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Term: Anticipation inventories

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2013

Definition
Additional inventories above basic pipeline stock to cover projected trends of increasing sales, planned sales promotion programs, seasonal fluctuations, plant shutdowns, and vacations.

Term: Backorder

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Definition
An unfilled customer order or commitment. An immediate (or past due) demand against an item whose inventory is insufficient to satisfy the demand.

Term: Balanced scorecard

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Definition
A list of financial and operational measurements used to evaluate organizational or supply chain performance. The dimensions of this might include customer perspective, business process perspective, financial perspective, and innovation and learning perspectives. It formally connects overall objectives, strategies, and measurements. Each dimension has goals and measurements.

Term: Balance sheet

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Definition
A financial statement showing the resources owned, the debts owed, and the owner's share of a company at a given point in time.

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Term: Benchmarking

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Definition
Comparing a company's costs, products, and services to that of a company thought to have superior performance.

Term: Blanket purchase order

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Definition
A long-term commitment to a supplier for material against which short-term releases will be generated to satisfy requirements.

Term: Buffer

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Definition
1) A quantity of materials awaiting further processing. It can refer to raw materials, semifinished stores or hold points, or a work backlog that is purposely maintained behind a work center. 2) In the theory of constraints, these can be time or material and support throughput and/or due date performance. They can be maintained at the constraint, convergent points, divergent points, and shipping points.

Term: Business plan

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Definition
1) A statement of long-range strategy and revenue, cost, and profit objectives usually accompanied by budgets, a projected balance sheet, and a cash flow statement. Usually stated in terms of dollars and grouped by product family. It is then translated into synchronized tactical functional plans through the production planning process. 2) A document consisting of the business details prepared by an entrepreneur to plan for a new business.

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Term: Carrying cost

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Definition
The cost of holding inventory, usually defined as a percentage of the dollar value of inventory per unit of time.

Term: Cash flow

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Definition
The net flow of dollars into or out of the proposed project. The algebraic sum, in any time period, of all cash receipts, expenses, and investments.

Term: Cash-to-cash cycle time

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Definition
An indicator of how efficiently a company manages its assets to improve cash flow. (Inventory days + accounts receivable days - accounts payable days).

Term: Changeover

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Definition
1) The work required to change a specific machine, resource, work center, or line from making the last good piece of item A to making the first good piece of item B. 2) The refitting of equipment to neutralize the effects of the last lot produced.

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Term: Collaborative planning, forecasting, and replenishment (CPFR)

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Definition
1) A collaboration process whereby supply chain trading partners can jointly plan key supply chain activities from production and delivery of raw materials to production and delivery of final products to end customers. It encompasses business planning, sales forecasting, and all operations required to replenish raw materials and finished goods. 2) A process philosophy for facilitating collaborative communications. It is considered a standard, endorsed by the Voluntary Interindustry Commerce Standards.

Term: Competitive analysis

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Definition
An analysis of a competitor that includes its strategies, capabilities, prices and costs.

Term: Cost of goods sold

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Definition
An accounting classification useful for determining the amount of direct materials, direct labor, and allocated overhead associated with the products sold during a given period of time.

Term: Cost of quality

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Definition
The cost associated with providing poor quality products or services. There are four categories of costs: (1) internal failure costs; (2) external failure costs; (3) appraisal costs; and (4) prevention costs.

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Term: Cross-selling

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Definition
Occurs when customers buy additional products or services after the initial purchase.

Term: Customer relationship management (CRM)

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Definition
A marketing philosophy based on putting the customer first. The collection and analysis of information designed for sales and marketing decision support to understand and support existing and potential customer needs.

Term: Customer service

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Definition
1) The ability of a company to address the needs, inquires, and requests from customers. 2) A measure of the delivery of a product to the customer at the time the customer specified.

Term: Cycle

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Definition
1) The interval of time during which a system or process, such as seasonal demand or a manufacturing operation, periodically returns to similar initial conditions. 2) The interval of time during which an event or set of events is completed.

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Term: Cycle stock

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Definition
One of the two main conceptual components of any item inventory, it is the most active component; it depletes gradually as customer orders are received and is replenished cyclically when supplier orders are received.

