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.
Accounts Receivable (A/R) - Money owed to a company by its debtors for services or goods rendered to a customer from who payment has not yet been received.
Active Item - Inventory item having recent or continuing demand or depletion activity.
Active Stock - Items currently available for sale, often classified as having frequent turnover.
Activity Analysis - The process of dissecting an activity to understand its processes purpose and outputs. Activity Analysis typically involves on-on-one interviews, group workshops, questionnaires, observations and document review.
Activity Based Costing (ABC) - A process to identify the costs associated with an organisations activities. Each activity is assigned a relative portion of organisation overhead and raw material cost based on its percentage usage of resources.
Activity Ratio - Financial metrics used to gauge the ability of an organisation to convert various assets, liabilities and capital accounts into cash or sales. The faster a business is able to convert its assets into cash or sales, the more efficient it runs. Activity ratios include inventory turnover, receivables conversion period, fixed-asset turnover and return on assets.
Actual Turns - See Turnover, Actual.
Ad Valorem Tax - A tax whose amount is based on the value of a transaction or shipment value. Examples include the Australian Goods and Services Tax (GST), a 10% value added tax on most goods and services sold in Australia.
Adjusted Forcecast Demand (AFD) - Forecast of demand plus or minus any forecast adjustments made.
Advanced Manufacturing - See Advanced Planning and Scheduling (APS).
Advanced Planning and Scheduling (APS) - Advanced planning and scheduling (APS) refers to a management process whereby raw materials and manufacturing production capacity are optimally allocated to meet demand. APS is also known as advanced manufacturing.
Advanced Shipping Notice (ASN) - A document that provides information about a pending delivery specifying the contents and nature of the shipment. The purpose of an ASN is to notify the customer when shipping occurs and provide information on the physical characteristics of the shipment so the customer can prepare for receipt.
AFD - See Adjusted Forecast Demand.
After Sales Service - Services provided to a customer after following their purchase of a good. This includes repairs, maintenance and telephone support.
Aggregate Adjusted Forecast Investment - This forecasted investment is a best-case scenario of what your inventory investment could be if you followed every GAINS advanced planning system recommendation and you had the ability to dispose of excess inventory quickly and easily.
Aggregate Forecast - A summation of the forecasts for a group of products. Products may be grouped by category, department, state, or nationwide. Aggregate forecasts are stated in units or dollars and are used for reporting and supply chain planning.
Aggregate Forecast investment - See Average Inventory.
AGV - See Automated Guided Vehicle System (AGVS).
AI - See Artificial Intelligence (AI).
Algorithm - A process or set of rules to be followed by a computer to perform calculations or other problem-solving operations. Example include GAINS Advanced Planning System forecast model algorithms.
Allocable Inventory - The aggregation of stock on hand and incoming EROs throughout the lead-time period.
Allocated Requirement - Where a picking order has been released to the stockroom but the item has not yet been sent out of the stockroom.
Allocation - A distribution of stock which may be unrelated to historical demand or forecast requirement at that location.
Allocations - Inventory “Allocation” is the process of allocating stock from a DC (of other location) down to individual Stores (or other sub-tier locations) when the SOH at the DC is insufficient to meet the replenishment orders of all individual stores. Typically companies establish their own business logic for how this allocation decision process should be made.
Alpha Factor - An forecast algorithm weighting factory typically used to weight a specific period of demand history more heavily (i.e. the last 3 months).
AM - Additive Manufacturing. See 3D Printing.
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.
AOG - Aircraft on Ground (AOG) a high demand priority within the Defence and the aviation industries indicating that a problem is serious enough to prevent an aircraft from flying. Generally there is a rush to acquire the parts to put the aircraft back into service and prevent further delays or cancellations of the planned itinerary.
API - Application programming interface (API) is a set of routines, protocols, and tools for building software applications. An API expresses a software component in terms of its operations, inputs, outputs, and underlying types.
APL - Associated Parts List (APL) is a list a parts associated with a specific task, such as a 10,000km vehicle service. APLs are often treated as Bills of Materials (BOMs).
APS - See Advanced Planning and Scheduling.
AQL - Acceptable Quality Level.
AR - See Augmented Reality
Ariba Procurement - Procurement and spend management software.
ARO - Additional Replenishment Order.
Artificial intelligence (AI) - The design and build of systems that seek to mimic or make intelligent decisions. AI can be defined by properties that are characteristic to AI, in particular autonomy and adaptivity: Autonomy: The ability to perform tasks in complex environments without constant guidance by a user. Adaptivity: The ability to improve performance by learning from experience.
AS/RS - See Automated Storage and Retrieval System (AS/RS).
ASN - See Advanced Shipping Notice (ASN).
Assemble to Order - The process of completing the configuration of a good or service once a customer order has been received. Similar to Make to Order (MTO) except that Assemble to Order typically involves the arrangement of complete/semi-complete components to produce the final good. Assemble to Order is useful in enabling last minute configurations to customer specific requirements.
Assembly - The final product which is a configuration of a group of sub-assemblies and/or parts. An assembly may be an end item or a component of a higher-level assembly.
Asset Efficiency - A performance metric calculated as: Sales / Assets
ATD - Actual Time of Departure.
ATLS - See Automated Truck Loading Systems (ATLS).
ATP - See Available to Promise (ATP).
Augmented Reality - Augmented reality (AR), is a live direct or indirect view of a physical, real-world environment whose elements are augmented by computer-generated sensory input such as sound, video, graphics or GPS data. It is related to a more general concept called computer-mediated reality, in which a view of reality is modified (possibly even diminished rather than augmented) by a computer.
Automated Guided Vehicle System (AGVS) - Robotic material handling equipment (MHE) which move autonomously or along set guideway without requiring human intervention to transport and store stock within a warehouse. AGVs are capable of taking alternative paths when obstructed and provide automated put-away and unloading of trucks. GRA research (2016) indicates that during operating times, one AGV is approximately equivalent to one forklift driver. Together with a well-integrated Warehouse Management Systems (WMS), AGVs can completely automate the warehousing process.
Automated Storage and Retrieval Systems (AS/RS) - Autonomously store pallets and packs using automated gantry cranes. These systems are more commonly seen in quick turn-around distribution centres. Compared to facilities with traditional racking systems, an AS/RS is capable of improving space utilisation by at least 60%.
Automated Truck Loading Systems (ATLS) - Systems which stack and arranges pallets to resemble a full truck load. When the pallets are ready for shipment, they are transferred ‘as is’ into a truck through a mechanical platform that either rolls or pulls the load into the trailer via a chain-driven conveyor system.
Availability - The percentage of time a system is operational. A key measure in a system's level of performance.
Available Inventory - Inventory which is available for sale, is in 'good', undamaged, serviceable condition.
Available to Promise (ATP) - The uncommitted portion of a company's inventory which is available to fulfil future customer-orders which have not yet been placed. ATP equals on-hand inventory less customer orders that are due and overdue.
Average Cost - Aggregate average cost of an item divided by aggregate on hand across all locations.
Average Inventory - As an accounting measure used to assess performance over a specific period, Average Inventory is calculated as: (Inventory at the Beginning of the assessment period + Inventory at the end of the assessment period) / 2. As an indication of future inventory levels, Average Inventory is calculated as: Safety Stock + 1/2*ORQ. Average Inventory Level is a "best case" average and excludes working excess stock.
Average Line Item Fill Per Order - A supply chain performance metric calculated as: Line Item Fill by Order divided by the Total Number of Orders, typically expressed as a percentage.
Average Unit Fill Per Order - A supply chain performance metric calculated as: Unit Fill by Order divided by the Total Number of Orders, typically expressed as a percentage.
B-Double - A truck consisting of a prime mover towing 2 semi-trailers where the first semi-trailer is connected to the prime mover by a fifth wheel coupling and the second semi-trailer is connected to the first semi-trailer by a fifth wheel coupling.
B2B - See Business-to-Business (B2B).
B2C - See Business-to-Customer (B2C).
Back Order (Unshipped) - Unfilled customer or manufacturing order due to unavailability of stock; orders released but unshipped or unsatisfied due to inadequate stocks.
Backhaul - The return trip of a transportation vehicle from its destination, back to its origin (i.e. store to warehouse). The backhaul can be with a full, partial, or empty load. An empty backhaul is also known as deadheading.
Backlog (BL) - Orders from customers which have not yet been shipped but are in process and not considered late. This is not the same as a Backorder which was unfulfilled in the designated delivery period.
Backorder Demand Suppression - A GAINS Advanced Planning System functionally to defer the deduction of independent demand if the projected inventory position (PIP) has already gone negative until the critical period (next ERO) date. This prevents GAINS from over ordering due to forecasted demand that will not be realized because of a stock-out situation. If the customer is not willing to wait for material to arrive, they will likely look to fulfil its needs elsewhere.
Backsourcing - The process of returning a business function back in-house from a third party (the oppose of outsourcing).
Balance Sheet - The balance sheet shows the assets and liabilities for the business.
Balanced Inventory Position - When the projected inventory position at lead-time is greater than zero and less than one ORQ.
Bale - A compressed and bound bundle of a commodity such as cotton or hay.
Bar Code - A product marker consisting of a series of printed bars and spaced representing numerical or alphanumeric values and read by bar code scanners using optical character recognition. An example is the UPC code used on retail packaging.
Bar Code Scanner - A device used to read bar codes and communicate product data to computer systems.
Barrier to Entry - Obstacles to entering a particular business market (both domestically and internationally) and can include high initial set up costs, tax benefits to existing firms, patents, strong customer loyalty, high customer switching costs and country legislations.
Base Currency - The currency whose value is "1" unit whenever a quote is made between two currencies. The quotation AUD/USD 0.75 means that one Australian Dollar is exchanged for 0.75 US dollars. Here, AUD is the base currency and USD is the counter currency.
Base Procurement Cost - See Procurement Cost.
Batch Picking - The process of combining product demand from multiple orders into one pick instruction in order to increase warehouse travel efficiency. The aggregated quantities of each product are then transported to a common area where they are consolidated by order or shipping destination. See also Zone Picking.
Batch Processing - The execution of a series of programs ("jobs") on a computer without manual intervention. Jobs are set up so they can be run to completion without human interaction. All input parameters are predefined through scripts, command-line arguments, control files, or job control language.
Benchmarking - The comparison of a business' processes and performance metrics to that of it's best in class competitors to determine the relative performance.
Best in Class - The highest current performance level in an industry or sector which is used as a standard or benchmark to be equalled or exceeded. Also known as Best of Breed.
Best of Breed - See Best in Class.
Best Practice Demand Planning (BPDP) - The foundation required for effective and efficient supply chain operation, ensuring the right inventory is placed at the right location, at the right time and in the right quantity.
BI - See Business Intelligence (BI).
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.
Big Data - Extremely large data sets that may be analysed computationally to reveal patterns, trends, and associations, especially relating to human behaviour, supply chain processes, system performance, and predictive maintenance.
