Glossary

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A

3D Printing - 3D printing is a process by which a three-dimensional component is ‘printed’ from its raw materials, layer-by-layer. The technology has evolved significantly in recent years enabling printing of various alloys, metals and plastics using a variety of processes—including multi-material printing.

3PL - See THIRD PARTY LOGISTICS.

4PL - See FOURTH PARTY LOGISTICS.

80/20 Rule - See Pareto Principal.

ABC Analysis - An inventory categorisation approach used to assign different groupings and service levels to items according to their importance, as defined by an organisation specific criteria (often sales). ABC analysis typically divides inventory into three (or more) categories; "A" class items, "B" class items and "C" class items. "A" items being an organisations most valuable and typically receiving the highest service level requirement, planning priority and effort. "C" items are typically an organisations least valuable items and are assigned lower service level requirements, and lesser planning priority. Typically the "A" items represent 10-20% of number of items, and 50-70% by projected dollar volume. The "B" items represent about 20% of the items and 20% of the dollar volume. The "C" items represent 60-70% of the items and approximately 10-30% of the dollar volume.

ABC Classification - See ABC Analysis.

ABC Costing - See Activity-Based Costing (ABC)

Above Fit Spares - Spare items which are kept on hand over and above the 'fitted' requirement (i.e. holding a spare tyre in excess of the four a car requires to run). This term is commonly used for rotables and the above fit quantity can be optimised.

Accessorial Charges - The fees a carrier charges for additional services including loading and unloading, pickup and delivery, and any other charge deemed appropriate.

Accounts Payable (A/P) - Money owed by a company to its creditors for goods or services acquired for which payment has not yet been made.

Active Item - Inventory item having recent or continuing demand or depletion activity.

Actual Turns - See TURNOVER, ACTUAL

Adjusted Forcecast Demand (AFD) - Forecast of demand plus or minus any forecast adjustments made.

Advanced Planning and Scheduling (APS) - Forecast of demand plus or minus any forecast adjustments made.

AFD - See ADJUSTED FORECAST DEMAND.

Allocated Requirement - Where a picking order has been released to the stockroom but the item has not yet been sent out of the stockroom.

Annual Forecasted Demand - An annual estimate of future demand. A forecast can be determined by mathematical means using historical data; it can be created subjectively by using estimates from informal sources; or it can represent a combination of both techniques.

APS - See ADVANCED PLANNING AND SCHEDULING.

Average Cost - Aggregate average cost of an item divided by aggregate on hand across all locations.

B

Back Order (Unshipped) - Unfilled customer or manufacturing order due to unavailability of stock; orders released but unshipped or unsatisfied due to inadequate stocks.

Balance Sheet - The balance sheet shows the assets and liabilities for the business.

Base Procurement Cost - See PROCUREMENT COST.

Bias - Indicates that the forecast may be significantly higher or lower than actual demand over time; implies that all other alternative forecasts for the item are likewise biased but that the forecast selected has a lower measure of probable forecast error.

Bill of Material - Lists materials (components or ingredients) required to produce an item.

Blanket Order - Single replenishment order typically spanning up to a year during which time portions of the total order are scheduled for release and receipt. This simplifies the purchase of repetitively purchased items.

BO - See UNSHIPPED DEMAND (BACK ORDER).

BOM - See Bill of Material

C

Capacity Allocation Group (CAG) - Family of items that are produced/purchased together which share similar production or other sourcing constraint (ie minimum).

Capacity Requirements Planning - Process for determining amount of machine and labour resources required to meet production.

Carrying Cost Rate - Percentage of inventory item cost incurred to stock that item in inventory for one year; generally twice the cost of money. Typical elements of carrying cost include: weighted cost of capital, taxes, obsolescence due to technology or regulation, security, cycle counting, insurance, shrinkage and depreciation.

Cash Flow - Highlights the cash that is generated and how it relates to reported earnings.

Cash Flow Statement - Records a company's performance over a period of time, like a quarter or a year.