Term: Cycle time

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Definition
1) In industrial engineering, the time between completion of two discrete units of production. 2) In materials management, it refers to the length of time from when material enters a production facility until it exits.

Term: Decoupling

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Definition
Creating independence between supply and use of material. Commonly denotes providing inventory between operations so that fluctuations in the production rate of the supplying operation do not constrain production or use rates of the next operation.

Term: Demand

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Definition
A need for a particular product or component. This could come from any number of sources. At the finished goods level, this is usually different from sales data because it does not necessarily result in sales. There are generally up to four components: cyclical component, random component, seasonal component, and trend component.

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Term: Demand forecasting

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Definition
Forecasting the demand for a particular good, component, or service.

Term: Demand management

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Definition
1) The function of recognizing all demands for goods and services to support the marketplace. It involves prioritizing demand when supply is lacking. It facilitates the planning and use of resources for profitable business results. 2) In marketing, the process of planning, executing, controlling, and monitoring the design, pricing, promotion, and distribution of products and services to bring about transactions that meet organizational and individual needs.

Term: Demand planning

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Definition
Using forecasts and experience to estimate demand for various items at various points in a supply chain. Several forecasting techniques may be used during the planning process. Often, families of items are aggregated in doing this planning. Aggregation also may occur by geographical region or by life cycle stage. Forecast demand is compared to actual demand in order to measure and increase forecast accuracy.

Term: Demand shaping

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Definition
The practice of using the 4 Ps (product, pricing, placement, promotion) and other market variables to influence the demand of a product or service so that the demand better matches the available supply.

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Term: Dependent demand

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Definition
Demand that is directly related to or derived from the bill of material structure for other items or end products. Such demands are therefore calculated and need not and should not be forecast.

Term: Distributor

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

Term: Enterprise resources planning (ERP)

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Definition
Framework for organizing, defining, and standardizing the business processes necessary to effectively plan and control an organization so the organization can use its internal knowledge to seek external advantage.

Term: Extrinsic forecasting method

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Definition
A forecast method on a correlating leading indicator, such as estimating furniture sales based on housing starts. These forecasts tend to be more useful for large aggregations, such as total company sales, that for individual product sales.

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Term: Fluctuation inventory

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Definition
Inventory that is carried as a cushion to protect against forecast error.

Term: Forecast error

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Definition
The difference between actual demand and forecast demand, stated as an absolute value or as a percentage.

Term: Forecasting

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Definition
The business function that attempts to predict sales and use of products so they can be purchased or manufactured in appropriate quantities in advance.

Term: Gross margin

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Definition
The difference between total revenue and the costs of goods sold.

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Term: Horizontal marketplace

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Definition
An online marketplace used by buyers and sellers from multiple industries. This marketplace lowers prices by lowering transaction costs.

Term: Income statement

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Definition
A financial statement showing the net income for a business over a given period of time.

Term: Independent demand

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Definition
The demand for an item that is unrelated to the demand for other items. Demand for finished goods, parts required for destructive testing, and service parts requirements are examples of this.

Term: Interplant demand

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Definition
One plant's need for a part or product that is produced by another plant or division within the same organization. Although it is not a customer order, it is usually handled by the master production scheduling system in a similar manner.

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Term: In-transit inventory

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Definition
Material moving between two or more locations, usually separated geographically; for example, finished goods being shipped from a plant to a distribution center.

Term: Intrinsic forecast method

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Definition
A forecast method based on internal factors, such as an average of past sales.

Term: Inventory management

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Definition
The branch of business management concerned with planning and controlling inventories.

Term: Inventory optimization software

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Definition
A computer application having the capability of finding optimal inventory strategies and policies related to customer service and return on investment over several echelons of a supply chain.

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Term: Inventory turnover

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Definition
The number of times that an inventory cycles, or "turns over," during the year. A frequent method to compute this is to divide the average inventory level into the annual cost of sales.

Term: Inventory valuation

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Definition
The value of the inventory at either its cost or its market value. Because inventory value can change with time, some recognition is taken of the age distribution of inventory. Therefore, this is usually computed on a FIFO basis, LIFO basis, or a standard cost basis to establish the cost of goods sold.