Bill of Lading (BOL) - A document issued by a carrier (master of ship) to acknowledge receipt of a shipment of cargo from a consignor.
Bill of Material - Lists materials (components or ingredients) required to produce an item.
Binder - Material placed between layers of containers to hold a stack together.
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.
Blanket PO - A long-term purchase order submitted by business to the supplier in order to procure a specific amount of goods and services at the set price over a specified period of time. Often the goods and services are “drawn down” from the total quantity in regular intervals or quantities.
Blanket Rate - A rate that does not increase due to circumstances (such as shipping distance or quantity ordered).
Blockchain - Blockchains are distributed electronic ledgers that use software to record and confirm transactions (and other logic) with speed and certainty. The blockchain ledger is decentralised so does not depend on any single entity (like a bank) for safekeeping. Each block (a list of records) contains a timestamp and a link to a previous block. A blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks. When using blockchain, the nodes connected to the blockchain network get updated every time a new transaction takes place, supporting traceability and transparency.
Blow Down - A top down demand planning process where by inventory is allocated to downstream locations (i.e. from DC to store) based on the downstream location's relative historic or forecast usage of a (similar) item.
BO - See Unshipped Demand (Back Order).
BOL - See Bill of Lading (BOL).
BOM - See Bill of Material
Bonded Warehouse - A customs-controlled warehouse for the retention of imported goods until the duty owed is paid.
Bottom Up Demand Planning - Bottom Up Demand Planning gathers individual forecasts from each store or end customer and aggregates them to drive restocking decisions higher up the supply chain. A combination of Top Down Demand Planning and Bottom Up Demand Planning is generally considered best practice.
Boxcar - An enclosed railcar used to transport freight.
BPDP - See Best Practice Demand Planning (BPDP).
Break Bulk Cargo - Cargo that is shipped as a unit or package (for example palletised cargo, boxed cargo, large machinery, trucks) but is not containerized.
Break-Bulk - The separation of a consolidated shipment load into smaller individual shipments for delivery to the final receiving location.
Bricks and Clicks - See Click and Collect.
BTO - Build to Order.
Bucket - The process of aggregating data into distinct time periods (buckets). Bucketing is used by MRP, DRP and other time phased planning systems including GAINS Advanced Planning System. Examples include aggregating sales history transactions into daily, weekly or monthly buckets for forecasting or reporting purposes.
Buffer Stock - See Safety Stock.
Build Inventory - Inventory in excess of Investment, Cycle and Safety Stock Inventory. Build inventory is used to meet demand spikes that outstrip production or supply capacity. E.g. Seasonal patterns, promotions and new product introductions.
Bulk Area - A storage area for large items best handled by the pallet load.
Bullwhip Effect - An extreme change in the inventory 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 due to the serial nature of communicating orders up the chain and the inherent transportation delays of moving product down downstream. The bullwhip effect can be significantly reduced or eliminated IT integration (EDI).
Business Intelligence (BI) - The reference to a variety of software applications used to analyse an organisation's raw data and track performance. BI as a discipline is made up of several related activities, including data mining, online analytical processing, querying and reporting.
Business Unit - A relatively autonomous department or section of an organisation that operates semi-independently with responsibility for a particular range of products or activities.
Business-to-Business (B2B) - A situation where one business makes a commercial transaction with another business.
Business-to-Consumer (B2C) - A situation where a business makes a commercial transaction directly with the end-users of its products or services.
CA - See Current Assets.
CAC - Child Allocation Code (CAC) is used by GAINS Advanced Planning System to indicate the inventory statuses of the parent and child locations after Distribution Allocation logic has been performed.
CAG - See Capacity Allocation Group (CAG)
Capacity Allocation Group (CAG) - Capacity Allocation Group (CAG) is a family of SKULs which are all produced from the same supply capacity (i.e. production line or raw material). CAG items are produced/purchased together and share similar production or other sourcing constraints (i.e. minimum order quantities).
Capacity Requirements Planning - Process for determining amount of machine and labour resources required to meet production.
CAPEX - See Capital Expenditure (CAPEX).
Capital - A company's assets (or their financial value) which includes cash, property, plant and equipment.
Capital Employed - The total amount of capital used for the acquisition of profits. It is the value of all the assets employed in a business and can be calculated by adding fixed assets to working capital or subtracting current liabilities from total assets.
Capital Expenditure (CAPEX) - The cost of maintaining or acquiring property, plant or equipment for a product or system. CAPEX can be thought of as the cost of running a business into the future.
Capital Expense - See Capital Expenditure.
Car Drop - Car drops involve a customer providing temporary electronic access to their car boot, which is used as a secure delivery location for purchase of goods.
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.
Cartage - The charge applied for the pick up and delivery of goods.
Cash Conversion Cycle (CCC) - The length of time (typically in days) that it takes a company to convert inputs (raw materials in manufacturing, and products in retailing) into cash sales. The Cash Conversion Cycle assists in evaluating the quality of company working capital position, providing a better measure than working capital or current ratio. A low CCC (fast turnover rate) indicates efficient management of inventory and receivables. CCC = Days inventory outstanding (DIO) + Days Sales Outstanding (DSO) - Days Payables Outstanding (DPO).
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.
Cash In Advance (CIA) - A payment method where the buy pays the seller prior to shipment of goods to the seller.
Cash with Order (CWO) - A payment method where the payment must be made at the time of order placement.
Cash-to-Cash Cycle Time - See Cash Conversion Cycle (CCC).
Category - Logical grouping of like parts in a general system of classification.
Category Management - The management of a group of products which are typically similar in nature. Category management involves managing inventory levels, shelf-space allocation, promotions, and buying.
Centralised Inventory Control - The management of all inventory, regardless of location, from a single centralised department within a company. See also Top Down Demand Planning.
CFC - See Customer Fulfilment Centre (CFC).
CFR - Cost and Freight.
CFS - See Container Freight Station (CFS).
Change Management - The management process that coordinates and monitors the implementation of new or updated business processes, policies or systems. Change management is intended to assist implementation in a timely manor, while minimising risk to service delivery and operations.
Change Order - A formal notification from a customer to a supplier to modify an existing purchase order.
Channel - A method whereby a business dispenses its product, such as a retail or distribution channel, call centre, or a web-based electronic storefront.
Channel Forecasts - Managing the forecast of a specific sales channel outside the standard hierarchy i.e. by region or priority customers.
Child Location - The receiving location of a 'parent' location within a supply chain. A 'child' location passes its independent demand onto the 'parent' location as dependant demand. Stores are typically the 'children' of a DC which is the 'parent'. See Parent Location, Dependant Demand.
Churn - The process of customers changing their buying preferences. Churn is caused by stock outs, or the customer finding better or cheaper products and services elsewhere.
CIA - See Cash In Advance (CIA).
CIF - Cost, Insurance & Freight.
CIP - Carriage and Insurance Paid.
Click and Collect - A service where customers can order items online and pick them up in-store. Click and collect (also known as “bricks and clicks”) reduces the burden of delivery on the retailer, and offers customers a way to avoid delivery charges, or potentially get the item sooner.
CLO - Chief Logistics Officer.
CMI - See Co-Managed Inventory (CMI).
Co-Managed Inventory (CMI) - See Vendor Managed Inventory (VMI).
COGS - See Cost of Goods Sold
Collaborative Planning, Forecasting, and Replenishment (CPFR) - A concept that aims to enhance supply chain integration and overall performance by supporting and assisting joint practices. CPFR encourages sharing of information and joint planning of key activities with all supply chain partners, including material providers, manufacturers, distributers and retailers. Collaboration encompasses business planning, sales forecasting and all operations required to replenish goods.
Collect Freight - An agreement whereby the company that is receiving goods pays the cost of transportation at the point in time that they are received.
Combined Lead Time - See Cumulative Lead Time.
Commercial Warehouse - A remote, third party warehouse location for stocking inventory items.
Complete and On-Time Delivery (COTD) - See Delivered In Full and On Time (DIFOT).
Component Usage - The average quantity of BOM component demand / unit of kit demand.
Consignee - The buyer (and generally receiver) of a shipment of goods.
Consignment - A process whereby the inventory owner (consignor) sends goods to a distributer (consignee) who undertakes to sell them. The goods remain the property of the owner (consignor) until they are sold by the distributer (consignee) to a customer.
Consignor - The party who 'ships' goods, usually the seller.
Consol facilitiy - Abbreviation for ‘consolidation facility' a term used for facilities where goods from multiple suppliers/factories are consolidated into shipping containers. Also referred to as container freight station (CFS).
Consolidation - The aggregation of multiple shipments into one with the intent of reducing overall transportation costs.
Consolidator - An organisation which aggregates orders from different companies into one shipment to facilitate transportation.
Consortium - An association of two or more individuals, companies, organisations or governments that works together to jointly produce a product, service or project.
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.
Consumer Packaged Goods (CPG) - Equivalent to Fast Moving Consumer Goods (FMCG).
Container Depot - The storage area for empty containers. See also container freight station (CFS).
Container Freight Station (CFS) - A container freight station (CFS) is a warehouse where goods are consolidated into or deconsolidated from containers for transport to their next destination.
Container Terminal - A facility where containers are transitioned from one transportation method to another for onward transportation, such as from ship to train or truck.
Containerisation - A shipment method where products are transported in containers.
Continuous Replenishment Planning (CRP) - A replenishment process where the manufacture and shipment of a product is triggered and aligned with the corresponding purchase by an end user.
Conveyor - A materials handling device that moves stock within a warehouse over a series of rolling belts.
Cost Centre - A department of an organisation to which costs may be associated and charged for accounting purposes. A cost centre does not directly produce profit but is important to the ongoing running of the business.
Cost of Capital - The cost of funds used for financing a business. Cost of capital depends on the mode of financing used and is equal to the cost of equity if the business is financed solely through equity, or to the cost of debt if it is financed solely through debt. Many companies use a combination of debt and equity to finance their businesses, and for such companies, their overall cost of capital is derived from a weighted average of all capital sources, widely known as the weighted average cost of capital (WACC).
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.
COTD - See Complete and On-Time Delivery (COTD).
CPFR - See Collaborative Planning, Forecasting and Replenishment (CPFR).
CPG - Consumer Packaged Goods (CPG) is equivalent to Fast Moving Consumer Goods (FMCG).
CPT - Carriage Paid To.
Critical Item - An item which is essential to the continued operations of an asset or process. Critical items typically have an additional safety stock buffer held to reduce the likelihood of costly asset/process downtime. Critical items also include those which the supply chain has had difficulty sourcing historically, and may include discontinued items.
Critical Spare - See Critical Item.
CRM - See Customer Relationship Management (CRM).
Cross-Channel - Equivalent to Multi-Channel, Cross-Channel is the experience of a customer who has used a combination of different channels made available by a company for the one purchase, these channels include brick-and-mortar stores, catalogues, websites, mobile applications, TV commercials and call centres. For example, a customer may hear about a product on the radio, look it up on the internet and then go instore to make the actual purchase.
