Procurement glossary

Addressable spend is the part of a company's external spend that procurement can realistically influence through sourcing, negotiation or policy. It leaves out payments like taxes, statutory fees and inter-company charges, where there is no supplier to choose and no price to negotiate.

An approval workflow is a predefined sequence of approvals a request — such as a purchase requisition or PO — must pass through before it can proceed. Routing is usually driven by amount thresholds, roles, departments, or categories, and every step is logged for audit.

A blanket purchase order is a single PO that covers repeated purchases of the same items from one vendor over a fixed period, usually with a total value or quantity limit. Instead of raising a new PO for every delivery, the buyer issues release orders against the blanket PO as needs come up.

A delivery challan is a document that goes with goods when they are moved. Under GST it's used instead of a tax invoice when the movement isn't a sale yet, such as goods sent for job work. In everyday use it also means the dispatch note a supplier sends with a delivery, which the buyer's stores team checks the goods against.

A direct purchase order is a purchase order raised straight away, without a purchase requisition or competitive quotes before it. Companies allow it for low-value, urgent or repeat purchases where the price is already agreed.

E-sourcing is the use of online tools to conduct sourcing activities — issuing RFQs and RFPs, running reverse auctions, and collecting and comparing supplier bids electronically. It digitises supplier selection to make it faster, more competitive, and fully auditable.

A goods receipt note (GRN) is a document created when a delivery is received, recording the items, quantities, and condition of goods actually delivered against a purchase order. It is the proof-of-receipt used in three-way matching before an invoice is paid.

The L1 bidder is the vendor who quoted the lowest price among bids that passed the technical check.

Maverick spend is purchasing made outside an organisation's approved processes, contracts, or preferred suppliers. Because it bypasses sourcing and approval controls, it typically costs more, escapes audit, and undermines negotiated savings.

A PO number (purchase order number) is the unique reference a buyer's system gives to each purchase order. The vendor quotes it on the delivery challan and the invoice so the buyer can match the bill to what was ordered and received.

A proforma invoice is a preliminary bill a supplier sends before goods or services are delivered. It shows the expected price, taxes and terms so the buyer can approve the purchase or pay an advance. It is not a tax invoice, so it creates no GST liability and the buyer can't claim input tax credit on it.

A purchase order (PO) is a commercial document a buyer issues to a supplier to confirm a purchase. It lists the items, quantities, agreed prices, delivery, and payment terms, and becomes a legally binding contract once the supplier accepts it.

A purchase requisition (PR) is an internal request to buy goods or services. It is not an order to a vendor. “PR raised” means that request has been submitted and is waiting for approval.

A rate contract fixes the price and the terms for a period; the buyer places a release order only when the goods are needed.

A reorder point (ROP) is the stock level at which a new purchase order should be placed so that the delivery arrives before stock runs out. It is usually average daily usage multiplied by the supplier's lead time, plus a safety stock.

A request for proposal (RFP) is a sourcing document that invites suppliers to propose how they would solve a defined business problem. Unlike an RFQ, an RFP is evaluated on a weighted combination of approach, capability, and price — making it suited to complex or service-heavy purchases.

A request for quotation (RFQ) is a sourcing document a buyer sends to suppliers to obtain priced offers for clearly defined goods or services. Because the specification is fixed, suppliers respond mainly on price, terms, and delivery, making quotes easy to compare side by side.

A reverse auction is a procurement event in which multiple pre-qualified suppliers compete for a buyer's order by submitting successively lower bids in real time. Unlike a normal (forward) auction, the price falls as sellers undercut each other, and the lowest responsible bid usually wins.

Source-to-pay (S2P) is the end-to-end procurement lifecycle that spans the strategic front end — spend analysis, sourcing, and contract management — through the transactional procure-to-pay cycle of ordering, receiving, and paying. It is procure-to-pay plus everything that comes before the requisition.

Spend analysis is the process of collecting, cleaning and grouping a company's purchase data to see what it buys, from whom and at what price. The goal is to find where money can be saved and where supply risk sits.

Spend under management is the share of spend that procurement genuinely controls, written as a percentage of addressable spend.

A supplier scorecard is a structured evaluation tool that rates suppliers against weighted performance criteria — typically quality, on-time delivery, price competitiveness, and service. It turns supplier performance into an objective, comparable score used for reviews and award decisions.

Tail spend is the part of a company's spending made up of many small, infrequent purchases from a large number of vendors. Each purchase is too small to get procurement's attention, but together they add up to a real amount of money with little price checking or control.

Three-way matching is an accounts-payable control that compares three documents — the purchase order, the goods receipt note (GRN), and the supplier invoice — before a payment is approved. The invoice is paid only if quantities and prices agree across all three.

Total cost of ownership (TCO) is the complete lifetime cost of a purchase, including the purchase price plus all related costs of acquiring, operating, maintaining, and disposing of it. It reveals the true cost behind a low sticker price.

Vendor management is the discipline of selecting, onboarding, monitoring, and developing the suppliers an organisation buys from. It covers qualification, performance evaluation, risk and compliance, and relationship management to ensure consistent quality, delivery, and value.