6 most important procurement terms you should know

6 most important procurement terms you should know

  • Post published:June 9, 2021
  • Post category:eProcurement
  • Reading time:3 mins read

6 most important procurement terms you should know

1. eProcurement

eProcurement is the process of conducting B2B procurement processes via procurement software solutions such as TenderBoard. eProcurement Systems help companies be more effective and efficient as the processes are controlled and automated. These processes include sourcing activities, creating purchase orders, and getting approvals for invoices.

2. Buyer and Seller

These terms typically refer to the main parties involved in the procurement process.

A Buyer refers to the business or organisation that procures goods or services.

Sellers are businesses who are seeking to provide a product or service to Buyers. Sellers may also be called Suppliers or Vendors.

Tenders posted by Buyers in TenderBoard. Source: TenderBoard

3. Sourcing

Sourcing is the process by which buyers research, evaluate and purchase goods and services for their companies. As part of this process, they may obtain information about the suppliers through a variety of means, including through web research, word of mouth recommendations and even through sourcing events.

Sourcing events include several types of requests during the procurement process. Some of these include requests for information (RFI), requests for proposal (RFP), request for quotations (RFQ), and requests for tender (RFT).

4. Qualified vendor

A qualified vendor is one that has been identified by the buyer to have met the minimum requirements to be placed on a pre-approved vendor list. Typical considerations include experience with the vendor through previous engagements, financials/solvency, track record/testimonials, responsiveness, quality of products/services, certifications, staff strength and retention. Once qualified, the vendor may enjoy better access to the buyer’s procurement needs, as buyers may prefer to keep their pre-approved vendors list small. Note that the qualification process may be repeated on a regular basis, eg annually. 

Buyers may list their tenders via eProcurement software to tap into a marketplace of sellers.

5. Spend analysis

Buyers use spend analysis to gain insights into their spending to identify opportunities for spend consolidation and savings. This usually encompasses analysing the spend breakdown by vendor, category and even departments. 

6. Best and final offer (BAFO)

Expect negotiations as part of the procurement process. These may cover non-price areas as well, including the contract and delivery terms.

Clarifications with the suppliers, receiving submissions, as well as managing the negotiations are essential parts of Supplier Management to help buyers streamline their business processes.

Sellers may be asked by buyers to submit a BAFO as part of a shortlisting or negotiation process. 

Knowing these terms is highly important to get a better understanding of the procurement process. Make sure to know what these terms mean before starting your journey as a procurement professional.