Cross-Docking (C-D) - Cross-Docking (C-D) is a distribution method that utilises three key entities: the external vendor/supplier, a cross-dock parent (hub), and branch locations (children). The difference between a cross-dock (C-D) network and traditional hub and spoke distribution is that in cross dock, there is no inventory held at the branch parent. The C-D location serves as a transit point and/or re-packaging facility only, at which material is received from the vendor, potentially re-packaged, and shipped out to branch locations where it is then stocked, typically within a day. A C-D design is particularly advantageous for companies who have high vendor minimums and/or high re-handling costs.
Crowd Shipping - A spectrum of delivery options ranging from linking smaller carriers together, to creating a delivery network from scratch, by aggregating individual drivers, riders or walkers.
CRP - See Continuous Replenishment Planning (CRP).
CSLO - Constrained Service Level Optimisation (CSLO) is a GAINS Advanced Planning System functionality which is similar to IDO in that it can determine the lowest-cost service level for SKULs, but it can also find other organisational targets such as the minimum inventory investment, greatest cash flow, or greatest profit. CSLO can maximize service levels or profit given a restricted budget, or minimize total inventory while maintaining a specified service level or other constrained target.
Cubage - Cubic meter volume of space. Cubage is typically used when referring to shipments or storage capacity.
Cube Out - The process of filling the volumetric capacity (typically of a transport vehicle) with cubic meter volumes of product(s).
Cumulative Lead Time - The sum of all lead-times for a given SKUL, including the lead-time to the top-tier component/parent SKUL within a Bill of Materials, plus the lesser of the lead-times from the Raw Material Supplier to the component/parent SKUL or the arrival of the next ERO at the component/parent location.
Current Assets (CA) - Cash and other assets expected to be converted into cash in less than one year.
Current Liabilities (CL) - Current Liabilities (CL) are debt and obligations due in less than one year.
Current Ratio - A performance metric calculated as: Current Assets / Current Liabilities.
Customer Fulfilment Centre (CFC) - A facility which receives stock from a DC or Cross-Dock and sends products to customers and stores.
Customer Relationship Management (CRM) - Refers to practices, strategies and technologies that companies use to manage and analyse customer interactions and data. The goal of CRM is to improve customer relations, retention (loyalty) and overall sales growth.
Customer Segmentation - The grouping together of like customers in order to assist with targeted marketing. Grouping attributes include age, gender, interests and past spending behaviour.
Customer Tolerance Time - The time a customer is willing to wait for an order.
Customer Value Proposition (CVP) - Is a company's key differentiator(s) in reaching, obtaining and building customer loyalty. It is often a business or marketing statement that describes why a customer should buy a product or use a service.
Customer Wait Time (CWT) - Customer Wait Time (CWT) is the time between a (failed) demand being raised and the same demand being satisfied. This metric is often aggregated and averaged over a system of platform to determine overall CWT performance.
CVP - See Customer Value Proposition (CVP).
CWO - See Cash with Order (CWO).
CWT - See Customer Wait Time (CWT).
Cycle Stock - Cycle stock is the average amount of inventory a business needs to meet customer demand between the times it orders more inventory from suppliers. Cycle stock is the portion of total inventory allocated to fill normal or anticipated demand. On average, cycle stock is one-half the replenishment quantity.
DAF - Delivered at Frontier.
Dangerous Goods - Stock items which pose a risk to health, safety, or property, and that ordinarily require special attention when transported. Dangerous Goods are classified based on company specific rules and governing legislation.
DAP - See Delivered at Place.
DAT - Delivered at Terminal.
Data Mining - The process of using computer software to look for patterns in large batches of data, in search for previously unknown relationships. This knowledge is then typically applied to achieving specific business goals.
Days Cover - An inventory replenishment methodology under which target inventory is based off a moving average of recent demand and inventory over the period.
Days Inventory Outstanding - An accounting / supply chain performance metric calculated as: Average Inventory / COGS * 365.
Days of Inventory - See Days Inventory Outstanding
Days Payables Outstanding - An accounting / supply chain performance metric calculated as: Average Accounts Payable / COGS * 365. Days Payables outstanding is also sometimes calculated as: Average Accounts Payable / Cost of Sales * 365.
DC - See Distribution Centre.
DD - See Dependant Demand (DD).
DDP - See Delivered Duty Paid.
DDU - Delivered Duty Unpaid.
Dead Stock - Stock which has had no demand for an extended period of time, different companies often establish their own criteria for Dead Stock. Fore example 2 or 3 years with no usage/demand would be typically within an Maintenance, Repair and Overhaul (MRO) environment.
Deadhead - The return of an empty transportation vehicle or container to its point of origin.
Deleted item - An item, which is no longer produced and/or carried in inventory and whose item master record is no longer referenced.
Delivered at Place (DAP) - “Delivered at Place” means that the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. The seller bears all risks involved in bringing the goods to the named place. Source: www.iccwbo.org
Delivered Duty Paid (DDP) - “Delivered Duty Paid” means that the seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport ready for unloading at the named place of destination. The seller bears all the costs and risks involved in bringing the goods to the place of destination and has an obligation to clear the goods not only for export but also for import, to pay any duty for both export and import and to carry out all customs formalities.Source: www.iccwbo.org
Delivered In Full (DIF) - Delivered In Full (DIF) is a supply chain performance metric used to measure service level performance and is typically presented as a percentage. See also DIFOT.
Delivered In Full and On Time (DIFOT) - Delivered In Full and On Time (DIFOT) is a common supply chain performance metric used to measure service level performance. All items on a given order must be delivered on time for the order to be considered as delivered in full and on time. DIFOT is typically presented as a percentage out of 100.
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.
Demand Planning System - A software platform which collects all sources of demand and supply information across a companies supply chain with the intent of producing reliable product-location forecasts.
Demand Sensing - An enhancement of demand planning by integrating a broader and nearer-to-real-time dataset into the demand planning process to better predict customer demand.
Demand Signal - A signal from a customer to a supplier which triggers the issue of product or raw material.
Demand Signalling - The generation, capture and utilisation of customer demand data to provide faster and more convenient ways for customers to ‘signal’ their intent to purchase a product (eg. Amazon Dash).
Demurrage - The cost charged by a carrier when rail freight cars, ships or containers are retained beyond a specified loading or unloading time en-route to their final destination.
Department - Major grouping designation to which several smaller sub-groupings (groups) of items may belong.
Dependant Demand - Dependant demand (DD) is demand generated to replenish inventory at another location within the distribution network, based on inventory policy at that location and independent demand at that location. This relationship between supplying location and receiving location is also referred to as 'parent' to 'child' (see Parent Location, Child Location). It is common to have at least a Parent-Child relationship within a supply chain, but this can extend to Parent-Child-Grandchild.
Depletion - Reduction of inventory from the norm or expected.
DEQ - Delivered Ex Quay.
DES - Delivered Ex Ship.
Devaluation Cost - The cost associated with a products decrease in value due to a price drop.
Deviation - Departure from the norm or expected; difference between forecasted and actual activity measured at a point in time.
DIF - See Delivered In Full (DIF).
DIFOT - See Delivered In Full and On Time (DIFOT).
Direct Channel - A situation in which a company sells a product directly to the end customer.
Direct Cost - A cost that can be completely attributed to a particular product, a direct or repeatable cause-and-effect relationship exists between the product and expense. Examples of Direct Costs includes direct labour, direct materials, commissions and manufacturing supplies. See also Indirect Cost.
Direct Ship - Arrangement where the vendor ships directly to the final stocking location(s). The Direct Ship option usually increases carrying cost at the child location (because vendor minimum order quantities are typically large) but transport and re-handling costs are reduced (in comparison to using Cross Docking. Direct Ship is sometimes preferred when the item’s lead-time from the vendor is short enough that Service Stock quantities can be very low.
Direct Store Delivery (DSD) - The process of shipping goods directly from a manufacturer to a store, bypassing any other locations (e.g. DC) within the customers supply chain.
Direct-to-Store (DTS) Delivery - See Direct Store Delivery.
Discontinued Item - Inventory item for which normal replenishment has been discontinued and yet whose stock may not be entirely depleted.
Disintermediation - When the traditional sales channels are disassembled and the 'middleman' is removed from future arrangements. Such as where the manufacturer ships direct to a retailer, bypassing the distributor.
Distribution - The process of making a product or service available for sale to the consumer. Distribution involves transportation, warehousing, inventory control, and material handling. It includes all activities related to physical distribution, as well as the return of goods to the manufacturer.
Distribution Centre (DC) - A warehouse facility which holds inventory to be redistributed to retailers, wholesalers or directly to consumers.
Distribution Channel - A chain of businesses or intermediaries through which goods pass enroute to the end user or consumer. Distribution channels include wholesalers, retailers, distributors and the internet.
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.
Distribution Warehouse - A finished goods warehouse from which a company sells directly to end users.
Distributor - A business that does not manufacture its own products, but purely engages in Distribution. See also Distribution
Downstream - A company, location or individual who is closer to the end user or customer within the supply chain and participates in the flow of goods from the manufacturer to the end user or consumer.
Drayage - The transportation of goods over a short distance, including the pick-up and delivery of containers from a ship to a warehouse.
Drone Delivery - Drone delivery utilises small remote-piloted or automated aerial vehicles to deliver single packages directly to customers, offering ultra-fast (often within 30 minutes) and convenient delivery across a 10km radius.
DRP - See Distribution Requirements Planning
DSD - See Direct Store Delivery (DSD).
DSI - Days Sales of Inventory.
DTS - See Direct-to-Store Delivery (DTS).
Dunnage - Packing material used to secure and protect a product from damage during transport.
Duty - Tax imposed by a government on goods imported from another country.
Duty Free Zone (DFZ) - An area where foreign goods can be stored without paying import duties while awaiting manufacturing or future transport. Import duties must be paid on these goods if they are released in the local market.
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&M - Engineering and Manufacturing.
E-Commerce - Electronic commerce, or E-Commerce, is the trading or facilitation of trading in products and services via the Internet.
e-Procurement - e-Procurement allows an organisation to conduct procurement processes online using web-based applications, improving efficiency and timeliness of the procurement process.
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 nulls the effects of different capital structures and tax rates by ignoring tax and interest, and hones in on a companies ability to generate profit making it easier to compare company profitability like-for-like.
EBIT - See Earnings before Interest & Tax
ECD - Expected Consumption Date (ECD) for a lot based on the projected demand for each SKUL in Final Ship Date (FSD) sequence.
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 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. EOQ is calculated as: sqrt(2*receiving cost * annual demand / carrying cost).
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".
Economy of Scale - The reduction in per unit production cost as a result of increasing production volume. Increased production volume distributes fixed costs over a larger quantity hence reducing per unit production cost.
EDD - Estimated Delivery Date.
EDI - Electronic Data Interchange.
Embargo - An official prohibition on trade with a specific country or commodity.
