Sourcing glossary
A shared language for the decision.
Terms are useful when everyone understands their practical effect. Agreement definitions still control the specific transaction.
- BATNA
- Best alternative to a negotiated agreement: the executable action available if no deal is reached.
- RFI
- Request for information: structured market discovery before the solution or supplier field is fully understood.
- RFP
- Request for proposal: a request for a solution and offer where multiple dimensions need comparison.
- RFQ
- Request for quotation: pricing request for a sufficiently defined and comparable requirement.
- TCO
- Total cost of ownership: costs across the relevant lifecycle, with scope and assumptions stated.
- Should-cost
- An evidence-based model of plausible cost drivers. It is an analytical estimate, not knowledge of a supplier’s actual costs.
- Benchmark
- A comparison point whose usefulness depends on scope, volume, timing, geography and terms.
- Incumbent
- The current supplier. Its advantages and constraints should be assessed rather than assumed.
- Switching cost
- The cost and disruption of changing a supplier, including internal effort, overlap, integration and migration.
- Category strategy
- A coordinated direction for a related portfolio of business needs and supply markets.
- Sourcing wave
- A sequenced group of sourcing activities organized around dependencies, timing and available capacity.
- Supplier rationalization
- A review of supplier overlap and value that can lead to consolidation, retirement or deliberate retention.
- BAFO
- Best and final offer: a defined final-offer step governed by the rules of the particular event.
- Price hold
- A commitment to retain an agreed price for a defined period, scope and conditions.
- Renewal cap
- A limit on a specified price increase. Its base, period and exclusions determine how much protection it provides.
- SLA
- Service level agreement: defined performance obligations, measurement and associated processes or remedies.
- Service credit
- A contractual financial adjustment for specified service failures. Its availability and limits depend on the agreement.
- Acceptance criteria
- Observable conditions used by the designated buyer owner to accept a deliverable.
- Change order
- A documented approval of a change to scope, price, timing or responsibilities under an agreed process.
- Transition assistance
- Defined support for moving work, data or services to the buyer or another provider.
- True-up
- An adjustment to a commitment or charge based on measured use under the agreed rules.
- True-down
- A permitted reduction in committed quantity or charges; it should not be assumed to accompany a true-up.
See how the concepts connect across the sourcing lifecycle →