Glossary/Definitions Flashcards
Acceptance Testing
A form of testing used to determine if the requirements of a specification or contract are met
Accrual
An adjustment made to a set of financial accounts to reflect activity that has occurred but for which cash has not yet been received or paid
Annual Planning Cycle
Planning involves a number of activities, such as analysis of opportunities, setting aims, exploring options, producing detailed plans and reviewing the plans against expectations. A cycle of activities as the result where each activity might need the previous activity revised before the final plan is accepted
Approved supplier List
A list of approved suppliers who have the skills ( for example, technical, functional or financial) to undertake the work
Arm’s length relationship
The relationship between two parties where either or both of the parties are not interested in developing a closer relationship
Asset Value
The value of everything an organisation owns
Bargaining Power
The relative ability of one party to exert influence over another in a negotiation or commercial dealing
Benchmarked prices
Comparing an element of one business, such as price, quality, or service, against another
Bill of materials
A comprehensive list of components, items, materials and parts to create a product, essentially a recipe for the production of an item
Break-even point
The level of output of a business at which revenue equals total cost
Breakthrough result
The achievement of a particularly important and significant result
Business Case
A justification for a proposed project or undertaking on the basis of its investment and cost implications balanced against its expected benefits
Business Requirement
The activities that meet the need of, and provide value to, the business (also called business need)
Business Requirements Definition (BRD)
Sets out what the product or service needs to achieve if all stakeholders are to be satisfied
Buying off-contract
The purchase of an item without a contract when a contract for that item already exists
Call off
The purchase of an item using a framework agreement that has already been through a procurement process
Capability
The ability of a supplier to meet an organisations specific business requirements
Capacity
A measure of the rate at which the operations function can transform its inputs into a quantity of product or service outputs in a given timescale
Cashflow
The amount of money going into and out of a business
Change management
The process, tools and techniques for dealing with the people aspect of change to achieve the business outcome required
Collaborative agreement
This is a long term agreement between a buying organisation and a selling organisation which sets out how each party proposes to share information, costs, risks and results by working together on a product or service
Company annual reports
Reports released once a year as a way of communicating with shareholders about the performance of a company
Competitive assessment/’teardown’
The act of disassembling a competitor or supplier product into its component parts so that its costs can be estimated
Competitive bids
Suppliers’ submissions in the process, by which an organisation selects from a number of competing suppliers to award a contract
Consumer markets
A marketplace involving individual consumers rather than businesses or companies
Continuous Improvement
An ongoing effort to improve products, processes and services
Corporate goals
The targets set by an organisation or company that will achieve the organisations mission or objectives
Cost estimating
The process for arriving at the approximate cost of a product or service
Cost leadership
A strategy used by businesses in order to gain a competitive advantage by having the lowest cost of operation within their particular industry
Cost model
A process designed to assess and calculate all costs associated with producing or delivering a product or service and arrive at a provable end cost
Cost-benefit analysis
A technique for deciding whether to follow a particular course of action based on its financial impact
Cost-down approach
The reduction of a cost in the manufacture of a product or the delivery of a service by means of changing an item in the specification
Cost-out approach
The elimination of a cost in the manufacture of a product or the delivery of a service by means of removing an item from the specification
Criteria
Principles or standards used to judge or decide something
Critical path
The sequence of steps in a project plan that together determine the shortest time to complete the project
Cross-functional collaboration
A group of people with different skills and specialisms coming together to achieve a common purpose
Cross-functional team
Teams that involve individuals from different departments who work together towards a common goal. this could be a group of people working on a defined project who come from different functions or departments of the company. It can also include members who are from outside the company such as suppliers
Decommisioned
Withdraw an item from active use or service
Design Specification
A detailed document that sets out the precise way that a product must be built or a service delivered and includes any technical drawings, standards that must be met and dimensions
Differentiation
When a product or brand stands out as being unique to customers when compared to its competitors
Direct costs
Costs that are directly associated with the production of a good or service
Direct marketing
When products are sold directly to the consumer rather than through retailers
Distribution channel
The network used to get a product or service from the manufacturer or creator to the end user or consumer. It can include wholesalers, agents and retailers and can include online channels
Early adopters
A group of consumers who are the first after the innovators to buy or use a new product or technology
Early supplier involvement
The involvement of a supplier in the product development process from a very early stage in order to use the supplier’s experience and expertise
Ergonomics
The consideration of people’s efficiency in the work environment
Exit barriers
Obstacles that prevents a business form leaving an industry
Financial budget
A plan for a defined period, usually twelve months, showing either revenues or costs, or both
Financial ratios
