Supply Chain Terminology

ABC Classification:
Classification of a group of items in decreasing order of annual value or other criteria.

ABC Inventory Control:
An inventory control approach based on the ABC volume or sales revenue classification of products

Acceptance Sampling:
Sampling a part of goods for inspection rather than examining the entire lot.

Accessory:
A feature added to the good or service offered to the customer for customizing of the end product.

Accountability:
Being responsible for doing a specific work.

Accounts Payable (A/P):
The value of goods and services for which payment has not yet been made to the supplier.

Accounts receivable (A/R):
The value of goods shipped or services rendered to a customer on whom payment has not yet been received.

Accreditation:
Certification, capability, objectivity, competence and integrity of a group or individual to provide a specific service.

Accredited Standards Committee (ASC):
A committee of the ANSI chartered to develop uniform standards for the electronic interchange of business documents.

Assembly bin:
A place, usually a physical location, used to accumulate all components that go into an assembly before the assembly is sent out to the assembly floor.

Accuracy:
The degree of freedom from error or the degree of conformity to a standard.

Acknowledgment:
A communication by a supplier to advise a purchaser that a purchase order has been received.

Acquisition Cost:
In cost accounting, the cost required to obtain one or more units of an item. It is order quantity
times unit cost.

Exception Message:
An output of a system that identifies the need for and the type of action to be taken to correct a current or potential problem.

Action Plan:
A method or process to achieve the results called for by one or more objectives. An action
plan can be a simpler version of a project plan.

Active Inventory:
The raw materials, work in process, and finished goods that will be used or sold within a given period.

Active Stock:
Goods in active pick locations and ready for order filling.

Activity Based Costing (ABC): A methodology that measures the cost and performance of cost objects, activities and resources.

Activity Based Costing Model:
In activity-based cost accounting, a model, by time period, of resource costs created because of activities related to products or services causing the activity to be carried out.

Activity Based Planning (ABP):
Activity-based planning (ABP) is an ongoing process to determine activity and resource requirements based on the ongoing demand of products or services by specific customer needs.

Activity Level:
A description of types of activities dependent on the functional area.

Activity Network Diagram:
An arrow diagram used in planning and managing processes and projects.

Activity Ratio:
A financial ratio used to determine how an organization’s resources perform relative to the revenue the resources produce.

Actual Costs:
The labor, material, and associated overhead costs that are charged against a job as it moves through the production process.

Actual Demand:
Actual demand is built up of customer orders and actual demand consumes the forecast based on chosen rules.

Actual to Theoretical Cycle Time:
The ratio of the measured time required to produce a given output divided by the sum of the time required to produce a given output based on the rated efficiency of the machinery and labor operations.

Advance Material Request:
Ordering materials before the release of the formal product design needed due to long lead times.

Advanced Planning and Scheduling (APS):
Techniques that deal with analysis and planning of logistics and manufacturing over the short, intermediate, and long-term time periods.

Advanced Shipping Notice (ASN):
Detailed shipment information transmitted to a customer or consignee in advance of delivery, designating the contents and nature of the shipment.

After-Sale Service:
Services provided to the customer after products have been delivered.

Aggregate Forecast:
An estimate of sales, often time phased, for a grouping of products or product families produced by a facility or firm.

Aggregate Inventory:
The inventory for any grouping of items or products involving multiple SKU´s.

Air Cargo:
Freight that is moved by air transportation.

Algorithm:
A clearly specified mathematical process for computation; a set of rules, which, if followed, give a
pre-scribed result.

All-cargo carrier:
An air carrier that transports cargo only.

Allocated Item:
In an MRP system, an item for which a picking order has been released ready to get picked.

Allocation:
Allocation of available inventory to customer and production orders.

Alpha Release:
A very early release of a product to get preliminary feedback about the feature set and usability.

American National Standards Institute (ANSI):
ANSI is the U.S. representative to the International Standards Organization (ISO).

Approved Vendor List (AVL):
List of the suppliers approved for doing business.

Assemble-to-order:
A production environment where goods can be assembled after receipt of a customer’s order.

Assembly:
A group of subassemblies and/or parts that are put together and that are a major subdivision for the final product.

Assembly Line:
An assembly process in sequence in which raw materials and parts are assembled.

Asynchronous Process:
A situation where two related processes are started and run concurrently without waiting for the other to complete.

Attachment:
An accessory that has to be physically attached to the product.

Attributes:
A label used to provide additional classification or information about a resource, activity, or cost object. Used for focusing attention and may be subjective.

Audit:
The inspection and examination of a process or quality system to ensure compliance to requirements.

Authentication:
The process of verifying the eligibility of a device, originator, or individual to access specific categories of information or to enter specific areas of a facility.

AutoID:
Referring to an automated identification system. This includes technology such as bar coding and radio frequency tagging (RFID).

Automatic Rescheduling:
Rescheduling done by the computer to automatically change due dates on scheduled receipts when it detects that due dates and need dates are out of phase.

Available Inventory:
The on-hand inventory balance minus allocations, reservations, backorders, and (usually) quantities held for quality problems.

Available to Promise (ATP):
Free inventory and planned production maintained in the master schedule to support customer-order promising.

Average Cost per Unit:
The estimated total cost, including allocated overhead, to produce a batch of goods divided by the total number of units produced.

Average Inventory:
The average inventory level over a period of time.

Average Payment Period (for materials):
The average time from receipt of production-related materials and payment for those materials.

Avoidable Cost:
A cost associated with an activity that would not be incurred if the activity was not performed

Back Order:
Product ordered but out of stock and promised to ship when the product becomes available.

Back Scheduling:
A technique for calculating operation start dates and due dates working backward to determine the required start date and/or due dates for each operation.

Backflush:
A method of inventory bookkeeping where the inventory of components is automatically reduced by the computer after completion of activity on the component’s upper-level parent item based on what should have been used as specified on the bill of material and allocation records.

Backlog:
Customer orders received but not yet shipped.

Backorder:
The quantity remaining to be shipped if an initial shipment(s) has been processed.

Balanced Scorecard:
A structured measurement system based on a mix of financial and non financial measures of business performance. A list of financial and operational measurements used to evaluate organizational or supply chain performance.

Bar Code:
A symbol consisting of a series of printed bars representing values.

Bar code scanner:
A device to read bar codes and communicate data to computer systems.

Base Demand:
The percentage of a company’s demand that is derived from continuing contracts and/or existing customers.

Baseline:
A basis for comparison set by monitoring the initial performance of a process.

Batch Number:
A sequence number associated with a specific batch or production run of products and used for tracking purposes.

Batch Picking:
A method of picking orders in which order requirements are aggregated by product across orders to reduce movement to and from product locations. The aggregated quantities of each product are then transported to a common area where the products are sorted per order.

Batch Processing:
A computer term referring to the processing of computer information after it has been accumulated in one group, or batch.

Baud:
A computer term describing the rate of transmission over a channel or circuit.

Benchmark:
A measured, “best in class” achievement to compare actual performance against.

Benchmarking:
The process of comparing performance against best in class practices

Best-in-Class:
An organization, usually within a specific industry, recognized for excellence in a specific process area.

Best Practice:
A specific process or group of processes which have been recognized as the best method for conducting an action.

Beta release:
A pre-released version of a product that is sent to customers for evaluation and feedback.

Bilateral Contract:
An agreement wherein each party makes a promise to the other party.

Bill of Activities:
A listing of activities required by a product, service, process output or other cost object. Bill of activity attributes could include volume and or cost of each activity in the listing.

Bill of Lading (BOL):
A transportation document that is the contract of carriage containing the terms and conditions between the shipper and carrier.

Bill of Material (BOM):
A structured list of all the materials or parts and quantities needed to produce a particular finished product, assembly, subassembly, or manufactured part.

Bin:
1) A storage device designed to hold small discrete parts.
2) A shelving unit with physical dividers separating the storage locations.

Block diagram:
A diagram that shows the operation, interrelationships and interdependencies of components in a system. Boxes, or blocks, represent the components; connecting lines between the blocks represent interfaces.

Bonded Warehouse:
Warehouse approved by the Treasury Department and under bond/guarantee for observance of revenue laws. Used for storing goods until duty is paid.

Bookings:
The sum of the value of all orders received (but not necessarily shipped), net of all discounts, coupons, allowances, and rebates.