Cash from Financing - Cash paid or received from issuing and borrowing of funds.

Cash from Investing - Cash used for investing in assets, as well as the proceeds from the sale of other businesses, equipment or other long term assets.

Cash from Operations - Cash generated from day to day business operations.

Category - Logical grouping of like parts in a general system of classification.

COGS - See Cost of Goods Sold

Commercial Warehouse - A remote, third party warehouse location for stocking inventory items.

Constraint Based Optimisation - This technique is used to determine inventory strategies given the presence of significant critical constraints which are common in constrained manufacturing, scheduling and processing environments. Examples include grain processing and distribution, petroleum processing and distribution, process manufacturing such as float glass production or dairy product manufacturing and commodity export shipping.

Cost of Goods Sold (COGS) - An expense that reflects the cost of the product or good that generates revenue. For example, if a loaf of bread costs $0.50 to make, then COGS is $0.50.

Costing Method - The calculations used to determine inventory cost.

Current Assets - An expense that reflects the cost of the product or good that generates revenue. For example, if a loaf of bread costs $0.50 to make, then COGS is $0.50.

Current Liabilities - Includes a company's liabilities that will come due within the next 12 months.

Cycle Stock - Portion of total inventory allocated to fill normal or anticipated demand; equivalent to one-half of the typical order quantity.

D

DC - Distribution centre.

Deleted item - An item, which is no longer produced and/or carried in inventory and whose item master record is no longer referenced.

Demand History - Sales or usage of items during previous time periods.

Demand over Total Lead Time - Concept of projecting (forecasting) demand for an item over the time necessary to obtain (buy or make) the stock; as opposed to projecting over fixed calendar period, such as weeks or months.

Department - Major grouping designation to which several smaller sub-groupings (groups) of items may belong.

Depletion - Reduction of inventory from the norm or expected.

Deviation - Departure from the norm or expected; difference between forecasted and actual activity measured at a point in time.

Discontinued Item - Inventory item for which normal replenishment has been discontinued and yet whose stock may not be entirely depleted.

Distribution Requirements Planning (DRP) - A process used to determine inventory requirements in a multiple location environment where parent/child relationships exist. Applicable to both distribution and manufacturing environments.

DRP - See Distribution Requirements Planning

Dwell Time - The ratio of the number of days that inventory (or other assets) sit idle to the number of days it is actually moving in the supply chain.

E

Earnings before Interest & Tax (EBIT) - An indicator of a company's profitability, calculated as revenue minus expenses, excluding tax and interest. EBIT is also referred to as "operating earnings", "operating profit" and "operating income". EBIT is all profits before taking into account interest payments and income taxes

EBIT - See Earnings before Interest & Tax

Economic Order Quantity (EOQ) - A type of fixed order quantity which determines the amount of product to be purchased or manufactured at one time in order to minimise the cost involved, including the order costs and carrying costs of cycle stock.

Economic Value Added (EVA) - A measure of a company's financial performance based on the residual wealth calculated by deducting cost of capital from its operating profit. Also referred to as "economic profit".

Enterprise Resource Planning - Software systems designed to manage and co-ordinate all business and data processing functions across an enterprise such as Accounts, Human Resources, Forecasting, Purchasing, Material Requirements Planning, Production Planning, Warehousing, Sales and Distribution.

EOQ - See Economic Order Quantity

ERP - See Enterprise Resource Planning

Excess Stock - Stock that is over and beyond the material that is required. The penalties of overstocked items are obsolescence, spoilage, unnecessary investment of material, and the associated costs of carrying the excess stock. See also MATERIAL REQUIREMENTS PLANNING and DISTRIBUTION REQUIREMENTS PLANNING.

Expedite Order Requirements - Orders which, if placed during current week, would not arrive into inventory as needed unless special or expedite action is taken.

Expediting - The "rushing" or "chasing" of production or purchase orders which are needed in less than the normal lead time.

