Procurement glossary
Plain-English definitions of the terms procurement and supply chain teams use every day.
Accessorial charges
Fees for freight services beyond standard pickup and delivery, such as detention, liftgate, residential delivery or inside delivery.
Accessorials can add significantly to freight cost. Negotiate a fixed schedule in carrier contracts rather than accepting each carrier’s published rates.
Agentic AI
AI systems that can take actions across business systems, such as creating requisitions or routing approvals, rather than only generating text or suggestions.
Agents need clear permissions, approval steps and audit logs proportional to the actions they can take.
Agentic procurement
An operating model in which AI agents carry out steps of the procurement process — intake, sourcing, ordering, matching — while humans set policy and approve exceptions.
Agentic procurement describes what the process looks like when agentic AI is applied across source-to-pay, not a single tool. It shifts the buyer’s role from executing transactions to supervising agents and handling the cases they escalate.
AI governance
The policies, permissions, controls and audit trails that define what AI systems may decide and act on across source-to-pay, and who is accountable when they are wrong.
In procurement the control set is process-specific: which agents can create orders, approve invoices or select suppliers; spend thresholds that force human review; logging of every AI action; and segregation-of-duties checks that still hold when an algorithm sits between requisition and payment.
Autonomous sourcing
AI that runs all or most of a sourcing event without human initiation — identifying suppliers, issuing and answering RFQs, analyzing bids and recommending or executing an award within set thresholds.
“Autonomous” refers to the scope of the event, not the absence of oversight. Tail-spend, low-risk categories are where autonomous sourcing is most common today; strategic categories usually keep a human on the award decision.
Blank sailing
A scheduled vessel sailing that an ocean carrier cancels, usually to cut capacity or recover schedules.
Ocean contracts should state what happens to a shipper’s allocation when a sailing is blanked.
CAPE
Consolidated Administration and Processing of Entries, the CBP tool in the ACE portal for refunding IEEPA tariffs.
Phase 1 launched April 20, 2026 for unliquidated entries and entries liquidated within 80 days of submission. Only the importer of record or its broker can file.
Country of origin
The country where a product was made or last substantially transformed, which determines the tariffs it owes.
For tariff purposes, origin is not where goods ship from. Assembly that changes a product’s name, character or use can confer origin; simple repackaging cannot. Origin drives Section 301 exposure and USMCA eligibility.
Critical vendor
In a Chapter 11 bankruptcy, a supplier the debtor asks the court for permission to pay for pre-filing amounts because its goods or services are essential to continued operations.
Suppliers to a bankrupt company should check whether they qualify, since critical vendor status can mean faster payment.
Customs value
The value of imported goods on which ad valorem duties are calculated, usually the transaction value paid.
Since April 2026, Section 232 metals duties apply to the full customs value of derivative products, not only their metal content.
Detention and demurrage
Charges for holding equipment too long: demurrage for containers left at a port or terminal, detention for containers or trailers kept outside it.
Negotiated free time and efficient pickups reduce these charges, which can exceed the difference between competing freight rates.
Direct procurement
Buying the materials, components and services that go directly into the products a company sells.
Direct spend is usually the largest and most strategic category for manufacturers, and the most exposed to tariffs and commodity prices.
Dual sourcing
Buying the same item from two qualified suppliers to reduce dependence on either.
Dual sourcing trades some volume leverage for resilience. It is most valuable for parts that are single-sourced today and hard to requalify quickly.
Due diligence statement (DDS)
A statement required under the EU Deforestation Regulation confirming products are deforestation-free and legally produced before they are placed on the EU market.
Downstream companies can, under certain conditions, rely on the DDS reference number submitted by the first operator.
Escalation clause
A contract term that adjusts price based on a defined change in costs, usually tied to a published index.
Good escalation clauses name the index series, base period, adjustment frequency, indexed share of price and any caps or floors, and work in both directions.
EUDR
The EU Deforestation Regulation, which from Dec. 30, 2026 requires companies to show that cattle, cocoa, coffee, palm oil, rubber, soy and wood products sold in the EU are deforestation-free.
