0.4Key vocabulary: RFQ, GRN, PO, lead time and OTIF
The essentials in 30 seconds
- Document cycle: RFQ (price), PO (contractual order), GRN (delivery) and invoice (three-way matching).
- Real lead time: total order → availability time, with customs and receiving — not catalogue lead time.
- Measured reliability: OTD (on time) and OTIF (on time and complete) sum up a supplier in one figure.
Running mini-case — Nadia decodes her paperwork
Nadia pulls out a recent purchase: an RFQ sent in a hurry, an order without written lead time, a vague delivery note and an invoice matching neither. The supplier announced two weeks; the SME received in five. Nadia understands that without precise vocabulary — lead time, MOQ, OTIF — she can neither order right nor claim.
Final episode of cases 0.1-0.3 — Nadia puts exact words on her documents.
1. Documents in the purchasing cycle
RFQ (Request for Quotation) asks for a priced quote. RFI (Request for Information) probes capabilities without price. RFP (Request for Proposal) asks for a full proposal (solution + price) for a complex need.
The purchase order (PO) is the contractual document: references, quantities, prices, lead times, conditions — it commits the parties. The goods receipt / delivery note (GRN) accompanies the goods and lists what is actually delivered: basis for checking on receipt.
The invoice closes the cycle: it must match the PO (ordered) and the GRN (received). This three-way match will be detailed in level 1.
2. Lead times, quantities and references
Lead time is the total time between order and availability at your site: supplier preparation + transport + customs + receipt. It sizes your stocks, not the catalogue lead time.
MOQ (Minimum Order Quantity) is the minimum quantity imposed. A high MOQ forces you to stock: it is negotiated like price. Free carriage indicates transport is included above a threshold ("free carriage at €500").
The item / SKU (Stock Keeping Unit) is the unique identifier of an item in its precise variant (model, size, colour). Without clean, non-duplicate references, no serious stock management is possible.
3. Measuring reliability: OTD and OTIF
OTD (On-Time Delivery) measures punctuality. OTIF (On Time In Full) is more demanding: on time and complete. A supplier's OTIF is the best summary of its reliability.
These rates are measured both ways: your suppliers' reliability to you, and yours to your customers. They will structure steering seen in levels 2 and 5.
Don't be intimidated by acronyms: behind each, a simple idea. Knowing them means reading your tools (ERP) and talking with international partners without ambiguity.
🔎 Concrete example — Reading a lead time correctly
A supplier announces "2 weeks". In reality the full lead time is 5 weeks: 3 days internal admin, 14 days supplier, 10 days transport, 4 days customs and 2 days receipt/control.
Lesson: measure your actual lead time (internal request → availability) and its variability, not the catalogue lead time.
Action: it's this real lead time that sizes the reorder point and safety stock.
Section vocabulary
- RFQ / RFI / RFP
- RFQ: priced request. RFI: information request. RFP: full proposal request (solution + price).
Simple example: Nadia sends a priced RFQ for 10,000 cartons delivered to Algiers.
What it is not: ordering by phone with nothing in writing and no confirmed price.
Reflex: every written enquiry with quantities, lead time and delivery place.
- Purchase order (PO)
- Contractual document that formally orders (references, quantities, prices, lead times, conditions); the committing piece.
Simple example: Nadia issues a PO with price, confirmed lead time and free carriage specified.
What it is not: a vague email “send us cartons quickly” with no reference or price.
Reflex: no order without a written, confirmed PO.
- Goods receipt (GRN)
- Document that accompanies goods and lists what is delivered; basis for checking on receipt.
Simple example: Nadia ticks off pallets received line by line against the carrier's GRN.
What it is not: signing the GRN without counting, trusting the hurried driver.
Reflex: tick off before signing, gap noted on the GRN.
- Lead time
- Total time between order placement and availability (preparation + transport + customs + receipt); sizes stocks.
Simple example: Nadia measures 5 real weeks: 3 internal days + 14 supplier days + transport + customs + receiving.
What it is not: sizing stocks on the “2 weeks” announced by the supplier alone.
Reflex: measure and log your actual lead times observed.
- MOQ
- Minimum Order Quantity: minimum imposed by supplier; forces overstock if high and is negotiable.
Simple example: Nadia negotiates the MOQ from 5,000 down to 2,000 cartons to protect her cash.
What it is not: letting MOQ dictate the order without ever discussing it.
Reflex: renegotiate any MOQ forcing you to overstock.
In practice — Master vocabulary on your own documents
- Find a recent purchase and identify its documents: was there RFQ, PO, GRN, invoice?
- For 3 regular items, measure actual lead time observed (order → receipt), not promised lead time.
- Spot MOQs and free-carriage thresholds of your main suppliers: which force you to order too much?
- Check that your items have unique and stable references (no duplicates under two names).
Ready-to-say script — lock price and lead time in writing
“Please confirm in writing price, quantity, lead time and free carriage. Without written confirmation, I cannot commit the order.”
Say to every supplier before ordering: an unconfirmed order commits no one.
Copy-paste template — vocabulary sheet on a real purchase
PURCHASE: _______________ | SUPPLIER: _______________
RFQ / PO / GRN / INVOICE (ticked?): ___ / ___ / ___ / ___
PROMISED / ACTUAL LEAD TIME: _______________ / _______________
MOQ + FREE CARRIAGE: _______________
UNIQUE REFERENCE (SKU): _______________
OTIF OBSERVED: _______________Small business / tight budget
One binder is enough: one sleeve per purchase with RFQ, PO, GRN and invoice stapled together for matching.
Algeria SME
Add on each PO: price in dinars, lead time to Algiers including clearance, and free-carriage threshold — no more “2 weeks” turning into 5.
Regular importer
Track lead time per segment (supplier, transport, customs, receiving) to know where to hit when it slips.
Messy references
Clean duplicates: one unique code per variant (size, colour), old reference crossed out and replaced everywhere.
✓ Best practices
- Use local language internally, acronyms internationally: being understood beats sounding expert.
- Always demand a written order confirmation with price and lead time: an unconfirmed order commits no one.
- Measure and record your actual lead times: it's the most profitable data for stock management.
✗ Common pitfalls
- Believing announced lead time covers full lead time: it often covers only one segment.
- Letting MOQs dictate quantities without negotiating: it's cash immobilised by default.
- Having duplicate references (same product under two codes): management becomes unmanageable.
Key takeaways
- Document cycle: RFQ → PO (contractual) → GRN (check) → invoice (matching).
- Total lead time = real time that sizes stocks; MOQ and free carriage condition quantities.
- SKU: a unique and stable reference per precise variant.
- OTD/OTIF: best summary of supplier reliability, to measure both ways.
48h Challenge — apply tomorrow
Pull out 1 recent purchase and measure its real lead time (order → receipt) with the sheet above. Gap with promised lead time? Note it and adjust your next reorder point.
- I can define RFQ, PO, GRN, lead time, MOQ and OTIF without hesitating.
- I have linked each term to one of our real documents.
- I have measured a real lead time and spotted one MOQ to renegotiate.
Frequently asked questions
Why so many acronyms?
Because supply chain is international and software (ERP) speaks English: PO, SKU, MOQ, OTIF are understood everywhere. Vocabulary is stable and limited (about thirty terms cover 95% of situations). Internally use plain language; internationally acronyms avoid ambiguity.
Supplier says 2 weeks but I receive in 5: who is right?
No one is lying, each talks about a different segment. Supplier lead time is only part of total lead time (admin + preparation + transport + customs + receipt). Measure end-to-end real lead time and its variability: that's what should feed your replenishment calculations.
What does three-way matching between PO, GRN and invoice verify?