Procurement Glossary: 100 Essential Terms
- Michelle M
- 20 hours ago
- 7 min read
Procurement plays a vital role in projects, organizations, and businesses of every size. From sourcing suppliers to contract management, procurement ensures that materials, services, and resources are acquired in a structured, cost-effective, and risk-conscious manner. For project managers, understanding procurement terminology is crucial, since clear knowledge prevents misunderstandings, strengthens vendor relationships, and enhances compliance. This glossary provides 100 key terms, each explained in detail, to help project managers and procurement professionals navigate the complex world of purchasing, supplier management, and contracting with confidence.
1. Procurement
The process of acquiring goods, services, or works from an external source. It involves sourcing, negotiating, and managing suppliers to meet project or organizational needs efficiently.
2. Sourcing
Identifying, evaluating, and selecting suppliers that can provide required goods or services. Sourcing emphasizes strategic decision-making and long-term supplier relationships.
3. Request for Proposal (RFP)
A formal document inviting suppliers to submit proposals for providing goods or services. RFPs detail requirements, timelines, and evaluation criteria.
4. Request for Quotation (RFQ)
A document requesting price quotations from suppliers for specific items or services. RFQs focus primarily on cost rather than broader service capabilities.
5. Invitation to Tender (ITT)
A structured procurement method where suppliers submit detailed bids in response to a tender notice. Often used in government and large-scale projects.
6. Bid Evaluation
The process of assessing supplier bids against defined criteria such as price, quality, compliance, and delivery capability.
7. Supplier Selection
Choosing the supplier that best meets the procurement criteria. This involves balancing cost, quality, capacity, and risk.
8. Contract
A legally binding agreement between buyer and supplier that defines terms, conditions, deliverables, and responsibilities.
9. Purchase Order (PO)
An official document issued by the buyer to confirm an order of goods or services from a supplier under agreed terms.
10. Supplier Relationship Management (SRM)
A systematic approach to managing interactions with suppliers. SRM focuses on collaboration, performance improvement, and long-term partnerships.
11. Vendor
A company or individual providing goods or services under a procurement agreement. Vendors may be manufacturers, wholesalers, or service providers.
12. Procurement Cycle
The end-to-end process of identifying a need, sourcing suppliers, issuing contracts, and managing supplier performance.
13. Strategic Sourcing
A procurement method focused on long-term supplier partnerships, optimizing costs, and ensuring value creation beyond short-term transactions.
14. E-Procurement
The use of digital tools and platforms to automate and streamline procurement processes, such as ordering, approvals, and payments.
15. Procurement Policy
A formal document outlining the rules and procedures that govern purchasing within an organization.
16. Procurement Plan
A roadmap detailing how procurement activities will be executed, managed, and controlled within a project.
17. Competitive Bidding
A process where multiple suppliers compete by submitting bids, ensuring fairness, transparency, and value for money.
18. Tender Document
The official package of requirements, instructions, and conditions provided to suppliers for submitting their bids.
19. Procurement Officer
An individual responsible for managing procurement activities, ensuring compliance, and maintaining supplier relationships.
20. Contract Management
The process of administering contracts to ensure compliance, track performance, and manage risks.
21. Category Management
Organizing procurement activities into categories (e.g., IT, construction, logistics) for more strategic sourcing and control.
22. Preferred Supplier
A supplier designated as the primary choice due to proven reliability, quality, and cost-effectiveness.
23. Supplier Audit
A formal evaluation of a supplier’s operations, processes, and compliance with contractual or regulatory requirements.
24. Supplier Performance Review
A structured assessment of supplier delivery, quality, communication, and adherence to agreed standards.
25. Procurement Risk
Potential threats to procurement success, such as supplier bankruptcy, delivery delays, or price volatility.
26. Contract Negotiation
Discussions between buyer and supplier to finalize terms such as price, timelines, and responsibilities before contract signing.
27. Framework Agreement
A long-term agreement with a supplier that sets out terms for future contracts, often used in government procurement.
28. Single Sourcing
Selecting one supplier exclusively to provide goods or services, often for strategic or quality reasons.
29. Multiple Sourcing
Engaging multiple suppliers for the same goods or services to reduce risks and improve competition.
30. Outsourcing
The practice of contracting external organizations to handle tasks or services that were previously managed internally.
31. In-House Procurement
When goods or services are produced or sourced internally within the organization rather than using external suppliers.
32. Contract Lifecycle Management (CLM)
The process of managing a contract from initiation through execution, performance monitoring, and closure.
33. Procurement Audit
A structured review of procurement activities to ensure compliance, efficiency, and alignment with policies.
34. Direct Procurement
Purchasing goods and services that directly contribute to production, such as raw materials and components.
35. Indirect Procurement
Purchasing goods and services that support operations but do not directly impact production, such as office supplies.
36. Just-in-Time Procurement (JIT)
A strategy where materials are procured only when needed, reducing inventory costs but increasing reliance on suppliers.
37. Ethical Procurement
Ensuring procurement practices are socially responsible, sustainable, and free from unethical practices like exploitation.
38. Sustainable Procurement
Integrating environmental, social, and economic considerations into purchasing decisions.
39. Fair-Trade Procurement
Purchasing from suppliers that adhere to fair labor, environmental, and trade practices.
40. Procurement Strategy
A high-level plan outlining how procurement goals will be achieved in alignment with organizational objectives.
41. Procurement Compliance
Adhering to rules, regulations, and internal policies in procurement activities.
42. Procurement Fraud
Dishonest practices such as bribery, bid rigging, or invoice manipulation within procurement processes.
43. Open Tendering
Allowing any supplier to submit bids for a contract, ensuring transparency and equal opportunity.
44. Restricted Tendering
Inviting only selected suppliers to submit bids, usually based on prequalification.
