In strategic sourcing, portfolio segmentation refers to the overall classification of either spend categories or suppliers

The classical approach to classify spend categories is to use the Kraljic Purchasing Portfolio which classifies spend categories into four buckets based on risk and profit potential. Sourcing Business Model theory classifies spend categories into seven Sourcing Business Models based on 25 attributes.

Is a Transaction-Based Economic Model. A key difference between a Preferred Provider and the other Transaction-Based models is that the buyer has made the strategic choice to move to a more strategic relational model. Repeat business and longer term and/or renewable contracts are the norm.

Uses a transaction-based approach, but the buyer chooses a more strategic relational model with specifically chosen supplier(s) in order to gain access to value-added capabilities at best value or volume discounts through a longer-term contract.

A type of supplier relationship where the majority of spend in a particular commodity area is consolidated through one vendor in order to obtain the most competitive pricing and services terms through spend leverage. The buyer and supplier then collaborate to market and promote these products and/or services to the campus users in an effort to drive further spend through the preferred supplier. Preferred supplier does not mean a mandate relationship. End users still have the freedom to purchase through the vendor of their choice but are highly encouraged to utilize the Preferred Supplier for reasons of better pricing and services.

The screening of potential suppliers in which factors such as financial capability, reputation and management are considered when developing a list of qualified vendors. This is part of the market assessment and sometimes included in an RFI.

A price is how much you pay for something. You pay $3.25 for your Starbucks Grande two pump vanilla latte. A call center supplier may have a price of $0.50 per minute every time company’s customer service representative picks up the phone. Is not limited to, when applicable and when specified in the solicitation delivery charges, installation charges and other costs.

The main purpose behind business process mapping is to assist organizations in becoming more efficient

A contractual agreement in which a purchaser contracts with a vendor to provide the purchaser’s requirements at a predetermined price. Usually involves a minimum number of units, orders placed directly with the vendor by the purchase, and limited duration of the contract. Sometimes also referred to as Blanket Order or Master Services Agreement (MSA).

Refers to increased costs associated from changes that occur when a good or service has not been properly specified. It is generally considered harmful. See also Scope Creep or Requirements Creep.

As such, contracts with specifically chosen supplier(s) assume a more collaborative relationship

A component or clause of a contract that allows for the use of price indexing to establish costs. Often used by businesses top cash advance Arizona and government to adjust payments and/or charges to take account of changes in categories of prices. Also known as Indexation Clauses. Some examples include: Consumer Price Index, Producer Price Index, Construction Price Index, Employment Cost Index, Import/Export Price Indexes, Manufacturing Production Index, Metal Price Index and Commodity Fuel Index.

The mechanism companies use to establish the price(s) between a company and its supplier. A pricing model is different from price as it includes mechanisms to determine optimum monetary exchange between and buyer and supplier.

Business process mapping refers to activities involved in defining what a business entity does, who is responsible, to what standard a business process should be completed, and how the success of a business process can be determined. A clear and detailed business process map or diagram allows individuals to determine whether or not improvements can be made to the current process.

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