Aggregate Inventory Management
The process of managing the total quantity of items held in stock across an entire supply chain, to optimize total inventory levels and costs.
Advanced Planning and Scheduling
Systems that integrate data from across the supply chain to improve the accuracy of planning and scheduling of manufacturing processes.
Average Days to Sell Inventory
This ratio calculates the average number of days it takes for a company to turn its inventory into sales. It's also known as the inventory days formula.
Average Payment Period for Production Materials
The average time taken by a company to pay for materials used in production after receipt. It's a measure of the payment cycle for production inputs.
ABC Analysis
A method for categorizing inventory items based on their importance, usually determined by factors such as sales or purchase volume. It helps prioritize inventory management efforts.
ABC Classification
This process ranks items in descending order of their annual dollar volume or other criteria and then splits them into three categories: A (high value), B (moderate value), and C (lower value)
ABC Costing
Activity-Based Costing - A costing method that assigns costs to products based on the activities required to produce them, providing a more accurate reflection of the costs incurred.
ABC Inventory Control
An inventory management approach that prioritizes products based on their classification in the ABC analysis, focusing more resources on the most valuable items.
ABC Model
In cost management, a representation that illustrates the cost of resources used over a period and how these are consumed by activities and subsequently traced to products, services, or customers.
ABC System
A cost management system that tracks financial and operational data on resources, activities, drivers, and measures. ABC models are created and maintained within this system.
Abnormal Demand
Demand that falls outside the limits established by management policy, often due to new customers or changing needs of existing customers.
Absorption Costing
A method of inventory valuation where both variable and a portion of fixed costs are assigned to each unit of production. Fixed costs are typically allocated based on labor hours, machine hours, or material costs.
Accelerated Commercial Release Operations Support System
A system used by Canada Customs to expedite the release of shipments by allowing electronic data interchange around the clock.
Acceptable Quality Level
In quality management, a threshold level that represents a satisfactory average quality level in a batch or series of lots during sampling inspection.
Acceptable Sampling Plan
A specific plan indicating the sizes of samples to be used and the criteria for accepting or rejecting a lot based on those samples.
Acceptance Number
In quality management, a number used in acceptance sampling to decide whether a lot will be accepted or rejected based on the number of defective units found in the sample.
Acceptance Sampling
A process where a portion of goods is inspected to determine whether the entire lot should be accepted or rejected. This can involve either attributes sampling or variables sampling.
Accessibility
The ability of a carrier to provide service between an origin and a destination.
Accessorial Charges
Additional charges from a carrier for supplementary services such as loading, unloading, pickup, and delivery.
Accountability
The obligation of an individual or organization to account for its activities, accept responsibility for them, and disclose the results in a transparent manner.
Accounts Payable
The total value of goods and services purchased for which payment has yet to be made.
Accounts Receivable
The value of goods shipped or services rendered to a customer for which payment has not yet been received.
Accreditation
Official certification that a facility, operation, or individual has the competence and integrity necessary to perform specific services, as recognized by a governing body.
Accredited Standards Committee
A committee within ANSI responsible for developing uniform standards for electronic interchange of business documents in the United States.
Accumulation Bin
A location used to gather all components required for an assembly before they are moved to the assembly area.
Accuracy
In quality management, the degree to which a measurement reflects the true value or standard. It differs from precision, which relates to the consistency of repeated measurements.
Automated Call Distribution
A telecommunication technology that automatically routes incoming calls to specific agents or departments within a company.
Acknowledgement
A formal confirmation from a supplier indicating the receipt and acceptance of a purchase order.
Acquisition Cost
The cost associated with obtaining one or more units of an item, including the purchase price and other costs related to procurement.
Action Message
A notification generated by MRP or DRP systems indicating the need for attention or action regarding inventory or production schedules.
Active Stock
Inventory that is readily available for order fulfillment and located in primary picking locations.
Activity
Any work performed within an organization, typically described using an action-verb-adjective-noun grammar structure. In cost accounting, an activity is a task that consumes resources to produce outputs.
Activity Analysis
The process of identifying, documenting, and understanding activities, often through interviews, questionnaires, observations, or reviews.
Activity-Based Budgeting
A budgeting approach that uses an understanding of activities and their relationships to estimate workload and resource requirements for an organization’s ongoing business plan.
Activity-Based Costing
A methodology that assigns costs to products based on the activities and resources required to produce them, providing a more accurate reflection of the costs incurred.
Activity-Based Costing Model
A time-specific model in activity-based cost accounting that represents resource costs created by activities related to products, services, or other cost objects.
Activity-Based Costing System
A set of activity-based costing models that collectively define data on an organization's resources, activities, drivers, and measures.
Activity-Based Management
A management discipline focusing on managing activities as the route to improving value received by customers and the profit earned by providing that value.
Activity-Based Planning
A process to determine activity and resource requirements based on ongoing product or service demand. It involves comparing these requirements with available resources to identify and manage capacity issues.
Activity Dictionary
A comprehensive listing and description of activities within an organization, providing a standard definition and detailed information about each activity.
Activity Driver
A quantitative measure of the frequency and intensity of demands placed on an activity by cost objects or other activities. It is used for assigning activity costs.
Activity Level
Describes the types of activities based on their relation to different functional areas, like unit, batch, product, customer, market, channel, or project levels.
Activity Ratio
A financial metric used to determine how efficiently an organization's resources perform relative to the revenue they produce. Examples include inventory turnover and return on assets.
Actual Cost System
A cost system that collects costs historically as they are applied to production and allocates indirect costs to products based on actual costs and achieved production volumes.
Actual Costs
The actual expenses incurred for labor, material, and overhead during the production process.
Agreement
An agreement is a mutual understanding between two or more parties about their relative rights and responsibilities. It may or may not be legally binding, depending on its nature and the intentions of the parties involved.
Accessorial
Accessorial charges are fees for additional services performed by a carrier beyond the standard pickup and delivery. Examples include lift gate service, inside delivery, and storage.
Asset Turnover
The value of a company's revenues in relation to the value of its assets. It is also referred to as the asset turnover ratio. This ratio shows the efficiency with which a company uses its assets to generate income. The higher the asset turnover, the better a company uses its assets to generate revenue.
Activity Ratio
Measures the efficiency of a company's inventory management by comparing the cost of goods sold to the average inventory level, indicating how frequently inventory is turned over.
Aggregate Plan
A strategic approach that outlines the expected production volume and inventory levels over a longer period, typically focusing on demand and supply matching at a macro level.
Aggregate Unit Of Capacity
Combined capacity unit of measure when a variety of outputs exists.
Annual Inventory Count
A periodic process, typically done yearly, where a business physically counts its entire inventory to verify stock levels and reconcile with recorded inventory data.
Anticipation Inventory
Stock that is accumulated in advance of expected peak demand periods, seasonal sales, or known future events to ensure adequate supply and meet customer needs.
Asset Management Efficiency
A measure of how effectively a company manages its assets to generate revenue, often evaluated in terms of return on assets or investment.
Automated Data Capture
The use of technology (such as barcodes and RFID) to collect, store, and transfer data automatically in real-time for inventory tracking and management purposes.
Automated Ordering System
A technology-driven process that automatically generates purchase orders based on inventory levels, demand forecasts, and preset reorder points to ensure timely replenishment.
Available Inventory
The portion of inventory that is on hand and ready for sale or distribution, excluding any stock that is reserved or not fit for sale.
Air Waybill
An AWB is a document issued by an airline to acknowledge receipt of cargo and an agreement to carry that cargo to a specified destination. It serves as a receipt for the shipper, a carrier’s contract of carriage, and a document of title.
Assignment of Rights
AOR is a legal process in which a party transfers its rights to receive benefits under a contract to another party, often used in financial transactions, insurance claims, and in the transfer of property rights.
Backorder
A situation where an order cannot be fulfilled at the current time due to a lack of available stock, with a commitment to deliver the product at a later date.
Bill of Materials
A comprehensive list of raw materials, components, and instructions required to construct, manufacture, or repair a product or service.
Bid
A bid is a proposal made by a company or individual to undertake a specific job or project, or to provide goods or services at a stated price and terms. Bidding is often part of a competitive process in procurement.
Bid Package
A bid package is a compilation of materials, information, and specifications sent to potential suppliers or contractors as part of a bidding process. It typically includes project requirements, timelines, terms and conditions, and submission guidelines for the bid.
Bill of Quantities
A Bill of Quantities is a document used in tendering in the construction industry in which materials, parts, and labor (and their costs) are itemized. It helps to provide specific measurements and quantities for tendering purposes.
Blanket Purchase Order
A blanket purchase order is an agreement wherein a customer commits to buy certain items from a supplier over a period of time, usually at predetermined prices. It simplifies the process for repeat purchases of the same goods.
BATNA (Best Alternative to a Negotiated Agreement)
BATNA refers to the best alternative a party has if negotiations fail and an agreement cannot be reached. Understanding one's BATNA is crucial for negotiation, as it sets the lowest acceptable value for a deal.
BAFO (Best and Final Offer)
BAFO is a procurement term used during the negotiation phase, where suppliers are asked to submit their most competitive bid, considering it to be their last chance to make an offer before the final selection is made.
