What is Cost Avoidance? Definition What is cost avoidance? In simple terms, it is measures taken to prevent costs from being incurred. This could be in the form of reducing waste, improving efficiency, or anything else that would reduce the amount of money spent unnecessarily. There are many different ways to achieve cost avoidance, but
What is Savings Tracking? Definition Savings tracking is the process of monitoring your personal finances in order to save money. This can be done through a number of methods, such as setting up a budget, tracking spending, and setting financial goals. While it may seem like a daunting task, savings tracking is actually a very
What is Maverick Buying? Definition Maverick buying is a term used to describe the act of making a purchase outside of the company’s usual purchasing process. Maverick buyers are usually employees who have authority to make purchases on behalf of their company, but choose to do so without going through the proper channels. Maverick buying
What is Working Capital? Definition Working capital is a metric used to gauge a company’s short-term liquidity and its ability to cover operational expenses. It’s important to note that working capital is different from cash flow. While cash flow measures all of the money coming in and out of a business, working capital only looks
What is Whole Life Costs? Definition Whole life costs (WLC) is a system of calculation used by businesses to understand the financial impact of their product or service over its entire life cycle. This costing method takes into account all aspects of a product or service, from development and production through to delivery, use, and
What is Volatile Spend? Definition You’ve likely heard of volatile spend before, but do you really know what it is? Volatile spend is defined as any money that your company spends on a regular basis that can fluctuate greatly from month to month. This type of spend includes things like inventory, marketing, and even employee
What is Whole Life Costing? Definition Whole life costing (WLC) is a tool used to assess all costs associated with owning, operating and maintaining an asset over its entire life. It can be used for tangible assets such as buildings, bridges and vehicles, or intangible assets such as software systems or intellectual property. The aim
What is Value For Money (Vfm)? Definition When it comes to making purchasing decisions, we often ask ourselves “is this item worth the price?” In other words, are we getting good value for our money? This concept is known as value for money (VfM) and can be applied to anything from houses and cars to
What are Direct Material Costs? Definition In business and accounting, direct material costs are the cost of the materials used in the manufacture or production of a product. These costs are directly traceable to the finished product and can be easily accounted for in the financial records. Direct material costs can include the cost of
What is Spend Management? Definition Spend management is the process of strategically managing your company’s spending in order to reduce costs and improve efficiency. It involves understanding where your company is spending money, setting limits on what can be spent, and carefully monitoring spending to ensure compliance. There are many different aspects to spend management,
What are Transaction Costs in Procurement? Definition Introduction When it comes to business, there are all sorts of costs associated with running and maintaining a successful operation. But what are transaction costs in procurement? In short, transaction costs are the fees and commissions that are paid during a business transaction. This can include anything from
What is a Rebate? Definition A rebate is a discount on the purchase of an item, typically given when the customer completes a specific task set forth by the company, such as filling out a survey or sending in proof of purchase. In order to redeem a rebate, the customer must follow the instructions included
What is a Public Sector Buyer? Definition A public sector buyer is an individual or organization that purchases goods or services on behalf of a government entity. Public sector buyers are responsible for ensuring that the products and services they purchase meet the needs of the government entity they represent and are procured in a
What is Intangible Cost? Definition Introduction In business, the term “intangible costs” refers to all expenses that don’t have a physical form. These can include the costs of research and development, intellectual property, advertising, and employee training. While some intangible costs can be difficult to quantify, they are nonetheless real expenses that must be considered
What is Firm Price? Definition When it comes to pricing, there are a lot of terms that get thrown around. Cost-plus, value-based, and firm price are just a few. So, what is firm price? In short, firm price is a type of pricing where the buyer and seller agree on a set price for goods
What is Dynamic Discounting? Definition Dynamic discounting is a type of early payment discount that is offered to buyers based on the buyer’s ability to pay sooner than the contracted terms. The idea behind dynamic discounting is that the earlier the buyer can pay, the more cash flow the seller has to invest in other
What is an Estimate in Business? Definition Estimate in business refers to the value or quantity of something that is approximate and not exact. It is a statement or calculation of expected costs, revenues, or profits. In business, an estimate is based on past experience and knowledge of current trends. It is generally used when
What is Cost Plus? Definition Cost plus is a pricing method where the selling price of a product or service is set at the cost of production plus a markup percentage. This type of pricing is common in retail and can be seen as either a fixed price or an ongoing fluctuating price. While this