End item - The complete end user / customer item or repair part. End items often consist of multiple items, without one or more of which the End Item would be unavailable for use.
End User - The final buyer of a product who is purchasing for immediate use.
End-of-Life Inventory - Inventory on hand that will satisfy future demand for products that are no longer in production (are Discontinued). End-of-life (or Life-of-Type) purchases are common amongst MRO organisations seeking to stockpile inventory which will be difficult or costly to obtain in the future.
Enterprise Resource Planning (ERP) - 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. Often includes electronic commerce with suppliers. Examples of ERP systems are the application suites from SAP, Oracle, PeopleSoft, and others.
EOQ - See Economic Order Quantity
EPC - Electronic Product Code (EPC) is a part number unique to a part through the entire supply chain. The EPC is a 96-bit tag which contains a number called the Global Trade Identification Number (GTIN). Unlike a UPC number, which only provides information specific to a group of products, the GTIN gives each product its own specific identifying number, giving greater accuracy in tracking.
ERF - Expected Remaining Forecast.
ERO - See Existing Replenishment Order.
ERP - See Enterprise Resource Planning
ETL - Extract, Transform and Load (ETL) refers to a process in database usage (E.g. batch processing) and especially in data warehousing that: - Extracts data from homogeneous or heterogeneous data sources, - Transforms the data for storing it in proper format or structure for querying and analysis purpose, - Loads it into the final target (database, more specifically, operational data store, data mart, or data warehouse).
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. Excess is often calculated as Projected Inventory Position at Lead Time (PIPE) minus the Optimal Replenishment Quantity (ORQ).
Existing Replenishment Orders (ERO) - Existing Replenishment Orders (ERO) are committed future replenishments. EROs include orders coming from vendor or customer, as long as it is "good" for sale.
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.
EXW - Ex Works.
Factory Warehouse - Finished goods warehouse replenished primarily through factory production.
FAS - Free Alongside Ship.
FCA - Free Carrier.
FCL - See Full Containerload (FCL).
FEU - Forty-Foot Equivalent unit (FEU) is the size of a standard size intermodal container.
FIFO - See First In First Out (FIFO).
FIIP - Financial Inventory Investment Projection (FIIP) indicates the effect on individual item average annual investment as the service level varies from the current level. The primary purpose of a FIIP report is to guide management in providing the highest possible level of service for the least total investment in inventory.
Fill Rate - The percentage of serviceable order items that the picking operation found available to pick.
Financial Leverage - An accounting measure calculated as: Total Assets / Net Worth.
Firm Planned Order - A planned order which has been updated to a fixed order.
First In First Out (FIFO) - A supply chain and accounting term used to describe the process of consuming inventory which was received first, prior to consuming inventory which was received last. FIFO is widely considered best practice over the alternative Last In First Out (LIFO) option.
First Indenture Item - An item or spare part that is installed directly onto an asset (e.g. Aircraft) which has malfunctioned. It First Indenture Item may be rectified by a 2nd Indenture Item (a component which goes into the First Indenture Items), or a 3rd which goes into the 2nd, etc.
FIS - See Free In Store (FIS).
Fixed Asset Efficiency - A supply chain performance metric calculated as: Sales / (Average Property, Plant and Equipment value). The higher the ratio the better.
Fixed Asset Ratio - See Fixed Asset Efficiency.
Fixed Asset Utilisation - See Fixed Asset Efficiency.
Fixed Costs - Indirect Costs which do not fluctuate with business volume in the short term. Fixed costs include the majority of physical infrastructure, equipment and employment costs required to do business such as most labour, power, amenities and management time cost.
Fixed Cycle - A planning methodology under which the ordering cycle is set, with order quantities determined as required. Fixed cycle is an basic inflexible replenishment methodology.
Fixed Overhead - See Fixed Cost
Flatbed - A type of trailer on a truck that consists of a level floor with no roof or sides.
Flatcar - A flat rolling stock with no roof or sides, typically used for hauling goods which are too bulky to fit into enclosed cars.
Flexible-Path Equipment - Materials handling devices that include hand trucks and forklifts.
Floor-Ready Merchandise (FRM) - Products shipped by suppliers to retailers with all required tags, prices, security devices and packaging already attached so goods can be cross docked rapidly through the supply chain, or received directly at stores for sale.
Flow Rack - A storage method where product is picked from one side of a rack, and replenished on the opposite side.
Flow-Through Distribution - See Cross-Docking (C-D)
FMAD - Forecast Mean Absolute Deviation (FMAD). See Mean Absolute Deviation.
FMCG - Fast Moving Consumer Goods (FMCG) are consumable goods which typically get used up and have to be replaced frequently, in contrast to items usually kept for a long time, such as cars and furniture. FMCGs include food and beverages, footwear and apparel, tobacco and cleaning products. Also known as Consumer Packaged Goods (CPG).
FO - Firm Future Order.
FOB - Free on Board.
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 Mean Absolute Deviation (FMAD) - See Mean Absolute Deviation.
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.
Forecasting - The process of predicting future demand from sales history and/or other historical data metric. Forecasting is typically conducted by algorithms with user supervision and review.
Forklift - A machine-powered device used to pick, raise, lower, transfer and store pallet load freight within a warehouse.
Forward Buying - The process of buying more product, or buying sooner, than normal due to special sale offers or lowered prices.
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. 4PL often involves outsourcing the entire supply chain with service providers providing; procurement, storage, distribution, and other process services.
Free In Store - A commercial term indicating that the seller is responsible for delivery costs. Similar to the Incoterm "Delivered, Duty Paid (DDP)"
Free Stock - Uncatalogued inventory.
Freight Consolidation - The grouping of shipments to obtain reduced costs by improving utilisation of a transport vessel. Freight consolidation can be achieved by grouping by delivery schedules, or using third party services such as public warehouses and freight forwarders.
Freight Forwarder - Freight Forwarders organise shipment of goods from a manufacturer to a market, customer or final point of distribution. A forwarder does not move the goods but acts as an expert in the logistics network and contracts with carrier(s) to move goods.
FSD - Final Ship Date (FSD) indicates the date by which all materials within a lot must be sold to prevent disposal of product due to expiration. This date is the last date at which the Maximum Acceptable Age (MAA) is not exceeded. FSD is often calculated by assigning a MAA by SKUL or the expiration date minus the Minimum Time Until Expiration (MTE) as defined by SKUL.
FTE - Full-Time Equivalent (FTE) represents the hours worked by one employee on a full-time basis.
FTL - See Full Truckload (FTL).
Full Containerload (FCL) - A term used when goods occupy a entire container.
Full Truckload (FTL) - A term used when goods occupy the entire capacity of a truck's trailer.
Functional Silo - A department or group within an organisation which is either intentionally or unintentionally operating independently of other departments or groups within the organisation, and hence termed a "silo". Typically classified by having limited communication with other departments and groups within the organisation.
Future Orders - Future orders represent documented customer demand that has a defined date and quantity.
GAINS - General Adaptive INventory System (GAINS) is a best-of-breed demand, inventory and supply chain planning and optimisation system. GAINS’ unique planning capabilities enable businesses to optimally balance capital, costs, capacity and customer service. www.gains.net.au
Gap Analysis - Gap Analysis involves assessing the current "as-is" process or system and determining what needs to change to reach the optimal or final configuration.
GIT - Goods in Transit (GIT) refers to inventory that has been shipped by the seller, but not yet received by the buyer.
Goodwill - The excess of the purchase price over the fair market value of an asset.
Grandchild Location - The extension of the PARENT, CHILD relationship one location closer to the supply chain end user. A grandchild location indicates that there are at least three tiers of dependant demand within a supply chain, for example: CFS (Parent), DC (Child), Store (Grandchild). See Parent Location, Child Location, Dependant Demand.
Grass Stock - Rail inventory which has been left beside tracks as reserve stock.
Gross Margin - A performance metric. Gross Margin is also known as Gross Profit and is calculated as: Revenue - Cost of Goods Sold (COGS). Gross Margin is not to be confused with Net Income which includes all expenses (COGS and operating expenses).
Gross National Product (GNP) - A measure of a nation's production output, GNP is the value of all final goods and services a nation produces during a one year period.
Gross Profit - See Gross Margin
GTIN - Global Tracking Identification Number. GTIN is the globally-unique identification number used for trade items (products and services).
Handling Costs - The costs involved in preparing, moving or transferring inventory.
Hazardous Goods - See Dangerous Goods.
Heijunka - A Japanese word used to describe a process of matching production throughput with end product sales and eliminate wasteful excess, by products and processes.
Hole - When a spare (repaired item) is not available and the End Item / system is unavailable for use as a key component is missing.
Hub - A large retailer or manufacturer having many trading partners. Alternatively, a reference to a transportation network as a "hub and spoke".
Hub-and-Spoke - A network design where Inventory is held at a central point for use at the branches ("spokes"). The Hub and Spoke option has the additional advantage of pooling Service Stock for items with long lead times from the vendors, reducing the requirement for Service Stock at the branches. Both Cross-Dock and Hub and Spoke options result in cost savings by spreading the required vendor minimums among several branches. Also, trucks dispatched from a hub to a branch can utilise pooling across several vendors’ items to ensure full truckloads (FTL).
IBP - See Integrated Business Planning (IBP).
ICC - See Inventory Carry Cost (ICC).
ID - See Independent Demand (ID).
IDC - See Inventory Driven Cost (IDC).
Ideal Inventory Investment - See Average Inventory.
Ideal Replenishment Order (IRO) - A re-ordering strategy in which recommended Additional Replenishment Orders (AROs) are made ignoring Existing Replenishment Orders (EROs).
IDO - See Inventory Deployment Optimisation (IDO).
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.
Incoterms - International terms of trade developed by the International Chamber of Commerce (ICC) to define sellers' and buyers' responsibilities. Incoterms are widely used in international contracts and are protected by ICC copyright. Source: www.iccwbo.org
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.
Independent Demand (ID) - The demand as a result of direct customer orders. Independent demand cannot be controlled or linked to another supply chain locations demand (unlike Dependent Demand).
Indirect Cost - Costs which cannot be traced directly back to a specific product, but are rather a cost of doing business. Indirect costs include accounting, administration, rent, IT, insurance and utilities expenses. Indirect costs may be either fixed or variable. See also Direct Cost, Fixed Cost and Variable Cost.
Industry 4.0 - Industry 4.0 or the fourth industrial revolution, is the current trend of automation and data exchange in manufacturing technologies. It includes cyber-physical systems, the Internet of things (IoT) and cloud computing. Industry 4.0 creates what has been called a "smart factory".
Inner Carton Quantity - The number of product units in the smallest package size available for wholesale (i.e. 4 sponges sold together in the one packet on a supermarket shelf).
Input Form - Form on which inventory related information is recorded and submitted for inventory control purposes; basis for data input into the computer.
Integrated Business Planning (IBP) - A planning process that integrates across two or more functions in a business to maximise communication and financial value. IBP is often used interchangeably with Sales and Operations Planning (S&OP).