Term: Inventory velocity

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Definition
The speed with which inventory passes through an organization or supply chain at a given point in time as measured by inventory turnover.

Term: Inventory visibility

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Definition
The extent to which inventory information is shared within a firm and with supply chain partners.

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Term: Keiretsu

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Definition
A form of cooperative relationship among companies in Japan where the companies largely remain legally and economically independent, even though they work closely in various ways such as sole sourcing and financial backing.

Term: Key performance indicator (KPI)

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Definition
A financial or nonfinancial measure, either tactical or strategic, that is linked to specific strategic goals and objectives.

Term: Landed cost

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Definition
This cost includes the product cost plus the costs of logistics, such as warehousing, transportation, and handling fees.

Term: Logistics

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Definition
1) In an industrial context, the art and science of obtaining, producing, and distributing material and product in the proper place and in proper quantities. 2) In a military sense (where it has greater usage), its meaning can also include the movement of personnel.

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Term: Market demand

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

Term: Market driven

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Definition
Responding to customers' needs.

Term: Market research

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Definition
The systematic gathering, recording, and analyzing of data about problems relating to the marketing of goods and services. Such research may be undertaken by impartial agencies or by business firms or their agents. It includes several types: (1) market analysis is the study of the size, location, nature, and characteristics of markets, (2) sales analysis is the systematic study and comparison of sales (or consumption) data, (3) consumer research is concerned with the discovery and analysis of consumer attitudes, reactions, and preferences.

Term: Metrics

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Definition
A system for collecting, measuring, and comparing a measure to a standard for a specific criterion for an operation, item, good, service, business, etc. A performance measurement system consists of a criterion, a standard, and a measure.

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Term: Multisourcing

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Definition
Procurement of a good or service from more than one independent supplier.

Term: Obsolescence

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Definition
1) The condition of being out of date. A loss of value occasioned by new developments that place the older property at a competitive disadvantage. A factor in depreciation. 2) A decrease in the value of an asset brought about by the development of new and more economical methods, processes, or machinery. 3) The loss of usefulness or worth of a product or facility as a result of the appearance of better or more economical products, methods, or facilities.

Term: Optimization

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Definition
Achieving the best possible solution to a problem in terms of a specified objective function.

Term: Ordering cost

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Definition
Used in calculating order quantities, the costs that increase as the number of orders placed increases. It includes costs related to the clerical work of preparing, releasing, monitoring, and receiving orders, the physical handling of goods, inspections, and setup costs, as applicable.

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Term: Outsourcing

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Definition
The process of having suppliers provide goods and services that were previously provided internally. It involves substitutionthe replacement of internal capacity and production by that of the supplier.

Term: Partnership

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Definition
1) A form of business ownership that is not organized as a separate legal entity, but entailing ownership by two or more persons. 2) In a supply chain, a relationship based on trust, shared risk, and rewards aimed toward achieving a competitive advantage.

Term: Pipeline inventory

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Definition
Inventory in the transportation network and the distribution system, including the flow through intermediate stocking points.

Term: Planning horizon

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Definition
The amount of time a plan extends into the future. For a master schedule, this is normally set to cover a minimum of cumulative lead time plus time for lot sizing low-level components and for capacity changes of primary work centers or of key suppliers. For longer term plans the planning horizon must be long enough to permit any needed additions to capacity.

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Term: Process chart

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Definition
A chart that represents the sequence of work or the nature of events in process. It serves as a basis for examining and possibly improving the way the work is carried out.

Term: Procurement

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

Term: Profit

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Definition
1) Earnings from an ongoing business after direct costs of goods sold have been deducted from sales revenue for a given period. 2) Earnings or income after all expenses (selling, administrative, depreciation) have been deducted from gross profit. 3) Earnings or income after adjusting for miscellaneous income and expenses (patent royalties, interest, capital gains) and tax from operating profit.

Term: Profit margin

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Definition
1) The difference between the sales and cost of goods sold for an organization, sometimes expressed as a percentage of sales. 2) In traditional accounting, this is the product selling price minus the direct material, direct labor, and allocated overhead for the product, sometimes expressed as a percentage of selling price.