45. Sole Sourcing
Awarding a contract directly to one supplier without competitive bidding, usually due to unique capability.
46. Blanket Purchase Agreement
A long-term agreement with a supplier to provide recurring goods or services at pre-negotiated prices.
47. Call-Off Order
An order placed under a framework or blanket agreement for specific goods or services as required.
48. Incoterms
International commercial terms that define responsibilities for shipping, insurance, and delivery in global trade.
49. Lead Time
The total time taken from placing a purchase order to receiving the goods or services.
50. Supplier Evaluation Criteria
The standards used to assess suppliers, such as cost, quality, reputation, and delivery capacity.
51. Logistics Management
The coordination of transportation, storage, and distribution of procured goods to their destination.
52. Procurement Forecasting
Predicting future procurement needs based on demand, trends, and business growth.
53. Market Analysis
The process of researching supplier markets to understand trends, risks, and opportunities.
54. Procurement Benchmarking
Comparing procurement performance against industry standards or competitors to improve efficiency.
55. Reverse Auction
A procurement method where suppliers compete by lowering prices in real time until the lowest bid is achieved.
56. Total Cost of Ownership (TCO)
The complete cost of acquiring, operating, and maintaining a product or service over its lifecycle.
57. Life Cycle Costing
An approach that considers all costs associated with a product from acquisition through disposal.
58. Service Level Agreement (SLA)
A contract that defines performance standards, responsibilities, and penalties for service providers.
59. Key Performance Indicator (KPI)
Metrics used to measure procurement or supplier performance against defined goals.
60. Supplier Diversity
Encouraging procurement from a variety of suppliers, including small, minority-owned, and women-owned businesses.
61. Green Procurement
Focusing on purchasing environmentally sustainable products and services.
62. E-Tendering
Using digital platforms for the tendering process, from publication to submission and evaluation.
63. Procurement Governance
The framework of policies, processes, and controls ensuring ethical and compliant procurement.
64. Price Escalation Clause
A contract clause allowing prices to be adjusted based on inflation or market fluctuations.
65. Procurement Outsourcing
Delegating procurement processes to third-party specialists to gain efficiency or expertise.
66. Procurement Dashboard
A visual tool displaying procurement metrics, KPIs, and supplier performance in real-time.
67. Supplier Development
Collaborating with suppliers to improve their capabilities, efficiency, and innovation.
68. Procurement Integration
Aligning procurement with project, operations, and finance to achieve organizational goals.
69. Procurement Optimization
Streamlining procurement processes to reduce costs, improve quality, and increase efficiency.
70. Spot Buying
Purchasing goods or services on an as-needed basis, often at short notice and without long-term contracts.
71. Blanket Order Release
A specific order issued under a blanket agreement for a fixed quantity of goods.
72. Vendor-Managed Inventory (VMI)
A system where the supplier manages and replenishes stock at the buyer’s location.
73. Procurement Analytics
Using data analysis tools to evaluate procurement efficiency, risks, and trends.
74. Procurement Contract Risk
Potential risks in contract terms such as penalties, ambiguities, or supplier default.
75. Procurement SLA Monitoring
Tracking supplier compliance with service level agreements to ensure accountability.
76. Dispute Resolution
Processes for resolving conflicts between buyers and suppliers, often involving mediation or arbitration.
77. Procurement Law
The set of legal requirements and regulations governing procurement activities.
78. Contract Termination
The formal ending of a contract due to performance issues, mutual agreement, or breach.
79. Liquidated Damages
Pre-agreed penalties a supplier must pay for failing to meet contract obligations.
80. Procurement Transparency
Ensuring openness and fairness in procurement activities to build trust and accountability.
81. Procurement Ethics
Adhering to principles of fairness, honesty, and responsibility in procurement practices.
82. Supplier Onboarding
The process of integrating new suppliers into the procurement system, including compliance checks.
83. Purchase Requisition
An internal document requesting approval to procure goods or services.
84. Procurement Approval Workflow
The chain of approvals required before a procurement decision is finalized.
85. Invoice Matching
The process of comparing purchase orders, invoices, and delivery receipts to ensure accuracy before payment.
86. Procurement Payment Terms
The agreed schedule and method of payment for procured goods or services.
87. Procurement Escalation Process
The steps taken when procurement issues require higher-level management intervention.
88. Procurement Catalog
A pre-approved list of goods or services available for internal ordering.
89. Framework Tendering
A procurement method establishing long-term agreements with multiple suppliers for recurring needs.
90. Procurement Efficiency Ratio
A measure of how effectively procurement resources are used compared to outputs.
91. Cost Avoidance
Savings achieved by preventing future costs through negotiation or strategy.
92. Procurement Innovation
Adopting new tools, technologies, or methods to improve procurement effectiveness.
93. Supplier Consolidation
Reducing the number of suppliers to streamline procurement and gain better pricing.
94. Procurement Automation
Using technology to automate repetitive procurement tasks, reducing time and errors.
95. Electronic Data Interchange (EDI)
The electronic exchange of procurement documents such as purchase orders and invoices.
96. Procurement Workflow Automation
Implementing digital workflows to streamline approvals, requisitions, and orders.
97. Supplier Collaboration
Working closely with suppliers to co-develop solutions, reduce costs, and innovate.
98. Global Sourcing
Procuring goods and services from international suppliers to reduce costs or access specialized capabilities.
99. Procurement Cost Savings
The financial benefits achieved by negotiating lower prices or more favorable terms.
100. Procurement Lessons Learned
The documentation of procurement successes, challenges, and improvements to guide future projects.
Key Learning Resources can be found here:
Subscribe and share your thoughts and experiences in the comments!
Professional Project Manager Templates are available here