Bill of Lading
A bill of lading is a legal document issued by a carrier to a shipper, detailing the type, quantity, and destination of the goods being carried. It serves as a shipment receipt when the goods are delivered at the predetermined destination.
Blanket Order
A blanket order is a purchase order the customer makes with its supplier which contains multiple delivery dates scheduled over a period of time, often at predetermined prices. It's used for repeated supply of goods or services.
Bonded Warehouse
A bonded warehouse is a storage facility where imported goods are stored under customs control before being processed. Taxes and duties on these goods are deferred until they are officially released for distribution.
Bullwhip Effect
This well-known phenomenon describes how small fluctuations in demand at the retail level can cause progressively larger fluctuations in demand at the wholesale, distributor, manufacturer, and raw material supplier levels.
Beer Game Effect
Originating from a business simulation game, it demonstrates the complexities of supply chains and how decision-making processes can affect the entire chain.
Backflush
A post-production issue method where materials consumed in manufacturing are deducted from inventory records based on the output quantities rather than at the point of actual consumption.
Backflush Costing
An accounting method where the costs of producing a product are assigned backward from the point of sale or completion, based on the standard costs associated with the product.
Balance of Stores Record
A detailed record showing the quantity of each item of inventory on hand, often used to maintain the accuracy of stock levels in warehouse management.
Base Demand
The fundamental level of demand for a product or service, excluding seasonal, cyclical, or irregular fluctuations, often used in forecasting and planning inventory needs.
Base Stock System
An inventory control system where a constant level of stock is maintained to meet average demand, with additional orders placed as sales occur to replenish the base level.
Baseline Forecast
An initial forecast that serves as a reference point, made using historical data and adjusted for future expectations, used as a starting point for further planning and adjustments.
Baseline Inventory Monitoring
A process of establishing and tracking a standard or baseline level of inventory over time to identify trends, anomalies, and opportunities for optimization.
Beginning Inventory
The value or quantity of stock held by a company at the start of a financial or inventory period, carried over from the end of the previous period.
Bin Location File
A record or database entry that indicates the specific locations (bins) within a warehouse where different items of inventory are stored.
Bin Reserve System
A storage method where products are kept in specific bins or locations, with quantities and locations tracked to manage inventory levels and facilitate order picking.
Bin Tag
A label attached to a storage bin or shelf that indicates information about the inventory items stored there, such as part number, description, and quantity.
Bin Transfer
The process of moving inventory from one bin or storage location to another within the same warehouse or facility, often tracked to maintain accurate inventory records.
Book Inventory
The quantity of inventory recorded in the accounting records or inventory management system, ideally matching the physical inventory count.
Buffer Penetration
The extent to which actual inventory levels deplete the buffer or safety stock, indicating potential stock-out risks and the need for replenishment.
Baltic and International Maritime Council
BIMCO is the world's largest international shipping association, representing shipowners, operators, managers, brokers, and agents. It provides information on the maritime industry, including contracts and clauses.
Cash-to-Cash Cycle Time
The number of days between the purchase of materials/inventory from a supplier and the collection of payment for the sale of the resulting product.
Cross-Docking
A logistics procedure where products from a supplier or manufacturing plant are distributed directly to a customer or retail chain with minimal handling or storage time.
Cycle Counting
An inventory auditing process where a small subset of inventory is counted on a specific day.
Consignment Inventory
Inventory that is in the possession of the customer but still owned by the supplier until it is used or sold.
Cash-to-Cash Cycle Time
This is the time duration between when a company pays for its inventory and when it receives payment for the sale of that inventory. It's a critical measure of liquidity and efficiency in the supply chain.
Capacity Utilization
The extent to which an entity uses its installed productive capacity. It's a measure of operational efficiency and the potential to increase production without incurring excessive costs.
Cash-to-Cash Cycle Time
The duration between a company's outlay of cash for purchasing inventory from suppliers and the receipt of cash from customers for sales. It's a key measure of liquidity and operational efficiency.
Customer Satisfaction Index and Retention Rate
A metric that gauges how satisfied customers are with a company's products and services, and the rate at which customers continue to do business with the company over time.
Customer Order Cycle Time
The total time from when a customer places an order to when they receive the product. It's an important metric for evaluating the efficiency of the order fulfillment process.
Customer Response Time
The average time it takes for a business to respond to customer inquiries or complaints. This metric is important for assessing the effectiveness of customer service.
Cost-per-order
The average amount spent on the supply chain processes for fulfilling each order. This includes costs related to procurement, manufacturing, warehousing, and transportation.
Cross-Docking
A logistics process where incoming goods are unloaded directly onto outbound trucks, trailers, or rail cars, with minimal or no storage in between. This reduces handling costs and storage time.
Contract
A contract is a legally binding agreement between two or more parties. It details the terms and conditions of a transaction or relationship, including obligations, responsibilities, payment terms, duration, and remedies for breach.
Contract Management
Contract management involves overseeing and managing contracts made with customers, vendors, partners, or employees. It includes negotiation, execution, performance monitoring, and termination or renewal of contracts.
Category Management
Category management is a strategic approach to procurement where products or services are grouped into specific categories. This grouping allows for more efficient management and optimization of each category by focusing on market trends, supplier analysis, and cost-saving opportunities.
Compliance
Compliance in the supply chain context refers to the adherence of a company to laws, regulations, standards, and ethical practices within its industry. It ensures legal operation and can affect various aspects of the supply chain, like environmental impact, labor practices, and safety standards.
Conformance
Conformance means meeting or aligning with predefined specifications, standards, or guidelines in supply chain operations. It focuses on ensuring products or services meet quality or performance standards set by the company or regulatory bodies.
Commodity
A commodity is a basic good used in commerce that is interchangeable with other goods of the same type. In supply chains, commodities usually refer to raw materials like metals, grains, or crude oil, used to manufacture finished goods.
Contract Release Order
A contract release order is an order issued against an existing contract, typically a framework or master agreement. It specifies details like quantities and delivery dates for the products or services required.
Cost Reimbursement Contract
This is a type of contract where the seller is paid for all incurred costs plus a fixed fee or a percentage of the profit. It’s typically used when uncertainties in contract performance do not allow for a fixed price.
Category Management
Category management is a strategic approach to procurement where goods and services are categorized and managed as distinct business units. It focuses on market analysis, supplier relationships, and performance optimization in each category.
Cost Plus Contract
A cost plus contract is a type of contract where the buyer agrees to pay the cost of the work plus a fixed or percentage fee for profit. It is often used when the scope is not clearly defined.
Carnet
A carnet is an international customs document that allows the holder to temporarily import goods without paying duties or import taxes. It's often used for goods that will be re-exported within a certain period, like trade show materials.
Consignment
Consignment refers to a supply chain arrangement where goods are sent by their owner (consignor) to an agent (consignee), who holds and sells the goods, paying the owner only for the sold items.
Cost Analysis
Cost analysis in procurement involves evaluating all the costs associated with acquiring goods or services. It includes the base price as well as additional expenses like shipping, handling, and taxes.
Cross Docking
Cross docking is a logistics process where products received from a supplier or manufacturer are distributed directly to a customer or retail chain with minimal to no handling or storage time.
Corrected Bill of Lading
A corrected bill of lading is issued when changes need to be made to the original bill of lading. It may be needed for inaccuracies or amendments in shipment details.
Consignor
The consignor is the person or company that is the original sender of goods for transport. They are responsible for initiating the shipment and ensuring proper documentation.
Consignee
The consignee is the person or company to whom the goods are shipped. They are the recipient of the freight and are typically responsible for any duties or taxes associated with the shipment.
Concealed Loss
Concealed loss refers to damage or loss to a shipment that is not apparent until the package is opened. It usually requires immediate reporting to the carrier for a claim.
Commodity
In supply chain, a commodity refers to any raw material or primary agricultural product that can be bought and sold, such as copper, coffee, or grain.
Cargo Claim
A cargo claim is a demand made against a transportation carrier for financial reimbursement for loss or damage to a shipment.
Collaborative Planning, Forecasting, and Replenishment (CPFR)
CPFR is a business practice that combines the intelligence of multiple trading partners in the planning and fulfillment of customer demand. It involves shared forecasts and inventory replenishment plans.
Capable to Promise
CTP is a process that determines whether a company can commit to fulfilling an order from a customer. It takes into account the current production schedule and capacity, as well as material availability.
Changeover Time
Time taken to transition a machine or product line from working on one product to another.
Customer Returns
The metric for calculating the rate of returned goods/products from customers due to cancellation, defect, repair, or replenishment.
Customer Return Rate
Returning customer rate (RCR) is a metric that signals how well you are performing in terms of customer experience and customer loyalty.
Cycle Time
Time taken to complete one full rotation of a specific process or operation.
Cash Spin
A strategy of freeing up capital by reducing inventory levels, thereby converting stock into cash to improve liquidity and reduce carrying costs.
Centralized Inventory Control
A management approach where inventory decisions and processes are handled centrally for multiple locations or departments within an organization to achieve consistency and economies of scale.
Change Order
A formal request or instruction to modify the quantity, specifications, or delivery of goods or services in an existing purchase order or contract.
Chase Production Method
A production strategy where output levels are adjusted to match demand fluctuations, increasing or decreasing production as needed to avoid holding excess inventory.