Integrated Logistics - Management of entire logistics chain as a single entity, instead of separate management of individual logistical functions.
Interest Expense - The payments made on the company's outstanding debt (also known as interest payable).
Intermodal Transportation - Transporting freight by using two or more modes of transport (including ship, rail, truck).
Internet of Things - The Internet of things (IoT) is the internetworking of physical devices, vehicles, buildings and other items—embedded with electronics, software, sensors, actuators and network connectivity that enable objects to collect and exchange data.
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 Accuracy - The accuracy of a registered inventory balance to the actual inventory on-hand.
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.
Inventory Balance Analysis - Segmentation of inventory in accordance with its relative stocking position (i.e. 30% overstocked, 60% balanced and 10% understocked). Inventory balance analysis often involve tracking the inventory balance performance over time.
Inventory Carry Cost (ICC) - Inventory Carry Cost (ICC) is the total cost of holding inventory (typically stated ex-GST). This includes warehousing costs such as rent, utilities and salaries, financial costs such as opportunity cost, and inventory costs related to perishability, pilferage, shrinkage and insurance. The sum of total cycle stock carrying cost and service stock carrying cost. ICC should only include costs that vary with the quantity of inventory, e.g.: - Capital costs, - Service costs, - Storage Space Costs, - Inventory Risk costs.
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 Deployment Optimisation (IDO) - A technique used to decide where to optimally store or produce inventory. IDO establishes the lowest cost mix of SKUs to stock at each potential stocking location and the lowest cost service level for each SKUL. For each SKUL, IDO provides the suggested service level for lowest total annual cost.
Inventory Driven Cost (IDC) - The summation of: Holding Costs, Devaluation Costs, Obsolescence Costs, Price Protection Costs, and Return Costs.
Inventory Efficiency - A supply chain performance metric calculated as: Cost of Sales / Average Inventory. The higher the ratio the better.
Inventory In Transit - Inventory being transported between two locations (i.e. from the seller to the buyer) and currently in a carrier's possession.
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 Optimisation (IO) - The process of managing inventory levels to as low a level as possible while still meeting target service levels and taking into account supply chain constraints.
Inventory Planning System - A software system which balances forecast demand and supply with the goal of optimally positioning inventory to meet target service levels at the lowest possible cost.
Inventory Sharing - The satisfaction of demand at one network location by sharing the excess stock from another network location whenever the return on investment of repositioning is positive.
Inventory Turn - Number of times inventory is consumed or sold during a certain time period.
Inventory Turnover Ratio (ITR) - A measure of how many times a year the average inventory (item or aggregate) for an organisation is consumed or sold. Typically calculated as: COGS / Average Inventory. If Average Inventory is recorded at retail price, the Inventory Turnover Ratio can be alternatively calculated as: Total Sales / Average Inventory. The Inventory Turnover Ratio can be measured using historical or forecast information to calculate "actual" or "forecast" measures respectively.
Inventory Velocity - The time period at which inventory moves through a defined cycle, such as from receiving to shipping or from raw materials to finished goods.
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.).
Investment Inventory - Inventory in excess of Cycle and Safety Stock inventory and not considered as excess stock. Investment Inventory may be purchased due to an apparent ROI advantage, e.g. higher anticipated future prices, obsolescence risk, or due to a favourable purchase price today.
Invoice - A statement issued by a seller to a buyer detailing the products, quantities, agreed prices and payment terms for a sale transaction, for which money is owed.
IO - See Inventory Optimisation (IO).
IoT - See Internet of Things.
IRO - See Ideal Replenishment Order (IRO).
ISO 9000 - A series of quality assurance standards compiled by the International Standards Organization.
Item - Any manufactured or purchased article, which could be a part, material, sub-assembly or finished product.
Item Description - Descriptive information used to identify the item on output reports.
Item Fill - A supply chain performance metric calculated as: The percentage of time (annualised) an item is available to pick off the shelf and completely meet the total requirements.
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.
ITR - See Inventory Turnover Ratio (ITR).
Jidoka - A Japanese term originating from Toyota used to describe the human element of judgment applied to a semi-automated process. Jidoka is "automation with a human touch", as opposed to a machine that simply moves under the monitoring and supervision of an operator.
JIT - See Just In Time (JIT).
Just In Time (JIT) - An inventory strategy that aims to ensure inventory is only received as needed in the production process, thereby significantly reducing inventory holding costs. Success of a Just In Time strategy hinges on forecast demand accuracy and/or short lead-times.
Kaizen - A Japanese term for continual improvement involving all members of an organisation. In manufacturing, kaizen relates to finding and eliminating waste in machinery, labour, or production methods.
Kanban - Kanban is a Japanese term for a scheduling system for lean and just-in-time manufacturing. Kanban aims to maintain optimal inventory levels; a signal is sent to produce and deliver a new shipment as material is consumed. These signals improve visibility to suppliers and buyers.
Key Performance Indicator (KPI) - A measure which demonstrates how effectively a company or department is achieving a specified businesses objective which is of strategic importance to the organisation. KPIs are used to track performance over time, forecast future performance and target problem areas.
Kit - Is synonymous with the words finished assembly or sub-assembly and refers to any SKUL that has one or many component items as part of its bill of material.
Kitting - The assembly of multiple sub-assembly items, typically identified on a Bill of Materials, into a single unit (higher-assembly) item (kit).
KPI - See Key Performance Indicator (KPI).
L&CO - Logistics and Customer Operations.
Last In First Out (LIFO) - A supply chain and accounting term used to describe the process of consuming inventory which was most recently (last) received, prior to consuming that which was first received. This has limited use in stock keeping and is primarily a cost-accounting method. First in First Out (FIFO) is widely considered to be the best practice alternative to LIFO.
Last Mile Delivery - Last Mile Delivery is the term used to describe the last leg of goods transportation from a distributer to the end user / customer.
LCC - See Life Cycle Cost.
LCD - Lot Create Date.
LCL - See Less-Than-Containerload (LCL).
Lead Time (LT) - 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.
Lead-time Gap - Lead-Time Gap is the period of time between the requested lead-time and the actual supply lead-time. Lead-Time Gap is calculated as: Supply Lead-Time - Demand 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.
Less-Than-Carload (LCL) - A term used when a train is transporting goods that do not fill an entire rail car load.
Less-Than-Containerload (LCL) - A term used when goods do not completely fill a container's capacity.
Less-Than-Truckload (LTL) - A term used when a truck is transporting goods that do not fill its entire capacity, or an organisation that consolidates and transports smaller (less than truckload) shipments of freight.
Life Cycle Cost (LCC) - The total end-to-end cost of a product or process through its lifetime; from idea inception to capability decommissioning and disposal.
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.
Life-of-Type (LOT) Purchase - A large order for an item made because the item is going out of production and thus no supply will be available in the future.
LIFO - See Last In First Out (LIFO).
Line - Synonymous with Item.
Line Fill - A supply chain performance metric. The percentage of the total items you are able to completely fill given the total order requirements over a certain time period.
Line Item - A unit of information in a document, record, or statement, shown on a separate line of its own. Line items often refers to an item which is separately identified on a replenishment order or invoice.
Line Item Fill - A supply chain performance metric calculated as: The total number of lines filled / total number of lines, expressed as a percentage.
Llamasoft Supply Chain Guru - A supply chain network optimisation tool which enables companies to model, optimise and simulate their supply chain operations.
LOB - Line of Business.
Location - The place where inventory or stock is physically stored.
Logistics - All warehousing and transportation activities within a supply chain associated with delivering a product to a customer.
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 Purchase - See Life-Of-Type (LOT) Purchase.
Lot Size - A measure or quantity increment acceptable to or specified by the party offering to buy or sell. Can be subject to constraints such as container size, shift capacity, etc. Used also as an alternative term for lot quantity.
LPO - Local Purchasing Officer.
LT - See Lead Time.
LTL - See Less-Than-Truckload (LTL).
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'.
MAA - Maximum Acceptable Age (MAA) measured in days is the oldest a product can be when received by a customer. Different customers often have different MAAs. When recording MAA at an individual SKUL level, If different customers have different MAAs, the MAA by SKUL value should be set to either the minimum value (to be conservative) or to some demand-weighted, average value.
Machine Learning (ML) - A subset of Artificial Intelligence. Machine learning systems improve their performance in a given task with more and more experience or data.
Maintenance, Repair & Overhaul (MRO) - A supply chain industry with significant maintenance and repair requirements, MROs include rail, aviation and defence organisations.
Make to Order (MTO) - A manufacturing process where by manufacture of a product only commences once an order is received. See also Make to Stock (MTS).
Make to Stock (MTS) - A manufacturing process strategy where finished product is continually held in order to fulfil forecast demand. See also Make To Order (MTO)
Manifest - A document which details the contents (cargo, passengers and crew) of a shipment (ship, aircraft, or vehicle) for use by customs and other officials.
Manufacture Cycle Time - See Manufacturing Lead Time
Manufacturing Lead Time - The total time required to manufacture an item, measured from release of an order to receipt of a manufactured good. Manufacturing Lead Time includes preparation time, queue time, set-up time, run time, move time, inspection time, and put-away time.
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, repairable 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.). Marginal Analysis is used to develops the optimal backorder versus cost curve. Whereas backorders are used to measure availability instead of fill rate.
Marginal Cost - The incremental cost (Variable Cost) to produce one additional unit of output.
Mass Customisation - Mass customisation enables customers to modify a base product to meet their specific needs, thus allowing for an increase in product variety, without the typically associated production and inventory holding costs. Mass customisation is a marketing and manufacturing technique that combines the flexibility and personalisation of custom-made products with the low unit costs associated with mass production.
Master Data - The constant and unique data and parameters associated with a particular material or item including: Supplier, ABN, Lead time, Description, Weight, Cost, 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.
Materials Handling - The physical handling of at supply chain nodes including at docks, distribution centres, warehouses and stores.
Matrix Organizational Structure - An organization structure in which two (or more) channels command budget responsibility and performance measurement simultaneously. For example, both product and functional forms of organization could be implemented simultaneously; the product and functional managers may have equal authority, with employees reporting to both managers. Such systems are typically very inefficient and create confusion regarding overall responsibility.
MAV - Material Availability (MAV) is the current and subsequent weeks expected future inventory on-hand. GAINS Advanced Planning System calculates MAV as Safety Stock + PIPE. A positive value indicates that there will be stock available at the end of Total Lead Time and a value of zero indicates that, unless actions are taken to reverse the situation, a likely stock-out will result at the end of Total Lead Time.
Maximum Order Quantity - The maximum size (units) in which a consumer can place an order with a supplier for a specific product
MDC - See Minimum Demand Consumption Capacity (MDC).
Mean Absolute Deviation (MAD) - An error measure often used in demand forecasting. MAD is calculated as the average of the differences between actual demand and the simulated forecasts of demand over a given period.