Compliance requires plot-level geolocation data from the point of production.
Force majeure
A contract clause that excuses a party from performing when events beyond its control, such as war or natural disaster, prevent it.
Review what events qualify, what notice is required and whether price changes are covered, since force majeure rarely covers higher costs alone.
Fuel surcharge
A charge added to freight rates to cover changes in fuel cost, usually indexed to the weekly U.S. average diesel price.
Truckload surcharges are commonly calculated per mile as (diesel price minus a base price) divided by an assumed miles per gallon. LTL and parcel carriers usually charge a percentage from a published table.
General rate increase (GRI)
An annual increase in a carrier's published base rates, expressed as an average across lanes, services and weights.
Parcel and LTL carriers announce GRIs every year. Your real increase depends on your shipment mix and contract structure, so re-rate your own shipments rather than relying on the headline percentage.
HTS code
The 10-digit Harmonized Tariff Schedule classification that determines the duty rate and special tariffs for an imported product.
Classification errors are among the most common and costly import mistakes. Binding rulings from CBP give certainty when classification is unclear.
IEEPA tariffs
Tariffs imposed under the International Emergency Economic Powers Act, ruled unlawful by the U.S. Supreme Court in February 2026.
Importers of record can seek refunds through CBP’s CAPE process.
Importer of record
The party legally responsible for an import, including paying duties and ensuring compliance with U.S. Customs and Border Protection.
Under DDP Incoterms the supplier is typically the importer of record; under FOB or EXW the buyer usually is.
Incoterms
Standard trade terms published by the International Chamber of Commerce that define who pays for and bears the risk of each stage of shipping.
Common terms include EXW, FOB, CIF, DAP and DDP. The Incoterm in a contract decides who pays freight, insurance and duties.
Index-linked pricing
Pricing that moves automatically with a published cost index, such as a Producer Price Index series.
Index-linked pricing replaces negotiated flat increases with a formula, so prices fall when costs fall as well as rising when they rise.
Indirect procurement
Buying goods and services a company uses to operate but does not resell, such as software, facilities, travel and professional services.
Indirect spend is often fragmented across many suppliers and budget owners, which makes it a common target for consolidation and savings.
Landed cost
The total cost of getting a product to its destination: purchase price plus freight, insurance, duties, taxes and handling.
Comparing suppliers on landed cost rather than unit price is essential when tariffs differ by country of origin.
Model Context Protocol (MCP)
An open standard for connecting AI applications to external systems — data sources, tools and workflows — through a common interface, often compared to a USB-C port for AI.
For procurement stacks, MCP matters because it gives AI agents a standardized way to reach ERP, catalog, contract and risk data without bespoke integrations for each system. Exposing purchasing actions through MCP also concentrates the governance question: whoever builds the server decides what an agent is allowed to do.
Most-Favored-Nation (MFN) rate
The standard U.S. tariff rate for a product, applied to imports from World Trade Organization members without a special agreement.
Special duties such as Section 232 and Section 301 are added on top of the MFN rate.
Predictive procurement
Using historical spend, demand and market data to forecast future demand, prices and supply risk, so buying decisions are made ahead of events rather than in reaction to them.
Predictive procurement is analytical rather than agentic: it informs when and what to buy, but a person — or a separate agent — still executes. Forecast quality depends heavily on clean, well-classified spend history.
Procurement orchestration
Software that gives employees one place to request purchases and routes each request through the right approvals and systems.
Also called intake-to-procure. It sits in front of ERP, sourcing, contract and risk systems rather than replacing them.
Producer Price Index (PPI)
A monthly U.S. Bureau of Labor Statistics measure of changes in the prices domestic producers receive for their output.
PPI series exist for thousands of products and industries and are the most common reference for contract escalation clauses. Our Cost Pressure Monitor is built on them.
Purchase-to-pay (P2P)
The process from requisition and purchase order through goods receipt, invoice matching and payment.
P2P is the transactional half of source-to-pay and is where most procurement automation is applied.
Purchasing Managers' Index (PMI)
A monthly survey-based index of manufacturing activity published by the Institute for Supply Management; readings above 50 indicate expansion.