Co-managed Inventory
A collaborative inventory management approach where both the supplier and the customer jointly manage and make decisions regarding inventory levels and replenishment.
Collaborative Inventory Planning
The process where multiple parties, such as suppliers, manufacturers, and retailers, work together to plan and manage inventory levels to optimize the supply chain.
Consigned Stocks
Inventory that is provided by a supplier but remains their property until sold or used by the client, at which point the client pays for the consumed stock.
ConWIP (Constant Work In Process)
A production and inventory control system where a constant number of work items are maintained in the production process to optimize flow and efficiency.
Count Frequency
The rate or interval at which inventory counts are conducted, which can vary from continuous tracking (daily) to periodic counts (weekly, monthly, or annually).
Current On-hand Alert
A notification system in inventory management that alerts when current stock levels reach a specified threshold, indicating the need for action such as replenishment or review.
Cycle Stock/Inventory
The portion of inventory that is regularly turned over in the course of business operations, representing the normal operational stock level between replenishments.
Cycle Reduction Stock
Inventory held to enable faster response to customer demand and reduce the length of the production cycle, thereby improving service levels and efficiency.
Cycle Reduction Stock
Inventory maintained to decrease the production or purchase cycle time, aiming to enhance responsiveness to market changes and reduce lead times.
Carriage and Insurance Paid To
CIP is an Incoterm where the seller delivers the goods to a carrier of their choice, pays for carriage and insurance to the named destination point, but risk passes when the goods are handed over to the first carrier.
Cost, Insurance and Freight
CIF is an Incoterm where the seller pays the costs, freight, and insurance to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods are loaded onto the shipping vessel.
Carriage of Goods by Sea Act
COGSA is a law that governs the rights and responsibilities between shippers of cargo and ship operators regarding ocean shipments. It establishes legal standards for the carriage of goods, including loss or damage.
Cost and Freight
CFR is an Incoterm where the seller is responsible for the cost of transporting goods to the destination port, but the risk transfers to the buyer once the goods are loaded onto the shipping vessel.
Cubic Meter
CBM is a unit of volume measurement used in shipping to determine the total volume of goods being shipped. It is critical for calculating space requirements in transportation.
Demand Forecasting
The process of predicting future customer demand for a product or service, based on historical data, market trends, and other relevant factors.
Demand Planning
The process of forecasting customer demand to make informed supply chain decisions, from stocking to production planning.
Distribution Center
A warehouse or specialized building where products are stored and distributed to retailers or customers.
Demand Forecast Accuracy
The degree to which a company can accurately predict customer demand for its products over a specific period. High accuracy in demand forecasting leads to better inventory management and reduced costs.
Damage-free Delivery Rate
The proportion of products delivered to customers without any damage. It's a key indicator of logistics and packaging efficiency.
Day Sales Outstanding
The average number of days it takes for a company to collect payments after a sale has been made. It's a measure of the efficiency of a company's credit and collections.
Damage-free Delivery Rate
A metric that indicates the percentage of products delivered to customers without any damage. A high rate is indicative of effective packaging, handling, and transportation processes.
Delivery Accuracy
A measure of how accurately and reliably a company's shipments are delivered within the promised time frame. It reflects the efficiency and reliability of the order fulfillment and logistics processes.
Digital Supply Chain Twin
A digital replica of a physical supply chain that uses data and models to mirror and predict the behavior of its real-world counterpart. It helps in optimizing supply chain operations and scenario planning.
Direct Procurement
Direct procurement refers to acquiring goods or materials that are directly used in the production of goods or services sold by a company. These purchases are integral to the company's primary business activities.
Drop Shipment
Drop shipment is a retail fulfillment method where a store doesn't keep the products it sells in stock. Instead, when a store sells a product, it purchases the item from a third party and has it shipped directly to the customer.
Dock
A dock is a platform where trucks or trains load or unload cargo. In maritime contexts, it's a water-level structure for the berthing of ships and the handling of cargo.
Dispatch
Dispatch in logistics refers to the scheduling and sending out of transportation vehicles for freight pickup or delivery. It includes managing and coordinating transportation schedules, routes, and load assignments.
Density Calculator
A density calculator is a tool used in logistics to determine the density of a shipment. Shipment density is a key factor in determining freight class and shipping costs.
Delivery Receipt
A delivery receipt is a document signed by the receiver of a shipment to provide proof that the delivery was completed. It often includes the date, time, and condition of the goods upon arrival.
Distribution Requirements Planning
DRP is a systematic process to determine when and how much inventory is needed at different distribution points. It's used to ensure timely replenishment of goods.
Direct Point of Sale
Direct point of sale refers to selling products directly to the customer at the point of purchase. This approach bypasses intermediaries and often involves real-time inventory management.
Downtime to Operating Time
This metric tracks how often production assets are operational versus idle due to maintenance, offering a metric for assessing the efficiency of manufacturing equipment.
Digital Inventory
The use of smart algorithms to manage and track inventory levels is digital inventory. It involves using software and hardware to automate the process of inventory management.
Decentralized Inventory Control
An inventory management approach where decisions and processes are distributed among various locations or departments, allowing for localized decision-making and flexibility.
Decoupling Inventory
Stock that is held to decouple different stages of the production process, allowing upstream and downstream operations to run independently and buffer against disruptions.
Demand Chain Management
The management of upstream and downstream relationships with suppliers and customers to deliver value and drive demand, encompassing all activities from product development to the end customer.
Demand Time Fence
A period within the production planning schedule during which the forecast is fixed, and changes to the production plan are minimized to maintain stability and order.
Departmental Stocks
Inventory held by specific departments within an organization, tailored to meet their particular needs and managed separately from central inventory.
Dependent Demand
Demand for items that are directly linked to the demand for other products, such as components for a finished product, where the required quantity is calculated based on the production of the final product.
Deployment Planning and Scheduling
The process of determining how and where inventory should be allocated or moved within the supply chain to meet demand efficiently and effectively.
Deterministic Inventory Models
Inventory control models that assume demand and other variables are known with certainty, allowing for precise calculations of reorder points and quantities.
Disbursement
The process of distributing or paying out goods, funds, or resources from inventory, often tracked for financial and inventory control purposes.
Distributed Inventory
Inventory that is spread out across multiple locations or facilities, allowing for closer proximity to customers and potentially faster delivery times.
Distribution Costs
Expenses associated with moving goods from one location to another, including transportation, warehousing, handling, and packaging costs.
Distribution Planning
The process of strategizing and organizing the distribution of goods from the point of production or storage to the end customer, ensuring timely and efficient delivery.
Dock to Stock
A measure of supply chain efficiency, representing the time it takes for goods to move from the receiving dock at a warehouse or facility to usable inventory stock.
Demand Planning
The process of forecasting future demand for products or services based on historical data, market trends, and statistical analysis to ensure optimal inventory levels.
Delivered at Terminal
DAT is an Incoterm where the seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the disposal of the buyer at a named terminal at the named port or place of destination.
Delivered Duty Paid
DDP is an Incoterm where the seller assumes all responsibilities and costs of delivering the goods to the named place of destination, including transportation, customs clearances, and taxes.
Delivered at Place
DAP is an Incoterm where the seller delivers the goods to a named place of destination, ready for unloading at the buyer's disposal, with the seller bearing all risks and costs to that point.
Economic Order Quantity
A calculation used to determine the most cost-effective quantity of inventory to order, balancing ordering costs and holding costs.
Efficient Consumer Response
A strategy aimed at improving the supply chain through collaboration between suppliers and retailers to better respond to consumer demands.
Expediting Costs
Costs incurred from accelerating the delivery or production of items, typically through premium shipping or rushed processing.
Economic Order Quantity
A formula used to determine the optimal order quantity that minimizes the total cost of ordering and holding inventory.
End-to-End Supply Chain Monitoring
The continuous oversight of every aspect of the supply chain, from raw material sourcing to the final delivery to the customer. This holistic view helps in identifying bottlenecks, reducing inefficiencies, and improving overall performance.
Enterprise Resource Planning
An integrated management system that combines all the different aspects of a business, including planning, purchasing, inventory, sales, marketing, finance, human resources, and more, into a single unified system to streamline processes and information across the organization.
E-Procurement
E-procurement is the use of electronic methods, typically internet-based, to conduct the processes of procurement such as purchasing, sourcing, and tendering. It enhances efficiency, reduces costs, and streamlines procurement processes.
Electronic Data Interchange
EDI is the electronic exchange of business information using a standardized format. It allows companies to transfer documents like invoices and purchase orders electronically.
EDI or Electronic Data Interchange
EDI is the electronic interchange of business information using a standardized format; a process which allows one company to send information to another company electronically rather than with paper.
Employee Turnover
The percentage of employees that leave the organization in a given period of time.
Ex Works
EXW is an Incoterm where the seller makes the goods available at their premises, and the buyer is responsible for all other risks and costs involved in taking the goods from the seller's location to the desired destination.
Estimated Date of Departure
EDD refers to the planned date on which a vessel (or other mode of transport) is expected to leave a specified port or location. It is a key factor in planning and scheduling shipments.
Estimated Time of Arrival
ETA is the date and time when a ship, vehicle, or aircraft is expected to arrive at a particular place, crucial for logistics planning and coordination.