What is Cost Of Goods Sold (Cogs)? Definition What is cost of goods sold (COGS)? Cogs refers to the direct costs associated with producing a product or service. This includes the cost of materials, labor, and overhead. In accounting, COGS is considered an expense and is recorded on the income statement. The purpose of recording
What is Cost Modelling? Definition Cost modelling is the process of estimating the future costs of a product or service. This can be done for a number of reasons, such as to price a product or service, to compare the cost of different options, or to forecast the cost of production. There are many different
What is Cost Estimate? Definition When it comes to manufacturing, one of the most important things to keep in mind is cost estimation. After all, you need to know how much it will cost to produce your product before you can even begin to price it. But what exactly is cost estimation? In this blog
What is Forecasting In Procurement? Definition Forecasting in procurement is the process of estimating future demand for goods or services. The goal of forecasting is to ensure that the correct level of resources are available when needed, while avoiding overstocking or understocking. Procurement forecasting can be done using a variety of methods, including trend analysis,
What is Cost Reduction? Definition Cost reduction is a process where businesses attempt to minimize expenses and waste in order to increase profits. The goal is to find ways to do more with less, so that resources can be used more efficiently. There are many different ways to reduce costs, but it’s important to remember
What is Index Pricing? Definition Index pricing is a pricing strategy used by companies to set the price of their products or services. This type of pricing is based on an index, which is a number that represents the average price of a good or service in a given market. Index pricing is often used
What is Agile Spend Management? Definition Agile spend management is a new way of thinking about how organizations manage and control their spending. In the traditional model, organizations typically have a centralized procurement department that manages all spending. This can be very inefficient, especially if different departments have different needs. With agile spend management, each
What are Life Cycle Costs? Definition Life cycle costing (LCC) is an important concept in business that looks at the total cost of ownership for a product or service. This includes all costs incurred from the initial purchase to the eventual disposal of the item. LCC is used by businesses to make informed decisions about
What is Bottom Line? Definition Most businesses have one primary goal: to make money. But how do they go about doing that? The answer lies in the bottom line. In business, the bottom line is a term used to describe a company’s net income, or the total amount of money left over after all expenses
What is Cost Analysis? Definition Cost analysis is the process of allocating resources and assessing the financial feasibility of a project. In other words, cost analysis is the practice of evaluating a project to determine if it is worth undertaking. Projects can be anything from building a new factory to launching a new product. Cost
What is Fixed Price? Definition In business, the term “fixed price” takes on a variety of different meanings. Sometimes it refers to the price of a good or service that is set and cannot be changed. Other times, it refers to a contract in which the price is set but can be adjusted based on
What are Landed Costs? Definition In business, the term “landed cost” is used to describe the total cost of a product or shipment when it arrives at its destination. This includes the cost of the goods themselves, as well as any taxes, duties, shipping, and insurance fees that may be incurred along the way. Landed
What is Life Cycle Costing? Definition The term “life cycle costing” (LCC) is one you may have come across in your business travels, but what does it actually mean? In short, life cycle costing is a tool used to assess the total cost of ownership (TCO) of an asset over its lifespan. This includes everything
What is a P-Card? Definition A P-Card, also known as a procurement card or purchase card, is a type of credit card that allows businesses to streamline and automate their purchasing processes. P-Cards can be used for small purchases or for large contracts. Typically, there is a limit on the amount that can be spent
What is Linear Pricing? Definition Linear pricing is a pricing strategy where price increases or decreases in direct proportion to the quantity of goods or services purchased. This type of pricing is common in businesses that sell commodities or other undifferentiated products. While linear pricing is straightforward and easy to understand, it can often be
What is Long Tail Spend? Definition What is long tail spend? It’s a term used in business and procurement that refers to the aggregate of low-volume, indirect purchases that a company makes. Long tail spend is often 10-15% of a company’s total annual spend, but can be as high as 30-40% for certain industries. While
What is a Procurement Card, Purchasing Card, P Card? Definition A procurement card, also known as a purchasing card or P card, is a type of credit card that is used by businesses to make purchases. The card can be used for both small and large purchases, and it can be used by employees of
What is Purchase Price Variance (Ppv)? Definition Purchase price variance, or PPV, is the amount of money that a company saves or overspends on inventory due to changes in the prices of their raw materials. This calculation can be done for an entire company or for specific products. The information is useful for budgetary purposes