Bottleneck:
A constraint, obstacle or planned control that limits throughput or the utilization of capacity.

Bottom-up Replanning:
In MRP, the process of using pegging data to solve material availability or other problems. This process is accomplished by the planner (not the computer system), who evaluates the effects of possible solutions. Potential solutions include compressing lead time, cutting order quantity, substituting material, and changing the master schedule.

Bracing:
Securing a shipment inside a carrier’s vehicle to prevent damage.

Branding:
The use of a name, term, symbol, or design, or a combination of these, to identify a product.

Break-Even Point:
The level of production or the volume of sales at which operations are neither profitable nor un-profitable. The break-even point is the intersection of the total revenue and total cost curves.

Broker: An intermediary between the shipper and the carrier. The broker arranges transportation for shippers and represents carriers.

Bucketed System:
An MRP in which all time-phased data are accumulated into time periods, or buckets. If the period of accumulation is one week, then the system is said to have weekly buckets.

Buffer:
A quantity of materials awaiting further processing.

Bulk area:
A storage area for items which are most efficiently handled per pallet load.

Bulk storage:
The process of housing or storing materials and packages in larger quantities, generally using the original packaging or shipping containers or boxes.

Business Application:
Any computer program, set of programs, or package of programs created to solve a particular business problem or function.

Business Continuity Plan (BCP):
A contingency plan for sustained operations during periods of high risk, such as during labor unrest or natural disaster.

Business Logistics:
The systematic and coordinated set of activities required to provide the physical movement and storage of goods (raw materials, parts, finished goods) from vendor/supply services through company facilities to the customer (market) and the associated activities-packaging, order processing, etc.-in an efficient manner necessary to enable the organization to contribute to the explicit goals of the company.

Business Plan:
1) A statement of long-range strategy and revenue, cost, and profit objectives usually accompanied by budgets, a projected balance sheet, and a cash flow (source and application of funds) statement.
2) A document consisting of the business details (organization, strategy, and financing tactics) to plan for a new business.

Business Performance Measurement (BPM):
A technique which uses a system of goals and metrics to monitor performance.

Business Process Outsourcing (BPO):
The practice of outsourcing non-core internal functions to third parties.

Business Process Reengineering (BPR):
The fundamental rethinking and oftentimes, radical redesign of business processes to achieve dramatic organizational improvements.

Business-to-Business (B2B):
As opposed to business-to-consumer (B2C). Many companies are now focusing on this strategy, and their sites are aimed at businesses (think wholesale) and only other businesses can access or buy products on the site.

Business-to-Consumer (B2C):
Selling goods directly to consumers are considered B2C.

Business Unit:
A division or segment of an organization generally treated as a separate profit-and-loss center.

Cage:
1 A secure enclosed area for storing highly value items,
2 A pallet-sized platform with sides that can be secured to the forks of a forklift and in which a person may ride.

Calendar Days:
The conversion of working days to calendar days is based on the number of regularly scheduled workdays per week in your manufacturing calendar.

Call Center:
A facility housing personnel who respond to customer phone queries and/or perform telemarketing services. These personnel may provide customer service or technical support.

Capacity:
The physical facilities, personnel and process available to meet the product or service needs of customers.

Capacity Planning:
Assuring that needed resources (e.g., manufacturing capacity, distribution center capacity, transportation vehicles, etc.) will be available at the right time and place to meet logistics and supply chain needs.

CAPEX:
A term used to describe the monetary requirements (CAPital EXPenditure) of an initial investment in new machines or equipment.

Capital:
The resources, or money, available for investing in assets that produce output.

Cargo:
A product shipped in an aircraft, railroad car, ship, barge, or truck.

Carousel:
Carousels are a technology used to store items for eventual picking or retrieval in a series of motorized bins.

Carrier:
A firm which transports goods or people via land, sea or air.

Cartel:
A group of companies that agree to cooperate, rather than compete, in producing a product or service, thus limiting or regulating competition.

Cash-to-Cash Cycle Time:
The time it takes for cash to flow back into a company after it has been spent for raw materials.

Total Inventory Days of Supply :
Calculation: Days of Sales Outstanding -Average Payment Period for Material in Days
This is a measure of when the financial transaction occurs, not when stock movement happens.

Cash Conversion Cycle:
1) In retailing, the length of time between the sale of products and the cash payments for a company’s resources.
2) In manufacturing, the length of time from the purchase of raw materials to the collection of accounts receivable from customers for the sale of products or services.

Centralized Inventory Control:
Inventory decision making (for all SKUs) exercised from one office or department for an entire company.

Certificate of Origin:
An international business document that certifies the country of origin of the shipment.

Certified Supplier:
A status awarded to a supplier who consistently meets predetermined quality, cost, delivery, financial, and count objectives.

Champion:
A business leader or senior manager who ensures that resources are available for training and projects, and who is involved in project tollgate reviews; also an executive who supports and addresses Six Sigma organizational issues.

Change Management:
The business process that coordinates and monitors all changes to the business processes and applications operated by the business as well as to their internal equipment, resources, operating systems, and procedures. The change management discipline is carried out in a way that minimizes the risk of problems that will affect the operating environment and service delivery to the users.

Closed-loop Corrective Action (CLCA):
Methodology to document, verify and diagnose failures, recommend and initiate corrective action, provide follow-up and maintain comprehensive statistical records.

Co-Packer:
A contract co-packer produces goods and/or services for other companies, usually under the other company’s label or name.

Commodity:
An item that is traded in commerce. The term usually implies an undifferentiated product competing
primarily on price and availability.

Commodity Procurement Strategy:
The purchasing plan for a family of items.

Competitive Bid:
A price/service offering by a supplier that must compete with offerings from other suppliers.

Compliance:
Meaning that products, services, processes and/or documents comply with requirements.

Component:
Material that will contribute to a finished product but is not the finished product itself.

Computer-aided design (CAD):
Computer-based systems for product design that may incorporate analytical and “what if” capabilities to optimize product designs.

Consensus:
A state in which all the members of a group support an action or decision, even if some of them don’t
fully agree with it.

Consignee:
The party to whom goods are shipped and delivered. The receiver of a freight shipment.

Consignment:
1) A shipment that is handled by a common carrier.
2) The process of a supplier placing goods at a customer location without receiving payment until after the goods are used or sold.

Consolidation:
Combining two or more shipments in order to realize lower transportation rates.

Consortium:
A group of companies that work together to jointly produce a product, service, or project.

Constraint:
A bottleneck, obstacle or planned control that limits throughput or the utilization of capacity.

Consuming the Forecast:
The process of reducing the forecast by customer orders or other types of actual demands as they are received.

Container:
1) An iron “box,” typically 20 to 40 feet long, which is primarily used for ocean freight shipments. For travel to and from ports, containers are loaded onto truck chassis or on railroad flatcars.
2) The packaging, such as a carton, case, box, bucket, drum, bin, bottle, bundle, or bag, that an item is packed and shipped in.

Contingency Planning:
Preparing to deal with calamities (e.g., floods) and non-calamitous situations (e.g., strikes) before they occur

Continuous Improvement (CI):
A structured measurement driven process that continually reviews and improves performance.

Continuous Process Improvement (CPI):
A never-ending effort to expose and eliminate root causes of problems; small-step improvement as opposed to big-step improvement.

Contract:
An agreement between two or more competent persons or companies to perform or not to perform specific acts or services or to deliver merchandise.

Contract Administration:
Managing all aspects of a contract to guarantee that the contractor fulfills his obligations.

Controlled Access:
Referring to an area within a warehouse or yard that is fenced and gated. These areas are typically used to store high-value items and may be monitored by security cameras

Conveyor:
A materials handling device that moves freight from one area to another in a warehouse. Roller conveyors make use of gravity or motors, whereas belt conveyors always use motors.

Core Competency:
Bundles of skills or knowledge sets that enable a firm to provide the greatest level of value to its customers in a way that is difficult for competitors to emulate and that provides for future growth.

Cost Allocation:
In accounting, the assignment of costs that cannot be directly related to production activities via more measurable means.

Cost Center:
In accounting, a sub-unit in an organization that is responsible for costs.

Cost Driver:
In accounting, any situation or event that causes a change in the consumption of a resource, or influences quality or cycle time.