Exponential Smoothing - A type of weighted moving average forecasting technique in which past observations are geometrically discounted according to their age. The heaviest weight is assigned to the most recent data. The smoothing is termed "exponential" because data points are weighted in accordance with an exponential function of their age.

Extrinsic Forecast - A forecast based on a correlated leading indicator such as estimating furniture sales based on housing starts. Extrinsic forecasts tend to be more useful for large aggregations such as total company sales, than for individual product sales.

F

Factory Warehouse - Finished goods warehouse replenished primarily through factory production.

Forecast - A forecast is the extrapolation of the past into the future. It is an objective computation involving data as opposed to a prediction, which is a subjective estimate incorporating management's anticipation of changes and new factors influencing demand.

Forecast Adjustments - Authorised adjustments to forecast demand reflecting anticipated effects of promotional activity and/or deviations from prepared forecasts; specified in units during future intervals.

Forecast Demand - Projected depletions or other activities; in the general sense, expected depletions from inventory expressed in units or dollars during the specified future periods.

Forecast Error - Statistical measure of historical deviations between actual and forecasted performance; used in determining service stock requirements, along with ORQ and service level.

Forecast Horizon - The period of time into the future for which a forecast is prepared.

Forecast Interval - The length of time over which the forecast is computed.

Forecast Stock Turnover - Estimate of the number of times an item or inventory will cycle during the year, calculated by dividing the adjusted forecast demand value next year by the forecasted investment.

Forecast/Actual Indication - Indicates that the interval forecast generated during the previous forecasting cycle differs significantly from the actual demand recorded for the same interval; may highlight erroneous actual demand input; may also suggest drastically changing item demand patterns.

Fourth-Party Logistics (4PL) - Term used to describe service providers whose role is to ensure that supply chain relationships and cost efficiency are optimised by managing a variety of logistics related services for clients.

Future Orders - Future orders represent documented customer demand that has a defined date and quantity.

G

Goodwill - The excess of the purchase price over the fair market value of an asset.

Gross Margin - Also called gross profit, or gross profit margin, is the total revenue minus cost of goods sold (COGS).

Gross Profit - See Gross Margin

I

Inactive Item - Inventory item having no recent activity; generally discontinued items.

Income Statement - See Profit & Loss Statement

Income Tax Expense - The amount payable to the federal and state governments.

Incremental Order Quantity - Indicates item's incremental replenishment quantity in appropriate unit of measure; used if replenishment lot sizing constraints exist and is considered when determining the optimal replenishment quantity.

Input Form - Form on which inventory related information is recorded and submitted for inventory control purposes; basis for data input into the computer.

Interest Expense - The payments made on the company's outstanding debt (also known as interest payable).

Intrinsic Forecast - A forecast based on internal factors, such as an average of past sales.

Inventory - Items which are in a stock point or work-in-process and which serve to decouple successive operations in the process of manufacturing a product and distributing it to the consumer. Inventories may consist of finished goods ready for sale, parts or intermediate items, work-in-process or even raw materials.

Inventory Balance - Measure of inventory availability relative to inventory demand; absolute balance is where time-phased availability is exactly offset by demand; prime indication of item's inventory performance; see INVENTORY IMBALANCE.

Inventory Class (ABC) - An inventory control approach that segments inventory into ABC classes based on characteristics such as unit volumes, sales revenue or profit contribution. In the main, 'A' items tend to have the highest value within the categorisation used and often receive the most management attention. 'B' items represent the middle tier value and receive the next management attention, with 'C' items receiving the least management attention as the lowest value within the category measure used. The primary aim of ABC classification is to segment inventory based on priority and management by exception.

Inventory Control - The activities and techniques of maintaining the stock of items at desired level.

Inventory Investment - The number of dollars that are tied up in all levels of inventory.

Inventory Item - A stocked item for which an active inventory is maintained; grouped according to type such as finished goods, raw materials, work-in-process, etc.

Inventory Management - The branch of business management concerned with the planning and control of inventories.