Mean Effort Between Failure (MEBF) - A unique forecasting approach for service parts planning environments that is based on expected part life span and future use of a part (rather than demand history). MEBF has unique inputs, such as how frequently a part requires replacement based on usage (e.g. hours or miles).
MEBF - See Mean Effort Between Failure (MEBF).
MEO - See Multi-Echelon Optimisation (MEO).
MF - Minimum Forecast.
MHE - Materials Handling Equipment (MHE) is machinery often used in warehouses and DCs to relocate, package and store inventory. MHE can be human operated or automated.
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 Demand Consumption Capacity (MDC) - Is a SKUL's capacity to consume additional excess inventory without placing any current material at expiration risk.
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).
Minimum Stock Presence (MSP) - Is the minimum quantity of stock to be held for a particular item at a particular location. MSP is often dictated by 'visual appeal' rather than a forecast demand requirement. MSP is often over and above a mathematically calculated Safety Stock level. MSP is also known as Presentation Level or Reserve Stock Quantity (RSQ).
ML - See Machine Learning (ML).
MLOR - Minimum Life on Receipt (MLOR) is typically a customer dictated value. MLOR is the remaining shelf-life remaining that an item must have when receipted by the customer. MLOR is often a percentage of the products total shelf life.
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.
MRO - See Maintenance, Repair and Overhaul (MRO).
MRP - See Material Requirements Planning
MSP - See Minimum Stock Presence.
MTE - Minimum Time until Expiration.
MTO - See Make To Order.
MTS - See Make To Stock.
Multi-Channel - Equivalent to Cross-Channel, Multi-Channel is the experience of a customer who has used a combination of different channels made available by a company for the one purchase, these channels include brick-and-mortar stores, catalogues, websites, mobile applications, TV commercials and call centres. For example, a customer may hear about a product on the radio, look it up on the internet and then go instore to make the actual purchase. Multi-channel is often used by businesses to enhance customer experience.
Multi-echelon - Multi-echelon describes a supply chain with multiple stocking locations (Echelons, also known as 'levels', 'tiers' or 'stages'). E.g. 1st Echelon: Store, 2nd Echelon: DC, 3rd Echelon: Supplier.
Multi-Echelon Optimisation (MEO) - Multi-Echelon Optimisation identifies a globally near-optimal inventory stocking strategy in environments with complex bill-of-material and distribution relationships. Within a population of interconnected SKULs, a change in the service level of any one SKUL can influence other SKUL(s) in the population. Because of these far-reaching and complex effects, optimal service level decisions must involve global, rather than strictly SKUL-level, analysis. MEO searches for a stocking strategy globally optimising the material network.
Multinational Company - A company that both produces and markets products in different or multiple countries.
NBO - See Net Back Orders (NBO).
Net Assets - An accounting metric calculated as: Total assets minus total liabilities. Where assets includes: cash, marketable securities, accounts receivable, prepaid expenses, inventory, fixed assets, intangible assets, goodwill and liabilities includes: accounts payable, accrued liabilities, accrued wages, customer deposits, debt payable, deferred revenue, taxes payable, interest payable and warranties liabilities.
Net Back Orders (NBO) - Net Back Orders (NBO) is equal to Unshipped - Onhand - Past Due EROs.
Net Firm Orders (NFO) - Net firm orders (NFO) are booked customer orders within lead time that exceed the available supply of stock. NFO is calculated as: [FO through lead time + US - OH – Pd EROs – ERO thru lead- time] – NBOs.
Net Income - Net Income is Final Profit and is calculated as: Revenue - All expenses (including taxes). Net Income is not to be confused with Gross Margin (which doesn’t include operating expenses) and EBIT (which doesn’t include interest and tax).
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.
Network Design - A structured approach to determine a supply chain’s optimal configuration - including size and location of facilities and product flows - that best supports an organisations customer value proposition, given known constraints such as transport modes, site capacities and required handling equipment.
Network Flow Optimisation (NFO) - Network Flow Optimisation (NFO) determines the profit-optimal distribution relationships between locations in the network for each SKU. The profit-optimal parent-child relationships are determined based on the following factors: - proximity to the supplier (lead time), - usage rate, - demand variability.
New Item - Planned or recently introduced item for which an inventory will be maintained. A completed new item as opposed to a modified item.
New Product Introduction (NPI) - The process of planning for and introducing a new product into an organisations portfolio of saleable products.
NFO - See Network Flow Optimisation OR Net Firm Orders.
NIBIT - See Net Income Before Interest and Income Tax.
NIC - Not in Catalogue.
Node - A fixed point in a organisations supply chain where goods come to rest, this includes distribution centres, warehouses, and stores.
Non-Ship Dates - Dates shipments cannot be made (e.g.: Saturdays, Sundays and Public Holidays).
Non-stock Item - A non-stock item refers to items that you do not keep physical stock in your store. For instance, you can have an order-on-demand item or you are offering a service. There is no quantity associated with a non-stock item.
NOPAT - Net Operating Profit After Tax = EBIT - Tax. NOPAT excludes costs and tax benefits of debt financing.
NPI - See New Product Introduction (NPI).
NPV - See Net Present Value
Obsolescence Cost - Cost associated with end of life write offs and discounts on about to be discontinued products. Obsolescence costs are identified at the point of obsolescence.
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.
OEM - See Original Equipment Manufacturer (OEM).
OH - See On Hand
OIP - Orders In Process
OmniChannel - Omnichannel is a cross-channel business model that companies use to increase customer experience. An omni-channel experience involves the simultaneous use of multiple sales/marketing channels at once, such as mobile phone, tablet and TV marketing inside a store. The term is also used to describe the consistency between different channels that facilitate and streamline customer interactions.
On Hand (OH) - The balance shown in perpetual inventory records as being physically present at the stocking locations.
On-Demand - Processes performed as and when demand is registered, typically used to refer to on-demand manufacturing and assembly (i.e. making to order).
Open To Buy (OTB) Plan - A plan used in retail inventory management to help companies figure out how much inventory they need to buy on a monthly basis in order to meet sales projections. An OTB Plan is a guide for the amount of dollars a department has to spend on inventory and constantly flexes based on how the business is doing.
Operating Expenditure (OPEX) - An operating expense is any expense that doesn't fit under cost of goods sold (COGS), such as administration and marketing expenses. Also known as Operating Expense.
Operating Expense - See Operating Expenditure.
Operating Expenses - An operating expense is any expense that doesn't fit under cost of goods sold (COGS), such as administration and marketing expenses.
Operating Ratio - A measure of operating efficiency defined as a company's operating expenses as a percentage of revenue.
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.
OPEX - See Operating Expenditure.
Opportunity Cost - The opportunity cost of holding inventory is the loss of other investment alternatives made when a company chooses to hold inventory. This should be based on your company's own cost of capital standards.
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 Batching - The process of placing orders periodically for amounts of product that will minimise their order processing and transportation costs.
Order Cycle - The time that elapses from placement of order until receipt of order. This includes time for order transmittal, processing, preparation and shipping.
Order Fill - A supply chain performance metric calculated as: The percentage of the total orders you are able to completely fill over a certain period of time.
Order Picking - Assembling a customer's order by aggregating items within a warehouse.
Order Processing - Activities associated with filling customer orders.
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.
Ordering Cost - The costs associated with placing an order with a supplier.
Orders Complete - A supply chain measure of the Total Number of Orders Complete / Total Number of Orders, expressed as a percentage.
Original Equipment Manufacturer (OEM) - A company that makes a part or subsystem that is used in another company's end product.
ORQ - See Optimal Replenishment Quantity
OTB - See Open To Buy (OTB) Plan.
Outer Carton Quantity - The number of Inner Cartons in an Outer Carton. An outer carton is typically a cardboard box filled with the individual item packages which are sold 'as-is' without further unpacking.
Outlier - A data point that differs significantly from other data in the same set. Often defined as being more than three standard deviations from the mean.
Outsource - The process of using a third party to complete a specific set of activities previously performed in-house. An example includes outsourcing logistics (3PL).
Overstocked - The projected inventory position at lead time (PIPE) is greater than one ORQ quantity. Excess at Lead Time = PIPE - ORQ. If Excess is greater than Surplus Limit the item is considered to be heavily overstocked at that location and it is likely that action should be taken to reduce future stock on hand. If Excess is less than the Surplus Limit, action may not be required as stock levels will likely reduce to a balanced position over the short-term.
P/E Ratio - See Price/Earnings Ratio
P2P - Peer to Peer.
PAB - Projected Available Balance (PAB) is equivalent to Projected Inventory Position Evaluation (PIPE).
Pallet - A platform on which goods are stacked for ease of transportation and storage. A standard Australian pallet is 1165 × 1165 mm and typically constructed of timber, but may be composite.
Pallet Jack - The most basic form of forklift, a mechanized device used for moving pallets within a warehouse.
Pallet Wrapping Machine - A machine that wraps a pallet's contents in stretch-wrap plastic to secure its goods for shipping.
Palm's Theorem - An estimation of the number of rotable units in repair at a given time, often used as a guide to determining the approximate size of a rotable pool. Based on Palm's Theorem, Pipeline (u) = m*T = Ave. Annual Demand * Ave. Repair Time = Ave. Failure Rate * Ave. Repair Time.
Parent Location - The Parent location is the suppler of a 'child' location within a supply chain. A DC is typically the 'parent' location of a Store, with the stores demand on the DC often termed 'dependant demand'. See Child Location, Dependant Demand, Multi-Echelon.
Pareto Principal - The theory that most effects (80%) come from relatively few of the possible causes (20%). For example, in a supply chain typically 80% sales or costs come from 20% of items. Also known as the 80/20 Rule.
Part Number - See Item Number
Past Due ERO - An Existing Replenishment Order (ERO) which should have been delivered already (the due date has lapsed) but has not yet been receipted by the customer.
Path - An allocated time slot for a train to travel between two points.
PBIT - Profit Before Interest and Tax.
pd ERO - See Past Due ERO.
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.
Pick List - A list of items to be picked from stock in order to fill an order.
Pick Up Points - Lockers or store-based delivery points that are outside of a retailer’s bricks-and-mortar store network, which can be assigned to a customer and used to deliver inventory, often outside of normal business operating hours.
Picking - The process of gathering components of a customer order from storage areas.
Piggyback - A term used to describe a truck trailer being transported on a railroad flatcar. See also Trailer On a Flat Car.
PIP - See Projected Inventory Position Evaluation (PIPE).
PIPE - See Projected Inventory Position Evaluation (PIPE).
Pipeline - See Palm's Theorem.
Planned Order - In DRP and MRP systems, a future order the system plans for in response to forecasted demand.
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 (e.g. 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.
PO - See Purchase Order.
Point of Sale Information (POS) - Price and quantity data from the retail location where sales transactions occur.
Pooling - The process of combining multiple shipment into a truckload in order to reduce shipping costs.
POS - Point of Sale (POS) is the time and location where a retail transaction is completed.