Cost Element:
In accounting, the lowest level component of a resource, activity, or cost object.

Cost of Lost Sales:
The forgone profit associated with a stockout.

Council of Supply Chain Management Professionals (CSCMP):
The CSCMP is a not-for-profit professional business organization consisting of individuals throughout the world who have interests and/or responsibilities in logistics and supply chain management, and the related functions that make up these professions. Its purpose is to enhance the development of the logistics and supply chain management professions by providing these individuals with educational opportunities and relevant information through a variety of programs, services, and activities.

Cross Dock / Cross Docking:
A distribution system in which goods received at the warehouse or distribution center is not put away, but instead is rerouted for shipment to retail stores. Cross docking requires close synchronization of all inbound and outbound shipment movements. By eliminating the put-away, storage and selection operations, it can significantly reduce distribution costs.

Critical Success Factor (CSF):
Those activities and/or processes that must be completed and/or controlled to enable a company to reach its goals.

Cumulative Available-to-Promise:
A calculation based on the available-to-promise (ATP) figure in the master schedule.

Cumulative Lead Time:
The total time required to source components, build and ship a product.

Customer Driven:
The end user, or customer, motivates what is produced or how it is delivered.

Customer Facing:
Those personnel or activities whose jobs is to actual have direct contact with the customer.

Customer Order:
An order from a customer for a particular product or a number of products. It is often referred to as an actual demand to distinguish it from a forecasted demand.

Customer/Order Fulfillment Process:
A series of customers’ interactions with an organization through the order filling process, including product/service design, production and delivery, and order status reporting.

Customer Profitability:
The practice of placing a value on the profit generated by business done with a particular customer.

Customer Relationship Management (CRM):
Information systems that help sales and marketing functions.

Customer Service:
Activities between the buyer and seller that enhance or facilitate the sale or use of the seller’s products or services.

Customization:
Creating a product from existing components into an individual order.

Cycle Counting:
An inventory accuracy audit technique where inventory is counted on a cyclic schedule rather than once a year. A cycle inventory count is usually taken on a regular, defined basis

Cycle Time:
The amount of time it takes to complete a business process.

Dashboard:
A performance measurement tool used to capture a summary of the Key Performance Indicators (KPIs)/metrics of a company.

Data Warehouse:
A repository of data that has been specially prepared to support decision-making applications.

Database:
Data stored in computer-readable form, usually indexed or sorted in a logical order by which users
can find a particular item of data they need.

Days of Supply:
Measure of quantity of inventory-on-hand, in relation to number of days for which usage which will be covered.

Dead on Arrival (DOA):
Products which are not functional when delivered.

Delivery-Duty-Paid:
Supplier/manufacturer arrangement in which suppliers are responsible for the transport of the goods they have produced, which is being sent to a manufacturer. Including tasks such as ensuring products get through Customs.

Demand:
What customers or users actually want. Typically associated with the consumption of products or services as opposed to a prediction or forecast.

Demand-Side Analysis:
Techniques such as market research, surveys, focus groups, and Performance / cost modeling used to identify emerging technologies.

Demand Management:
The proactive compilation of requirements information regarding demand  and the firm’s capabilities from the supply side.

Demand Planning:
The process of identifying, aggregating, and prioritizing, all sources of demand for the integrated supply chain of a product or service at the appropriate level, horizon and interval.

Demand Supply Balancing:
The process of identifying and measuring the gaps and imbalances between demand and resources in order to determine how to best resolve the variances through marketing, pricing, packaging, warehousing, outsource plans or some other action that will optimize service, flexibility, costs, assets in an iterative and collaborative environment.

Depot:
A location where a substance is stored usually for later utilization.

Disaster Recovery Planning:
Contingency planning specifically related to recovering hardware and software in information system outages.

Discrete Available-to-Promise:
A calculation based on the available-to-promise figure in the master schedule. For the first period, the ATP is the sum of the beginning inventory plus the MPS quantity minus backlog for all periods until the item is master scheduled again. For all other periods, if a quantity has been scheduled for that time period then the ATP is this quantity minus all customer commitments for this and other periods, until another quantity is scheduled in the MPS. For those periods where the quantity scheduled is zero, the ATP is zero

Dispatching:
The carrier activities involved with controlling equipment; involves arranging for fuel, drivers, crews,
equipment, and terminal space.

Distribution:
Outbound logistics, from the end of the production line to the end user.

Distribution Center (DC):
The warehouse facility which holds inventory from manufacturing pending distribution to the appropriate stores.

Distribution Channel:
One or more companies or individuals who participate in the flow of goods and services from the manufacturer to the final user or consumer.

Distribution Planning:
The planning activities associated with transportation, warehousing, inventory levels, materials handling, order administration, site and location planning, industrial packaging, data processing, and communications networks to support distribution.

Distribution Warehouse:
A warehouse that stores finished goods and from which customer orders are assembled.

Distributor:
A business that does not manufacture its own products, but purchases and resells these products. Such a business usually maintains a finished goods inventory.

Dock-to-Stock:
A program by which specific quality and packaging requirements are met before the product is released. Pre-qualified product is shipped directly into the customer’s inventory. Dock-to-stock eliminates the costly handling of components, specifically in receiving and inspection and enables product to move directly into production.

EAN.UCC:
European Article Numbering/ Uniform Code Council. The EAN.UCC System provides identification standards to uniquely identify trade items, logistics units, locations, assets, and service relations worldwide. The identification standards define the construction of globally-unique and unambiguous numbers.

Economy of Scale:
A phenomenon whereby larger volumes of production reduce unit cost by distributing fixed costs over a larger quantity.

EDI Standards:
Criteria that define the data content and format requirements for specific business transactions (e.g. purchase orders). Using standard formats allows companies to exchange transactions with multiple trading partners easily.

EDIFACT:
Electronic Data Interchange for Administration, Commerce, and Transport. The United Nations EDI
standard.

Electronic Commerce (EC):
Also written as e-commerce. Conducting business electronically via traditional EDI technologies, or online via the Internet.

Electronic Signature:
A form of authentication that provides identification and validation of a transaction by means of an authorization code identifying the individual or organization.

e-Marketplace:
A web based service which allows individuals or companies to offer products and services or make bids to buy products or services.

Empowerment:
A condition whereby employees have the authority to make decisions and take action in their work areas without prior approval.

End-of-Life:
Planning and execution at the end of the life of a product. The challenge is making just the right amount to avoid
1) ending up with excess, which have to be sold at great discounts or scrapped or
2) ending up with shortages before the next generation is available.

End-of-Life Inventory:
Inventory on hand that will satisfy future demand for products that are no longer in production at your entity. Differs

Enterprise Application Integration (EAI):
A computer term for the tools and techniques used in linking ERP and other enterprise systems together.

Enterprise Resource Planning (ERP) System:
A class of software for planning and managing “enterprise-wide” the resources needed to take customer orders, ship them, account for them and replenish all needed goods according to customer orders and forecasts. Often includes electronic commerce with suppliers.

Environmental Health and Safety (EH&S):
The category of processes, procedures and regulations related to addressing the needs of maintaining environmental quality standards for health and safety. E.g. WEEE (Waste Electrical and Electronic) standards.

European Article Number (EAN):
A defined numbering mechanism used in Europe to uniquely identify every retail product and packaging option. The EAN is similar in concept and design to the UPC code and is usually what the barcode represents on goods.

Expediting:
1) Moving shipments through regular channels at an accelerated rate.
2) To take extraordinary action because of an increase in relative priority, perhaps due to a sudden increase in demand.

Export:
1) In logistics, the movement of products from one country to another. For example, significant volumes of cut flowers are exported from The Netherlands to other countries of the world.
2) A computer term referring to the transfer of information from a source (system or database) to a target.

Export Declaration:
A document required by the Department of commerce that provides information as to the
nature, value, etc., of export activity.

Express:
1) Carrier payment to its customers when ships, rail cars, or trailers are unloaded or loaded in less than the time allowed by contract and returned to the carrier for use. See: demurrage, detention.
2) The use of priority package delivery to achieve overnight or second-day delivery.

Extensible Markup Language (XML):
A computer term for a language that facilitates direct communication among computers on the Internet. Unlike the older hypertext markup language (HTML), which provides data tags giving instructions to a web browser about how to display information, XML tags give instructions to a browser or to application software which help to define the specifics about the category of information.

