumstances. For instance, the quality of the goods, the quantity on hand at the supplier’s warehouse, the location of the supplier’s warehouse, and even seasonal traffic and temperature factors.


MRO stands for Maintenance, Repair, and Operations, and it refers to everything that has to do with repairs and production support. Although it has a direct impact on output, it is an indirect buy in procurement.

It’s a vital part of a company’s procurement because it ensures that several departments remain operational. MRO is a big percentage of the budget, even if it is an indirect purchase.


The activity of managing the manufacturing of commodities is the PCP (Production, Planning, and Control). It’s a great method for the industry. Managers can use it to plan, regulate, and optimize production.

As a result, PCP’s goal is to make decision-making easier and hence boost efficiency, profitability, and stand-alone results. In essence, it is a logistical procedure that ensures that the product is created and delivered correctly.

Procurement Terms in Sum

It’s important to know the procurement terms to understand better the process and how professionals conduct business. Not understanding the procedures and terminology may lead to mistakes and problems during the activity.

    Carol Gameleira

    Carol Gameleira

    Graduated in Public Relations and post graduated in Marketing by ESPM, Carol possess 7 years of experience in the area of Comunications and Digital Marketing, acting in the Artificial Inteligence and Supply Chain realm since 2020.