Postponement - An inventory optimisation strategy where inventory which is held in a generic state until a true demand pull is realised. Postponement strategies can occur in upstream processes or in the final assembly of finished goods. Postponement has been famously used by Dell to assemble computers last minute to customer requests. 3D printing now allows wider use of postponement, enabling the conversion of raw materials into end products as demand pulls occur. See also Risk Pooling.
Power by the Hour - The outsourcing of preventative maintenance, often used in the aviation industry and involves leasing asset engines from another party who monitor, maintain and replace the engine as necessary to meet operating requirements over the lease period. This strategy can be attractive to companies looking to lock in a fixed price for expensive assets and is particularly attractive to small fleet airlines.
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.
Predictive Analytics - Predicative analytics includes a variety of statistical techniques such as data mining and predictive modelling to generate trends and forecast future events based on historical data.
Predictive Maintenance - A process to predict when an asset or component requires servicing based on its current physical condition and performance, rather than a fixed duration since the last maintenance occurred. Predictive maintenance combines IOT and big data analytics to optimise maintenance processes, increase asset up-time and reduce operating costs.
Presentation Level - See Minimum Stock Presence (MSP).
Preventative Maintenance - Maintenance that is regularly performed on a piece of equipment to lessen the likelihood of it failing. Preventative maintenance is performed while the equipment is still working, so that it does not break down unexpectedly. Preventative Maintenance typically involves Inspecting plant or equipment at certain intervals to make an assessment if a part(s) looks worn or faulty and should be replaced before it causes an issue.
Price Protection Cost - The cost of reimbursing a channel partner for the difference of any unsold products, so the channel partner doesn't sell at a loss. If the manufacturer has agreed 100% reimbursement to distributers, Price Protection Cost is calculated as: the value of price drop * number of units in the distributers inventory.
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.
Private Carrier - A company that transports its own goods only. The Private Carrier's primary business is not transportation.
Probability of Sufficiency - See Ready Rate.
Procurement - The business functions of acquiring goods or services from an external source, often via a tendering or competitive bidding process.
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.
Procurement Strategy - A planned approach towards cost-effectively purchasing required supplies for the business while considering elements like timeline, project budget, risk and opportunity. It is also used to develop governance framework and understand the process of conducting procurement activities in the business environment.
Product - Something that has been or is being produced. Also known as an item.
Product Code - A means for classifying similar parts, assemblies and raw materials.
Product Description - The description of what a product is.
Product Family - A group of products with similar characteristics. Product families are often used in demand and replenishment planning. Also known as product 'Category'.
Product Rationing - When manufacturers are faced with more demand than they can handle, they ration their products amongst their distributers proportionally, which can hence result in "Shortage Gaming".
Production Capacity - A measure of how much of a product(s) a facility can produce over a specified period of time.
Production Line - A series of equipment dedicated to the manufacture of a specific number of products.
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.
Profit Margin - An accounting performance metric calculated as: NOPAT / Net Assets, expressed as a percentage.
Profit Ratio - A performance metric calculated as: Profit / Sales, expressed as a percentage.
Projected Available Balance (PAB) - See Projected Inventory Position Evaluation (PIPE).
Projected Inventory Position - See Projected Inventory Position Evaluation (PIPE).
Projected Inventory Position Evaluation (PIPE) - An Item's projected inventory available for sale at a future point in time (typically equal to todays date plus the item's total lead time).
Promotion - A set period of time during which an organisation takes specific action in attempt to increase the sales of particular products. These actions typically include reduced prices, or deals such as 'buy one get one free'.
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.
Public Warehouse - The warehouse space that is rented or leased by an independent business providing warehousing services which typically include inventory management, physical stock counts and shipping functionality.
Public Warehousing - The storage of goods by a firm that offers storage service for a fee to the public. See also Public Warehouse.
Pull Distribution - An inventory planning process where stock is shipped to child locations when it reaches a predefined level ("min"). See also Push Distribution.
Purchase Order (PO) - The buyer's authorisation used to formalise a purchase transaction with a supplier.
Push Distribution - An inventory process where stock is shipped from a centralised stock location (DC) to it's child locations based on forecast demand requirements at there locations. See also Pull Distribution.
Put Away - The process of moving receipted goods to their storage area (such as bays within a distribution centre) and recording the movement and location where the material has been placed.
RACI Matrix - A responsibility assignment matrix which assists in project or business process assignment by defining who is: Responsible, Accountable, Consulted, and Informed for a specific task or deliverable.
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.
Rationing - The chosen allocation of stock to customers, or supply chain child locations, when the stock available to distribute is less than the total stock demanded.
Raw Material - The basic material from which other products are made. Raw materials include any outputs of agriculture, forestry, fishing and mining which has been prepared for internationally marketing in substantial volumes.
RDD - Required Delivery Date.
Ready Rate - The probability that at a given (random) point in time, an item has no backorders.
Receivable Efficiency - A supply chain performance metric calculated as: Sales / Average Receivables, expressed as a percentage. The higher the value the better.
Receiving - The processes associated with the physical receipt of stock, which typically includes time spent performing inspections, completing paperwork, processing receipts and paying vendors.
Receiving Calendar - Defines the dates that replenishment orders can be received.
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.
Receiving Location - The location an item is shipped to. A shipped item goes from the Shipping Location to the Receiving Location.
Recoverable - An item which is repairable.
Relative Error Ratio (RER) - The projected demand forecast error (FMAD) divided by the forecast demand through lead time. RER is used by GAINS Advanced Planning System as one of its indicator for reviewing forecast demand, as generated by GAINS models. The lower the RER the better, with zero being the ideal.
Release Date - The date an order for an item is released from manufacturing and ready for distribution.
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.
Requisition Date - Order Date.
RER - See Relative Error Ratio.
Reserve Stock Quantity (RSQ) - The amount of inventory that will be considered reserved stock for contingency/special purposes. See Minimum Stock Presence.
Responsibility Assignment Matrix - See RACI Matrix.
Retail-2-U - An added service to traditional delivery, where a shopping assistant or technical expert visits the customer on or before delivery to help them with their purchase or using the product.
Retailer - A business that sells products to the final end user. Examples include Woolworths, Coles, JB HI-FI, H&M and Zara.
Return Costs - All costs associated with a products return from a customer, including shipping, handling, re-testing and re-packaging.
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.
Reverse Logistics - The operation and processes involved in moving stock back through the supply chain from customer to retailer, retailer to distributer, or distributer to manufacturer for the purposes of capturing value via resale or disposal.
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
Risk Pooling - An inventory optimisation strategy where the safety stock quantity is calculated once for a common component instead of for each of its independent demand streams, thus reducing the overall safety stock requirement which would have been necessary if safety stocks were calculated at each individual independent demand stream. See also Postponement.
RO - See Replenishment Order
ROA - See Return On Assets
Road Train - A road train is a trucking configuration which has a relatively normal tractor unit, but instead of towing one trailer or semi-trailer, it pulls two or more. Road Trains are common in Western Australia.
ROCE - See Return On Capital Employed
ROE - See Return On Equity
ROI - See Return On Investment
ROIC - Return on Invested Capital (ROIC) is a performance metric calculated as: (Net Income - Dividends) / Total Capital.
Rolled Up Demand - The process of aggregating demand upstream within a supply chain. For example the stores serviced by a DC will often have their demand reported as a summed (rolled up) figure on that DC.
Rolling Stock - Locomotives, carriages, wagons, or other vehicles used on a railway.
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
ROP/ROQ - A planning methodology which uses Re-order Points (ROP) and Re-order Quantities (ROQ). ROP/ROQ takes elements of days cover and MIN/MAX and plans for the demand over the lead-time. ROP/ROQ does not account for future orders. ROP = Demand rate (units/day)*Lead-time(days) + SS.
ROR - Rate of Return.
ROSHF - Return on Shareholder Funds (ROSHF) is an accounting metric calculated as: EBIT / Shareholders Funds. ROSHF shows earnings of a company compared to the shareholder equity.
Rotable - A "rotation part" is a repairable parts which when broken and replaced in the field, is sent for repair and then used to replenish service parts.
Rotable Pool - A pool of repairable spare parts inventory set aside to allow for multiple repairs to be accomplished simultaneously. A Rotable Pool allows for a failed operational rotable to be 'swapped out' and repaired while minimising the operational downtime of the asset.
RSQ - See Reserve Stock Quantity (RSQ).
Run-out Time - The number of days or weeks it would take to deplete the product inventory on hand given its expected future demand.
S&OP - See Sales and Operations Planning (S&OP).
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.
Sales and Operations Planning (S&OP) - Sales & Operations Planning (S&OP) is process to ensure the management of the business is effective, integrated and aligned with the organisations objectives and strategies. Sales and Operation Planning (S&OP) is a formal management process that reviews and communicates future business plans, and reviews demand and supply plans to ensure they are realistic, aligned with targets, agreed and being executed effectively by all business functions. The objective of S&OP planning process is to agree on one set of numbers for the organisation to deliver on. S&OP is sometimes referred to as Integrated Business Planning (IBP).
Sales Mix - The proportion of total organisation sales which each product segment or other defined category accounts for.
Sawtooth Diagram - A graphical representation of stock on hand over time as a result of a ROP/ROQ inventory management system. The Sawtooth Diagram typically shows cycles of sharp increases in stock on hand (equal to the ROQ) as inventory is receipted, followed by incremental decreases as stock is consumed over time until the next order receipt.
Scarcity - A term used to describe situations where the allocable inventory is less than the net forecast demand requirements.
SCBI - See Supply Chain Business Institute (SCBI).
SCE - See Supply Chain Execution.
Scenario Planning - A process whereby different “what if” situations and environmental changes are tested or modelled to understand their impacts, assess potential risks and prepare accordingly. Often the insights from this analysis is incorporated into future planning, such as by using a probability based weighting or in the development of contingency plans.
SCLAA - The Supply Chain Logistics Association of Australia (SCLAA) is Australia’s largest association for Supply Chain and Logistics professionals and practitioners working in SME’s through to large Corporates.
SCM7 - Another name for SAP's APO.
SCNO - Supply Chain Network Optimisation (SCNO) takes all of the flows of material needed to satisfy demand into and out of the network, considers the costs and constraints associated with those flows around all of the facilities in the network and then finds the lowest cost solution satisfying all of the identified constraints.
SCSR - See Supply Chain Strategic Review (SCSR).
Seasonal Demand Item - Inventory item whose historical pattern of depletions reflects more activity during certain periods of the year.
Seasonality - A repetitive pattern of demand from year to year (or other repeating time interval), with some periods of demand considerably higher than others. Seasonality explains the fluctuation in demand for various recreational products which are used during different seasons. E.g. increased sales of cold drinks in summer months versus relatively lower sales in winter months.
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 (SL) - Percentage of demand (measured in dollars) for an item which is filled routinely from available stock; demand can come from internal (e.g. higher manufacturing processes) or external (e.g. 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 Agreement (SLA) - Service Level Agreement (SLA) is a call for a measurable level of performance for orders satisfied - on time and complete. Failures to meet the terms in a SLA can mean financial penalties apply.
