Procurement Terms
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Tail Spend is the name for the large number of small value transactions that are processed, often through non-preferred suppliers. It is common for the number of transactions to total around 80% and 20% of the monetary value. It is important that control is gained across Tail Spend to aim to reduce the high administration burden of such a high number of transactions being processed.
Third-party Risk Management (TPRM) or Supplier Risk Management is the act of managing risk within the supplier base and associated supply chain. It is a core pillar of most procurement functions. The ability of an organization to manage the risks within their supply chain has a direct impact on their performance in the markets they participate within. Proactive risk management can allow preemptive identified risk mitigations that limit any affect on the organization’s operation.
Total Cost of Ownership (TCO), sometimes Cost Driver Analysis, Acquisition Cost or Value for Money (VfM), is an estimate of the true cost of buying a product or service. It is the sum of all costs incurred during acquisition, possession, utilization and disposition of a product or service. TCO is important because it represents a bigger picture beyond the basic purchase price and reflects the costs that aren’t necessarily included in the upfront pricing.
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