What is a Purchasing Card? Definition A purchasing card, also called a p-card or procurement card, is a type of business credit card that allows employees to make business purchases without going through the traditional requisition process. Purchasing cards are usually issued to employees who make frequent business purchases, such as those in the purchasing
What is a Spend Cube? Definition A spend cube is a data visualization tool used to analyze and understand an organization’s spending. Spend cubes can be used to track spending across different time periods, departments, and/or vendors. This type of tool can be helpful for budgeting and forecasting purposes, as well as identifying areas of
What is Tail Spend? Definition If you’re in the business world, you’ve probably heard the term “tail spend” before. But what is it, really? In short, tail spend is the money that businesses spend on goods and services that are not essential to their operations. This can include anything from office supplies to travel expenses.
What are Kpis? Definition KPIs, or key performance indicators, are a type of metric used to measure and track progress towards specific business goals. They provide insight into whether or not a company is on track to meet its targets, and can be used to identify areas of improvement. There are many different types of
What is Committed Spend? Definition Committed spend is the total amount of money that a company has pledged to spend on goods or services over a set period of time. This can be broken down into two categories: -Capital expenditure: This is money spent on long-term assets, such as buildings, vehicles, or machinery. -Operating expenditure:
What is Due Diligence? Definition What is due diligence? It’s a concept that is often used in business, but what does it actually mean? Due diligence is the process of investigating a potential investment or business opportunity. It’s important to do your due diligence before making any major decisions, as it can help you avoid
What is Earn-Back? Definition What is earn-back? In business, earn-back is defined as “the amount of money that must be earned in order to cover the initial investment in a project or venture.” For example, if a company spends $1 million on a new project, the earn-back period would be the length of time it
What are Contracting Authorities? Definition When it comes to government contracting, there are a lot of different terms and organizations that can be involved. One of the most important groups in the process is known as contracting authorities. But what exactly are they? In this blog post, we will explore the definition of contracting authorities
What is an Approval Workflow? Definition An approval workflow is a process in which a document or request is passed through a series of steps before it is finally approved. Each step in the workflow is typically performed by a different individual or group, and each step must be completed before the next one can
What is an Approved Supplier? Definition In business, the term “approved supplier” is used to refer to a supplier that has been vetted and pre-qualified by a company or organization. The approval process usually involve some form of due diligence, such as a review of the supplier’s financials, quality control procedures, and/or references. An approved
What is Artificial Intelligence (AI)? Definition Artificial intelligence is a process of programming a computer to make decisions for itself. This can be done through a number of methods, but the most common is through the use of algorithms. Algorithms are a set of rules that are followed in order to complete a task. They
What is Best Practice? Definition Best practice is defined as doing something the way it is supposed to be done. It is based on the knowledge and experience of those who have gone before us. In order to achieve best practice, we must constantly strive to learn and improve. We must also be willing to
What is Direct Spend? Definition Direct spend is a term used in supply chain management that refers to the total amount of money that a company spends on goods and services that are directly related to its production process. This includes raw materials, components, and labor. In other words, direct spend is the money that
What is an Expression Of Interest? Definition Are you interested in applying for a job, but not sure how to get started? An Expression of Interest (EOI) may be just what you need. An EOI is a short document that shows your intent to apply for a particular job or project. It’s usually one page
What is a Key Performance Indicator? Definition A key performance indicator (KPI) is a metric used to evaluate an organization, business unit, or individual’s performance. A KPI measures progress and success in relation to stated objectives. There are many different types of KPIs, and each organization will have different KPIs based on their specific goals
What is a Key Supplier? Definition In business, the term “key supplier” is used to describe a company that provides an essential product or service to another company. A key supplier is typically a strategic partner that is essential to the success of the business. A key supplier may be a producer of raw materials,
What is Competitive Procedure With Negotiation? Definition Competitive procedure with negotiation is a type of public procurement procedure, under EU law, whereby the contracting authority (CA) conducts a negotiated procedure after having conducted a competition among potential contractors. The main difference between this procedure and the other types of procedures is that, after the competition
What is Machine Learning (ML)? Definition Machine learning is a subset of artificial intelligence (AI) that provides computers with the ability to learn and improve from experience without being explicitly programmed to do so. The term “machine learning” was coined in 1959 by Arthur Samuel, an American computer scientist who pioneered the field of AI.