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Term: Pull system

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Definition
1) In production, the production of items only as demanded for use or to replace those taken for use. 2) In material control, the withdrawal of inventory as demanded by the using operations. Material is not issued until a signal comes from the user. 3) In distribution, a system for replenishing field warehouse inventories where replenishment decisions are made at the field warehouse itself, not at the central warehouse or plant.

Term: Purchasing

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Definition
The term used in industry and management to denote the function of and the responsibility for procuring materials, supplies, and services.

Term: Push system

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Definition
1) In production, the production of items at times required by a given schedule planned in advance. 2) In material control, the issuing of material according to a given schedule or issuing material to a job order at its start time. 3) In distribution, a system for replenishing field warehouse inventories where replenishment decision making is centralized, usually at the manufacturing site or central supply facility.

Term: Return on assets (ROA)

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Definition
Net income for the previous 12 months divided by total assets.

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Term: Return on investment (ROI)

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Definition
A relative measure of financial performance that provides a means for comparing various investments by calculating the profits returned during a specified time period. In the theory of constraints, it is calculated as throughput minus operating expense divided by investment.

Term: Reverse logistics

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Definition
A complete supply chain dedicated to the reverse flow of products and materials for the purpose of returns, repair, remanufacture, and/or recycling.

Term: Reverse supply chain

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Definition
Moving items from the consumer back to the producer for repair or disposal.

Term: Risk pooling

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Definition
A method often associated with the management of inventory risk. Manufacturers and retailers that experience high variability in demand for their products can pool together common inventory components associated with a broad family of products to buffer the overall burden of having to deploy inventory for each discrete product.

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Term: Safety stock

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Definition
1) In general, a quantity of stock planned to be in inventory to protect against fluctuations in demand or supply. 2) In the context of master production scheduling, the additional inventory and capacity planned as protection against forecast errors and short-term changes in the backlog.

Term: Sales and operations planning (S&OP)

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Definition
A process to develop tactical plans that provide management the ability to strategically direct its business to achieve competitive advantage on a continuous basis by integrating customer-focused marketing plans for new and existing products with the management of the supply chain. The process brings together all the plans for the business into one integrated set of plans.

Term: Seasonality

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Definition
A repetitive pattern of demand from year to year (or other repeating time interval) with some periods considerably higher than others.

Term: Service industry

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Definition
1) In its narrowest sense, an organization that provides an intangible product. 2) In its broadest sense, all organizations except farming, mining, and manufacturing.

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Term: Single-source supplier

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Definition
A company that is selected to have 100 percent of the business for a part although alternate suppliers are available.

Term: Sole-source supplier

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Definition
The only supplier capable of meeting (usually technical) requirements for an item.

Term: Sourcing

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Definition
The process of identifying a company that provides a needed good or service.

Term: Spend management

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Definition
Managing purchases of goods and services in a supply chain including outsourcing and procurement activities.

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Term: Standard costs

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Definition
The target costs of an operation, process, or product including direct material, direct labor, and overhead charges.

Term: Stockkeeping unit (SKU)

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Definition
1) An inventory item. 2) In a distribution system, an item at a particular geographic location.

Term: Stockout costs

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Definition
The costs associated with a stockout. Those costs may include lost sales, backorder costs, expediting, and additional manufacturing and purchasing costs.

Term: Strategic planning

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Definition
The process of developing a strategic plan.

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Term: Strategic sourcing

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Definition
A comprehensive approach for locating and sourcing key material suppliers, which often includes the business process of analyzing total-spend-for-material spend categories. There is a focus on the development of long-term relationships with trading partners who can help the purchaser meet profitability and customer satisfaction goals. From an information technology applications perspective, strategic sourcing includes automation of request for quote (RFQ), request for proposal (RFP), electronic auctioning (eauction or reverse auction), and contract management processes.

Term: Subcontracting

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Definition
Sending production work outside to another manufacturer.

Term: Supplier

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Definition
1) Provider of goods or services. 2) Seller with whom the buyer does business, as opposed to vendor, which is a generic term referring to all sellers in the marketplace.