Inventory Manufactured - Collection of finished product items; manufactured to eventually be assembled or used in building higher-level products or assemblies (eg finished castings).

Inventory Planning System - Combined set of procedures which, when taken together, enable the proper planning of inventory levels; includes both manual and automated procedures necessary to plan inventories.

Inventory Turn - Number of times inventory is consumed or sold during a certain time period.

Inventory, Finished Goods - Collection of finished and/or assembled items suitable to meet and satisfy customer demand; can be either industrial or commercial in nature.

Inventory, In Process - Collection of non-finished product items at some point along the conversion process from raw materials to finished goods (eg castings to be finished) at times referred to as work-in-process.

Inventory, Operating Supplies - Collection of materials not used directly in the manufacturing process, but necessary for this manufacturing (eg. flashlights).

Inventory, Raw Materials - Collection of base materials or ingredients used to eventually produce manufactured or finished goods (eg. iron ore, wood pulp, etc.).

Item Description - Descriptive information used to identify the item on output reports.

Item Number (Part Number) - Synonymous with SKU (stock keeping unit) code, item number, part number, control number, and control code; unique code identifying the lowest level inventory maintained and/or measured.

L

Lead Time - Time between when the decision to order or produce an item is made and when either the order is received or the item is produced; normal lag encountered when initiating an action; a component of total lead time (TLT).

Lead Time Inventory - This is inventory which is carried on-hand during the lead time period. The lead-time inventory will be equal to forecasted usage during the replenishment lead time.

Lean Manufacturing - A manufacturing philosophy that emphasises the minimisation of the amount of all the resources, including time, used in the various activities of the enterprise including the minimisation of waste.

Life-Of-Type (LOT) Purchase - Life-of-type purchases are made when a large order for an item is made because the item is going out of production and thus no supply will be available in the future.

Location - The place where inventory or stock is physically stored.

Logistics Costs - Transportation, warehousing, inventory related costs (carrying costs, receiving costs etc), order entry/customer service and administration.

Long Term Liabilities - Debt not maturing in the next 12 months. A good example is outstanding bonds that don't mature for several years.

Lot Size - Replenishment quantity; can be subject to constraints such as container size, shift capacity, etc.

Lumpy Demand - Demand falling within only a single portion of the year, or large demands followed by periods with no demand (eg. Christmas trees); typically seasonal demand; as opposed to regular or constant demand. Sometimes referred to as 'discontinuous demand'.

M

Marginal Analysis and Optimal Sparing - Marginal Analysis is used primarily in Maintenance Repair and Overhaul (MRO) industries. It seeks to determine the cost-optimal mix of rotables, repairables and spares to deliver maximum asset availability (e.g. aircraft, power generator) for a given budget. Conceptually, this technique shares some similarities with MEO and SLO but the mathematical approaches are different given the unique characteristics of MRO environments (e.g. very slow moving items, repair cycle turnaround time, etc.)

Material - Any commodity used directly or indirectly in producing a product, ie raw materials, component parts, sub-assemblies, and supplies.

Material Requirements Planning (MRP) - Set of procedures which perform three basic inventory management functions: 1. determining time-phased net material requirements, 2. scheduling replenishment order arrivals, and 3. offsetting order arrivals by total lead time to generate order release schedule.

Min-Max - A simplistic inventory management replenishment approach where minimum and maximum amounts are set for each item. When the inventory levels fall to the minimum level, re-ordering occurs up to the maximum level.

Minimum Order Quantity - Indicates an item's minimum replenishment quantity in the appropriate unit of measure; used if replenishment lot sizing constraints exist and is considered when determining the optimal replenishment quantity (ORQ).

Model Forecast - Mathematical equation(s) used in generating a time-series of activity forecast; one of a battery of techniques applied to each item's history to select a forecasting procedure to project future activity.

Model Selection Process - Process of applying all available forecast models to an item's historical activity records, simulating forecasts, evaluating each model's forecasts, and statistically determining the best model to use in forecasting the next year by interval.

