Procurement Preschool

Definitions from your Procurement Preschool professors

Procurement has a very different vocabulary.  Check out our “Procurement Preschoolers” as they provide you with the answers to questions like, “What is Procurement?,” “What is Inventory,” “What is an RFP,” and much more.

 

What is Procurement?

Procurement is the act of buying goods and services for an entity like a company, organization, or government agency. Procurement also refers to the profession involving the acquisition of goods and services for such entities.  

To learn the most modern procurement practices, earn your SPSM Certification. 

What is Purchasing?

Purchasing is the act of buying goods and services for an entity like a company, organization, or government agency. Purchasing also refers to the profession involving the acquisition of goods and services for such entities.   

What is ROI?

ROI stands for return on investment. Return on investment is a measurement of how much profit is made as a result of using money towards a specific project, business, or other investment. ROI can be expressed in units of money or as a percentage of the investment.  

What is SIM?

SIM stands for supplier information management. Supplier information management is an ongoing process of collecting important information about suppliers. Such information can include a variety of things such as certification status, insurance certificates, financial statistics, and more.  

What is IT Procurement?  

IT Procurement is the function of buying goods, services, and intellectual property that are related to information technology. These purchases include things like computers, servers, thumb drives, outsourced data center services, and software.   

What is IT Purchasing?

IT Purchasing is the function of buying goods, services, and intellectual property that are related to information technology. These purchases include things like computers, servers, thumb drives, outsourced data center services, and software. 

What is Inventory?

Inventory refers to physical things that are held by an organization for further conversion or sale. Inventory can include finished goods, partially finished goods called work-in-process inventory, components, or raw materials. 

Learn inventory management best practices in the course “Profitable Inventory Management and Control.”

What are Direct Materials?

Direct materials are things that are purchased to be incorporated into manufactured product. Direct materials may include things like wood to be used in manufacturing furniture or steel to be used in manufacturing automobiles. 

What is a PO?

PO stands for purchase order. A purchase order is a document used by entities such as companies, organizations, and government agencies to officially buy a product or service. These entities use PO’s instead of cash or credit cards because they provide a way for the entity to be billed for its purchases at a later time.

Learn more purchasing fundamentals in this online course: Mastering Purchasing Fundamentals

What is a Purchase Order?

A purchase order is a document used by entities such as companies, organizations, and government agencies to official buy a product or service. These entities use purchase orders instead of cash or credit cards because they provide a way for the entity to be billed for its purchases at a later time. 

Learn more purchasing fundamentals in this online course: Mastering Purchasing Fundamentals

What is a Supplier?

A supplier is an individual or company that sells goods or services to businesses. Buyers, purchasing agents, and procurement specialists are usually the people who communicate with a company’s suppliers.

What is FOB?

FOB is used on purchase orders and other purchasing documents issued in the United States to indicate where the risk of loss transfers when a product is shipped from a supplier’s facility to the buyer’s facility. FOB is always followed by a word representing the place where the risk of loss transfers. For example, FOB Origin means that the risk of loss transfers when the shipment leaves the supplier’s facility.

Learn more about international procurement in these online courses: Basics of Smart International Procurement and Executing a Global Sourcing Strategy.

What is an RFI?

RFI stands for Request For Information. A request for information is a document that an organization asks suppliers to complete. The purpose of the RFI is to help the organization learn about a product or service. The organization uses this information to develop its plans to get pricing for, and eventually buy, that product or service.

What is an RFP?

RFP stands for request for proposal. A request for proposal is a document that organizations send to suppliers when those organizations are interested in buying a product or service. The RFP asks those suppliers to reply with pricing and other information for the product or service.

What is a Supply Chain?

A supply chain is a group of companies that collaborate to produce and use a final product or service. A supply chain consists of three types of entities: customers, a producer, and the producer’s suppliers. The extended supply chain includes customers’ customers and suppliers’ suppliers.