Analysis using data from financial statements to identify and monitor trends in performance, for example, profitability, liquidity and debt
Fixed costs
Business costs that remain the same irrespective of the volume of activity of a business
Framework agreement
An arrangement that is put in place with one or more suppliers for the supply of a range of suppliers or services in which the prices (or a pricing formula) and terms and conditions are all agreed for the duration of the period of the arrangement
Functional Requirements
Functional requirements describe what a product or service should do
Functional test
A form of testing whether the functions of a product as set out in the specification are achieving their objective
Histogram
A graphical display in which data is grouped into ranges and then the frequency of those ranges is shown in a bar chart
Hybrid strategies
Strategies that combine the best parts of two or more strategies
Indirect costs
The general running costs of the organisation - these costs cannot easily be attributed to specific products or services (also known as overheads)
Innovators
People who like to be the first to try new ideas, goods and services
Invitation to tender (ITT)
A formal invitation sent to suppliers inviting them to make an offer to supply goods or services
Issues management
The process of identifying and resolving issues
Key suppliers
Externally located suppliers - either people or organisations - who are essential to the successful delivery of a business’ objectives
Kraljic matrix
Strategic tool to help managers recognise the weaknesses of their organisation and form strategies to guard against disruption of suppliers
Laggards
The last group of consumers who buy or use a new product or technology
Lead time
The amount of time from placing the order to the goods/services being delivered
Lean
A management process for reducing waste and thereby creating more value in a set of activities
Learning curve
A graphical representation of how unit costs reduce the greater the number of those items produced
Liability
Being legally responsible for something
Life-cycle costing
Relates to all costs of acquisition, owning and running the asset but does not include disposal
Limitation of liability
A limit placed on the financial obligations of a party within a contract
Line of best fit
The line that goes approximately through the middle of the data points with an equal number of data points above and below it
Logarithmic scale
A scale in which the distance of a point from the scale’s zero is proportional to the logarithm of the number rather than to the number itself
Market comparisons
An approach for assessing the price of a product or service by comparing it to similar ones available in the market
Middle majority
A group of consumers who buy or use a new product or technology after seeing it used successfully by innovators and early adoptors
Mission Statement
A written statement of the purpose of an organisation which does not change over time
Mitigating actions
Actions taken to lessen the impact of a risk to people or organisations
Modified rebuy
A product/service that has been sourced before but requires a slight change prior to being rebought
Monte Carlo model
A mathematical technique that generates and uses random numbers in the modelling of risk
Net present value (NPV)
An accounting term for an amount in the future adjusted to today’s value by a calculation
New purchase
The purchase of an item for the first time
Non-functional requirements
Non-functional requirements describe how a product or service should operate
Non-profit organisation
A type of organisation that does not earn profits for its owners but reinvests any revenue back into the organisation
Normal distribution
An arrangement of data points in which most of the points cluster around an average value with the remainder of the data points falling away to extremes on both sides
Open-book costing
A process whereby one party agrees to allow the other access to its finances to scrutinise and analyse costs
Opportunity cost
The potential benefits foregone as a result of choosing one alternative over another
Order patterns
The manner in which customers purchase goods or services
Outcome-focused specification
Type of performance specification that describes the functions or performance that a product must fulfil. An example of an outcome-based specification is the concept of payment by results
Output specification
Defines specific deliverables that can be measured in terms of time to deliver, their quality and their cost
Performance measures
Standards, targets and metrics used to collect and analyse information on the performance of an individual or contract
Performance specification
A description of the outputs or outcomes that are expected with the detailed design if the product or service left to the supplier to decide
Premium price
When a product is sold for a higher price than its competitors
Price analysis
An approach for testing whether not the price paid for goods or services is fair
Price comparator
A price that can be used as a benchmark against which the price of other products with similar characteristics can be assessed
Price indexes
A way of showing the percentage change in prices over a given period, based on a starting year (the base) which is taken to be equivalent to 100%. Indices above 100 indicate a rise; indices below 100 indicate a fall
Procurement cost analysis (PCA)
The analysis of the cost of the individual materials, components and activities that make up a purchased item
Procurement specification
A document that presents prospective suppliers with a clear, accurate and full description of the organisations needs and enables them to propose a solution to meet those needs
Product life-cycle
The process or stages relating to the development of a product from scratch; bringing the product to the marketplace, sales in the market and the eventual decline and removal of the product from the marketplace. The model has four key stages: introduction, growth, maturity and decline
Productivity
The efficiency and effectiveness of effort required to produce or do something - measured in terms of the rate of output per unit of input
Profit
The amount by which the revenues of a company exceed its total costs
Project initiation document
Document that outlines the key elements of a project
Project mandate
