Supply Chain Terms Flashcards
ABC Inventory Control
An inventory control approach based on the ABC volume or sales revenue classification of products (A items are highest volume or revenue, C - or perhaps D - are lowest volume SKUs.).
Accounts Payable (A/P)
The value of goods and services acquired for which payment has not yet been made.
Accounts Receivable (A/R)
The value of goods shipped or services rendered to a customer on whom payment has not been received. Usually includes an allowance for bad debts.
Agent
An enterprise authorized to transact business for, or in the name of, another enterprise..
Assembly
A group of subassemblies and/or parts that are put together and constitute a major subdivision for the final product. An assembly may be an end item or a component of a higher-level assembly.
Assignment
A distribution of costs using causal relationships. Because cost causal relationships are viewed as more relevant for management decision making, assignment of costs is generally preferable to allocation techniques. Synonymous with Tracing. Contrast with Allocation
Audit
In reference to freight bills, the term audit is used to determine the accuracy of freight bills.
Automated Storage/Retrieval System (AS/RS)
A high-density rack inventory storage system with unmanned vehicles automatically loading and unloading products to/from the racks.
Backorder
(1) The act of retaining a quantity to ship against an order when other order lines have already been shipped. Backorders are usually caused by stock shortages. (2) The quantity remaining to be shipped if an initial shipment(s) has been processed. Note: In some cases, backorders are not allowed. This results in a lost sale when sufficient quantities are not available to completely ship an order or order line.
Barrier to Entry
Factors that prevent companies from entering into a particular market, such as high initial investment in equipment.
Barter
The exchange of commodities or services for other commodities or services rather than the purchase of commodities or services with money.
Benchmarking
The process of comparing performance against the practices of other leading companies for the purpose of improving performance. Companies also benchmark internally by tracking and comparing current performance with past performance.
Best in Class
An organization, usually within a specific industry, recognized for excellence in a specific process area.
Best Practice
A specific process or group of processes which have been recognized as the best method for conducting an action. Best practices may vary by industry or geography depending on the environment being used. Best-practices methodology may be applied with respect to resources, activities, cost object, or processes.
Bill of Lading (BOL)
A transportation document that is the contract of carriage containing the terms and conditions between the shipper and carrier.
Bill of Material (BOM)
A structured list of all the materials or parts and quantities needed to produce a particular finished product, assembly, subassembly, or manufactured part, whether purchased or not.
Blanket Purchase Order:
A long-term commitment to a supplier for material against which short-term releases will be generated to satisfy requirements. Oftentimes, blanket orders cover only one item with predetermined delivery dates. Synonyms: Blanket Order, Standing Order.
Broker
There are 3 definitions for the term “broker”: 1) an enterprise that owns and leases equipment2) an enterprise that arranges the buying & selling of transportation of, goods, or services 3) a ship agent who acts for the ship owner or charterer in arranging charters.
Buffer Stock
A quantity of goods or articles kept in storage to safeguard against unforeseen shortages or demands.
Bullwhip Effect
An extreme change in the supply position upstream in a supply chain generated by a small change in demand downstream in the supply chain. Inventory can quickly move from being backordered to being in excess. This is caused by the serial nature of communicating orders up the chain with the inherent transportation delays of moving product down the chain. The bullwhip effect can be eliminated by synchronizing the supply chain.
Business-to-Business (B2B)
As opposed to business-to-consumer (B2C). Many companies are now focusing on this strategy, and their web sites are aimed at businesses (think wholesale) and only other businesses can access or buy products on the site. Internet analysts predict this will be the biggest sector on the web.
Business-to-Consumer (B2C)
The hundreds of e-commerce web sites that sell goods directly to consumers are considered B2C. This distinction is important when comparing web sites that are B2B as the entire business model, strategy, execution, and fulfillment is different.
Business Unit
A division or segment of an organization generally treated as a separate profit-and-loss center.
Buyer
An enterprise that arranges for the acquisition of goods or services and agrees to specific business terms through the issuance of a Purchase Order.
Capacity
The physical facilities, personnel, and processes available to meet the product or service needs of customers. Capacity generally refers to the maximum output or producing ability of a machine, a person, a process, a factory, a product, or a service. Also see: Capacity Management
Capital
The resources, or money, available for investing in assets that produce output.
Cartel
A group of companies that agree to cooperate rather than compete, in producing a product or service. Thus limiting or regulating competition.
Category Management
The management of product categories as strategic business units. This practice empowers a category manager with full responsibility for the assortment decisions, inventory levels, shelf-space allocation, promotions, and buying. With this authority and responsibility, the category manager is able to more accurately judge the consumer buying patterns, product sales, and market trends of that category.
Change Management
The business process that coordinates and monitors all changes to the business processes and applications operated by the business, as well as to their internal equipment, resources, operating systems, and procedures. The change management discipline is carried out in a way that minimizes the risk of problems that will affect the operating environment and service delivery to the users.
Change Order
A formal notification that a purchase order or shop order must be modified in some way. This change can result from a revised quantity, date, or specification by the customer; an engineering change; a change in inventory requirement data; etc.
Commodities
Any article exchanged in trade, most commonly used to refer to raw materials and agricultural products.
