Glossary

Welcome to the Fairmarkit glossary, your one-stop guide for all things procurement and spend management. Bookmark this page as we'll be updating this knowledge base regularly with new definitions, guides, and resources.

Procurement Center of Excellence

A procurement center of excellence (COE) is a specialized team that provides leadership, training, and support to improve procurement best practices across an organization.

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Spot Buying

A spot buy is a purchase that is unplanned, often considered an “emergency” or a one-time buy. Just like with any other type of spend, it is important to keep spot buys in check. 

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Agile Procurement

Agile procurement is a procurement methodology that borrows elements of the agile approach to software development. The core concepts of any agile methodology are to work in small, fast increments that build flexibility into the process. As such, agile procurement is an approach that is open, collaborative, and less strict than other procurement methodologies.

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Direct And Indirect Spend

Direct procurement refers to the process of buying raw materials and goods for production, while indirect procurement relates to purchasing services or supplies required to keep the day-to-day business running.

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MRO (Maintenance, Repair, and Operations)

MRO is a category of spending that covers all maintenance parts used for repairs and to support production at an organization. MRO, despite being vital to operations, is considered part of indirect spending. MRO procurement includes things like office and cleaning supplies, computers, and items related to maintaining tools needed for production.

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Maverick Spend

Maverick spend — sometimes called rogue spend — refers to any purchases that don’t follow the organization’s established procurement rules and procedures. Maverick spending is the result of either deliberately ignoring procurement processes or of a purchasing mistake that doesn’t align with previously negotiated purchasing terms.

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Procure-To-Pay Process

Procure to pay, sometimes abbreviated as p2p procurement, is the integration of purchasing and accounts payable tools to become more efficient. Procure-to-pay is a subset of the overall procurement process.

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Procurement Cycle

Procurement is cyclical, meaning it follows a set process of steps from start to finish. The procurement process is typically made up of six steps, starting with the identification of a business need.

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Spend Analytics

Spend analytics or spend analysis is the process of identifying areas where you can cut costs, improve strategic sourcing, and ultimately reduce expenses throughout the procurement process.

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Strategic Procurement

Strategic procurement, also known as strategic sourcing, is the process of planning to ensure that the goods and services needed to do business successfully are obtained on time as needed — and on budget. Strategic procurement involves carefully optimizing everything from vendor selection, payment terms, vetting, contract negotiation, and the purchase of goods and services.

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Supplier Relationship Management (SRM)

Supplier relationship management (SRM) provides a strategic way for a company to invest in strategic sourcing, find efficiencies in the supply chain, and reduce costs.

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Supply Base Rationalization

Supply base rationalization, or supplier rationalization, is the practice of reducing the number of active suppliers to streamline an organization’s spend. Ideally, intentionally shrinking a supply base will allow the organization to spend more time and focus on building value from existing supplier relationships.

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Sustainable Procurement

Sustainable procurement is defined by the United Nations Procurement Practitioner’s Handbook as the process of procurement while taking social and environmental factors into consideration, as well as financial factors. 

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Tail spend

Tail spend is often defined as the money a company spends on purchases that account for roughly 80% of total transactions, which makes up about 20% of the company's spend by volume.

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Best Practices for Vendor Management

Vendor management requires great communication, the right technology, and regular risk assessments to build long-term profitable relationships.

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eProcurement

eProcurement is the purchase or sale of goods or services through the internet. It is not the same as eCommerce, however. eProcurement uses a supplier’s closed system that’s only available to registered users. It resembles a digitized version of the procurement cycle and includes elements such as a request for information, request for proposal, request for quotation, RFx (the previous three together), and eRFx (software for managing RFx projects).

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