Moving Average - The arithmetic average of the N most recent observations. As each new observation is added, the oldest one is dropped. The value of N, the number of periods to use for the average, reflects responsiveness versus stability in the same way that the choice of smoothing constant does in exponential smoothing.

MRP - See Material Requirements Planning

Multi-Echelon Optimisation (MEO) - MEO can be applied in environments where product and/or component substitution is possible.

N

Net Income - Net income is the final profit after deducting all expenses from revenue.

Net Income Before Interest and Tax - Net income before taking interest and income tax expenses into account.

Net Income per Share - Net income per share is the net income divided by the number of shares (stocks) owned by the public. Otherwise known as earnings per share (EPS).

Net Present Value (NPV) - The difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyse the profitability of an investment or project. NPV compares the value of a dollar today to the value of that same dollar in the future, taking inflation and returns into account.

New Item - Planned or recently introduced item for which an inventory will be maintained. A completed new item as opposed to a modified item.

NPV - See Net Present Value

O

Obsolete Inventory - Inventory above the minimum specified or calculated level required for production or distribution operations, defined safety stock levels or predefined time period (ie days) of supply. Also known as dead inventory or excess inventory.

On-Hand - The balance shown in perpetual inventory records as being physically present at the stocking locations.

Operating Expenses - An operating expense is any expense that doesn't fit under cost of goods sold (COGS), such as administration and marketing expenses.

Operations Cash Flow - The cash generated from the operations of a company, generally defined as revenues less all operating expenses, but calculated through a series of adjustments to net income.

Optimal Replenishment Quantity (ORQ) - The average replenishment quantity that minimises the total annual cost for procurement, ordering, receiving, carrying, freight, and providing sufficient inventory to meet or exceed service level specified for the item.

Order Receipt Date - Date or period at which time a replenishment order should arrive into inventory.

Order Release Date - Date or period at which time a replenishment order should be released to maintain inventory balance at some future period.

ORQ - See Optimal Replenishment Quantity

P

P/E Ratio - See Price/Earnings Ratio

Part Number - See Item Number

Period - Basic unit of time in which material replenishment planning reports are expressed, such as weeks; unit of measure of total lead time and planning period.

Planning Horizon - Span of time over which replenishments are planned; synonymous with total lead time; referred to as "frozen" if additional replenishment orders cannot be scheduled within the horizon and "slushy" or "uniform" if orders can be accommodated.

Planning Week/Planning Period - Measure of time (eg week, period, etc.) for which inventory activities are either planned (in the case of replenishment orders, excess stock, forecast adjustments) or expected to occur (in the case of forecast demand); any one of the next 52 rolling weeks or periods; designated by a unique number representing both the year and the sequential week number within the year.

Pre-Build Inventory - Inventory to be accumulated prior to forecasted depletions due to projected replenishment or production constraints (eg machine and labour capacity restrictions) or production levelling; pre-planned stock build-up for those items having future capacity restrictions.

Price/Earnings Ration (P/E) - A valuation ratio of a company's current share price compared to its per-share earnings. Where P/E Ratio = Market Value per Share/ Earnings per Share (EPS) For example, if a company is currently trading at $43 a share and earnings over the last 12 months were $1.95 per share, the P/E ratio for the stock would be 22.05 ($43/$1.95). Earnings per share (EPS) is the portion of a company's profit allocated to each outstanding share of common stock and serves as an indicator of a company's profitability.

Procurement Cost - The cost, per unit, of selecting a supplier, and to place and obtain a commitment for specific quantities of material at specified times.

Product Code - A means for classifying similar parts, assemblies and raw materials.

Profit & Loss Statement - Shows how much money a company brought in (revenues), how much it spent (expenses) and the difference between the two (profit/loss) over a specified time.

Property & Equipment (on Balance Sheet) - This is not exclusive to equipment and property, it can be more accurately described as long term operating assets (less depreciation on these assets).

