It’s a given that, in order to build stuff, you need parts. Lots of them. And in electronics, every part matters because it serves a very specific function. But in electronics, the truth of the matter is that as you progress in circuit design complexity and end-product features, your quest for parts changes. You cease buying or scrounging for single components to fit your prototype, and move on to the larger world of “sourcing and procurement”. That’s when the vocabulary changes.

If you’re moving into larger volume sourcing, it may be useful to understand some of the terms and acronyms which may be used in your discussions with distributors or suppliers. And, if you are new to electronics, be warned that, like NASA, it uses lots of acronyms.

Here is a list, by no means exhaustive, of some of the more common terms you may hear. Rest assured, there will be more added to your procurement lexicon as you gain more responsibility. 

Here is our purchasing and procurement terms list:

• • • 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. 

• • • Lead Time – The time between the awarding of a component purchasing document to a vendor and the receipt of those products by the purchaser.

• • • LTB (Last Time Buy) – Final ship date for a product prior to the end of manufacturing of it.

• • • 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.

For definitions of some of the many additional terms used in electronics design, you might also try the digital glossary provided by our friends at CircuitBread. You can access it at: www.circuitbread.com/glossary. Or you could just go to a dictionary, but the CircuitBread site is a lot more fun!