Reference

Procurement glossary

Clear definitions with practical examples for procurement, supply chain, and vendor management professionals.

C

Corrective Action (CAPA): A structured process for addressing non-conformances identified during supplier audits or quality incidents. Includes: root cause analysis, corrective action plan with owner and deadline, implementation, effectiveness verification, and preventive measures. Typically tracked using the 8D (Eight Disciplines) methodology.; See also:Supplier AuditQuality ManagementRoot Cause Analysis

ISO 9001:2015: The international standard for quality management systems. Section 8.4 addresses control of externally provided processes, products, and services — directly relevant to supplier management. Requiring ISO 9001 certification is a common mandatory pass/fail gate in vendor evaluation.; See also:Supplier AuditQuality ManagementIATF 16949

KPI (Key Performance Indicator): A quantifiable measure used to evaluate supplier performance against defined targets. Common procurement KPIs: OTD (On-Time Delivery, target ≥97%), PPM (Parts Per Million Defective, target <500), Lead Time (calendar days), Cost Variance (actual vs contract), Responsiveness (hours to respond).; See also:Supplier ScorecardOTDPPM

Multi-Criteria Decision Analysis (MCDA): A formal decision-making framework used when choices must be evaluated against multiple, often conflicting criteria. In procurement, the weighted scoring method is the most common MCDA technique, taught in ISM CPSM and CIPS professional certification programs.; See also:Weighted ScoringVendor EvaluationDecision Matrix

OTD (On-Time Delivery): The percentage of purchase order line items delivered on or before the confirmed delivery date. Industry targets: automotive ≥98%, electronics ≥97%, general manufacturing ≥95%. Should be measured by part number, not aggregate volume, to avoid masking late deliveries on critical parts.; See also:KPISupplier ScorecardLead Time

P×I (Probability × Impact): A risk scoring methodology where each risk category receives two scores from 1-4: Probability (likelihood of occurrence) and Impact (severity of consequences). Multiply them for a risk score from 1-16. Scores 1-3 = Low, 4-8 = Medium, 9-12 = High, 13-16 = Critical.; See also:Risk MatrixSupplier Risk AssessmentISO 31000
PPM (Parts Per Million Defective): A quality metric measuring the number of defective parts per million received. Calculated as (defective units / total units received) × 1,000,000. Six Sigma target = 3.4 PPM. Automotive Tier 1 target <50 PPM. Electronics <200 PPM. General manufacturing <1,000 PPM. Should be measured at receiving inspection, not supplier outgoing.; See also:Quality ManagementKPIDefect Rate

Quarterly Business Review (QBR): A structured quarterly meeting between buyer and supplier to review the past quarter's KPI performance, discuss successes and challenges, review open action items, share forecast and upcoming needs, and agree on new targets. Best practice: share the scorecard 3-5 business days before the meeting.; See also:Supplier ScorecardKPISupplier Relationship Management

RFP (Request for Proposal): A formal document issued to potential suppliers requesting detailed proposals, including pricing, capabilities, methodology, and terms. Unlike an RFQ (Request for Quote), an RFP evaluates both cost and qualitative factors. Scored using weighted evaluation criteria.; See also:Vendor EvaluationSourcingRFQ

Supplier Scorecard: A performance measurement tool that tracks supplier KPIs (On-Time Delivery, Quality PPM, Lead Time, Cost Variance, Responsiveness) using a traffic light system (Green/Yellow/Red). Used for quarterly business reviews and supplier development decisions.; See also:KPIQuarterly Business ReviewSupplier Performance Management
Supplier Audit: A systematic, independent examination of a supplier's quality management system, production processes, compliance, and continuous improvement practices. Typically covers 5 sections: Quality Systems, Production & Process, Supply Chain Management, Compliance, and Continuous Improvement. Aligned with ISO 9001:2015 §8.4.; See also:ISO 9001Quality AuditSupplier Qualification
Single Point of Failure: Any supplier, facility, component, or process where a disruption would halt operations with no immediate alternative. Single-source suppliers (only one qualified source exists), sole-source suppliers (only one source is approved), and single-site manufacturers are the most common single points of failure.; See also:Risk AssessmentSupply Chain ResilienceBusiness Continuity

TCO (Total Cost of Ownership): The complete cost of acquiring, using, and maintaining a product or service over its lifetime, beyond the purchase price. Includes: unit cost, freight, duties, inventory carrying cost (typically 15-25% of inventory value annually), quality failure costs, and supplier management overhead. A lower unit price supplier may have higher TCO.; See also:Cost AnalysisVendor EvaluationValue Analysis

Vendor Evaluation: A structured process of assessing and comparing potential suppliers using predefined criteria and weighted scoring to determine the best fit for a specific sourcing need. Typically covers Quality, Cost, Delivery, Risk, Capacity, and Innovation dimensions.; See also:Weighted ScoringSupplier SelectionRFP

Weighted Scoring: A multi-criteria decision analysis method where each evaluation criterion is assigned a weight (percentage) based on business priority, and each vendor is scored against those criteria. Final score = Σ (Score × Weight) / total weight. Used to produce objective, defensible vendor rankings.; See also:Vendor EvaluationMulti-Criteria Decision Analysis

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