Proportional Replenishment - Allocating available supply by equal percentage to those SKULs, which will be partially replenished.

R

Radio Frequency Identification (RFID) - The location tracking of inventory using tags containing antennas that enable them to receive and respond to radio-frequency data from an RFID transceiver.

Ratio Analysis - One process of investigating the relationship between the balance sheet, income statement (or profit & loss) and cash flow statement. Ratio analysis involves methods of calculating and interpreting financial ratios in order to assess a firm's performance and status such as ROI, ROA and ROE.

Receiving Cost - Variable cost associated with the ordering and receipt of a replenishment order into an item's inventory; used in calculating an item's optimal replenishment quantity.

Replenishment - Addition to an item's inventory availability either through production and/or purchase receipt; act of increasing an item's inventory availability.

Replenishment Cost - The cost of replenishing an item's inventory is made up of five separate cost components: purchasing or production costs, transportation cost, receiving or set-up cost, carrying cost or service stock, and carrying cost of cycle stock.

Replenishment Order (RO) - Order scheduled to arrive into an item's inventory and to be available to satisfy demands and depletions at a future period, can be either a manufacturing replenishment order placed against production or a purchased replenishment order placed against an outside supplier.

Reserve Stock Quantity (RSQ) - The amount of inventory that will be considered reserved stock for contingency/special purposes.

Return On Assets (ROA) - Shows how efficient management is at using its assets to generate earnings. ROA is displayed as a percentage. Where, ROA = Net Income/Total Assets The ROA figure gives an idea of how effectively a company is converting the money it has to invest into net income. The higher the ROA number, the better, because the company is earning more money on less investment.

Return on Capital Employed (ROCE) - This ratio indicates the efficiency and profitability of a company's capital investments. Where, ROCE = EBIT / Total Assets - Current Liabilities ROCE should always be higher than the rate at which the company borrows, otherwise any increase in borrowing will reduce shareholders' earnings. A variation of this ratio is Return On Average Capital Employed (ROACE), which takes the average of opening and closing capital employed for the time period.

Return on Equity (ROE) - A measure of a corporation's profitability, calculated as: Where, ROE = Net Income / Shareholders Equity Essentially, ROE reveals how much profit a company generates with the money shareholders have invested in it. Also known as Return On Net Worth (RONW).

Return on Investment (ROI) - A performance measure expressed as a percentage or ratio, used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. Where, ROI = (Gain from investment - Cost of investment) / Cost of investment If an investment does not have a positive ROI, or if there are other opportunities with a higher ROI, then the investment should not be undertaken.

Return On Net Assets (RONA) - A measure of financial performance calculated as: RONA = Net Income / Fixed Assets +Net Working Capital The higher the return, the better the profit performance for the company.

Revenue - The proceeds that come from sales to customers.

Review Time - Time required to review an item's inventory position prior to making decisions; a component of total lead time (TLT).

RFID - See Radio Frequency Identification

RO - See Replenishment Order

ROA - See Return On Assets

ROCE - See Return On Capital Employed

ROE - See Return On Equity

ROI - See Return On Investment

Rolling Year - Annual span of time starting at any point and extending through the next 52 weeks; as opposed to fixed calendar year starting January and extending through December

RONA - See Return On Net Assets

S

Safety Factor - Statistical factor multiplied by forecast error to determine service stock requirements.

Safety Stock - Quantity of inventory used in inventory management systems to allow for deviations in demand or supply.

Seasonal Demand Item - Inventory item whose historical pattern of depletions reflects more activity during certain periods of the year.

Selling Price - Current selling price per unit of measure (each, ton, carton, etc.) used to extend units forecast to dollar forecast.

Service Function - A mathematical relationship of the safety factor to service level, ie fraction of demand that is routinely met from stock.

Service Level - Percentage of demand (measured in dollars) for an item which is filled routinely from available stock; demand can come from internal (eg higher manufacturing processes) or external (eg customer) sources. One minus the service level equals the percentage of time an item's inventory can be expected to be out of stock.

