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Warehouse Dictionary
January 2014
V1.1
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2D bar code: Two-dimensional bar code based on a flat set of rows of encrypted data in the form of bars and spaces,
normally in a rectangular or square pattern.
3D bar code: Three-dimensional bar code based on a physically embossed or stamped set of encrypted data interpreted
by variations in height rather than contrast between spaces and bars (as used in 2D bar codes). Often used in
environments where labels cannot be easily attached to items
3PL: This refers to a ‘3rd Party Logistics’, which is where a warehouse is managed on behalf of the owner of the stock.
The type of activities and how a 3PL operates will vary according to the type of organization it is. A 3PL could operate as
a fulfilment services provider or as managed warehousing facility.
80/20 rule: a more specific version of the Pareto principle. 80/20 implies that 80% of effects are the result of 20% of
causes.
ABC Analysis: A classification of items in an inventory according to importance defined in terms of criteria such as sales
volume and purchase volume.
ABC Classification: Classification of a group of items in decreasing order of annual dollar volume or other criteria. This
array is then split into three classes called A, B, and C. The A group represents 10 to 20% by number of items, and 50 to
70% by projected dollar volume. The next grouping, B, represents about 20% of the items and 20% of the dollar volume.
The C-class contains 60 to 70% of the items, and represents about 10 to 30% of the dollar volume.
ABC Inventory Control: An inventory control approach based on the ABC volume or sales revenue classification of
products (A items are highest volume or revenue; C – or perhaps D – are lowest volume SKUs.)
ABC Model: In cost management, a representation of resource costs during a time period that are consumed through
activities and traced to products, services, and customers, or to any other object that creates a demand for the activity
to be performed.
ABC System: In cost management, a system that maintains financial and operating data on an organization’s resources,
activities, drivers, objects and measures. ABC Models are created and maintained within this system.
Abnormal Demand: Demand in any period that is outside the limits established by management policy. This demand
may come from a new customer or from existing customers whose own demand is increasing or decreasing. Care must
be taken in evaluating the nature of the demand: Is it a volume change; is it a change in product mixes, or is it related to
the timing of the order?
Absorption Costing: In cost management, an approach to inventory valuation in which variable costs and a portion of
fixed costs are assigned to each unit of production. The fixed costs are usually allocated to units of output on the basis of
direct labor hours, machine hours, or material costs. Synonym: Allocation Costing.
Acceptable Quality Level (AQL): In quality management, when a continuing series of lots is considered, AQL represents a
quality level that, for the purposes of sampling inspection, is the limit of a satisfactory process average.
Acceptable Sampling Plan: In quality management, a specific plan that indicates the sampling sizes and the associated
acceptance or non-acceptance criteria to be used.
Acceptance Number: In quality management, 1) A number used in acceptance sampling as a cut off at which the lot will
be accepted or rejected. For example, if x or more units are bad within the sample, the lot will be rejected. 2) The value
of the test statistic that divides all possible values into acceptance and rejection regions.
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Acceptance Sampling: 1) The process of sampling a portion of goods for inspection rather than examining the entire lot.
The entire lot may be accepted or rejected based on the sample even though the specific units in the lot are better or
worse than the sample. There are two types: attributes sampling and variables sampling. In attributes sampling, the
presence or absence of a characteristic is noted in each of the units inspected. In variables sampling, the numerical
magnitude of a characteristic is measured and recorded for each inspected unit; this type of sampling involves reference
to a continuous scale of some kind. 2) A method of measuring random samples of lots or batches of products against
predetermined standards.
Accessibility: A carrier’s ability to provide service between an origin and a destination.
Accessorial Charges: A carrier’s charge for accessorial services such as loading, unloading, pickup, and delivery, or any
other charge deemed appropriate.
Accountability: Being answerable for, but not necessarily personally charged with, doing specific work. Accountability
cannot be delegated, but it can be shared. For example, managers and executives are accountable for business
performance even though they may not actually perform the work.
Accounts Payable (A/P): The value of goods and services acquired for which payment has not yet been made.