Estimated Time of Departure
ETD is the date and time when a ship, vehicle, or aircraft is expected to depart from a particular place, important for scheduling and logistics operations.
Fill Rate
A measure of a supply chain's ability to deliver the requested product quantity to a customer on the first attempt.
Forecast Accuracy
The measure of how close the forecasted demand is to the actual demand, used to improve the precision of planning processes.
Freight Forwarder
A company that arranges the transport of goods on behalf of a shipper, using various shipping modes like ships, airplanes, trucks, and railroads.
Forecast Error
The difference between the forecasted and actual demand for products. A reduction in forecast error indicates improved accuracy in predicting customer demand.
Fill Rate
The percentage of customer orders that can be fulfilled from current stock without resulting in backorders or stockouts. (Note: Similar to 'Order Fulfillment Rate' mentioned earlier.)
Freight Expediting Costs
Additional costs incurred to speed up the delivery of goods, often involving premium transportation charges and higher unit prices due to the urgency of shipment.
Forecast Error
The variance between the predicted or forecasted demand for a product or service and the actual demand that occurs. This metric is crucial for evaluating the accuracy of demand forecasting methods.
Freight Forwarder
A company that arranges the shipment of goods on behalf of its clients. It typically provides a full range of services including tracking inland transportation, preparation of shipping and export documents, warehousing, booking cargo space, and freight consolidation.
Forecasting
In supply chain, forecasting refers to the process of making predictions about future demand, trends, and behaviors, using historical data and analysis. This is critical for effective supply chain planning, inventory management, and meeting customer demand.
Forward Auction
A forward auction is a traditional auction format where a single seller offers an item or service, and multiple buyers bid to purchase it. The price typically increases with each bid, and the highest bidder wins.
Fixed Price Contract
A fixed price contract is an agreement where the service or product is provided at a predetermined price. Regardless of the actual costs incurred, the price does not change, transferring the risk to the supplier.
First In, First Out
FIFO is an inventory management technique where the products that were first added to the inventory are the first to be sold or used. It's commonly used in managing perishable goods.
Freight Class
Freight class refers to an item's classification as defined by the National Motor Freight Classification (NMFC). It is determined based on the item's density, stowability, handling, and liability.
First Pass Yield
Percentage of products or units that pass quality inspection on the first try and do not require any reworking. This metric is used to measure the efficiency of a production process and can be tracked over time to identify areas for improvement.
Forrester Effect
Similar to the Bullwhip Effect, it describes the ripple effect of demand fluctuations through various stages of the supply chain.
Forecast Bias
Forecast bias is the tendency of a forecasting model to consistently overestimate (positive forecast bias) or underestimate (negative forecast bias) the actual demand for a product or service.
Free Alongside Ship
FAS is an Incoterm where the seller delivers the goods to the ship beside which the goods are to be loaded, with the buyer responsible for the cost and risk of loss or damage to the goods from that point.
Free On Board
FOB is an Incoterm where the seller is responsible for the cost and risk of loss or damage to the goods until they are loaded on board the ship, at which point the responsibility transfers to the buyer.
Free Carrier
FCA is an Incoterm where the seller delivers the goods, cleared for export, to the carrier nominated by the buyer at the named place. The risk transfers to the buyer when the goods are handed over to the first carrier.
Forty-Foot Equivalent Unit
FEU is a measure used in shipping to describe the capacity of a container ship or terminal, where one FEU equals the space of a standard forty-foot shipping container.
Full Container Load
FCL refers to a shipping method where a container is used exclusively for one shipper's cargo, providing more control over the handling and usually faster transit time compared to shared containers.
Green Supply Chain Management
Practices and processes in supply chain management that focus on environmental sustainability and reducing the ecological footprint of operations.
Global Supply Chain
The network created among different worldwide companies producing, handling, and distributing specific goods and/or products.
Global Sourcing
The practice of sourcing goods and services from the global market across geopolitical boundaries, often aimed at exploiting global efficiencies such as lower cost skilled labor, cheaper raw materials, and other economic factors like tax breaks and low trade tariffs.
Global Positioning System (GPS) Tracking
The use of GPS technology to monitor the location and movement of goods and vehicles in the supply chain. This provides valuable insights for route optimization, asset utilization, and delivery tracking.
Guarantee
A guarantee is a formal assurance, typically in writing, that certain conditions will be fulfilled, especially regarding the quality, durability, or performance of a product or service.
Groupage
Groupage is a shipping term used when small shipments from different customers are consolidated into one full container. It reduces shipping costs by sharing the container space.
General Average
GA is a maritime law principle whereby all parties in a sea voyage proportionally share the loss resulting from a voluntary sacrifice of part of the ship or cargo to save the whole in an emergency.
Hub and Spoke Distribution
A system of logistics where a centralized 'hub' exists and 'spokes' radiate out to the destinations. This system is often used in transportation, warehousing, and freight, and allows for more efficient routing and use of resources.
Harmoized System of Codes (HS Codes)
The Harmonized System is an international nomenclature for the classification of products. It allows participating countries to classify traded goods on a common basis for customs purposes.
Hitchment
Hitchment refers to the combination of several smaller shipments (usually LTL) into a single shipment in order to save on transportation costs. It's often used in less-than-truckload (LTL) shipping.
Hazmat or Hazardous Material
Hazmat refers to materials or items with hazardous properties that pose a potential risk to health, safety, property, or the environment during transportation.
Hull and Machinery
H&M is a type of marine insurance that covers physical damage to the ship itself, including the hull, machinery, and equipment, against perils of the sea and other risks.
Inventory Turnover
A ratio showing how many times a company's inventory is sold and replaced over a period of time, indicating the efficiency of inventory management.
Incoterms
International Commercial Terms -A series of pre-defined commercial terms published by the International Chamber of Commerce relating to international commercial law.
Inventory Management
The supervision of non-capitalized assets (inventory) and stock items, including the management of raw materials, components, and finished products.
Inventory Turnover Ratio
This metric indicates the number of times a company's inventory is sold and replaced over a specified period. A higher ITR usually signifies efficient inventory management and sales performance.
In Full Delivery
This metric assesses the percentage of customer orders that are completely fulfilled in the first delivery attempt. It's an indicator of supply chain effectiveness in meeting customer requirements in full on initial delivery.
Inventory Days of Supply
An efficiency ratio that measures the average time in days that inventory is held before being sold or used in production.
Inventory Turnover Rate
Measures how often inventory is sold and replaced over a specified period. A high ITR indicates efficient inventory management. (Note: This term was mentioned earlier.)
Inventory Carrying Cost Percentage
The total costs associated with holding inventory, expressed as a percentage of the inventory value. These costs include storage, insurance, taxes, depreciation, and obsolescence.
Inventory Turnover Rate
A metric indicating how many times a company's inventory is completely sold and replaced over a specific period. High ITR is generally a sign of good inventory management and strong sales.
Inventory Visibility
The ability to accurately track and manage inventory levels at all stages of the supply chain. This ensures that the right amount of product is available at the right time and place, minimizing costs and maximizing service levels.
Inventory Tracking
The process of monitoring and managing inventory levels, locations, and movements within a company. This includes keeping track of stock quantities, orders, sales, and deliveries, often using software systems to ensure accuracy and efficiency.
Inventory
Inventory refers to the goods and materials a business holds for the ultimate goal of resale, production, or utilization. It is a key asset that is managed to balance the cost of holding goods with the need to meet customer demand.
Incentive Contract
An incentive contract is a type of contract where the final cost paid to the vendor is based on their performance. Performance incentives could include meeting project milestones, staying under budget, or exceeding quality standards.
Inspection
Inspection in supply chain management involves checking, measuring, testing, or gauging the features of a process or product and comparing these with specified requirements to ensure conformity.
Invoicing
Invoicing is the process of sending bills to customers for goods sold or services provided, outlining the amount due for payment. It is a critical part of the billing process in business transactions.
Indirect Procurement
Indirect procurement involves purchasing services or supplies required to maintain company operations but not directly included in the products or services sold. Examples include office supplies, software, and cleaning services.
IMDG Codes
The International Maritime Dangerous Goods (IMDG) Code is a set of rules that regulate the transport of hazardous materials and dangerous goods across water on vessels.
Inspection Certificate
An inspection certificate is a document prepared by an independent body, which attests to the quality, quantity, or condition of goods being shipped. It's often required in international trade.
Inventory Planning
Inventory planning is determining the optimal quantity and timing of inventory to align with sales and production capacity. It balances inventory levels to meet customer demand without incurring excessive costs or stockouts.
Invoice
Invoices are commercial documents that record the transactions between a seller and a buyer. It includes the products or services delivered, the total cost, preferred payment method, etc.
Institute Cargo Clauses
The ICC are standardized insurance policy terms for international cargo shipments, detailing the levels of coverage available against loss or damage to goods during transit.
International Chamber of Shipping
The ICS is the principal international trade association for shipowners, concerned with all regulatory, operational, and legal issues related to shipping.
International Federation of Freight Forwarders Associations
FIATA is a global organization representing freight forwarding and logistics firms, setting industry standards and providing a common voice for freight logistics and transportation.
International Labour Organization
The ILO is a United Nations agency that sets international labor standards and promotes rights at work, encourages decent employment opportunities, and enhances social protection for labor forces.
