Procurement terms: K

A Japanese word for ‘improvement’, or ‘change for the better’, kaizen refers to a business practice that focuses on continuous improvement of processes with the involvement of all staff in the process. The aim of kaizen is to eliminate waste, or to create a lean manufacturing environment, by improving standardised activities and processes. In contrast to Six Sigma or other initiatives that may rely upon ‘top down’ initiatives and external experts, kaizen is a ‘bottom up’ initiative involving the generation of simple ideas by staff involved in the process, which are ‘bite-sized’, quicker and easier to implement and which may lead to incremental improvement. See also Lean Thinking and Six Sigma.

Keiretsu is a Japanese word for a grouping of enterprises with interlocking commercial relationships and shareholdings. Keiretsu member companies have reciprocal share ownership and may also procure from each other to create reciprocal trading relationships. There is some debate about whether keiretsu are as prevalent as they once were, although notable keiretsu such as Sumitomo and Mitsubishi still trade successfully, but with less emphasis on a closed supply chain ecosystem. See also Chaebol.

In many sales structures, resources are focused on the most important customers and the key customer segments are allocated dedicated key account managers. Key account managers are not only responsible for ensuring sales meet targets, but also for managing the relationship with the key stakeholders in the customer organisation and planning the longer-term growth of the account. Relationships developed by key account managers will include those with procurement personnel, though typically they seek to influence all decision makers and key influencers. See also Account Manager.

A key performance indicator [KPI] is a term for a performance measure that is important to the organisation, business unit or individual who is being measured. In procurement, KPIs are typically used as measures of supplier performance and may be part of a contract or service level agreement. For example, in a contract for responsive repairs, the time taken to perform is important, so the time taken to respond to a call-out might be one possible performance indicator. Choosing the right KPIs requires a good understanding of what is important to the organisation, which in this case is the time taken to make the repair, not just how quickly the engineer took to arrive on site. Provided there are metrics for each KPI, reviewing performance can give each party an understanding of the level of service being provided. See also Performance Review and Service Level Agreement. Developing Service Level Agreements (SLA) and Key Performance Indicators (KPI) training is available at Academy of Procurement.

Knowledge includes information, facts or skills gained through experience, training or education. The term is used for both theoretical and practical understanding. In procurement, category management represents an attempt to increase the quality and quantity of information available about the category. Some commentators see knowledge as the ability to make decisions based on information, so the richer the information, and the more likely that better decisions will be reached. See also Knowledge, Explicit and Knowledge, Tacit.

Explicit knowledge involves creating knowledge that can be written down, stored and shared. Training manuals and category plans are examples of explicit knowledge. See also Knowledge and Knowledge, Tacit.

Tacit knowledge is know-how that is not easily recorded, stored or shared. An example would be negotiation skills. Many of us would learn by watching someone else practise negotiation, as reading a book or following a procedure manual would not be the most effective way to develop such skills. See also Knowledge and Knowledge, Explicit.

Refer to Key Performance Indicator