Document that authorises the project manager to commence with the project preparation
Pugh analysis
A tool for facilitating a team-based approach that converts customer expectations into a number of potential solutions and then evaluates them to choose the best one
Purchase order (PO)
A commercial document issued by a buyer to a seller confirming the goods or services required together with the quantity and specification needed
Quality assurance (QA)
Systematic processes and activities that together have the effect of preventing mistakes in the manufacture of a product or delivery of a service
Quality function deployment (QFD)
A structured approach for defining customer requirements and translating them into product specifications
Regulatory bodies
Public authorities or government agencies that have responsibility for overseeing and supervising a specified activity
Request for information (RFI)
A document used to gather information about suppliers and their capabilities prior to a formal procurement process
Request for quotation (RFQ)
An invitation to suppliers to bid on specific products or services
Requisition
An internal document raised by a user or a store to communicate to procurement the need to buy the product or service specified
Return on capital employed (ROCE)
A financial ratio which identifies a business’ ability to generate profit from the capital used
Return on investment (ROI)
A measure of profitability that indicates whether a gain or loss has been generated compared with the initial cost
Risk appetite
The level of risk that an individual or organisation is willing to accept
Risk assessment
The process for identifying and dealing with any potential hazards that a project could face
Rivalry
Competition between companies, usually within the same industry
Safety stock (buffer stock)
Stock held as a contingency or insurance against disruption or unexpected demand
Semi-variable costs
A cost that is made up of both a fixed cost and a variable cost
‘Should cost’ analysis
A techniques used by procurement for determining what a purchased product or service should cost based on the materials, components, processes and overheads of the supplier
Six Sigma
A quality management approach that focuses on improving processes, products or services through the identification and elimination of defects
Social capital
The network of relationships between people who work in a particular environment
Sourcing strategy
A plan for creating an advantage by continually reviewing current needs against purchasing opportunities
Specification
A detailed description of the product or service required
Sponsor
A person who assumes accountability for a project
Standard deviation
A statistical term to calculate how much the conformance of an item deviates from the mean
Statement of needs
The definition of a business problem or opportunity together with the criteria that define it
Statement of work (SOW)
Detailed description of the specific tasks or services a contractor must perform under the terms of a contract
Straight rebuy
Straightforward repurchase of an item bought previously, rather than considering an alternative
Strategic suppliers
Those who have an integral role in an organisation’s value chain over and above the provision of a product or service
Substitutes
Goods which, as a result of changed conditions, may replace each other in the market
Super-profits
Excess of average profit over normal profit
Supplier cost breakdowns
Where the supplier provides a breakdown of its costs and profits
Supply market
The marketplace in which suppliers conduct business
Switching costs
The costs incurred by a buyer when changing from one product or supplier to another
Target cost analysis
An analysis of market price, volume and profit, from which a target production cost is derived
Target costs
The expected cost of making a product or delivering a service
Technical (conformance) specification
A detailed technical description together with acceptance criteria that forms the basis of a product design
Tendering process
A request from a buying organisation to invite suppliers to formally quote on a large value project
Terms and conditions
The rules that must be adhered to during a contract (also called terms of service or terms of use)
Through-life contracts
A contract that gives a contractor sole accountability for the design, acquisition, operation, maintenance and disposal of an asset
Tolerances
The permissable limit of a variable used to define a product - for example, its physical dimensions
Total cost modelling
A process which uses algorithms designed to arrive at the provable cost of a product or service
Total cost of acquisition (TCA)
The total cost incurred in acquiring a product from sourcing to receiving an installing
Trigger events
A set of circumstances that start an activity
Value analysis
Process of analysing costs to identify cost reduction and cost control opportunities to ensure that a product or service production costs are as efficiency as possible in order to maximise profit
Value chain
A business model created by Michael Porter that details the set of coordinated processes, people and resources within an organisation which generates corporate value
Value engineering
A process used to review and amend new products to reduce costs and increase value to consumers
Variable costs
Costs that change in proportion to the output of the business. They increase as the volume of the product or service produced is increased. As sales increase, variable costs increase. For example, the amount of materials that are used or the cost of hours worked
Vision statement
Sets out the rules and goals by which the organisation will conduct its affairs in order to achieve its mission
Volume discount
A reduction in the usual price when a minimum quantity is ordered (also called a bulk discount)
Warranties
Warranties are lesser terms in a contract which can result in damages but not contractual termination in the event of a breach
Whole-life cost analysis
A structured approach to calculating the full end-to-end cost of providing a service, manufacturing, or procuring a product. Also commonly referred to as total cost of ownership (TCO), or total life-cycle costs (LCC). The use of the terms vary dependent on industry and sector
Zero-based budget
A method of budgeting in which every expense must be justified starting from a base of zero