International Transport Workers' Federation
The ITF is a global federation of transport workers' unions that represents the interests of transport workers in the global economy, negotiating better conditions and advocating for workers' rights.
International Convention for the Prevention of Pollution
MARPOL is an international treaty designed to minimize pollution of the seas, including dumping, oil, and exhaust pollution. It is one of the most important international marine environmental conventions.
International Maritime Organization
The IMO is a specialized agency of the United Nations responsible for regulating shipping. It sets global standards for the safety, security, and environmental performance of international shipping.
International Safety Management Code:
The ISM Code is an international standard for the safe management and operation of ships and for pollution prevention. It was adopted by the IMO and mandates a standardized safety management system for shipping companies.
International Air Transport Association
IATA is a global trade organization for the airline industry, establishing industry policies and standards for airline safety, security, efficiency, and sustainability.
International Organization for Standardization
ISO is an independent international organization that develops and publishes standards to ensure the quality, safety, and efficiency of products, services, and systems.
International Ship and Port Facility Security Code:
The ISPS Code is a comprehensive set of measures to enhance the security of ships and port facilities, developed in response to the perceived threats to ships and port facilities.
Just-in-Time Inventory
A strategy where inventory is ordered and received only as it is needed in the production process, minimizing inventory costs.
Key Performance Indicator
Metrics used to measure and evaluate the effectiveness and efficiency of supply chain operations.
Kanban
An inventory-control system used in just-in-time manufacturing to track production and order new shipments of parts and materials.
Key Performance Indicator
A KPI is a measurable value that demonstrates how effectively a company is achieving key business objectives. In supply chain, KPIs often measure performance in areas like logistics, production, inventory, purchasing, and warehousing.
Knocked Down
Knocked down refers to products that are disassembled so that they can be packed more efficiently for transport. These products are then reassembled by the customer upon receipt.
Lean Supply Chain
A supply chain management approach focused on minimizing waste and maximizing efficiency, often through the elimination of non-value-adding activities.
Lead Time
The total time that elapses between the initiation and completion of a production process, including the time required for procurement, manufacture, and delivery.
Logistics
The overall process of managing how resources are acquired, stored, and transported to their final destination.
Landed Cost
The total cost of a product including all logistics charges, such as transportation fees, customs, duties, taxes, insurance, currency conversion, crating, handling, and payment fees.
Lost Sales Reductions
This term refers to the reduction in sales that are lost due to customers opting for illegal or unauthorized alternatives.
Lean Manufacturing
A production methodology derived mainly from the Toyota Production System, which emphasizes the minimization of waste within manufacturing systems while simultaneously maximizing productivity.
Logistics
Logistics refers to the detailed coordination of a complex operation involving many people, facilities, or supplies. In the context of supply chain, it involves the management of the flow of goods from the point of origin to the point of consumption to meet customer requirements.
Letter of Intent
An LOI is a document outlining the preliminary agreements between two or more parties before a formal contract is finalized. It signifies intention to enter into a contract and highlights key terms of the future agreement.
Landed Cost
Landed cost is the total price of a product or shipment once it has arrived at a buyer's doorstep. It includes the original price, transportation fees, customs, duties, taxes, insurance, currency conversion, and other costs.
Linehaul
Linehaul refers to the movement of freight between cities or major points excluding pickup and delivery service. It's the central part of long-distance freight shipment, excluding the local transporting sections.
Lift Gate
A lift gate is a mechanical device on the back of a vehicle, used to assist in the loading and unloading of freight. It's particularly important when the shipping or receiving location does not have a loading dock.
LLTL or Less-than-Truckload
LTL shipping is used for the transportation of small freight or when a shipment does not require the use of an entire trailer. This method combines shipments from multiple customers.
Lane
In logistics, a lane is a regular route or corridor that a carrier uses for shipments. It's defined by a point of origin and a destination.
Letter of Authority
An LOA is a document that grants one party the authority to act on behalf of another party in specified matters, often used in legal, financial, and business transactions.
Lift On Lift Off
LOLO refers to a type of cargo handling process where goods are loaded (lifted on) and unloaded (lifted off) a vessel using cranes or other equipment.
Less Than Container Load
LCL refers to a shipping method where cargo that is not enough to fill a container is shipped along with other consignments, allowing shippers to transport smaller volumes of goods without paying for a full container.
Letter of Indemnity
An LOI is a document in which one party agrees to compensate another for any losses or damages that may occur as a result of a particular act or failure to act.
Multi-Echelon Inventory Management
Managing inventory across multiple levels of the supply chain, from raw materials to finished goods, to optimize overall inventory levels.
Manufacturing Resource Planning
A method for the effective planning of all resources of a manufacturing company, addressing operational planning in units and financial planning.
Material Requirement Planning
A production planning, scheduling, and inventory control system used to manage manufacturing processes. MRP ensures that materials and components are available for production and products are available for delivery to customers, minimizing inventory levels and costs.
Material Requirements Planning (MRP)
Material Requirements Planning is a production planning and inventory control system used to manage manufacturing processes. MRP ensures that materials and components are available for production and products are available for delivery to customers.
Make or Buy Decision
This decision involves determining whether to produce a product or service in-house (make) or buy it from external suppliers (buy). It's based on factors like cost, capacity, expertise, and time constraints.
Memorandum of Understanding
An MOU is a formal agreement between two or more parties, used in situations where parties do not imply a legal commitment. It outlines mutual goals and clarifies the understanding of the planned collaboration.
Multiple Sourcing
Multiple sourcing is a procurement strategy where a company sources a particular product or service from several suppliers. This can increase competition, reduce dependency on a single supplier, and mitigate risk.
Multiplant Capacity Planning
This involves planning and managing production capacity across multiple manufacturing facilities, ensuring that each plant operates efficiently while meeting overall production goals.
Master Production Scheduling
MPS is the process of planning which products will be produced, in what quantities, and when, considering the manufacturing capacity.
Maintenance Cost Per Unit
The sum of all the expenses that a company incurs to produce, store, and sell one unit of a product or a service.
Machine Downtime
Machine or manufacturing downtime is any period during which facility output is stopped. Machine downtime includes planned downtime for scheduled asset maintenance and unplanned downtime due to equipment failure and other events. It may also include stoppages due to supply or labor shortages.
Manufacturing Cost Per Unit
Also known as cost of goods sold. It is the sum of all the expenses that a company incurs to produce, store, and sell one unit of a product or a service.
Material Yield Variance
In simple words, it is the metric for quantity variance of material converted to its cost to arrive at the monetary value of the variance. We can also call it Material Quantity Variance.
Memorandum of Agreement
An MOA is a formal document outlining an agreement between two or more parties. It serves as a legal record of the agreement and outlines the terms and details of the partnership or cooperative effort.
Multimodal Transport Operation
MTO refers to the transportation of goods under a single contract but performed with at least two different means of transport; the carrier is liable for the entire carriage, even though it is performed by several different modes of transport.
Network Design
The process of designing a supply chain network to efficiently and effectively support the movement of goods from suppliers to customers.
Net Profit
The total earnings of a company after all expenses, including cost of goods sold, operating expenses, and taxes, have been deducted. It's a crucial indicator of a company's financial health.
Non-Stock Inventory
Items that are not regularly kept in stock but are ordered or manufactured whenever needed. This practice is common for unique or rarely used items.
NMFC or National Motor Freight Classification
The NMFC is a standard that provides a comparison of commodities moving in interstate, intrastate, and foreign commerce. It's used to classify goods for determining freight charges.
NMFTA or National Motor Freight Traffic Association
The NMFTA is a nonprofit organization that provides guidance and standardization for freight classification, packaging, and bills of lading in the motor carrier industry.
NOI or Not Otherwise Indicated
NOI is a term used in freight shipping when a more specific description of the goods is not provided. It's often used in classifications of freight where detailed commodity descriptions are not available.
Nearshoring
A business strategy where a company outsources work to companies or individuals located in nearby countries, typically those sharing a border or in close geographical proximity.
Negative Forecast Bias
Negative forecast bias is when the forecast consistently underestimates the actual demand. When the predicted quantities fall short of what customers require. Negative forecast bias can result in stockouts, missed sales opportunities, dissatisfied customers, and potentially increased costs due to rush orders or expedited shipping to meet unanticipated demand.
Non-Vessel Operating Common Carrier
An NVOCC is a cargo consolidator who does not own any vessel but acts as a carrier by issuing its own bills of lading or air waybills and assuming responsibility for the shipments.
Order Fulfillment
The complete process from the point of sale to delivery of a product to the customer.
Outsourcing
The business practice of hiring a party outside a company to perform services and create goods that traditionally were performed in-house by the company's own employees.
Order Management
The administration of business processes related to orders for goods or services.
On-time Delivery
A key performance indicator measuring the rate at which a company delivers products or services to customers within the promised time frame. High OTD rates indicate reliable and efficient fulfillment processes.
Order Fulfillment Rate
The proportion of customer orders that are fulfilled from available stock without resulting in lost sales, backorders, or stockouts. A higher rate indicates better inventory management and customer service levels.
Overstocks Reduction
A strategy to significantly decrease the amount of inventory held beyond what is needed, aiming to reduce carrying costs and waste.
Operational Costs
The sum of the cost of goods sold and operating expenses. It represents the total expenses incurred in the day-to-day running of a business.
