Sourcing and Procurement
Glossary
Your trusted guide to exploring sourcing and procurement terms & definitions,
from the world’s leading procurement experts and companies
First Cost
This is the initial price paid for an item. It does not take into account any costs beyond receipt and installation.
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First in-first out (FIFO)
Items purchased first are sold first, e.g., an electrical component sold out of inventory would be issued at the oldest or first price
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Fiscal Year
The 12 months between one annual settlement of financial accounts and the next; a term used for budgeting, etc. The fiscal year for the U.S. Government is October 1 to September 30; the fiscal year for the State of Minnesota is July 1 to June 30.
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Fit-For-Purpose
A concept usually applied to quality or technical specifications, which denotes the use of levels of quality or specifications, which are of an adequate level, but not more than is necessary.
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Fixed Price
A type of pricing clause included in a contract where a specified amount is paid for a specific product, service, or goal. In a fixed-price compensation method the buyer and supplier agree in advance to a "price." The fixed price may relate to an individual transaction (e.g., price per call, per minute, per FTE, per unit, per shipment, per square foot, etc.) or to a bundled set of transactions together (e.g., fixed monthly management fee to manage IT maintenance.) See also Firm Fixed Price.
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Fixed-Price Contract or Agreement
A fixed price contract is a contract wherein a specified amount of money is promised in order to pay for the completion of a project or task. Fixed price contracts are commonly used in building/construction situations. The contract may either have a firm fixed price or, in certain cases, an adjustable fixed price where a maximum price and/or a target price are specified.
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First article inspection
The process of checking a product manufactured for the first time to determine that it meets design and specification requirements
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First-party audit
An inspection of an organisation by an auditor employed by the organisation (also known as an internal audit)
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Fishbone Diagram
An analysis tool used to provide a systematic way of understanding cause and effect. The design of the diagram looks like the skeleton of a Fishbone, hence, the name fishbone diagram. The Fishbone diagram assists teams in categorizing the many potential causes of problems or issues in a systematic way and helps identify root causes.
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Fixed Cost
A cost that is primarily related to a given time period and does not change due to production volume. Examples include rent, depreciation, and property taxes.
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Fixed asset
State property that is in one of four categories:
- all non-expendable property having a normal life expectancy of more than two years and a value of $2,000 or more.
- all semi-expendable property established by the owning agency's policy as fixed assets: any item having a normal life expectancy of more than two years and a value of less than $2,000.
- all firearms, regardless of their value.
- all sensitive items, as established by the agency policy.
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