Transaction costs are the costs of ‘doing business’ and may be classified in terms of internal and external transaction costs. Time spent developing service level agreements and discussions about internal transfer pricing are examples of internal transaction costs. Market reviews, supplier appraisal, negotiations and the costs of drawing up and managing contracts between two separate entities are examples of external transaction costs. The concept was popularised through transaction cost economics and part of the rationale behind cooperative supplier relationships is the reduction in external transaction costs.
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Discover the world’s largest Glossary of Procurement terms
With over 800 Procurement specific terms (and growing) you will find everything you need to know or thought you knew about the Procurement function. Our aim is to provide you with a comprehensive list collated from the Comprara Groups hub of training and procurement consulting source materials.The Procurement Glossary has been compiled by industry expert Paul Rogers.