Obsolete and Excess Inventory
Inventory that is no longer sellable or in demand. This can include outdated products, items that have surpassed their shelf life, or stock that exceeds current demand. Such inventory represents sunk costs and potential waste for a business.
Order Return Rate
Calculated as the number of products returned by customers divided by the total number of products sold, multiplied by 100. This rate helps businesses understand the frequency of returns and can indicate issues with product quality, customer satisfaction, or order accuracy.
On-time Delivery
This metric assesses a business's capability to fulfill orders and deliver products or services within the promised delivery timeframe. High OTD rates are indicative of efficient production, inventory management, and logistics operations.
On-time Delivery
A performance metric that evaluates how frequently a business delivers orders to customers within the agreed or promised time frame. High OTD rates signify efficient logistics and supply chain management.
Off-shoring
Off-shoring refers to the relocation of a business process from one country to another—typically an operational process, such as manufacturing, or supporting processes, like accounting. This is often done to take advantage of lower costs or specialized expertise.
Outsourcing
Outsourcing is the business practice of hiring a party outside a company to perform services or create goods that were traditionally performed in-house by the company's own employees. This is often done to reduce costs or improve efficiency.
On-time Delivery
On-time delivery measures the proportion of products that reach customers by the agreed deadline relative to the overall quantity of products shipped.
Overall Equipment Effectiveness
A metric used to measure the effectiveness and performance of manufacturing processes, or any individual piece of equipment based on the utility and efficiency in production and delivery.
Overall Operations Effectiveness
A maintenance metric used to measure the availability of general production lines, from beginning to end. Simply put – it identifies the percentage of manufacturing time that is truly productive. This includes planned maintenance for machines, even though machines are not productive during maintenance times.
Overtime Rate
The sum of hours worked by an employee that exceeds their normally scheduled working hours.
Procurement
The process of obtaining goods and services, including sourcing, negotiation, and strategic selection of products and suppliers.
Pareto Principle (80/20 Rule)
A principle often applied in inventory management, suggesting that roughly 80% of the effects come from 20% of the causes.
Production or Supply Attainment
A measure of how often production targets are met within a given time frame. It indicates the effectiveness of production planning and the ability to meet demand.
Perfect Order Index or Perfect Order Delivery Rate
A comprehensive metric evaluating the effectiveness of order fulfillment. It assesses factors like on-time delivery, order accuracy, product quality, and complete order fulfillment.
Perfect Order Measurement
The percentage of orders fulfilled completely, accurately, and on time, without any damages or returns. It's a comprehensive measure of order fulfillment efficiency.
Procure-to-Pay Cycle
The process of requisitioning, purchasing, receiving, paying for, and accounting for goods and services. It covers the complete cycle from identification of need, approval, procurement, and payment.
Predictive Analytics
The use of data, statistical algorithms, and machine learning techniques to identify the likelihood of future outcomes based on historical data. In the supply chain, this helps in forecasting demand, managing inventory, and mitigating risks.
Procurement
Procurement is the process of acquiring goods, services, or works from an external source, often via a bidding or tender process. It involves activities such as identifying needs, selecting suppliers, negotiating terms, and managing contracts to optimize cost, quality, and delivery.
Payment Terms
Payment terms are the conditions under which a seller will complete a sale. They outline how and when the buyer is to pay the seller, detailing the time frame, method of payment, and any potential discounts for early payment or penalties for late payment.
Purchase Order
A purchase order is a formal document sent by a buyer to a supplier, authorizing the purchase of specific products or services at agreed-upon prices and terms. It serves as an official offer and a contract once accepted by the supplier.
Purchase Requisition
A purchase requisition is an internal document used within an organization to request the procurement of goods or services. It usually requires approval before a purchase order can be issued to a supplier.
Procure-to-Pay
Procure-to-pay is a process that covers all activities from procurement of goods and services to making payments to suppliers. It integrates purchasing and accounts payable systems to create a seamless flow from order to payment.
Payment Method
A payment method in the supply chain refers to the way in which a buyer chooses to compensate the supplier. Common methods include cash, credit, bank transfer, online payment systems, and letters of credit.
Purchase Order
A purchase order is a formal document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services. It serves as an official order and a contractual agreement once accepted by the seller.
Payment
Payment in the supply chain refers to the transfer of funds from a buyer to a supplier as compensation for goods or services. It is the final step in the procure-to-pay process.
Payment Conditions
Payment conditions are the terms agreed upon by buyers and suppliers regarding the payment for goods or services. This includes payment timelines, methods, possible installments, discounts for early payment, and penalties for late payment.
Project Scope
Project scope refers to the detailed outline of all aspects of a project, including its objectives, deliverables, boundaries, and tasks. It's a critical part of project planning that guides what will and won't be included in the project.
Purchasing
Purchasing is the process of acquiring goods or services from external sources for an organization. It involves selecting suppliers, negotiating terms, and finalizing contracts for the procurement of necessary resources.
Price Analysis
Price analysis is the process of comparing supplier prices against external benchmarks, historical prices, or estimated costs. It's used to determine the fairness and reasonableness of the quoted price.
Procurement Policy
A procurement policy is a set of guidelines or rules that govern the process of acquiring goods and services in an organization. It ensures that procurement is conducted in a fair, ethical, and efficient manner.
Procurement Process
The procurement process is the series of activities and procedures organizations use to acquire goods and services. This typically includes identifying needs, selecting suppliers, negotiating terms, and managing contracts.
Packing Slip
A packing slip is a document included with a shipment that lists all of the items included in that particular shipment. It's used to inform transport agencies, government authorities, and customers about the contents of the package.
PADAG
PADAG stands for "Pricing And Data Analysis Group," which is a term sometimes used in logistics to refer to a team or department responsible for analyzing pricing data and market trends to determine the best pricing strategies.
POD or Proof of Delivery
Proof of Delivery is a document signed by the recipient confirming receipt of a shipment. This document typically includes details of the shipment such as date and time of delivery.
PRO or Progressive Rotating Order
A PRO number is a tracking number assigned by carriers to an individual shipment, used in managing and tracking the shipment throughout its journey.
Percentage Planned Maintenance
The measure of the number of planned maintenance tasks in comparison to all maintenance tasks. PMP is expressed as the percentage of total maintenance hours spent on planned maintenance tasks over a certain period.
Production Costs
Production costs refer to all of the direct and indirect costs businesses face from manufacturing a product or providing a service. Production costs can include various expenses, such as labor, raw materials, consumable manufacturing supplies, and general overhead.
Production Downtime
This metric tracks the time a machine or workstation is not in production, which can result in a production delay. ‘Planned downtimes’ are scheduled and budgeted stops during production such as scheduled maintenance and product changeovers. ‘Unplanned downtime’ in manufacturing occurs when an unexpected event such as equipment failures or running out of material occurs to equipment that is scheduled to be in operation.
Production Volume
It is the number of products a company makes. Production volume is calculated by multiplying the units produced by their unit cost.
Positive Forecast Bias
A concept when the forecast consistently overestimates the actual demand for a product or service. In supply chain terms, the predicted quantities are higher than what customers need or will consume. Positive forecast bias can lead to excess inventory, increased storage costs, and potential wastage if products cannot be sold before they expire or become obsolete.
Protective Inventory
Stock kept as a safeguard against uncertainties in demand or supply, ensuring that fluctuations do not result in stock-outs or operational disruptions.
Protection and Indemnity
P&I is a type of marine insurance provided by a P&I Club, covering liabilities such as third-party risks for injury, pollution, and damage related to the ownership and operation of a ship.
Quality Control
The process of ensuring that products meet the required quality standards, often involving inspections and testing at various stages of the production process.
Quality Assurance
Quality assurance is a proactive process aimed at ensuring products or services meet certain quality standards and requirements. It involves systematic activities and procedures during production to provide confidence that quality requirements will be fulfilled.
Quality Control
Quality control is a reactive process that involves inspecting and testing products or services to ensure they meet specified quality criteria. It is typically performed after a product is developed or a service is rendered.
Quality
Quality in the supply chain refers to the degree to which a product or service meets certain standards and fulfills customer expectations. It encompasses various attributes, including performance, durability, reliability, and conformance to standards.
Quantity
Quantity in the supply chain context refers to the amount or number of items or materials required or produced. It is a critical factor in inventory management, production planning, and fulfilling customer orders.
Reverse Logistics
The process of moving goods from their typical final destination (the customer) for return, repair, remanufacture, recycling, or disposal.
Radio Frequency Identification
The use of radio waves to read and capture information stored on a tag attached to an object, which is used in inventory management systems.
Return on Investment
A financial metric used to evaluate the efficiency or profitability of an investment. It compares the gain from an investment relative to its cost, typically expressed as a percentage.
Reduced Late Orders
A measure indicating a decrease in the frequency of orders delivered later than the promised date.
Return on Investment
A financial metric used to calculate the profitability of an investment. It compares the gain (or loss) from an investment relative to its cost, providing insight into the efficiency and value of financial decisions.
Return on Investment
A measure of the profitability and efficiency of an investment, calculated by dividing the net profit of the investment by its total cost. ROI is expressed as a percentage and helps in comparing the efficacy of different investments.