Facilities:
The physical plant, distribution centers, service centers, and related equipment.

Feature:
A distinctive characteristic of a good or service.

Fill Rate:
The percentage of order items that the picking operation actually fills within a given period of time.

Final Assembly:
The highest level assembled product, as it is shipped to customers.

Finance lease:
An equipment-leasing arrangement that provides the lessee with a means of financing for the leased
equipment.

Finished Goods Inventory (FG or FGI):
Products completely manufactured, packaged, stored, and ready for distribution.

Firewall:
A computer term for a method of protecting the files and programs on one network from users on another network. A firewall blocks unwanted access to a protected network while giving the protected network access to networks outside of the firewall.

Firm Planned Order:
A planned order which has been committed to production.

First In, First Out (FIFO):
Warehouse term meaning first items stored are the first used. In accounting this tem is associated with the valuing of inventory such that the latest purchases are reflected in book inventory.

Fixed-Location Storage:
A method of storage in which a relatively permanent location is assigned for the storage of each item in a storeroom or warehouse.

Fixed Costs:
Costs, which do not fluctuate with business volume in the short run.

Fixed Order Quantity:
A lot-sizing technique in MRP or inventory management that will always cause planned or actual orders to be generated for a predetermined fixed quantity, or multiples thereof if net requirements for the period exceed the fixed order quantity.

Flat File:
A computer term which refers to any file having fixed-record length, or in EDI, the file produced by EDI translation software to serve as input to the interface.

Flexibility:
Ability to respond quickly and efficiently to changing customer and consumer demands.

Flow-Through Distribution:
A process in a distribution center in which products from multiple locations are brought in to the D.C. and are re-sorted by delivery destination and shipped in the same day.

Flow Rack:
Storage rack that utilizes shelves (metal) that are equipped with rollers or wheels. Such an arrangement allows product and materials to “flow” from the back of the rack to the front and therein making the product more accessible for small-quantity order-picking.

Forecast:
An estimate of future demand.

Forecast Accuracy:
Measures how accurate your forecast is as a percent of actual units shipped.

Forecasting:
Predictions of how much of a product will be purchased by customers.

Forklift truck:
A machine-powered device that is used to raise and lower freight and to move freight to different warehouse locations.

Four P’s:
A set of marketing tools to direct the business offering to the customer. The four P’s are product, price, place, and promotion.

Fourth-Party Logistics (4PL):
Differs from third party logistics in the following ways;
1) 4PL organization is often a separate entity established as a joint venture or long-term contract between a primary client and one or more partners;
2) 4PL organization acts as a single interface between the client and multiple logistics service providers;
3) All aspects (ideally) of the client’s supply chain are managed by the 4PL organization; and,

Free on Board (FOB):
Contractual terms between a buyer and a seller, that define where title transfer takes place.

Freight Forwarder:
An organization which provides logistics services as an intermediary between the shipper and the carrier, typically on international shipments.

Fulfillment:
The act of fulfilling a customer order. Fulfillment includes order management, picking, packaging, and
shipping.

Full-time Equivalents (FTE):
Frequently organizations make use of contract and temporary employees; please convert contract, part-time, and temporary employees to full-time equivalents.

Gain Sharing:
A method of incentive compensation where supply chain partners share collectively in savings from productivity improvements..

Gap analysis:
The process of determining and documenting the variance (gap) between goals and current performance.

Gateway:
The connection that permits messages to flow freely between two networks.

Global Location Number (GLN):
Unique location number mandatory within the Global Data Synchronization process to identify data owners/info providers.

Global Positioning System (GPS):
A system which uses satellites to precisely locate an object on earth.

Global Strategy:
A strategy that focuses on improving worldwide performance through the sales and marketing of common goods and services with minimum product variation by country.

Global Trade Item Number (GTIN):
A unique number that comprises up to 14 digits and is used to identify an item (product or service) upon which there is a need to retrieve pre-defined information that may be priced, ordered or invoiced at any point in the supply chain.

Globalization:
The process of making something worldwide in scope or application.

Green field:
A method used to launch a new process or initiative where no others of that type have previously existed.

Gross Margin:
The difference between total revenue and the cost of goods sold.

Gross National Product (GNP):
A measure of a nation’s output; the total value of all final goods and services produced during a period of time.

Gross weight:
The total weight of the vehicle and the payload of freight or passengers.

Handling Costs:
The cost involved in moving, transferring, preparing, and otherwise handling inventory.

Hard copy:
Computer output printed on paper.

Hub:
1) A large retailer or manufacturer having many trading partners.
2) A reference for a transportation network as in “hub and spoke” which is common in the
airline and trucking industry.
3) A common connection point for devices in a network.

Hub Airport:
An airport that serves as the focal point for the origin and termination of long-distance flights; flights
from outlying areas are fed into the hub airport for connecting flights.

Human Resources (HR):
The function broadly responsible for personnel policies and practices within an organization.

HyperText Transport Protocol (HTTP):
The Internet protocol that allows World Wide Web browsers to retrieve information from servers.

Import/Export License:
Official authorization issued by a government allowing the shipping or delivery of a product across national boundaries.

In Bond:
Goods are held or transported In-Bond under customs control either until import duties or other charges are paid, or to avoid paying the duties or charges until a later date.

Inbound Logistics:
The movement of materials from suppliers and vendors into production processes or storage facilities.

Incentive Fee:
A premium fee which is based upon the control of costs in a cost-plus-incentive-fee contract.

INCOTERMS:
International terms of sale developed by the International Chamber of Commerce to define sellers’ and buyers’ responsibilities.

Indirect Cost:
A resource or activity cost such as operation costs and overhead that cannot be directly traced to a final cost object since no direct or repeatable cause-and-effect relationship exists.

Information systems (IS):
Managing the flow of data in an organization in a systematic, structured way to assist in planning, implementing, and controlling.

Insourcing:
The opposite of outsourcing, that is, a serve performed in-house.

Internal Customer:
The recipient (person or department) of another person’s or department’s output (good, service, or information) within an organization.

International Standards Organization (ISO):
An organization within the United Nations to which all national and other standard setting bodies (should) defer. E.g. OSI, EDIFACT, and X.400

Internet:
A computer term which refers to an interconnected group of computer networks from all parts of the world, i.e. a network of networks.

In-transit:
Material moving between two or more locations, usually separated geographically.

Inventory:
Raw materials, work in process, finished goods and supplies required for creation of a company’s goods and services.

Inventory Accuracy:
When the on-hand quantity is equivalent to the perpetual balance (plus or minus the designated count tolerances).

Inventory Carrying Cost:
One of the elements comprising a company’s total supply-chain management costs. These costs consist of the following:
Opportunity Cost: The opportunity cost of holding inventory. This should be based on your company’s own cost of capital standards using the following formula.
Calculation: Cost of Capital x Average Net Value of Inventory

Insurance and Taxes:
The cost of insuring inventories and taxes associated with the holding of inventory.

Total Obsolescence for Raw Material, WIP, and Finished Goods Inventory:
Inventory reserves taken due to obsolescence and scrap and includes products exceeding the shelf life, i.e. spoils and is no good for use in its original purpose.

Inventory Days of Supply:
Total gross value of inventory for the category (raw materials, work in process, partially finished goods, or fully-finished goods) at standard cost before reserves for excess and obsolescence, divided by the average daily usage.

Inventory Management:
The process of ensuring the availability of products through inventory administration.

Inventory Turns:
This ratio measures how many times a company’s inventory has been sold (turned over) during a period of time.

Inventory Velocity:
The speed which inventory moves through a defined cycle (i.e., from receiving to shipping).

ISO 9000:
A series of quality assurance standards compiled by the Geneva, Switzerland-based International
Standardization Organization.

ISO 14000 Series Standards:
A series of generic environmental management standards under development by the International Organization of Standardization, which provide structure and systems for managing environmental compliance with legislative and regulatory requirements and affect every aspect of a company’s environmental operations.

Just-in-Time (JIT):
An inventory control system that controls material flow into assembly and manufacturing plants by coordinating demand and supply to the point where desired materials arrive just in time for use.
Kanban:
Japanese word for “visible record”, loosely translated means card, billboard or sign. Popularized by Toyota Corporation, it uses standard containers or lot sizes to deliver needed parts to assembly line “just in time” for use.

