Sourcing and Procurement
Glossary
Your trusted guide to exploring sourcing and procurement terms & definitions,
from the world’s leading procurement experts and companies
Sourcing
Sourcing refers to the practices involved with finding, evaluating and engaging suppliers of goods and services. Sourcing helps procurement fulfill a key role in the corporate request for value growth. Companies should follow a rigorous methodology to achieve sourcing excellence.
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Sourcing Cycle
A continuous process for evaluating and managing a spend category requirement. Typically organizations have adopted a multi-step process with a seven step process being the most popular. See Multi-step Strategic Sourcing Process above.
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Sourcing Solution
The final selected approach to fulfill a spend category requirement; a sourcing solution is structured based on one of the seven Sourcing Business Models.
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Specification
A concise statement of a set of requirements to be satisfied by a product, material or process that indicates whenever appropriate the procedures to determine whether the requirements are satisfied. As far as practicable, it is desirable that the requirements are expressed numerically in terms of appropriate units, together with their limits. A specification may be a standard, a part of a standard, or independent of a standard. .
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Spend Category
Goods or services with similar characteristics that are grouped together for planning and management purposes. For instance, furniture could be a spend category for a business, and have sub categories consisting of the desks, chairs, tables and cabinets purchased by the company during the year. Some organizations classify spend using their own unique categories, others rely on more standard taxonomies like the United Nations Standard Products and Services CodeÆ (UNSPSCÆ) or the North American Industry Classification System (NAICS). A discussion of various methods for creating spend categories and classifying spend and suppliers according to those categories can be found in this SIG Member Peer2Peer Discussion here: http://www.sig.org/p2p-specific.php?id=144
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Sourcing Business Model Theory
A theory that suggests sourcing should be thought of as a business model between two parties with the goal to optimize the exchange.
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Sourcing Optimization
Use of algorithms to evaluate extensive data inputs and scenario constraints to determine the "optimal" decision on which supplier should be used.
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Sourcing Strategy
The approach an organization will use to buy and manage goods and services in a spend category. Typically a sourcing strategy focuses on the highest spend categories an organization purchases and consumes.
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Spend Analytics/Analysis
The process of consolidating, cleansing and connecting organization-wide spend and supplier data, tackling complex spend categories, proactively mitigating supplier risks, effectively monitoring the performance of suppliers and providing greater visibility, and unlocking insights and opportunities. This information is critical to the strategic sourcing process. This process is also sometimes referred to as supplier classification. It can also be leveraged in other areas of supply chain management such as inventory management, budgeting, planning and product development.
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Split Sourcing
Where more than one supplier is used to buy the same item.
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