Real-Time Data Tracking
The process of continuously and instantly capturing data about supply chain activities as they occur. This enables immediate response to changes or issues, enhancing the adaptability of the supply chain.
Radio Frequency Identification
A technology that uses electromagnetic fields to automatically identify and track tags attached to objects. In the supply chain, RFID tags are used to improve inventory management and reduce losses.
RFX
RFX is a broad term that encompasses various types of requests used in procurement, such as Request for Proposal (RFP), Request for Quotation (RFQ), and Request for Information (RFI). Each type serves a specific purpose in gathering information or bids from suppliers.
Request for Expression of Interest
A Request for Expression of Interest is a preliminary step in the procurement process, inviting suppliers or contractors to express interest in supplying goods or services. It helps in identifying potential suppliers before a detailed tender or proposal process.
Request for Information
A Request for Information is a standard business process whose purpose is to collect written information about the capabilities of various suppliers. It is primarily used in the initial stages of procurement to gather general supplier information.
Reverse Auction
In a reverse auction, the roles of buyer and seller are reversed. Multiple sellers compete to win the business of a single buyer by lowering their prices. It's often used by organizations looking to procure goods or services at the lowest price.
Receiving
Receiving is the process of accepting goods delivered by suppliers, verifying them against purchase orders, and inspecting them for quality and accuracy before they are stocked or used.
Request for Proposal
An RFP is a document issued by a company asking vendors to submit proposals for a specific product, service, or solution. It details project requirements and criteria for selection, inviting comprehensive responses from potential suppliers.
Request for Quotation
An RFQ is a document that a company sends to suppliers to invite them to quote prices for specific products or services. Unlike an RFP, it usually focuses more on price than on ideas or methodologies.
Reconsignment Request
A reconsignment request is made when a shipper wants to change the destination or consignee after a shipment has been dispatched but before it has been delivered.
Rough-Cut Capacity Planning (RCCP)
RCCP is a technique used to check the feasibility of the Master Production Schedule (MPS), assessing whether there is sufficient capacity to meet the MPS.
Rate of Return
This metric is used to measure the profit or loss of an investment over time on a variety of assets, from stocks to bonds, real estate, and art.
Revenue Per Employee
This metric measures the monetary capital each employee generates for the company. To calculate a company's revenue per employee, divide the company's total revenue by its current number of employees.
Right First Time
It is a process that measures the quality and sustainability standards of a product in the supply chain. The higher the percentage, the more products pass quality control after the first pass.
Request for Information (RFI)
Request for information (RFI) is a document to request information on a product or service from suppliers. The RFI document enables quick evaluation of suppliers and how they can fit in with the enterprise’s requirements.
Request for Proposal (RFP)
A request for proposal is a document where suppliers outline potential solutions for a business need or challenge. The RFP document is usually the second step after the buyer receives an RFI response. The RFP is a more detailed, specific document that outlines the business problem or objectives, outlining the project's requirements, timeline, budget, and evaluation criteria. providing enough information and context so that suppliers can propose creative solutions to meet the need.
Request for Quote (RFQ)
A request for quote, also known as an invitation, to quote, is a formal document used by a company (buyer) to solicit price quotes from selected vendors (sellers) for specific products or services. It outlines the specific requirements of the desired product or service, allowing vendors to provide detailed pricing information and potentially other relevant details like payment terms and delivery schedules.
Request for Bid (RFB)
It is a formal document issued by an enterprise (buyer) to solicit bids (proposals) from potential vendors (sellers) for the supply of goods or services. It outlines the specific requirements and specifications for the desired product or service and establishes the bidding process.
Supply Chain Visibility
The ability to track and monitor all parts of the supply chain, providing real-time data on inventory levels, order status, and shipment progress.
Safety Stock
Additional inventory held to guard against uncertainty in demand or supply, ensuring that a product remains available even in the face of fluctuations.
Sales and Operations Planning
A process to align operational planning with strategic business goals, balancing supply and demand and integrating financial planning with operations.
Six Sigma
A set of techniques and tools for process improvement, aiming to reduce defects and variability in manufacturing and business processes.
SKU
Stock Keeping Unit - A unique identifier for each distinct product and service that can be purchased.
Supply Chain Integration
The coordination and seamless connection of all components of the supply chain to operate as a unified system.
Supply Chain Optimization
The process of enhancing the efficiency and effectiveness of the supply chain processes, often through the use of technology and improved methodologies.
Supplier Relationship Management
Strategic planning and managing of all interactions with third-party organizations that supply goods and/or services to an organization in order to maximize the value of those interactions.
Strategic Sourcing
An approach to supply chain management that formalizes the way information is gathered and used so that an organization can leverage its consolidated purchasing power to find the best possible values in the marketplace.
Supply Chain Cycle Time
The total time required to fulfill a customer order when starting with no inventory. It's a measure of the efficiency of a supply chain in processing orders from start to finish.
Stock-Out Rate
This term refers to the percentage of times an item is not available when a customer wants to buy it.
Stock Holding Costs
These are the expenses related to storing unsold goods, including warehousing costs, insurance, taxes, depreciation, and obsolescence costs.
Supply Chain Cost per Unit Sold
This measures the total supply chain costs incurred for each unit sold. It helps in assessing the efficiency and cost-effectiveness of the supply chain processes.
Service Rate
A performance metric that assesses the level of customer service provided by a supply organization. It often considers factors like response time, order accuracy, and customer satisfaction.
Supplier Quality Performance
A measurement of a supplier's ability to deliver goods or services that meet predefined quality and compliance standards. It assesses factors like product quality, adherence to safety norms, and reliability of the supplier.
Safety Stock
Extra inventory held to guard against uncertainty in demand or supply. It acts as a buffer to mitigate the risk of stockouts.
Supply Chain Visibility
The ability of a company to track and monitor all parts of the supply chain journey, from sourcing and manufacturing to distribution and delivery. High SCV allows for better decision-making, risk management, and enhanced efficiency.
Supply Chain Event Management
A process of monitoring the supply chain to detect and respond to unplanned events. SCEM solutions provide real-time alerts and enable quick response to disruptions or changes.
Shipping and Receiving
This refers to the operations involved in sending out products to customers (shipping) and accepting goods that are delivered to a business (receiving). It includes handling, unloading, and checking incoming goods against invoices or orders and preparing and loading outgoing goods for transport.
Supply Chain Management
Supply Chain Management encompasses the oversight of materials, information, and finances as they move from supplier to manufacturer to wholesaler to retailer to consumer. It involves coordinating and integrating these flows both within and among companies.
Supplier
A supplier is an entity that provides goods or services to another organization. This could be a manufacturer, wholesaler, or another service provider. Suppliers are a critical link in the supply chain, directly impacting the quality and availability of products.
Supplier Management
Supplier management involves the process of identifying, acquiring, and managing the resources and suppliers that are essential to the operations of a business. This includes activities like supplier evaluation, relationship management, and performance assessment.
Stock
Stock typically refers to the finished goods or raw materials kept on hand by a business as part of its inventory. It is an essential component in the supply chain, ensuring that products are available for sale or production when needed.
Sales Order
A sales order is a document issued by a business to a customer, confirming the sale of specific products or services. It details the type, quantity, and price of goods or services sold and serves as a contract for the sale.
Spend Analysis
Spend analysis is the process of collecting, cleansing, classifying, and analyzing expenditure data with the purpose of reducing procurement costs, improving efficiency, and monitoring compliance. It helps in understanding procurement patterns and identifying savings opportunities.
Service Level Agreement
An SLA is a formal agreement between a service provider and the end user that defines the level of service expected. It specifies performance metrics, responsibilities, and expectations to ensure both parties understand and agree to the terms.
Specialty Procurement
Specialty procurement refers to the process of acquiring goods or services that are specialized or unique in nature. This often requires more detailed specifications and potentially a more complex procurement process due to the specialized nature of the items.
Strategic Sourcing
Strategic sourcing is a long-term approach to procurement that emphasizes continuous improvement and development of the supply base to gain a competitive advantage. It involves analyzing spending patterns, supplier market, and business needs.
Standing Order
A standing order is a long-term order that remains in effect until it’s canceled. It’s used for regularly scheduled deliveries or service provisions, ensuring continuous supply without the need to issue new purchase orders each time.
Supplier Relationship Management
This refers to the systematic approach to evaluating and managing relationships with suppliers. It aims to streamline and make more effective the processes between an organization and its suppliers.
Scope of Work
The scope of work is the portion of a contract or project documentation that defines the specific tasks, timelines, and deliverables that a contractor or team is expected to execute. It's a detailed breakdown of the work to be done.
Service Contract
A service contract is a formal agreement between a service provider and a client that outlines the terms of professional services to be provided. It specifies the scope, quality, time frame, and responsibilities of both parties.
Statement of Work
An SOW is a document used in project management that describes the specific services a contractor will perform under a contract. It details the work activities, deliverables, timelines, and quality expectations.
Strategic Sourcing
Strategic sourcing is a comprehensive approach for procuring goods and services, focusing on continuous improvement and re-evaluation of purchasing activities. It involves analyzing spending, understanding supply markets, and developing long-term supplier relationships.
Supplier Performance Management
This involves the process of assessing, analyzing, and managing the performance of suppliers. It aims to ensure that suppliers meet contractual obligations and contribute positively to the business objectives.