Key Performance Indicator (KPI):
A measure which is of strategic importance to a company or department.

Kitting:
Assembly of components or parts into defined units ahead of production issue or customer shipment.

Lading:
The cargo carried in a transportation vehicle.

Lead Time:
The total time that elapses between an order’s placement and its receipt. It includes the time required for order transmittal, order processing, order preparation, and transit.

Letter of credit:
An international business document that assures the seller that payment will be made by the bank issuing the letter of credit upon fulfillment of the sales agreement.

Leverage:
Taking something small and exploding it. Can be financial or technological.

Line Scrap:
Value of raw materials and work-in-process inventory scrapped as a result of improper processing or
assembly, as a percentage of total value of production at standard cost.

Liner Service:
International water carriers that ply fixed routes on published schedules.

Load Factor:
A measure of operating efficiency used by air carriers to determine the percentage of a plane’s capacity that is utilized, or the number of passengers divided by the total number of seats.

Logistics Chain Manager:
Plans appropriation of logistics chain resources to meet logistics chain requirements.

Logistics Management:
As defined by the Council of Supply Chain Management Professionals (CSCMP): “Logistics management is that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirements.

Logistics Service Provider (LSP):
Any business which provides logistics services. Includes those businesses typically referred to as 3PL, 4PL, LLP, etc. Services may include provisioning, transport, warehousing, packaging, etc.

Lot Control:
A set of procedures (e.g., assigning unique batch numbers and tracking each batch) used to maintain
lot integrity from raw materials, from the supplier through manufacturing to consumers.

Lot Size:
Set quantity of goods to be purchased or produced at one time in anticipation of use or sale in the future.
Machine Downtimes:
Time during which a machine cannot be utilized.

Mainframe:
A term sometimes generically used to refer to an organization’s central computer system.

Maintenance, Repair, and Operating supplies (MRO):
1) Items used in support of general operations and maintenance such as maintenance supplies, spare parts, and consumables used in the manufacturing process and supporting operations.
2) Software used to support asset maintenance and management, also called Computerized
Maintenance Management System (CMMS).

Make-or-buy decision:
The act of deciding whether to produce an item internally or buy it from an outside supplier.

Make-to-Order (Manufacture-to-order):
A manufacturing process strategy where the trigger to begin manufacture of a product is an actual customer order or release, rather than a market forecast.

Make-to-Stock (Manufacture-to-stock):
A manufacturing process strategy where finished product is continually held in plant or warehouse inventory to fulfill expected incoming orders or releases based on a forecast.

Manufacturing Lead Time:
The total time required to manufacture an item, exclusive of lower level purchasing lead time.

Manufacturing Resource Planning (MRP II):
A method for the effective planning of all resources of a manufacturing company.

Mapping:
A computer term referring to diagramming data that is to be exchanged electronically, including how it is to be used and what business management systems need it.

Market Demand:
In marketing, the total demand that would exist within a defined customer group in a given geographical area during a particular time period given a known marketing program.

Market Segment:
A group of potential customers sharing some measurable characteristics based on demographics, psychographics, lifestyle, geography, benefits, etc.

Mass Customization:
The creation of a high-volume product with large variety so that a customer may specify his or her exact model out of a large volume of possible end items while manufacturing cost is low because of the large volume.

Master Production Schedule (MPS):
The master level or top level schedule used to set the production plan in a manufacturing facility.

Inbound Freight and Duties:
Freight costs associated with the movement of material from a vendor to the buyer and the associated administrative tasks. Duties are those fees and taxes levied by government for moving purchased material across international borders. Customs broker fees should also be considered in this category.

Receiving and Put Away:
All costs associated with taking possession of material and storing it. Note that carrying costs are not a part of acquisition, and inspection is handled separately.

Incoming Inspection:
All costs associated with the inspection and testing of received materials to verify compliance with specifications.

Material Safety Data Sheet (MSDS):
A document that is part of the materials information system and accompanies the product prepared by the manufacturer.

Materials Handling:
The physical handling of products and materials between procurement and shipping.

Materials Management:
Inbound logistics from suppliers through the production process.

Materials Requirements Planning (MRP):
A decision-making methodology used to determine the timing and quantities of materials to purchase.

Matrix Organizational Structure:
An organizational structure in which two (or more) channels of command, budget responsibility, and performance measurement exist simultaneously.

Maximum Inventory:
The planned maximum allowable inventory for an item based on its planned lot size and target safety stock.

Maximum Order Quantity:
An order quantity modifier applied after the lot size has been calculated, that limits the order quantity to a pre-established maximum.

Milk run:
A regular route for pickup of mixed loads from several suppliers.

Min -Max:
A type of order point replenishment system where the “min” (minimum) is the order point, and the “max” (maximum) is the “order up to” inventory level.

Net Requirements:
In MRP, the net requirements for a part or an assembly are derived as a result of applying gross requirements and allocations against inventory on hand, scheduled receipts, and safety stock.

New Product Introduction (NPI):
The process used to develop products that are new to the sales portfolio of a company.

North American Free Trade Agreement (NAFTA):
A free trade agreement, implemented January 1, 1994, between Canada, the United States and Mexico. It includes measures for the elimination of tariffs and non-tariff barriers to trade, as well as many more specific provisions concerning the conduct of trade and investment that reduce the scope for government intervention in managing trade.

Obsolete Inventory:
Inventory for which there is no forecast demand expected.

On-Demand:
Typically used to describe products which are manufactured or assembled only when a customer order is placed.

On-Hand Balance:
The quantity shown in the inventory records as being physically in stock.

On Order:
The amount of goods that has been requested by customers.

On Time Delivery:
A metrics which is defined as % of receipts that were received by the customers on time.

Optimization:
The process of making something as good or as effective as possible with given resources and
constraints.

Order Batching:
Practice of compiling and collecting orders before they are sent in to the manufacturer.

Order Cycle:
The time and process involved from the placement of an order to the receipt of the shipment.

Order Entry and Scheduling:
The process of receiving orders from the customer and entering them into a company’s order processing system.

Order Fulfillment Lead Times:
Average, consistently achieved lead-time from customer order origination to customer order receipt, for a particular manufacturing process strategy (Make-to-Stock, Make-to-Order, Configure/Package-to-Order, Engineer-to-Order).

Order Interval:
The time period between the placement of orders.

Order Management:
The planning, directing, monitoring, and controlling of the processes related to customer orders, manufacturing orders, and purchase orders. Regarding customer orders, order management includes order promising, order entry, order pick, pack and ship, billing, and reconciliation of the customer account. Regarding manufacturing orders, order management includes order release, routing, manufacture, monitoring, and receipt into stores or finished goods inventories. Regarding purchasing orders, order management includes order placement, monitoring, receiving, acceptance, and payment of supplier.

New Product Release Phase-In and Maintenance :
This includes costs associated with releasing new products to the field, maintaining released products, assigning product ID, defining configurations and packaging, publishing availability schedules, release letters and updates, and maintaining product databases.

Create Customer Order:
This includes costs associated with creating and pricing configurations to order and preparing customer order documents.

Order Entry and Maintenance:
This includes costs associated with maintaining the customer database, credit check, accepting new orders, and adding them to the order system as well as later order modifications.

Order Fulfillment:
This includes costs associated with order processing, inventory allocation, ordering from internal or external suppliers, shipment scheduling, order status reporting, and shipment initiation.

Order Picking: Selecting or “picking” the required quantity of specific products for movement to a packaging area and documenting that the material was moved from one location to shipping.

Order Processing:
Activities associated with accepting and filling customer orders.

Order Promising:
The process of making a delivery commitment,
.
Original Equipment Manufacturer (OEM):
A manufacturer that buys and incorporates another supplier’s products into its own products.

Out Of Stock:
The state of not having inventory at a location and available for distribution or for sell to the consumer (zero inventory).

Outbound Consolidation:
Consolidation of a number of small shipments for various customers into a larger load.

Outbound Logistics:
The process related to the movement and storage of products from the end of the production line to the end user.

Outsource:
To utilize a third-party provider to perform services previously performed in-house. Examples include
manufacturing of products and call center/customer support.

