Sourcing and Procurement
Glossary
Your trusted guide to exploring sourcing and procurement terms & definitions,
from the world’s leading procurement experts and companies
Accreditation
A process of external verification to provide evidence that a standard of quality has been achieved, for example, competency, authority or credibility
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Accruals
An adjustment made to the accounts of a company that has the effect of putting aside money for future use. It can be an adjustment to sales or an adjustment to costs
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Acquisition
The act of acquiring goods and services (including construction) for the use of a governmental activity through purchase, rent or lease. Includes the establishment of needs, description of requirements, selection of procurement method, selection of sources, solicitation of procurement, solicitation for offers, award of contract, financing, contraction administration and related functions.
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Activities
Work associated with processes that a person or function performs, i.e., process PO's, process payments, etc.
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Activity Based Budgeting (ABB)
An approach to budgeting where a company uses an understanding of its activities and driver relationships to quantitatively estimate workload and resource requirements as part of an ongoing business plan. Budgets show the types of as well as number of and cost of resources that activities are expected to consume based on forecasted workloads. The budget is part of an organization's activity-based planning process and can be used in evaluating its success in setting and pursuing strategic goals.
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Activity Trap
One of Vested's 10 Ailments (see explanation of Vested below) that refers to an outsourcing paradox typically found in Transaction-Based Sourcing Business Models. The service provider is paid for every transaction.
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Accrual Accounting
A system of accounting in which revenues and expenses are recorded as they are earned and incurred, not necessarily when cash is received or paid. Accrual accounting also provides a more accurate picture of company's profitability at a particular time. Statement users can make more informed judgments concerning the company's earnings potential. Publicly held businesses are required to use accrual based financial statements.
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Acknowledgement
A communication indicating that something has been received or understood. In purchasing it usually refers to a form that is received from a supplier that accepts or sometimes modifies the purchase order.
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Acquisition Cost
The acquisition cost includes all costs associated with generating and processing an order and its related paperwork. In a broader management sense, the acquisition cost is the sum of the ordering, transporting, handling and all inventory holding costs associated with the acquisition of a material.
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Activity Analysis
The process of identifying and cataloging activities for detailed understanding and documentation of their characteristics. An activity analysis is accomplished by means of interviews, group sessions, questionnaires, observations and reviews of physical records of work.
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Activity Based Costing (ABC)
A methodology that measures the cost and performance of cost objects, activities and resources. Cost objects consume activities and activities consume resources. Resource costs are assigned to activities based on their use of those resources, and activity costs are reassigned to cost objects (outputs) based on the cost objects proportional use of those activities. Activity-based costing incorporates causal relationships between cost objects and activities and between activities and resources.
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Ad Valorem Rate
Ad valorem taxes (mainly real property tax and sales taxes) in the context of Sourcing and Procurement are customs duties charged on the value of goods that are dutiable, irrespective of quality, weight or any other considerations. Ad valorem rates are a fixed percentage based on the value of the goods, as determined by the invoice cost.
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