RESOURCES

Purchasing glossary

The terms used on this site, defined in one or two sentences. 39 terms

A

ABC class: Ranking of items or suppliers by their weight in spend: A for the most significant, C for the least.
Announced increase: The increase stated by the supplier, usually calculated on its price list without regard to what you buy.
Annualised impact: The effect of a price change expressed as an amount over one year of purchases.

Buying ahead of an increase: Purchase brought forward to build stock at the current price, before an announced increase takes effect.

Carriage-paid threshold: The order amount or quantity above which the supplier pays for transport.
Conditional saving: A saving that still depends on a condition, most often a volume commitment to be met.
Cost of ownership: Total cost of holding stock: tied-up cash, storage, insurance, losses and obsolescence.

Delivered price: The purchase price plus the costs needed to deliver the goods to the site, according to the chosen Incoterm.
Description: Descriptive label of an item. It often contains dimensions, a material or a brand.
Discount: A reduction granted on the list price, expressed as a percentage or an amount.

Entity: A company or site of a group that buys in its own name, often with its own ERP.
ERP: Enterprise resource planning system: the software that records items, orders, receipts and invoices.

Human decision: A choice made by a person when an automatic rule cannot settle a case, for example between two candidate items.

Incoterm: An international trade rule, published by the International Chamber of Commerce, that allocates costs, risks and formalities between seller and buyer.
Indexation formula: A contract clause that adjusts a price according to one or more indices.
Intercompany: Describes a purchase or sale flow between two companies of the same group.
Intra-group resale: Resale of goods by one entity of a group to another entity of the same group, usually with a margin.
Item: A product listed in a company's ERP, identified by its own item code.
Item matching: The link between a supplier reference and the corresponding item in the ERP.

Landed costs: Costs added to the purchase price to bring goods to the site: transport, customs, insurance, handling.
List price: The price shown in the supplier's price list, before any discount. Also called gross price or catalogue price.

Matrix price list: A price list laid out as a cross table, for example one price per item and per entity or country.

Packaging unit: The quantity contained in the supplier's sales unit: a box, a roll, a drum.
Pareto: An analysis that ranks items by decreasing weight in spend to isolate the small number that accounts for most of it.
Price list version: The state of a price list at a given date. Comparing two versions measures what changed.

Raw material index: A published index that tracks the price of a raw material and serves as a reference for adjusting a price.
Read-only: Access that allows data to be viewed but not changed.

Secured saving: A saving observed on purchases already made, which no longer depends on any condition.
Simple average: Average of price changes in which every item counts equally, whatever the volume purchased.
Special price: A price granted by a supplier as an exception, for a given customer, item or period.
Spread between sites: Difference in the price obtained for the same item between the entities or sites of a group.
Stock coverage: The period during which available stock covers expected consumption.
Supplier reference: The code under which the supplier identifies a product in its price list.

Unique key: A column, or combination of columns, that identifies each line of a price list without ambiguity.

VAT: Value added tax. A price may be stated excluding or including tax.
Volume commitment: A quantity a buyer commits to order over a period in exchange for a price or a discount.

Weighted increase: Average increase calculated by giving each item a weight proportional to the volumes actually purchased.