Packing List:
List showing merchandise packed and all particulars.

Pallet:
The platform which cartons are stacked on and then used for shipment or movement as a group. Pallets may be made of wood or composite materials.

Pallet Tag:
Also known as “License Plate”, The bar coded sticker that is placed on a unit load or partial load,
typically at receiving.

Pallet Wrapping Machine:
A machine that wraps a pallet’s contents in stretch-wrap to ensure safe shipment.

Parcel Shipment:
Parcels include small packages like those typically handled by providers such as UPS and FedEx.

Pareto:
Example, identifying that 20 percent of a set of independent variables is responsible for 80 percent of the effect.

Payroll:
Total of all fully burdened labor costs, including wage, fringe, benefits, overtime, bonus, and profit sharing.

Peak demand:
The time period during which the quantity demanded is greater than during any other comparable time period.

Peer to Peer (P2P):
A computer networking environment which allows individual computers to share resources and data without passing through an intermediate network server.

Performance and Event Management Systems:
The systems that report on the key measurements in the supply chain –inventory days of supply, delivery performance, order cycle times, capacity use, etc.

Phantom Bill of Material:
A bill-of-material coding and structuring technique used primarily for transient (nonstocked) subassemblies.

Physical Distribution:
The movement and storage functions associated with finished goods from manufacturing plants to warehouses and to customers; also, used synonymously with business logistics.

Pick-by-Light:
A laser identifies the bin for the next item in the rack; when the picker completes the pick, the bar code is scanned and the system then points the laser at the next bin.

Pick/Pack:
Picking of product from inventory and packing into shipment containers.

Pick List:
A list of items to be picked from stock in order to fill an order.

Pick Module:
A dedicated area specifically designed to enhance pick operations.

Pick-to-Clear:
A method often used in warehouse management systems that directs picking to the locations with the smallest quantities on hand.

Pick-to-Light:
Pick-to light systems consist of lights and LED displays for each pick location. The system uses software to light the next pick and display the quantity to pick.

Picking:
The operations involved in pulling products from storage areas to complete a customer order.

Picking by Aisle:
A method by which pickers pick all needed items in an aisle regardless of the items’ ultimate destination; the items must be sorted later.

Piece Count:
Number of individual cases, packages or bundles in an intermodal trailer or container.

Plan Make:
The development and establishment of courses of action over specified time periods that represent a
projected appropriation of production resources to meet production requirements.

Plan Source:
The development and establishment of courses of action over specified time periods that represent a
projected appropriation of material resources to meet supply chain requirements.

Planned Date:
The date an operation, such as a receipt, shipment, or delivery of an order is planned to occur.

Planned Order:
A suggested order quantity, release date, and due date created by the planning system’s logic when it encounters net requirements in processing MRP.
Planning Horizon:
The amount of time a plan extends into the future.

Plant Finished Goods:
Finished goods inventory held at the end manufacturing location.

Point Of Sale (POS):
The time and place at which a sale occurs

Postponement:
The delay of final activities until the latest possible time.

Pre-Expediting:
The function of following up on open orders before the scheduled delivery date, to ensure the timely delivery of materials in the specified quantity.

Prepaid:
A freight term, which indicates that charges are to be paid by the shipper.

Preventative Maintenance (PM):
Regularly scheduled maintenance activities performed in order to reduce or eliminate unscheduled equipment failures and downtime.

Price Erosion:
When prices begin to plummet.

Private Label:
Products that are designed, produced, controlled by, and which carry the name of the store or a name owned by the store; also known as a store brand or dealer brand.

Proactive:
The strategy of understanding issues before they become apparent and presenting the solution as a benefit to the customer, etc.

Process:
A series of time-based activities that are linked to complete a specific output.

Process Improvement:
Designs or activities, which improve quality or reduce costs, often through the elimination of waste or non-value-added tasks.

Process Yield:
The resulting output from a process.

Procurement:
The business functions of procurement planning, purchasing, inventory control, traffic, receiving, incoming inspection, and salvage operations.

Product Characteristics:
All of the elements that define a product’s character, such as size, shape, weight, etc.

Product Data Management (PDM):
A technology solution which provides for a single, centralized data repository that enables authorized users throughout a company to access and update current product information, while ensuring they follow specific procedures.

Product Family:
A group of products with similar characteristics, often used in production planning.

Production Capacity:
Measure of how much production volume may be experienced over a set period of time.

Production Forecast:
A projected level of customer demand for a feature of a make-to order or an assemble-to-order product.

Production Line:
A series of pieces of equipment dedicated to the manufacture of a specific number of products or families.

Production Planning and Scheduling:
The systems that enable creation of detailed optimized plans and schedules taking into account the resource, material, and dependency constraints to meet the deadlines.

Production-Related Material:
Production-related materials are those items classified as material purchases and included in Cost of Goods Sold as raw material purchases.

Productivity:
A measure of efficiency of resource utilization; defined as the sum of the outputs divided by the sum of the inputs.

Profit Ratio:
The percentage of profit to sales-that is, profit divided by sales.

Profitability Analysis:
The analysis of profit derived from cost objects with the view to improve or optimize profitability.

Promotion:
The act of selling a product at a reduced price, or a buy one -get one free offer, for the purpose of
increasing sales.

Proof of Delivery (POD):
Information supplied by the carrier containing the name of the person who signed for the shipment, the time and date of delivery.

Pull Signal:
A signal from a using operation that triggers the issue of raw material.

Pull:
Supply-chain action initiated by the customer.

Purchase Order (PO):
The purchaser’s authorization used to formalize a purchase transaction with a supplier. The physical form or electronic transaction a buyer uses when placing order for merchandise.

Purchasing:
The functions associated with buying the goods and services required by the firm.

Pure raw material:
A raw material that does not lose weight in processing.

Push Back Rack:
Utilizing wheels in the rack structure, this rack system allows palletized goods and materials to be stored by being pushed up a gently graded ramp.

Put Away:
Removing the material from the dock (or other location of receipt), transporting the material to a storage area, placing that material in a staging area, and then moving it to a specific lo-cation and recording the movement and identification of the location where the material has been placed.

Put-to-light:
A method that uses lights to direct the placement of materials. Most often used in batch picking to designate the tote to place picked item into.

QS 9000:
A quality certification program used in the automotive industry which is based on the ISO 9000 standards.

Qualifier:
A data element, which identifies or defines a related element, set of elements or a segment. The qualifier contains a code from a list of approved codes.

Quality:
Conformance to requirements or fitness for use.

Quality Control (QC):
The management function that attempts to ensure that the foods or services manufactured or purchased meet the product or service specifications

Quarantine:
In quality management, the setting aside of items from availability for use or sale until all required
quality tests have been performed and conformance certified.

Rack:
A storage device for handling material in pallets. A rack usually provides storage for pallets arranged in vertical sections with one or more pallets to a tier.

Radio Frequency (RF or RFID):
A form of wireless communications that lets users relay information via electromagnetic energy waves from a terminal to a base station, which is linked in turn to a host computer.

Random-Location Storage:
A storage technique in which parts are placed in any space that is empty when they arrive at the storeroom.

Raw Materials (RM):
Crude or processed material that can be converted by manufacturing, processing, or combination into a new and useful product.

Real-Time:
The processing of data in a business application as it happens -as contrasted with storing data for input at a later time (batch processing).

Receiving:
The physical receipt of material, the inspection of the incoming shipment for conformance with the purchase order (quantity and damage), the identification and delivery to destination, and the preparation of receiving reports.

Receiving Dock:
Distribution center location where the actual physical receipt of the purchased material from the carrier occurs.

Re-consignment:
A carrier service that permits changing the destination and/or consignee after the shipment has reached its originally billed destination and paying the through rate from origin to final destination.

Reengineering:
A fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in performance.

Reliability:
The ability of a system to perform as designated in an operational environment over time without failures.

Remanufacturing / Refurbishing:
Refers to the re-work performed on returned items to make the items saleable.

Reorder point:
A predetermined inventory level that triggers the need to place an order.

Replenishment:
The process of moving or re-supplying inventory from a reserve (or upstream) storage location to a primary (or downstream) storage/picking location.

Request for Information (RFI):
A document used to solicit information about vendors, products, and services prior to a formal RFQ/RFP process.