Its prices and supplier deliveries sub-indexes are early signals of supplier price increases and lengthening lead times.
Routing guide
A shipper's ranked list of contracted carriers and rates for each lane, used to tender loads in order.
Routing guide compliance, the share of loads accepted by the primary carrier, is a key measure of whether a freight bid’s awards are working.
Section 122
A provision of the Trade Act of 1974 allowing a temporary import surcharge of up to 15% for up to 150 days to address balance-of-payments problems.
A 10% Section 122 surcharge applied from Feb. 24 to July 24, 2026, after the IEEPA tariffs were struck down.
Section 232
A provision of the Trade Expansion Act of 1962 allowing tariffs on imports that threaten U.S. national security, applied by product.
In 2026 Section 232 duties cover steel, aluminum, copper, autos and parts, wood products, semiconductors, heavy vehicles and patented pharmaceuticals.
Section 301
A provision of the Trade Act of 1974 allowing the U.S. Trade Representative to impose tariffs in response to a country's unfair trade practices.
Section 301 underpins the China tariffs in place since 2018 and the 2026 forced-labor tariffs covering 60 economies.
Should-cost
An estimate of what a product ought to cost, built from its materials, labor, overhead, logistics and a fair margin.
Should-cost models give procurement teams an independent benchmark to test supplier quotes and price-increase requests.
Single sourcing
Buying an item from only one supplier, by choice or because no alternative exists.
Single sourcing can secure better pricing but creates concentration risk. A sole source (no alternative exists) is riskier than a chosen single source.
Source-to-pay (S2P)
The full procurement process from spend analysis and sourcing through contracting, purchasing, invoicing and payment.
S2P software suites combine strategic sourcing and contract management with purchase-to-pay automation.
Spend analysis
Collecting, cleaning and categorizing an organization's purchasing data to see what it buys, from whom and at what price.
Spend analysis is the starting point for category strategy, supplier consolidation and savings tracking.
Spend classification
Tagging individual transactions to a standard commodity or category taxonomy so spend can be aggregated and analyzed. Increasingly done by ML models trained on line-item text and supplier master data.
Classification is the quiet prerequisite for everything downstream: savings tracking, should-cost models and AI sourcing tools are only as good as the category labels on the data they consume. Misclassified tail spend is the most common reason procurement AI projects stall in pilot.
Spot rate
The price for a single shipment at current market conditions, as opposed to a contracted rate.
When spot rates rise above contract rates, carriers reject more contract loads; when they fall below, shippers gain leverage.
Supplier risk management
The process of identifying, assessing, monitoring and reducing the risks that suppliers pose to supply, cost, quality and compliance.
Effective programs segment suppliers, score them on financial, trade, operational, compliance and cyber risk, and monitor priority suppliers continuously.
Tariff exclusion
A decision exempting a specific product from a tariff, usually for a limited period.
The last 178 Section 301 China exclusions expire Nov. 10, 2026 unless extended.
Tender rejection
When a carrier declines a load offered under a contract rate, usually because spot rates are higher or capacity is tight.
Rising tender rejection rates are an early signal of a tightening truckload market and of contract rates that are too low to hold.
TEU and FEU
Standard container units: a TEU is a twenty-foot equivalent unit and an FEU a forty-foot equivalent unit, equal to two TEUs.
Ocean freight rates are usually quoted per FEU; port volumes are usually reported in TEUs.
Three-way match
An invoice control that checks the purchase order, goods receipt and supplier invoice agree before payment.
Three-way matching prevents paying for goods not ordered or not received, and is a core purchase-to-pay control.
Tier-n mapping
Identifying a supplier's own suppliers (tier 2, tier 3 and beyond) to find hidden dependencies and compliance exposure.
Forced-labor rules and concentrated sub-suppliers make tier-n visibility a compliance and resilience requirement.
USMCA
The United States-Mexico-Canada Agreement, the trade agreement that gives qualifying North American goods preferential tariff treatment.
USMCA-qualifying goods are exempt from several 2026 tariffs, including the Section 301 forced-labor duties.