Supplier Quality Management
Supplier quality management refers to the process that ensures suppliers deliver goods or services that meet predefined quality standards. It involves quality control and assurance practices, supplier audits, and ongoing performance evaluations.
Single Sourcing
Single sourcing is a procurement strategy where a company buys a particular product from only one supplier, rather than spreading purchases among multiple suppliers. This can streamline procurement but may increase risk.
Supplemental Bill of Lading (SBOL)
An SBOL is an additional document to the original bill of lading that provides updated information or instructions regarding a shipment that may have changed after the initial BOL was issued.
Strategic Network Design
This involves long-term planning of a company’s supply chain network structure. It includes decisions about the number, location, and size of warehouses and production facilities.
Scrap
Manufacturing scrap represents a portion of a product or leftover material that has little or no economic value. It can occur due to various factors such as errors in production, defects in raw materials, equipment malfunctions, or inefficiencies in the production line.
Scrap Rate
The number of products produced by businesses that are wasted from manufacturing flaws or errors is called the scrap rate.
Supply Chain Velocity
Supply chain velocity refers to the speed and efficiency at which products or goods move through all stages of the supply chain, from raw materials to final delivery to the customer. It encompasses activities like purchasing, production, warehousing, distribution, and ultimately, reaching the end consumer.
Supplier Diversification
Supplier diversification is the process of expanding the number of suppliers that source raw materials for a company. The goal of supplier diversification is to reduce the company’s dependence on only one supplier, which may lead to reduced costs, improved quality, and increased innovation.
Supply Chain Digitization/Supply Chain Digitalization
It is the process of replacing manual or analog processes throughout the supply chain with digital solutions to enhance decision-making, optimize performance, and proactively respond to fluctuating demand.
Supply Chain Audit
A supply chain audit is an in-depth assessment of all the operations that make up a business’s supply chain. The audit's purpose is to identify weaknesses and bottlenecks in those processes and discover opportunities for improvement.
Supplier Credit Rating
A supplier credit ranking is a professional assessment of a supplier's financial position and their ability to meet their obligations within the supply chain. It considers metrics such as transaction history, supply chain performance, relationships with other businesses, etc.
Roll On Roll Off
RoRo refers to ships designed to carry wheeled cargo, such as cars, trucks, semi-trailer trucks, trailers, and railroad cars, that are driven on and off the ship on their own wheels or using a platform vehicle.
Safety of Life at Sea
SOLAS is an international maritime treaty that sets minimum safety standards in the construction, equipment, and operation of merchant ships, aiming to ensure safety at sea.
Third-Party Logistics
The outsourcing of supply chain operations, such as transportation, warehousing, and distribution, to a third-party provider.
Total Cost of Ownership
The comprehensive assessment of the total cost of a product or service over its lifecycle, including acquisition, operation, and maintenance costs.
Transportation Management System
Software designed to optimize the transportation component of the supply chain, managing and optimizing the movement of goods.
Transportation Management
The planning and execution of the movement of goods, considering factors like transportation mode, carrier selection, route planning, and freight audit and payment.
Total Supply Chain Cost as a Percentage of Sales
This metric evaluates the total costs associated with the supply chain (including production, storage, transportation, etc.) as a percentage of the company's total sales. It helps in understanding the impact of supply chain operations on the overall revenue.
Track and Trace Systems
Technologies used to follow the path of a product from its origin through every stage of the supply chain, up to its final destination. These systems are crucial for ensuring transparency, authenticity, and compliance.
Tender
A tender is a formal, structured invitation to suppliers to submit a bid to supply products or services. In the tendering process, details of the goods or services required are provided, and bids are invited from interested parties.
Tactical Sourcing
Tactical sourcing is a short-term, transactional approach to procurement, focusing on immediate needs and individual purchases. It often deals with day-to-day buying activities and responding to immediate requirements.
Transportation
Transportation in the supply chain context is the movement of goods and materials from suppliers to manufacturers to the final point of sale. It's an essential component of logistics that affects the efficiency and cost of the supply chain.
Traditional Procurement
Traditional procurement refers to the conventional method of acquiring goods or services, involving processes like tendering, evaluating bids, and awarding contracts, often conducted offline.
Total Cost of Acquisition
Total cost of acquisition includes all costs associated with the purchase of a good or service, including the initial cost, delivery charges, taxes, insurance, and other procurement-related expenses.
Total Cost of Ownership
TCO is the comprehensive assessment of all costs associated with the purchase, use, and maintenance of a good or service over its entire lifecycle. It includes acquisition, operating, maintenance, and disposal costs.
Tariff
A tariff is a tax imposed on imported and exported goods. In transportation, it can also refer to a schedule of fees charged by a carrier for freight services.
Terminal
A terminal in supply chain and logistics is a facility where freight is organized, stored, or transferred. It serves as a hub in the transportation network, often for loading, unloading, and redistribution of goods.
TL or Truckload
Truckload shipping is the movement of large amounts of homogeneous cargo, generally the amount necessary to fill an entire semi-trailer or intermodal container. A truckload carrier typically contracts an entire trailer to a single customer.
Takt Time
Takt time represents the necessary pace of production to satisfy customer demand.
Throughput
The amount of a product or service that a company can produce and deliver to a client within a specified period. The term is often used in the context of a company's rate of production or the speed at which something is processed.
Total Effective Equipment Performance
A metric used to measure the overall performance and efficiency of equipment or a production line. It considers all the potential operating time, including planned and unplanned downtime, and assesses the equipment's maximum potential performance.
Twenty-Foot Equivalent Unit
TEU is a standard measure of cargo capacity often used to describe the capacity of container ships and terminals. One TEU represents the dimensions of a standard twenty-foot shipping container.
The Air Cargo Tariff
TACT provides the global air transport industry with the definitive guide to freight rates and rules across the globe, facilitating the movement of air cargo with standard regulations and pricing.
Unconstrained Distribution Planning
This type of planning does not consider current capacity or resource limitations. It focuses on identifying the best distribution strategy to meet customer demand under ideal conditions.
Uniform Customs and Practice for Documentary Credits
UCP is a set of standardized international banking regulations that apply to documentary credits (letters of credit), which facilitate international trade by providing a secure payment mechanism.
United Nations Convention on the Law of the Sea
UNCLOS is an international treaty that provides a regulatory framework for the use of the world's seas and oceans, ensuring the conservation and equitable usage of marine resources and the marine environment.
Vendor-Managed Inventory
A business model where the supplier takes responsibility for managing inventory levels for the customer, often through real-time data sharing.
Value Chain
A series of activities undertaken by a company to deliver a valuable product or service to the market.
Vendor Management
A discipline focused on controlling costs, driving service excellence, and mitigating risks to gain increased value from vendors throughout the lifecycle of the contracts. It involves selecting the right vendors, managing relationships, evaluating performance, and ensuring contract compliance.
Vendor
A vendor is a general term referring to any supplier or service provider that sells products or services to other businesses or consumers. In the supply chain context, vendors often supply goods or services to companies for resale or use in production.
Value Analysis
Value analysis is a systematic approach to assess the function of goods or services in an effort to reduce cost, improve function, or both. It involves scrutinizing all elements of a component or process to ensure it delivers maximum value.
Value Engineering
Value engineering is a methodology used to optimize the value of a product or service by examining its function. It aims to increase functionality or reduce costs through an in-depth analysis of materials, processes, and design features.
Value Analysis
Value analysis is a systematic approach to assess the function of goods or services in an effort to reduce cost, improve function, or both. It involves scrutinizing all elements of a component or process to ensure it delivers maximum value.
Vendor-Managed Inventory
Vendor-managed inventory (VMI) is a practice in which a supplier of goods, usually the manufacturer, is responsible for optimizing the inventory held by a distributor.
Vessel Operating Common Carrier
A VOCC is a common carrier that operates its own vessels. They are responsible for the transportation of cargo from one point to another and issue their own bill of lading.
Warehouse Management System
A software solution that offers visibility into a business's entire inventory and manages supply chain fulfillment operations from the warehouse to the store shelf.
Warehouse
A facility for the storage, handling, and management of goods and materials.
Work-in-Process
Materials and components that are currently being used in the production process. WIP includes all materials from raw to those that are only part way through the manufacturing process.
Warranty
A warranty is a guarantee issued to the purchaser of a product by its manufacturer, promising to repair or replace it if necessary within a specified period of time. It serves as an assurance of quality and reliability.
Work Breakdown Structure
A WBS is a project management tool that breaks down a project into smaller, manageable components or deliverables. It helps organize and define the total scope of the project.
Waybill
A waybill is a document issued by a carrier giving details and instructions relating to the shipment of a consignment of goods. Unlike a bill of lading, a waybill does not confer title and is non-negotiable.
Weight Certificate
A weight certificate is a document verifying the weight of a shipment. It is often required in shipping to ensure accurate freight charges and compliance with transportation regulations.
Weight or Measurement
W/M is a shipping term that refers to the basis on which freight charges are calculated, based on the weight or volume of the cargo, whichever is greater.
Yield Management
A strategy that uses pricing mechanisms and inventory control to maximize profitability, particularly in industries where products are perishable or have a fixed capacity.
Yield
Yield quantifies the total amount of finished products produced relative to the amount of raw materials used.