Request for Proposal (RFP):
A document, which provides information concerning needs and requirements for a manufacturer. This document is created in order to solicit proposals from potential suppliers.

Request for Quote (RFQ):
A document used to solicit vendor responses when a product has been selected and price quotations are needed from several vendors.

Resellers:
Organizations intermediate in the manufacturing and distribution process, such as wholesalers and retailers.

Resources:
Economic elements applied or used in the performance of activities or to directly support cost objects. They include people, materials, supplies, equipment, technologies and facilities.

Retailer:
A business that takes title to products and resells them to final consumers.

Return Disposal Costs:
The costs associated with disposing or recycling products that have been returned due to customer rejects, end-of-life or obsolescence.

Return Goods Handling:
Processes involved with returning goods from the customer to the manufacturer. Products may be returned because of performance problems or simply because the customer doesn’t like the product.

Return Material Authorization or Return Merchandise Authorization (RMA):
A number usually produced to recognize and give authority for a faulty, perhaps, good to be returned to a distribution centre of manufacturer.

Return on Investment (ROI):
The profit or loss resulting from an investment transaction, usually expressed as an annual percentage return.

Return on Sales:
Financial measure calculated by dividing profit by sales. Provides information on how much profit is being produced per dollar of sales.

Return to Vendor (RTV):
Material that has been rejected by the customer or the buyer’s inspection department and is awaiting shipment back to the supplier for repair or replacement.

Reverse Engineering:
A process whereby competitors’ products are disassembled & analyzed for evidence of the use of better processes, components & technologies

Reverse Logistics:
A specialized segment of logistics focusing on the movement and management of products and resources after the sale and after delivery to the customer. Includes product returns for repair and/or credit.

RMA:
Return Material Authorization.

Root Cause Analysis:
Analytical methods to determine the core problem(s) of an organization, process, product, market, etc.

Safety Stock:
The inventory a company holds above normal needs as a buffer against delays in receipt of supply or
changes in customer demand.

Salable Goods:
A part or assembly authorized for sale to final customers through the marketing function.

Sales and Operations Planning (S&OP):
A strategic planning process that reconciles conflicting business objectives and plans future supply chain actions. S&OP Planning usually involves various business functions such as sales, operations and finance to agree on a single plan/forecast that can be used to drive the entire business.

Sales Plan:
A time-phased statement of expected customer orders anticipated to be received (incoming sales, not outgoing shipments) for each major product family or item.

Salvage Material:
Unused materials in the form of waste or obsolete material that has a market value and can be
sold.

Scalability:
1) How quickly and efficiently a company can ramp up to meet demand. See also uptime production flexibility.
2) How well a solution to some problem will work when the size of the problem increases. The economies to scale don’t really kick in until you reach the critical mass, then revenues start to increase exponentially.

Scorecard:
A performance measurement tool used to capture a summary of the key performance indicators (KPIs)/metrics of a company.

Scrap material:
Unusable material that has no market value and must generally be disposed of as a cost.

Seasonality:
A repetitive pattern of demand from year to year with some periods considerably higher than others.

Self Billing:
A transportation industry strategy which prescribes that a carrier will accept payment based on the tender document provided by the shipper.

Serial Number:
A unique number assigned for identification to a single piece that will never be repeated for similar pieces.

Serial Shipping Container Code:
An 18-character identification number used to identify containers including pallets and boxes primarily for containers which are a part of a shipment covered by an Automated Shipment Notice (ASN).

Service Level:
A measure (usually expressed as a percentage) of satisfying demand through inventory or by the current production schedule in time to satisfy the customer’s requested delivery dates and quantities.

Service Level Agreement (SLA):
May be used in lieu of a contract to represent and document the terms of the performance based agreement for organic support.

Service Oriented Architecture (SOA):
Provides a blueprint for services-based, enterprise-scale business solutions that are adaptable, flexible, and open, for lower total cost of ownership.

Setup costs:
The costs incurred in staging the production line to produce a different item

Shareholder Value:
Combination of profitability (revenue and costs) and invested capital (working capital and fixed capital).

Shelf life:
The amount of time an item may be held in inventory before it becomes unusable.

Shipping:
The function that performs tasks for the outgoing shipment of parts, components, and products.

Shipping Lane:
A predetermined, mapped route on the ocean that commercial vessels tend to follow between ports.

Shipping Manifest:
A document that lists the pieces in a shipment.

Short Shipment:
Piece of freight missing from shipment as stipulated by documents on hand.

Sigma:
Sigma is a statistical term that measures how much a process varies from perfection, based on the number of defects per million units produced. One Sigma = 690,000 per million units
Two Sigma = 308,000 per million units
Three Sigma = 66,800 per million units
Four Sigma = 6,210 per million units
Five Sigma = 230 per million units
Six Sigma = 3.4 per million units

Single Sourcing:
Use one supplier to provide a product or service, even though there are other suppliers available.

Six-Sigma Quality:
A term used generally to indicate that a process is well controlled,.

Skills Matrix:
A visible means of displaying people’s skill levels in various tasks.

Slip Sheet:
Similar to a pallet, the slip sheet, which is made of cardboard or plastic, is used to facilitate movement of unitized loads.

Slotting:
Warehouse slotting is defined as the placement of products within a warehouse facility.

Sole sourcing:
When there is only one supplier for a product or service, and no alternate suppliers are available.

Sortation:
Separating items according to their intended destination within a plant or for transit.

Split Delivery:
A method by which a larger quantity is ordered on a single purchase order to secure a lower price, but delivery is divided into smaller quantities and spread out over several dates to control inventory investment, save storage space, etc.

Staff Functions:
The support activities of planning and analysis provided to assist line managers with daily operations. Logistics staff functions include location analysis, system design, cost analysis, and planning.

Staging:
Pulling material for an order from inventory before the material is required.

Stakeholders:
People with a vested interest in a company, including managers, employees, stockholders, customers, suppliers, and others.

Standard Components:
Components (parts) of a product, for which there is an abundance of suppliers. Not difficult to produce.

Standard Deviation/Variance:
Measures of dispersion for a probability distribution. The variance is the average squared difference of a distribution from the distribution’s mean (average) value.

Stickering:
Placing customer-specific stickers on boxes of product.

Stock Keeping Unit (SKU):
A category of unit with unique combination of form, fit, and function

Stock Out:
A term used to refer to a situation where no stock was available to fill a request from a customer or production order during a pick operation.

Strategic Planning:
Looking one to five years into the future and designing a logistical system (or systems) to meet the needs of the various businesses in which a company is involved.

Strategic Sourcing:
The process of determining long-term supply requirements, finding sources to fulfill those needs, selecting suppliers to provide the services, negotiating the purchase agreements and managing the suppliers’ performance.

Strategy:
A specific action to achieve an objective.

Subcontracting:
Sending production work outside to another manufacturer. This can involve specialized operations
such as plating metals, or complete functional operations.

Supplier:
1) A provider of goods or services. Also see: Vendor
2) A seller with whom the buyer does business, as opposed to vendor, which is a generic term referring to all sellers in the marketplace.

Supplier On Time Delivery:
A metric which measures the performance of a supplier/vendor on his delivery commitment and to what extent he is matching with the lead times expressed in % terms.

Supplier-Owned Inventory:
A variant of Vendor-Managed Inventory and Consignment Inventory. In this case, the supplier not only manages the inventory, but also owns the stock close to or at the customer location until the point of consumption or usage by the customer.

Supply Chain:
Starting with unprocessed raw materials and ending with the final customer using the finished goods, the supply chain links many companies together.

Supply Chain Design:
The determination of how to structure a supply chain.

Supply Chain Execution (SCE):
The ability to move the product out the warehouse door.

Supply Chain Event Management (SCEM):
SCEM is an application that supports control processes for managing events within and between companies.

Supply Chain Integration (SCI):
Similar concept to the Back-End Integration, but with greater emphasis on the moving of goods and services.

Supply Chain Inventory Visibility:
Software applications that permit monitoring events across a supply chain.

Supply Chain Management (SCM) as defined by the Council of Supply Chain Management Professionals (CSCMP):
“Supply Chain Management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies. Supply Chain Management is an integrating function with primary responsibility for linking major business functions and business processes within and across companies into a cohesive and high-performing business model. It includes all of the logistics management activities noted above, as well as manufacturing operations, and it drives coordination of processes and activities with and across marketing, sales, product design, finance and information technology.”