Term: Supplier-input-process-outputcustomer (SIPOC) diagram

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Definition
A high-level process map that shows substantial subprocess in an organization's process together with the structure of the process represented by the suppliers, inputs, outputs, and customers. It defines the critical aspects of a process without losing the overall perspective.

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Term: Supplier relationship management (SRM)

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Definition
A comprehensive approach to managing an enterprises interactions with the organizations that supply the goods and services the enterprise uses. The goal of this is to streamline and make more effective the processes between an enterprise and its suppliers.

Term: Supply chain

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Definition
The global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash.

Term: Supply chain management (SCM)

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Definition
The design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally.

Term: Supply Chain Operations Referencemodel (SCOR)

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Definition
A process reference model developed and endorsed by the Supply Chain Council as the cross-industry, standard diagnostic tool for supply chain management. It describes the business activities associated with satisfying a customers demand. Use of the model includes analyzing the current state of a companys processes and goals, quantifying operational performance, and comparing company performance to benchmark data.

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Term: Supply chain visibility

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Definition
The ability of supply chain partners to access demand and production information from trading partners.

Term: Sustainability

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Definition
Activities that provide present benefit without compromising the needs of future generations.

Term: Tactical buying

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Definition
The purchasing process focused on transactions and nonstrategic material buying. It is closely aligned with the ordering portion of executing the purchasing transaction process. The characteristics for this include stable, limited fluctuations, defined standard specifications, noncritical to production, no delivery issues, and high reliability concerning quality-standard material with very little concern for rejects.

Term: Tactical planning

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Definition
The process of developing a set of tactical plans (e.g., production plan, sales plan, marketing plan).

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Term: Target costing

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Definition
The process of designing a product to meet a specific cost objective. This involves setting the planned selling price, subtracting the desired profit as well as marketing and distribution costs, thus leaving the required manufacturing or target cost.

Term: Third-party logistics (3PL)

F O L D H E R E
2013

Definition
A buyer and supplier team with a third party that provides product delivery services. This third party may provide added supply chain expertise.

Term: Total cost of ownership (TCO)

F O L D H E R E
2013

Definition
In supply chain management, it is the sum of all the costs associated with every activity of the supply stream. The main insight that this offers to the supply chain manager is the understanding that the acquisition cost is often a very small portion of this.

Term: Trend

F O L D H E R E
2013

Definition
General upward or downward movement of a variable over time.

Fold each printed sheet in half lengthwise. The left side of the document will list the term and the right side will list the definition. Tape or staple the open edges of your eFlashcards. Cut out your eFlashcards on the lines indicated. Note: There are four eFlashcards on each printed page.

Term: Triple bottom line (TBL)

F O L D H E R E
2013

Definition
Measuring the economic, social, and environmental consequences of a firm's activities.

Term: Value-added

F O L D H E R E
2013

Definition
1) In accounting, the addition of direct labor, direct material, and allocated overhead assigned at an operation. 2) In current manufacturing terms, the actual increase of utility from the viewpoint of the customer as a part is transformed from raw material to finished inventory. It is the contribution made by an operation or a plant to the final usefulness and value of a product, as seen by the customer.

Term: Value chain

F O L D H E R E
2013

Definition
The functions within a company that add value to the goods or services that the organization sells to customers and for which it receives payment.

Term: Value stream

F O L D H E R E
2013

Definition
The processes of creating, producing, and delivering a good or service to the market. For a good, this encompasses the raw material supplier, the manufacturing and assembly of the good, and the distribution network. For a service, this consists of suppliers, support personnel and technology, the service producer, and the distribution channel.

Fold each printed sheet in half lengthwise. The left side of the document will list the term and the right side will list the definition. Tape or staple the open edges of your eFlashcards. Cut out your eFlashcards on the lines indicated. Note: There are four eFlashcards on each printed page.

Term: Value stream mapping

F O L D H E R E
2013

Definition
Drawing the current production process/flow and then attempting to draw the most effective production process/ flow.

Term: Vendor

F O L D H E R E
2013

Definition
Any seller of an item in the marketplace.

Term: Warehouse management system (WMS)

F O L D H E R E
2013

Definition
A system that manages all processes that a warehouse carries out. These processes include receiving, picking, and shipping.

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