What is a Request For Quote (RFQ)? Definition In business, the request for quote, or RFQ process, is when a company solicits bids from vendors for a product or service. The RFQ usually follows an RFP (request for proposal), in which the company has already determined its needs and is now looking for the best
What is a Request For Proposal (RFP)? Definition A request for proposal, or RFP, is a document that solicitations from suppliers in order to obtain pricing and other important information about products or services. The RFP process is used by businesses in many industries, including advertising, architecture, construction, and information technology. In order to create
What is a Purchase Order Form? Definition A purchase order is a request that initiates the buying process of goods or services. It’s a formalized request that includes all the important details of the transaction, such as what’s being bought, how much it costs, and when delivery is expected. A purchase order form is the
What is Selection Criteria in Procurement? Definition The world of procurement is filled with jargon and technical terms that can be difficult to understand. In this blog post, we will demystify one of these terms: selection criteria. In the most basic sense, selection criteria are the guidelines that a procurement team uses to choose between
What is RFx? Definition RFx stands for Request for (anything). It’s a generic term used in procurement for the process of inviting suppliers to submit a proposal or quotation for the supply of goods or services. The RFx process is used to help organizations select the best supplier to meet their requirements. It can be
What is Stakeholder Engagement? Definition What is stakeholder engagement? It’s a term that you might have heard thrown around but what does it actually mean? In business, a stakeholder is anyone who has an interest in the company or who can be affected by the company’s actions. This includes but is not limited to shareholders,
What is Supplier Benchmarking? Definition Supplier benchmarking is the process of comparing a company’s performance against other companies in the same industry or market. The aim is to identify areas where the company can improve its performance and become more competitive. This process can be applied to any area of a company’s operations, from manufacturing
What is Supplier Importance? Definition In business, the term “supplier” is used to describe a company or individual that provides goods or services to another company. A supplier can be an important part of a company’s operations, and the relationship between a company and its suppliers can have a significant impact on the company’s bottom
What is Supplier Performance Management? Definition Supplier performance management (SPM) is the process of assessing, measuring, and improving supplier performance. The goal of SPM is to ensure that suppliers are meeting all requirements and expectations in terms of quality, cost, delivery, and service. There are many different methods for assessing supplier performance, but the most
What is Supplier Performance? Definition Supplier performance is a measure of how well a supplier meets the requirements specified in the contract. The requirements can be quality, delivery, cost, or other measures. A supplier’s performance is important to the customer because it can affect the quality of the product, the price, and the delivery time.
What is a Request for Information (RFI)? Definition A request for information (RFI) is a type of procurement process in which a company or individual solicits information from potential suppliers about certain products or services. This process is often used when a company is seeking bids for a project or contract and wants to learn
What is Benchmarking? Definition Have you ever wondered what goes into the design of a product? How do companies know if their products are meeting customer expectations? The answer is quality benchmarking. Quality benchmarking is the process of comparing your product’s performance against similar products in the market. The goal is to identify areas where
What is a Supplier? Definition In business, the term “supplier” is used a variety of ways. Sometimes it’s used to describe the company that provides the raw materials for your product. Other times, it’s used interchangeably with “vendor,” meaning the company you buy finished goods from. In this article, we will explore the different types
What is Total Quality Management (TQM)? Definition Total Quality Management, or TQM, is an approach to management that seeks to integrate all aspects of an organization in order to improve quality and performance. The essential idea behind TQM is that quality is everyone’s responsibility and that all employees need to be involved in the quest
What is Vendor Onboarding? Definition Introduction Vendor onboarding is the process of onboarding new vendors and suppliers to your company. This process can be time-consuming and complicated, but it’s essential to ensure that your new vendor partners are a good fit for your business. There are a few key steps in vendor onboarding, including: 1.
