Procurement Glossary

The value customs uses to calculate duties and taxes. It is usually based on the CIF value, sometimes with a landing charge, and may differ from the invoice if customs revalues the goods.

The document issued by the carrier for sea shipments. It is a receipt for the goods, evidence of the contract of carriage and, when negotiable, a document of title.

A licensed clearing and forwarding agent who handles customs documentation, assessment and release of imported or exported goods on the owner's behalf.

The volume unit used to price sea LCL freight: length × width × height in metres. One CBM is a cube of 1 m on each side.

In air freight, the higher of the actual weight and the volumetric weight. Carriers charge on whichever is greater.

An Incoterms® rule for sea and inland waterway transport where the seller pays freight and minimum insurance to the named destination port. In Bangladesh customs valuation, the CIF value is commonly the starting point for the assessable value.

A table that places supplier quotations side by side — item prices, totals, discounts, taxes, delivery and payment terms — to identify the lowest evaluated offer (L1) and support the award decision.

The order quantity that minimises the combined cost of ordering and holding inventory: √(2 × annual demand × ordering cost ÷ holding cost per unit).

An Incoterms® rule for sea transport where the seller delivers the goods on board the vessel at the named port of shipment; the buyer pays the main freight and insurance from there.

A record of what was actually received, in what quantity and condition. It is one of the three documents in the three-way match.

The Harmonized System number that classifies a product for customs. It decides which duty and tax rates apply. Confirm it with your C&F agent or the official tariff schedule.

Rules published by the International Chamber of Commerce that define who arranges and pays for transport, insurance and customs, and where risk passes from seller to buyer. Always state the rule, the place and the version, e.g. "FOB Shanghai Incoterms® 2020".

Ranking of evaluated offers from lowest to highest: L1 is the lowest evaluated (compliant) offer, L2 the second lowest, and so on.

The total cost of an imported product once it reaches your warehouse: goods, freight, insurance, duties and taxes treated as cost, and local charges such as C&F, port and transport.

The time from placing an order to receiving the goods, including supplier processing, production, transit and clearance.

A bank's undertaking to pay the seller when documents that comply with the LC terms are presented. It reduces payment risk for the seller and performance risk for the buyer.

The smallest quantity a supplier will accept in one order.

A preliminary invoice from the seller showing goods, prices and terms before shipment. Importers use it to open an LC or arrange payment.

The buyer's formal commitment to a supplier: items, quantities, prices, delivery and payment terms. Once accepted it becomes a commercial contract.

The difference between the price actually paid and a standard or budgeted price, multiplied by the quantity bought.

An internal request from a user department asking procurement to buy something. It records what is needed, how much, when and against which budget.

The stock level at which a new order should be placed: average demand during the lead time plus safety stock.

An early request to gather market and supplier information before a formal RFQ or RFP. It does not ask for a binding offer.

A request for suppliers to propose how they would meet a need — approach, capability and price. Used for complex requirements where solutions differ.

A request asking suppliers to quote a price for a clearly specified item or service. Best when the requirement is standard and price is the main difference between offers.

Extra inventory held to protect against variations in demand or lead time, so that you do not run out while waiting for replenishment.

Single sourcing means choosing one supplier although others exist. Sole sourcing means only one supplier can supply the item.

Collecting, cleaning and classifying purchase data to see what is bought, from whom and at what cost — the basis for sourcing priorities and savings.

Scoring suppliers against agreed, weighted criteria such as price, quality, delivery, service and risk, so that selection is consistent and documented.

A formal, usually public, invitation for sealed offers under published rules and evaluation criteria — common in public procurement.

Checking that the purchase order, the goods received note and the supplier invoice agree on items, quantities and prices before paying.

All costs of an asset over its life — purchase, delivery, installation, operation, maintenance, downtime and disposal — not just the purchase price.