Good components make good products. That’s something you learn as your electronic designs get more sophisticated and complicated. You don’t build a machine from used parts or cast-offs and expect it to perform forever.
At CircuitBread, we help engineering students and interested people, like you, learn about the fundamentals of electronics, and practice circuit design and construction. Typically, what we don’t do is help you find all the parts you need to build your first designs, and then train you how to purchase for your future in electronics. That is, until now.
Purchasing electronic parts, especially in the volumes needed for producing more than a prototype, can be a challenge with a language all its own. But as your design skills increase and your responsibilities grow, being familiar with the world of purchasing and procurement is an asset worthy of your investment.
As you move into the sourcing of more sophisticated and larger volumes of electronic components, it’s useful to understand some of the vocabulary that may be used in your discussions with manufacturers or component distributors, like our friends at Onlinecomponents.com.
So, here is our list, which is fairly complete but not exhaustive, of some of the more common terms and acronyms you’ll probably be hearing and using in the weeks and years to come. Many of these terms are also used in other industries. Use it and you’ll sound like the professional you’re certain to become.
Common Purchasing and Procurement Terms
- Agile Procurement – A style of procurement that is less process-driven, more collaborative, and fast-paced to allow quick adaptation to business needs and the realities of the market.
- API (Application Programmable Interface) – A digital standard that allows software applications on different computers to communicate with each other.
- Bill of Lading – A document that details the type, quantity, and destination of goods being shipped by a carrier for a shipper.
- Bill To/Ship To – Instructions to a supplier to send invoice and product to different addresses.
- Blanket Order – A purchase order for a product or service that covers multiple delivery dates over a defined period of time, typically to earn better pricing terms.
- BOM (Bill of Materials) – A list of the materials, components, and instructions needed to manufacture a product.
- BOM Quoting – When a distributor handles the quoting and management of a BOM.
- Category Management - A strategic approach to procurement that groups similar products together and segments spending within those categories for efficiency.
- Certificate of Origin – A document that certifies the country of origin of a product.
- CLM (Contract Lifecycle Management) – The digital management of a contract from its initiation through execution and potential renewal.
- Consignment – An agreement where one party sells goods for another in exchange for a commission on the sale.
- Demand Management – A methodology used to forecast and manage the demand for a product or service.
- EOL (End of Life) – The end of the useful life of a product or the end of its manufacture.
- ECN (Engineering Change Notice) – A document that authorizes and records design changes to a component or system.
- EDI (Electronic Data Interchange) – An application that allows for the digital exchange of documents between computers.
- E-Procurement – A digital transaction process that allows for the requisition, ordering, and purchasing of parts and services online.
- Excess Inventory – Parts that are in inventory in excess of the immediate manufacturing needs of a business.
- Franchised Distributor – A distributor who has an established relationship with a manufacturer to inventory and sell their products.
- Just-in-Time Purchasing – A system that provides the necessary parts to a production facility as they are required for use instead of storing them in inventory until needed.
- Kitting – The process of gathering all the components needed to complete a task in a single location, or “kit”. It typically means gathering multiple SKUs together and assigning a new SKU to the kit.
- LTB (Last Time Buy) – Final ship date for a product prior to the end of manufacturing of it.
- Lead Time – The time between the awarding of a component purchasing document to a vendor and the receipt of those products by the purchaser.
- LoL (Limit of Liability) - A clause in a contract setting a cap on the financial liability of one party to the other in case of contract breach, error, damage, or specific events.
- Linear Pricing – A pricing model where the price of an individual product is based on the quantity of units purchased.
- Master Distributor – A distributor that sells to other distributors (wholesaler).
- MOQ – Minimum order quantity.
- NCNR (Non-Cancellable Non-Returnable) – A purchase order which cannot be returned to a supplier based on demand reduction.
- Parametric Search - A method (typically digital) allowing users to search for items based on specific characteristics or parameters, such as specs or prices.
- RFP (Request for Proposal) – A purchasing document that is used to announce a project, describe it in detail, and solicit bids from qualified vendors.
- RFQ (Request for Quote) – A procurement document that requests pricing options from a vendor for a specific product or service.
- RMA (Return Material Authorization) – An agreement between a customer and a supplier to allow product returns for refund during a warranty period.
- SKU (Stock Keeping Unit) – A bar code that may be assigned to a product to track inventory.
- Sole Sourcing - A purchasing situation where only one vendor is capable of providing an item or service, which rules out competitive bids.
- Split Sourcing – When a company uses two sources for the same product in order to insure availability.
- Stock Allocation Allowance – A process that determines the distribution of inventory of a product or component across multiple locations.
- Tare Weight – The weight of an empty vehicle or shipping container.
- Value-Added – Increasing the value of a product to a customer by incorporating additional features or services.
- Value-Added Distributor – A distributor who provides additional features or benefits for the products they sell.
- Value Analysis - The process of searching the supply chain for opportunities to reduce cost, improve quality, and cut waste in products.
- VMI (Vendor Managed Inventory) – Inventory managed for a customer by a distributor.
Now, as we mentioned, this list is not exhaustive. Companies create and use their own terms, adding to the lexicon of purchasing on a weekly basis. But this is a pretty good start, and our way of helping you learn more than just the details of Ohm’s Law.
If you’re at a loss to find the meaning of some obscure term you’ve heard in your purchasing discussions, we suggest you touch base with our friends at www.onlinecomponents.com. They’re ready to help you learn all you can.