Component
Material that will contribute to a finished product but is not the finished product itself. Examples include tires for an automobile, electronic piece parts for a printed circuit board or a zipper for a ski parka. Also see: Bill of Material (BOM).
Consignment
(1) A shipment that is handled by a common carrier. (2) The process of a supplier placing goods at a customer location without receiving payment until after the goods are used or sold. Also see: Consignment Inventory.
Consortium
A group of companies that works together to jointly produce a product, service, or project.
Contract
An agreement between two or more competent persons or companies to perform or not to perform specific acts or services or to deliver merchandise. A contract may be oral or written. A purchase order, when accepted by a supplier, becomes a contract. Acceptance may be in writing or by performance, unless the purchase order requires acceptance in writing.
Cost-of-Goods Sold (COGS)
The amount of direct materials, direct labor, and allocated overhead associated with products sold during a given period of time, determined in accordance with Generally Accepted Accounting Principles (GAAP).
Countertrade
A reciprocal trading agreement that includes a variety of transactions involving two or more parties.
Credit Terms
The agreement between two or more enterprises concerning the amount and timing of payment for goods or services.
Cross Docking
A distribution system in which merchandise received at the warehouse or distribution center is not put away, but instead is readied for shipment to retail stores. Cross docking requires close synchronization of all inbound and outbound shipment movements. By eliminating the put-away, storage, and selection operations, it can significantly reduce distribution costs.
Customer Relationship Management (CRM)
This refers to information systems that help sales and marketing functions as opposed to the ERP (Enterprise Resource Planning), which is for back-end integration.
Customer Service
The series of activities involved in providing the full range of services to customers.
Customs
The authorities designated to collect duties levied by a country on imports and exports.
Dashboard
A performance measurement tool used to capture a summary of the key performance indicators/metrics of a company. Metrics dashboards/scorecards should be easy to read and usually have red, yellow, green indicators to flag when the company is not meeting its metrics targets. Ideally, a dashboard/scoreboard should be cross functional in nature and include both financial and non-financial measures. In addition, scorecards should be reviewed regularly - at least on a monthly basis, and weekly in key functions such as manufacturing and distribution where activities are critical to the success of a company. The dashboards/scorecards philosophy can also be applied to external supply chain partners like suppliers to ensure that their objectives and practices align. Synonym: Scorecard.
Demand Planning Systems
The systems that assist in the process of identifying, aggregating, and prioritizing all sources of demand for the integrated supply chain of a product of service at the appropriate level, horizon, and interval.
Disaster Recovery Planning
Contingency planning specifically related to recovering hardware and software (e.g., data centers, application software, operations, personnel, telecommunications) in information system outages.
Distribution Center (DC)
The warehouse facility which holds inventory from manufacturing pending distribution to the appropriate stores.
Distributor
A business that does not manufacture its own products, but purchases and resells these products. Such a business usually maintains a finished goods inventory. Synonym: Wholesaler..
DUNS Number
A coded, numerical representation assigned to a specific company (USA).
Duty
A tax imposed by a government on merchandise imported from another country.
Economic Order Quantity (EOQ)
An inventory model that determines how much to order by determining the amount that will meet customer service levels while minimizing total ordering and holding costs.
Economy of Scale
A phenomenon whereby larger volumes of production reduce unit cost by distributing fixed costs over a larger quantity.
Electronic Data Interchange (EDI)
Intercompany, computer-to-computer transmission of business information in a standard format. For EDI purists, computer to computer means direct transmission from the originating application program to the receiving or processing application program. An EDI transmission consists only of business data, not any accompanying verbiage or free-form messages. Purists might also contend that a standard format is one that is approved by a national or international standards organization, as opposed to formats developed by industry groups or companies.
Electronic Funds Transfer (EFT)
A computerized system that processes financial transactions and information about these transactions or performs the exchange of value. Sending payment instructions across a computer network, or the company-to-company, company-to-bank, or bank-to bank electronic exchange of value.
End User
The final buyer of the product who purchases the product for immediate use.
Engineering Change
A revision to a drawing or design released by engineering to modify or correct a part. The request for the change can be from a customer or from production, quality control, another department, or a supplier. Synonym: Engineering Change Order
Engineering Change Order (ECO)
A documented and approved revision to a product or process specification.
Enterprise Resource Planning (ERP) System
A class of software for planning and managing enterprise-wide the resources needed to take customer orders, ship them, account for them, and replenish all needed goods according to customer orders and forecasts. Often includes electronic commerce with suppliers. Examples of ERP systems are the application suites from SAP, Oracle, PeopleSoft, and others.
FOB Destination
Title passes at destination, and seller has total responsibility until shipment is delivered.
FOB Origin
Title passes at origin, and buyer has total responsibility over the goods while in shipment.
Free on Board (FOB)
Contractual terms between a buyer and a seller that define where title transfer takes place.
Freight Forwarder
An organization which provides logistics services as an intermediary between the shipper and the carrier, typically on international shipments. Freight forwarders provide the ability to respond quickly and efficiently to changing customer and consumer demands and international shipping (import/export) requirements.
Global Strategy
A strategy that focuses on improving worldwide performance through the sales and marketing of common goods and services with minimum product variation by country. Its competitive advantage grows through selecting the best locations for operations in other countries.