Supply Chain Operations Reference Model (SCOR):
This is the model developed by the Supply-Chain Council SCC and is built around six major processes: plan, source, make, deliver, return and enable. The aim of the SCOR is to provide a standardized method of measuring supply chain performance and to use a common set of metrics to benchmark against other organizations.

SWOT Analysis:
An analysis of the strengths, weaknesses, opportunities, and threats of and to an organization.

Synchronization:
The concept that all supply chain functions are integrated and interact in real time; when changes are made to one area, the effect is automatically reflected throughout the supply chain.

Takt Time:
Sets the pace of production to match the rate of customer demand and becomes the heartbeat of any lean production system.

Tally sheet:
A printed form on which companies record, by making an appropriate mark, the number of items they receive or ship.

Tare Weight:
The weight of a substance, obtained by deducting the weight of the empty container from the gross
weight of the full container.

Tender:
The document which describes a business transaction to be performed.

Terms and Conditions (T’s & C’s):
All the provisions and agreements of a contract.

Third-Party Logistics (3PL):
Outsourcing all or much of a company’s logistics operations to a specialized company.

Third Party Logistics Provider:
A firm which provides multiple logistics services for use by customers.

Third-Party Warehousing:
The outsourcing of the warehousing function by the seller of the goods.

Throughput:
A measure of warehousing output volume (weight, number of units). Also, the total amount of units
received plus the total amount of units shipped, divided by two.

Time-To-Market:
The time interval between product concept development and introduction to the marketplace.

Time Bucket:
A number of days of data summarized into a columnar display.

Time Fence:
A policy or guideline established to note where various restrictions or changes in operating procedures take place.

Total Average Inventory:
Average normal use stock, plus average lead stock, plus safety stock.

Total Cost of Ownership (TCO):
Total cost of a computer asset throughout its lifecycle, from acquisition to disposal.

Total Inventory Days of Supply:
Total gross value of inventory at standard cost before reserves for excess and obsolescence.

Total Product Revenue:
The total value of sales made to external customers plus the transfer price valuation of intra-company shipments, net of all discounts, coupons, allowances, and rebates.

Total Supply-Chain Management Cost (5 elements):
Total cost to manage order processing, acquire materials, manage inventory, and manage supply-chain finance, planning, and IT costs, as represented as a percent of revenue.

Tracing:
Determining where a shipment is during the course of a move.

Traceability:
1) The attribute allowing the ongoing location of a shipment to be determined.
2) The registering and tracking of parts, processes, and materials used in production, by lot or serial number.

Tracing:
The practice of relating resources, activities and cost objects using the drivers underlying their cost causal relationships.

Tracking and Tracing:
Monitoring and recording shipment movements from origin to destination.

Transfer Pricing:
The pricing of goods or services transferred from one segment of a business to another.

Transit Time:
The total time that elapses between a shipment’s pickup and delivery.

Transportation Management System (TMS):
A computer system designed to provide optimized transportation management in various modes along with associated activities, including managing shipping units, labor planning and building, shipment scheduling through inbound, outbound, intra-company shipments, documentation management (especially when international shipping is involved), and third party logistics management.

Transportation Method:
A linear programming technique that determines the least-cost allocation of shipping goods from plants to warehouses of from warehouses to customers.

Transportation Mode:
The method of transportation: land, sea, or air shipment.

Transit Time:
The total time that elapses from pickup to delivery of a shipment.

Turnover:
Typically refers to Inventory Turnover.

Two-bin system:
An inventory ordering system in which the time to place an order for an item is indicated when the first bin is empty. The second bin contains sufficient supply until the order is received.

Unit Cost:
The cost associated with a single unit of product.

Unit of Measure (UOM):
The unit in which the quantity of an item is managed.

Upstream:
Refers to the supply side of the supply chain.

Value Added:
Increased or improved value, worth, functionality or usefulness.

Value Chain:
A series of activities, which combined, define a business process.

Velocity:
Rate of product movement through a warehouse

Vendor:
The manufacturer or distributor of an item or product line.

Vendor Code:
A unique identifier, usually a number, assigned by a Customer for the Vendor it buys from.

Vendor-Managed Inventory (VMI):
The practice of retailers making suppliers responsible for determining order size and timing, usually based on receipt of retail POS and inventory data.

Visibility:
The ability to access or view pertinent data or information as it relates to logistics and the supply chain, regardless of the point in the chain where the data exists.

Voice Activated or Voice Directed:
Systems which guide users such as warehouse personnel via voice commands.

Wall-to-Wall Inventory:
An inventory management technique in which material enters a plant and is processed through the plant into finished goods without ever having entered a formal stock area.

Warehouse:
Storage place for products. Principal warehouse activities include receipt of product, storage, shipment, and order picking.

Warehouse Management System (WMS):
The systems used in effectively managing warehouse business processes and direct warehouse activities, including receiving, putaway, picking, shipping, and inventory cycle counts.

Waste:
1) In Lean and Just-in-Time, any activity that does not add value to the good or service in the eyes of the consumer.
2) A by-product of a process or task with unique characteristics requiring special management control.

Wave Picking:
A method of selecting and sequencing picking lists to minimize the waiting time of the delivered material. Shipping orders may be picked in waves combined by a common product, common carrier or destination and manufacturing orders in waves related to work centers.

Work Breakdown Structure (WBS):
A complete line by line breakdown of the products, services, and activities that will be required to fulfill a contractual obligation.

Work-in-Process (WIP):
Parts and subassemblies in the process of becoming completed finished goods. Work in process generally includes all of the material, labor and overhead charged against a production order which has not been absorbed back into inventory through receipt of completed products.

Yard Management System (YMS):
A system which is designed to facilitate and organize the coming, going and staging of trucks and trucks with trailers in the parking “yard” that serves a warehouse, distribution or manufacturing facility.

Yield:
The ratio of usable output from a process to its input.

Zone Picking:
A method of subdividing a picking list by areas within a storeroom for more efficient and rapid order picking.

24/7:
Referring to operations that are conducted 24 hours a day, 7 days a week

24/7/365:
Referring to operations that are conducted 24 hours a day, 7 days a week, 365 days per year, with no
breaks for holidays, etc

5-S Program:
A program for organizing work areas. Sometimes referred to as elements, each of the five components of the program begins with the letter “S.” They include sort, systemize, shine or sweep, standardize, and sustain.
The 5-S program is frequently combined with precepts of the Lean Manufacturing Initiative.

6-S:
An expanded definition of 5-S which includes Safety

7 Wastes:
One of the basic concepts of Lean management, the seven ‘deadly wastes’
Transportation - moving products that is not actually required to perform the processing.
Inventory - all components, work-in-progress and finished product not being processed.
Motion - people or equipment moving or walking more than is required to perform the processing.
Waiting - waiting for the next production step.
Overproduction - too much production or ahead of demand.
Over Processing - due to poor tool or product design creating activity.
Defects - the effort involved in inspecting for and fixing defects.

80-20 Rule:
A term referring to the Pareto principle. The principle suggests that most effects come from relatively
few causes; that is, 80% of the effects (or sales or costs) come from 20% of the possible causes (or items).

References :

Some terms used in Supply Chain Terminology overview are based on the following sources:

The Supply-Chain Council’s Supply-Chain Operations Reference-model (SCOR) .
More info on the Supply-Chain Council and SCOR,
visit www.supply-chain.org

The American Production and Inventory Control Society’s (APICS) Dictionary .
For more information on APICS,
visit www.apics.org

Information Access’s Glossary of Data Integration Terminology .
More info on information on Information Access,
visit www.infoaccess.net

Manufacturing System’s

Glossary of Special Terms used in Client/Server Computing, Production Management and Process Automation .
More info on MSI,
visit www.manufacturingsystems.com

The Performance Measurement Group’s Supply Chain Metrics Definitions & Calculations.
More info on PMG,
visit www.pmbenchmarking.com

The Consortium for Advanced Manufacturing-International’s ABC/M Glossary.
For info on information on Activity Based Costing and advanced manufacturing practices,
visit www.cam-i.org

InnoChain does not take responsibility for these definitions or claims that these are official definitions