What is a Supplier Portal? Definition A supplier portal is an online system that connects suppliers with buyers. It allows suppliers to list their products and services, and buyers to browse and compare different suppliers. A supplier portal can also provide other features and tools, such as a request for proposal (RFP) system, contract management,
What is Vendor Lifecycle Management? Definition Many organizations struggle to manage their vendor relationships effectively. In fact, according to a study by Forrester, “63% of enterprises struggle to keep track of which vendors they use and only 26% have a centralized view of all vendor contracts.” Vendor lifecycle management (VLM) is a process for assessing,
What is Value For Money? Definition The phrase ‘value for money’ is one that is used often, but what does it actually mean? In this blog post, we will explore the definition of value for money and how it can be applied in different scenarios. We will also look at some examples of how value
What is a Vendor Performance Scorecard? Definition A vendor performance scorecard is a tool used to compare and contrast the relative performance of different vendors. The scorecard can be used to track any number of performance indicators, from customer satisfaction to on-time delivery. The benefits of using a vendor performance scorecard are many: by taking
What is a Vendor Portal? Definition In the business world, a vendor portal is a website or web application that allows vendors to securely access information and conduct transactions with an organization. The term “vendor” can refer to suppliers, contractors, or any other type of business partner. A vendor portal is typically used to streamline
What is a Vendor? Definition A vendor, also known as a supplier, is a person or company that provides goods or services to another person or company. The term can be used in a number of different ways, but most commonly it refers to someone who provides raw materials, components, or finished products to manufacturers,
What is Post Tender Negotiation (PTN)? Definition Post Tender Negotiation (PTN) is the process of negotiating with suppliers after the completion of a tender process. It is a way to get the best possible terms and conditions for your company, and can be used for both commercial and non-commercial contracts. PTN can be used to
What is Spend Analysis? Definition Spend analysis is the process of collecting and analyzing data about an organization’s spending patterns. The goal of spend analysis is to understand how an organization is spending its money and to identify areas where savings can be achieved. Spend analysis can be performed at different levels, such as departmental,
Do You Measure Procurement Savings? Every company prepares annual accounts that summarise its financial health and over time comparing them is a measure of how well its doing relative to previous years. These accounts are a top-level summary of the numbers, may be viewed externally and are limited in the amount of detail that they
How To Track Procurement Savings Just as every company tracks the revenue generated by their sales and marketing departments so they can also track the cost savings delivered by their finance and procurement departments. Although any cost savings delivered may look to be significantly less than the sales revenues generated over a similar period, they
How To Calculate Procurement Savings No matter what industry a business is in, it requires specific items to operate. Materials, equipment, and primary products are all required. As well as repairs, training, and other services, companies sometimes require a wide range of services to maintain them. Such costs can accumulate, especially if they are not
What is The Procurement Savings Tracking Process? In the same way that companies track the revenue generated by their sales and marketing departments, they can also track the cost savings delivered by the finance and procurement departments. Although cost savings may appear to be much smaller than sales revenue over the same period, they can have an equally
Cost Avoidance Vs Cost Reduction: What’s The Difference? When it comes to business, cutting costs and avoiding unnecessary expenditures is obviously a smart investment. Your profits will be higher if you can maintain a higher level of revenue and cash flow. Employees are often required by their employers to classify the financial benefits of capital investments or organisational initiatives as cost reduction or cost
How Do You Measure Procurement Savings? Each company prepares annual accounts that summarize its financial performance, and over time, comparing them is a measure of how well it is doing relative to previous years. There is a limited amount of detail in these accounts, and they are a top-level summary of the numbers that can