Glossary: Procurement
Procurement glossary.
Terms used in supplier negotiations, order management, and inventory acquisition, as they function in real procurement operations.
10 terms in this category
MOQ (Minimum Order Quantity)
- Definition
- The smallest order a supplier will accept for a single SKU or order.
- Operator context
- MOQ is negotiable but tied to production economics. Lower MOQ often means higher unit cost. Some suppliers quote MOQ per SKU, others per order total.
Lead Time
- Definition
- Time from order placement to goods ready for collection or shipment.
- Operator context
- Lead time typically includes production, quality control, and packing, but not shipping. Confirm what's included. Add buffer for delays; quoted lead times are best-case.
FOB (Free On Board)
- Definition
- Seller delivers goods to port of origin. Buyer assumes cost and risk from there.
- Operator context
- FOB pricing means you pay for freight, insurance, and customs. The seller's responsibility ends when goods are loaded onto the vessel. FOB is the most common Incoterm for imports from Asia.
DDP (Delivered Duty Paid)
- Definition
- Seller handles all costs, risks, and customs clearance to the buyer's door.
- Operator context
- DDP shifts all logistics risk to the supplier. Higher unit cost, lower operational complexity. Useful for small orders or when you lack import infrastructure.
EXW (Ex Works)
- Definition
- Buyer takes all responsibility from the seller's premises.
- Operator context
- EXW means you arrange pickup, export, freight, import, and delivery. Maximum control, maximum responsibility. Rarely used unless you have established logistics partners in-country.
CIF (Cost, Insurance, Freight)
- Definition
- Seller covers cost, insurance, and freight to the destination port.
- Operator context
- Risk transfers to buyer once goods are loaded. CIF is common for sea freight but can obscure true landed cost if insurance and freight are marked up.
Landed Cost
- Definition
- Total cost of a product delivered to your warehouse, including all duties, taxes, freight, and handling.
- Operator context
- Landed cost = Unit cost + Freight + Duties + Taxes + Handling + Insurance. Compare suppliers on landed cost, not unit price. A cheaper FOB quote can become expensive after logistics.
Payment Terms
- Definition
- Agreement on when and how payment is made to the supplier.
- Operator context
- Common terms: 30% deposit, 70% before shipment. Better relationships unlock better terms: 30/70 net 30, or even net 60. Payment terms directly affect cash flow and working capital.
Sample Order
- Definition
- A small order placed to evaluate product quality before committing to bulk production.
- Operator context
- Always order samples before bulk. Sample quality may exceed production quality. Request production-line samples after approval. Sample cost is often refunded against first order.
Tech Pack
- Definition
- Technical specification document containing all details required to manufacture a product.
- Operator context
- A complete tech pack includes dimensions, materials, construction methods, tolerances, packaging specs, and labelling requirements. Incomplete tech packs cause production errors.