Service Level Optimisation - SLO is a technique that determines the optimal service level policy for a given set of constraints.

Set-Up Cost - Fixed cost associated with manufacturing set-up operation to produce a replenishment quantity not a function generally of run size; synonymous with receiving cost when applied to a manufacturing environment; can be used in conjunction with (ie in addition to) receiving cost to portray total cost.

Shelf Life - Estimated length of time an item can remain in inventory under normal or specified conditions before its saleability, quality, etc. are affected.

Simulation - Modelling of real-world conditions and behaviour in order to compare the effectiveness of design procedures without the normal time and energy constraints.

SKU - See Stock Keeping Unit

SKUL - SKU by Location

Sporadic Demand - Demand showing a random or uncorrelated pattern over time; typically exhibiting lumpy demand characteristics where a majority of annual demand activity falls within several intervals of the year.

Standard Cost - Current replacement cost per unit of measure

Stock Keeping Unit (SKU) - Lowest level at which an inventory is measured and/or controlled; can be a raw material, purchased part, manufactured part, operating supply or finished good; synonymous with inventory item.

Stockholder's Equity - Reveals how the remainder of the company's assets are financed, including common and preferred stock, treasury stock and retained earnings.

Supplier - Source of item replenishments; referred to as "outside" if source is physically or organisationally apart from the order referred to as "internal" if source is part of organisation (eg manufacturing).

T

Third-Party Logistics (3PL) - Refers to providers of logistics related services performed on behalf of a manufacturer. Services might include storage of goods, processing of orders and packaging and distribution of inventory.

Time-Phasing - Process whereby period-specific inventory availability's (on-hand, replenishment orders) are compared to period-specific inventory demands (unshipped demand, forecast demand, service stock) on a period-to-period basis to arrive at future inventory positions; where each period considers only those inventory factors specified for that particular period.

TLT - See Total Lead Time

Total Annualised Cost - The total cost of replenishing an item's, or company's, inventory for a year.

Total Lead Time (TLT) - Time in weeks required to replenish the item into inventory; composed of normal replenishment lead-time plus review time (usually one week).

Turnover, Actual - Historical index representing the number of times that an inventory (item or aggregate) cycles during the year; generally computed as historical annual demand or usage divided by the current inventory available. Typically, turnover is used as a measure of inventory performance.

Turnover, Forecast - See Forecast Stock Turnover

U

Unshipped Demand (Back Order) - See Back Order

V

Vendor-Managed Inventory (VMI) - The process of a vendor (supplier) managing the stock levels and purchases of the materials supplied.

W

Warehouse Management System (WMS) - Software designed specifically for managing the movement and storage of materials throughout the warehouse to maximise the use of warehouse space.

Weight - Current weight per unit of measure.

Working Capital - A measure of both a company's efficiency and its short-term financial health. The Working Capital ratio is calculated as: Working Capital = Current Assets - Current Liabilities Positive working capital means a company is able to pay its short-term liabilities. Negative working capital means a company is unable to meet its short-term liabilities with its current assets (cash, accounts receivable and inventory).

Testimonials

“We selected GRA to proceed with implementation of the supply chain transformation because they had a reputation in the market for results delivery. This reputation proved to have merit. With their help we have increased service levels, improved our working capital and reduced our supply chains costs. Their consulting approach in implementation is unique as it delivers outcomes whilst ensuring they are sustained and owned by the business.”

– Brad Hurst, Regional Supply Chain Director ANZ & Global Supply Chain Integration Project Lead, Allnex

Typical results

  • 20-40% inventory investment reduction
  • increased service levels ranging up to 99.9%
  • 10%-15% reduction in supply chain operating costs
  • 5%-20% spend management savings
  • the ability to fund business initiatives from operating cash flow (OCF) improvements
  • improved return on capital employed (ROCE)
  • a minimum 3:1 ROI (10:1 to 30:1 typical)