Chapter 2

description by industry standard

A builder of residential communities, for example, might tell the purchasing staff to purchase R21 insulation, an industry standard

description by market grade

A builder of residential communities, for example, might tell the purchasing staff to purchase finish-grade lumber for walls, a market grade, for the trim and fireplace mantels.

receiving discrepancy report

A receiving discrepancy report details any shipping or receiving discrepancies noted by the receiving department. It is often the job of purchasing or material control to investigate and resolve material discrepancies.

e-procurement

Companies are using e-procurement tools to manage the flow of documents by (1)automating the document generation process and (2)electronically transmitting purchase documents to suppliers. (1) A virtual elimination of paperwork and paperwork handling (2) A reduction in the time between need recognition and the release and receipt of an order

request for quotation (RFQ)

Competitive bidding in private industry involves a request for bids from suppliers with whom the buyer is willing to do business. This process is typically initiated when the purchasing manager sends a request for quotation (RFQ) form to the supplier.The objective is to award business to the most qualified bidder.Purchasers often evaluate the bids based on price.

maverick buying

Failing to respond to the needs of internal customers will diminish the confidence these users have in purchasing, and they may try to negotiate contracts themselfs(a practice known as maverick buying).

legally binding document

For that reason,most purchase orders include details on standard legal conditions that the order (i.e,the contract)is subject to .Information may include details on the quantity of material(or service quantity),material specification, quality requirements, price, delivery date, method of delivery, ship-to address, purchase order number, and order due date.

span of control

Functional groups carry out certain duties on behalf of the organization.We refer to this as a function's responsibility or span of control

request for proposal (RFP)

If the purchase contract requires negotiation between the buyer and seller (rather than competitive bidding), purchasing sends a request for proposal (RFP) to a supplier.

reverse auction

In recent years, firms have also begun to utilize an electronic competitive bidding tool called a reverse auction or an e-auction. These mechanisms work exactly like an auction, but in reverse.

description by specification

In some cases, an organization may need to provide very detailed descriptions of the characteristics of an item or service. We refer to such efforts as description by specification.

stakeholders

Internal customers are sometimes called stakeholders, in that they have a significant stake in the outcome of purchasing's decision.

preferred suppliers

Let's assume for the moment that a qualified supplier is able to provide the product or service,and that the supplier has been through the evaluation process.For some items,firms may maintain a list of preferred suppliers that receive the first opportunity for new business.

escape clause

Most buyers reserve the right to cancel the blanket order at any time, particularly in the event of poor supplier performance. This requires an escape clause that allows the buyer to terminate the contract in the event of persistently poor quality, delivery problems, and so on.

supplier performance management(SPM)

One of the most important objectives of the purchasing function is the selection,development ,and maintenance of suppliers,a process that is sometimes described as supplier performance management(SPM)

convenience ordering system

Online ordering systems also allow users to contact suppliers directly, or the system may involve nothing more than a multiple part form, such as a limited purchase order that users complete as they initiate an order.FedEx refers to its "pick up the phone"system,which allows users to contact suppliers directly, as its convenience ordering system.

tariff

Previously,the U.S.government，through the Interstate Commerce Commission,established the rate（referred to as a tariff）that a transportation carrier charged

purchase order

Purchase orders often contain a large number of details regarding policies

statement of work(SOW)

Sometimes a service is required.For instance,marketing may want to purchase an advertising campaign,R&D may need a clinical trial,or human resources may need to print a brochure. In this case, the user will complete a statement of work (SOW) that specifies the work that is to be completed, when it is needed, and what type of service provider is required.

physical on hand (POH)

Stock checks(or cycle counts)involve the physical checking of inventory to verify that symstem records(also called the record on hand, or ROH) match actual on-hand inventory levels—also called the physical on hand (POH) levels.

record on hand (ROH)

Stock checks(or cycle counts)involve the physical checking of inventory to verify that symstem records(also called the record on hand, or ROH) match actual on-hand inventory levels—also called the physical on hand (POH) levels.

e-auction

That is, the buyer identifies potential qualified suppliers to go online to a specific website at a designated time and bid to get the business

purchase agreement

The drafting of a purchase order, sometimes called a purchase agreement takes place after supplier selection is complete.

material packing slip

The material packing slip, which the supplier provides, details the contents of a shipment.It contains the description and quantity of the items in a shipment.

bill of lading

Transportation carriers use a bill of lading to record the quantity of goods delivered to a facility.For example,the bill of lading may state that ABC carrier delivered three boxes to a buyer on a certain date.

blanket purchase order

an open order, usually effective for one year, covering repeated purchases of an item or family of items.

description by performance characteristic

focuses attention on the outcomes the customer wants, not on the precise configuration of the product or service.

electronic acknowledgment and receipt

involves the electronic transfer of purchase documents between the buyer and seller, and can help shorten order cycle time.

description by brand

is used when a product or service is proprietary, or when there is a perceived advantage to using a particular supplier's products or services.

purchasing process

the purchasing process is used to identify user requirements, evaluate the user needs effectively and efficiently, identify suppliers who can meet that need, develop agreements with those suppliers, develop the ordering mechanism, ensure payment occurs promptly, ascertain that the need was effectively met,and drive continuous improvement.

purchase requisition

there are a variety of purchase requisition formats, every requisition should contain the following: Description of required material or service; quantity and date required; Estimated unit cost; Operating account to be charged; Date of requisition(this starts the tracking cycle); Date required; Authorized signature

spot buy

which is also discussed within the context of the P2P process.For example,marketing may need to purchase a set of pens and cups for a special promotion and may alert purchasing on sudden notice of this need. If it was not planned for, then purchasing must work with marketing to quickly identify a supplier to provide these products on short notice at the lowest possible cost with an acceptable level of quality and delivery time.

electronic funds transfer(EFT)

which is the automatic transfer of payment from the buyer's bank account to the supplier's bank account

internal customers

which is the traditional role of the purchasing function.