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.
SG&A - Selling, General, and Administrative Expenses.
Shelf Life - Estimated length of time an item can remain in inventory under normal or specified conditions before its saleability, quality, etc. are affected.
Shingo's Seven Wastes - The seven barriers to improving manufacturing efficiency, as identified by Shigeo Shingo. They are the waste of: overproduction, waiting, transportation, stocks, motion, making defects, and the processing itself.
Shipping Lane - A regularly used route between ports for commercial ships.
Shipping Location - The Location shipping from. A shipped item goes from the Shipping Location to the Receiving Location.
Shortage Gaming - When distributers or retailers raise their order quantities artificially in order to increase the amount of stock that gets rationed to them when their distributer is faced with more demand than they can handle. The net effect of Shortage Gaming is greatly overstating demand which exacerbates the Bull Whip Effect.
Shrinkage - The inventory carrying costs associated with breakage, theft and obsolescence of inventories.
Simulation - Modelling of real-world conditions and behaviour in order to compare the effectiveness of design procedures without the normal time and energy constraints.
Six Sigma - A disciplined, data-driven approach to process improvement which seeks to identify and eliminate causes of defects and variability in manufacturing and business processes. A six sigma process is one in which there is a 99.99966% probability in an output being free of defects.
SKU - See Stock Keeping Unit
SKU Complete - A measure of the Total Number of SKUs Filled / Total Number of SKUs, expressed as a percentage.
SKUL - SKU by Location
SKUL - SKU by Location. A SKUL is a unique code used to identify a particular item at a particular location. The same item will have a unique SKUL for each of the location at which it is stocked across a company's supply chain.
SL - See Service Level.
SLA - See Service Level Agreement.
SLO - Service Level Optimisation.
SLOB - Slow Moving or Obsolete stock (SLOB) is inventory which is current or obsolete and has low or sporadic demand levels.
Slotting - The placement of products within a warehouse. The objective of slotting is to maximise the warehouse space utility and picking efficiency while minimising handling costs by optimising product locations.
SME - Subject Matter Expert.
SMI - Supplier Managed Inventory (SMI) is equivalent to Vendor Managed Inventory (VMI).
SOH - Stock On Hand.
SOP - See Standard Operating Procedure (SOP).
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.
SS - See Safety Stock.
Staging - Inventory that has been moved from its storage location (pick area, packaging area, inspection area) to a location where it is ready to be loaded onto a shipping vehicle.
Standard Cost - Current replacement cost per unit of measure
Standard Operating Procedure (SOP) - Read more: http://www.businessdictionary.com/definition/staged-inventory.html
STO - Stock Transfer Order (STO) is an internal stock movement within an organisation (i.e. DC-to-DC, DC-to-store, and Store-to-Store).
Stock Class - See Inventory Class.
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.
Straight Truck - Straight trucks do not have a separate tractor and trailer. The cab, engine and trailer are one unit.
Subhauler - An independent contractor hired by a transport company to move cargo. Typically a subhauler is an owner/operator or a small company.
Sunk Cost - The unrecovered balance of an investment. Sunk costs have already been paid and are not retrievable, as a result, Sunk Costs should not be considered when making future decisions.
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).
Supplier Managed Inventory - See Vendor Managed Inventory (VMI).
Supplier-Owned Inventory - A combination of Vendor Managed Inventory (VMI) and Consignment Inventory, where the supplier manages and owns the stock at the customer location until the time at which the customer on sells the inventory.
Supply Chain - A system of organisations, people, activities, information, and resources involved in moving products or services from supplier to customer. Supply chain activities involve the transformation of raw materials into a finished goods that are delivered to the end user or customer.
Supply Chain Business Institute (SCBI) - An Australian organisation offering a diverse and world class educational program for the Supply Chain Leaders and Innovators of today’s businesses, with multiple education offerings for the time poor professional.
Supply Chain Execution (SCE) - The physical movement of products, the day-to-day interactions, transactions and management of supply chain infrastructure and goods. The ability to delivery on the supply chain strategy.
Supply Chain Management (SCM) - The planning and management of all activities involved in the production and distribution of products to customers. Supply chain management covers the acquisition of raw materials, manufacturing, logistics and distribution. Supply chain management also involves coordination and collaboration with channel partners, including suppliers, intermediaries, third party service providers, and customers.
Supply Chain Planning - The systems, processes and policies behind managing the supply chain to ensure the right amount of goods are in the right place as the right time and at the lowest cost possible.
Supply Chain Strategic Review (SCSR) - A holistic review of an organisations supply chain strategy to determine the optimal approach going forward.
Supply Chain Strategy - Developing and designing the optimal supply chain structures and frameworks that best supports the business’ service proposition, whilst minimising costs and capital. Aligning the supply chain to the business strategy to deliver the maximum value to the business, customers and key stakeholders.
Supply Variability - The deviation of actual supplier delivery performance from the agreed or planned value, including lead time variance and quantity received variance. Supply variability can be calculated, managed and planned for by Advanced Planning systems such as GAINS.
Surplus Limit - A level of stock which is equal to or greater than a company specified maximum, typically unique by item. Surplus limits are useful for prioritising and managing excessive overstocks and can vary by item and industry from a few weeks up to 2 years of stock (based on forecast demand usage over the same period).
SWOT Analysis - An analysis of the strengths, weaknesses, opportunities, and threats of, and to, an organisation strategy, activity or task.
Tact Time - See Takt Time.
Takt Time - The process of matching production speed with customer demand. Takt time is the maximum amount of time in which a product needs to be produced in order to satisfy customer demand. "Takt" is "Pulse" in German.
Tare Weight - The weight of an empty container or vehicle.
Tariff - A government tax on goods entering or leaving a country.
Third Party Printing (3PP) - Refers to the outsourcing of 3D printing capabilities, where product designs and attributes are provided to a printer who then delivers the finished products in return. 3PPs are equivalent to suppliers.
Third Party Warehousing - The outsourcing of the warehousing function by the goods distributer.
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.
Throughput - A measure of warehousing output volume (weight, number of units, or sales).
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.
TL - Truckload Carriers.
TLT - See Total Lead Time
TMS - Transportation Management System.
TOC - Theory of Constraints.
TOFC - See Trailer on a Flat Car (TOFC).
Top Down Demand Planning - Top Down Demand Planning cedes control over demand forecasting to a centralised head office. Pure Top Down Demand Planning does not consider the unique and individual requirements of stores / end customers. A combination of Top Down Demand Planning and Bottom Up Demand Planning is generally considered best practice. Antonym: Bottom Up Demand Planning.
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).
Touch Labour - The labour that directly adds value to the product, including assemblers, welders, packagers. Touch labour does not include indirect resources who move and stage product or technicians who maintain equipment.
TPRP - Time Phased Replenishment Planning (TPRP) is an advanced planning methodology which determines future replenishment requirements by evaluating an items projected inventory position, with consideration for all elements of current and future supply and demand. TPRP combines both MRP and DRP requirements to forecast independent and dependant demand.
Tractor - The tractor is the driver compartment and engine of the truck. Together the tractor and the trailer make up the truck.
Trailer - The part of the truck which carries goods. Together the tractor and the trailer make up the truck.
Trailer on a Flat Car (TOFC) - A transportation process where the trailer of a truck(s) is directly transported on a train flat car. Also known as Piggybacking.
Transportation Mode - The method of product shipment i.e. air, sea or land
Transportation Planning - The process of defining policies, goals, investments and designs to prepare for the future requirements of goods transport, both internally and externally to the company.
TRO - Total Replenishment Orders.
Turnover - See Inventory Turnover Ratio (ITR)
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
Turns - See Inventory Turnover Ratio (ITR)
Understocked - The projected inventory position at lead time (PIPE) is less than the Safety Stock value.
Unit Cost - The cost associated with a single unit of product.
Unit Fill - Total Number of Units Filled / Total Number of Units (%).
Unit of Measure (UOM) - The unit in which the quantity of an item is managed. For example, kilograms, eaches, box of 6, etc. Various UOMs may exist for a single item. For example, a product may be purchased in cases (unit of purchase) and issued in single units (unit of issue).
Unshipped Demand (Back Order) - See Back Order
UOM - See Unit of Measure (UOM).
Upstream - The direction of movement of goods away from the customer and towards the manufacturer. Includes flows such as return product movements, payments for purchases, etc. The opposite of Downstream.
US - Unshipped.
Variable Cost - Indirect Costs which fluctuates with the volume or activity level of business. Examples of variable cost include inventory holding costs (cost, storage cost, obsolescence, damage, theft, demurrage and taxes) and inventory receiving costs (freight costs, planning/finance/receipting costs on time spent processing new orders, receipts, invoices and receipting stock).
Velocity - The period over which a company has ownership of inventory. Measured as the period of time from raw material / stock receipt to sale of finished goods.
Vendor - The supplier of products or services, the vendor could be the manufacturer or a distributor.
Vendor Code - A unique identifier, usually a number, assigned by a customer for the vendor it buys a specific product from.
Vendor-Managed Inventory (VMI) - The process of a vendor (supplier) managing the stock levels and purchases of the materials supplied.
Vendor-Owned Inventory (VOI) - See Consignment Inventory.
Vertical Integration - The extent to which an organisation directly owns and controls upstream and downstream supply chain functions. From raw material acquisition to the sale finished product to the end user, the more steps in the sequence the organisation controls, the greater the vertical integration.
Virtual Reality - A computer technology that uses Virtual reality headsets, sometimes in combination with physical spaces or multi-projected environments, to generate realistic images, sounds and other sensations that simulate a user's physical presence in a virtual or imaginary environment.
VMI - See Vendor-Managed Inventory (VMI).
VOI - See Vendor-Owned Inventory (VOI).
VR - See Virtual Reality
Warehouse - A commercial storage building for products. Warehouse activities include receipt of product, storage, shipment, and order picking.
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.
Warehousing - The process of storing (holding) goods inside a warehouse.
Weight - Current weight per unit of measure.
Wharfage - An accommodation charge by the pier or dock owner for the loading, unloading, or storage of goods.
Wholesaler - See distributer.
WIP - See Work in Process (WIP).
WMS - See Warehouse Management System (WMS).
Work in Process (WIP) - Material, labour and overhead costs which contribute to the production of a finished good.
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).
Yield - The ratio of usable manufacturing output to raw material input.
Zone Picking - A DC/warehouse order processing method where items are segregated into a series of different zones in order to increase processing efficiency by reducing the travel time required to pick goods. Inventory is then picked from its zone and forwarded to a central warehouse location where it is matched to its corresponding order. Zone picking also improves warehousing efficiency by allowing specialist MHE to be allocated to specific zones (such as larger forklifts to zones with larger product sizes).
“Many thanks for the review; it certainly exceeded our expectations, and we look forward to implementing many, if not all, of the recommendations.”
– Glenn Turner, Finance Director, Renault Nissan