Accounts Receivable (A/R): The value of goods shipped or services rendered to a customer on whom payment has not
been received. Usually includes an allowance for bad debts.
Accredited Standards Committee (ASC): A committee of ANSI chartered in 1979 to develop uniform standards for the
electronic interchange of business documents. The committee develops and maintains US generic standards (X12) for
Electronic Data Interchange.
Accumulation Bin: A place, usually a physical location, used to accumulate all components that go into an assembly
before the assembly is sent out to the assembly floor.
Accuracy: In quality management, the degree of freedom from error or the degree of conformity to a standard. Accuracy
is different from precision. For example, four-significant-digit numbers are less precise than six-significant-digit numbers;
however, a properly computed four-significant-digit number might be more accurate than an improperly computed sixsignificant-digit number.
Acknowledgement: A communication by a supplier to advise a purchaser that a purchase order has been received. It
usually implies acceptance of the order by the supplier.
Acquisition Cost: In cost accounting, the cost required to obtain one or more units of an item. It is order quantity times
unit cost.
Action Message: An alert that an MRP or DRP system generates to inform the controller of a situation requiring his or
her attention.
Active Stock: Goods in active pick locations and ready for order filling.
Activity: Work performed by people, equipment, technologies, or facilities. Activities are usually described by the actionverb-adjective-noun grammar convention. Activities may occur in a linked sequence and activity-to-activity assignments
may exist. (1) In activity-based cost accounting, a task or activity, performed by or at a resource, required in producing
the organization’s output of goods and services. A resource may be a person, machine, or facility. Activities are grouped
into pools by type of activity and allocated to products. (2) In project management, an element of work on a project. It
usually has an anticipated duration, anticipated cost, and expected resource requirements. Sometimes major activity is
used for larger bodies of work.
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Activity Analysis: The process of identifying and cataloging activities for detailed understanding and documentation of
their characteristics. An activity analysis is accomplished by means of interviews, group sessions, questionnaires,
observations, and reviews of physical records of work.
Activity-Based Budgeting (ABB): An approach to budgeting where a company uses an understanding of its activities and
driver relationships to quantitatively estimate workload and resource requirements as part of an ongoing business plan.
Budgets show the types, number of, and cost of resources that activities are expected to consume based on forecasted
workloads. The budget is part of an organization’s activity-based planning process and can be used in evaluating its
success in setting and pursuing strategic goals.
Activity-Based Costing (ABC): A methodology that measures the cost and performance of cost objects, activities, and
resources. Cost objects consume activities and activities consume resources. Resource costs are assigned to activities
based on their use of those resources, and activity costs are reassigned to cost objects (outputs) based on the cost
objects proportional use of those activities. Activity-based costing incorporates causal relationships between cost
objects and activities and between activities and resources.
Activity-Based Costing Model: In activity-based cost accounting, a model, by time period, of resource costs created
because of activities related to products or services or other items causing the activity to be carried out.
Activity-Based Costing System: A set of activity-based cost accounting models that collectively defines data on an
organization’s resources, activities, drivers, objects, and measures.
Activity-Based Management (ABM): A discipline focusing on the management of activities within business processes as
the route to continuously improve both the value received by customers and the profit earned in providing that value.
AMB uses activity-based cost information and performance measurements to influence management action.
Activity-Based Planning (ABP): Activity-based planning (ABP) is an ongoing process to determine activity and resource
requirements (both financial and operational) based on the ongoing demand of products or services by specific
customer needs. Resource requirements are compared to resources available and capacity issues are identified and
managed.
Activity-based budgeting (ABB) is based on the outputs of activity-based planning.
Activity Level: A description of types of activities dependent on the functional area. Product-related activity levels may
include unit, batch, and product levels. Customer-related activity levels may include customer, market, channel, and
project levels.
Activity profiling: The systematic analysis of the items and orders handled in a warehouse in order to improve its design
and operation.
Actual Cost System: A cost system that collects costs historically as they are applied to production, and allocates indirect
costs to products based on the specific costs and achieved volume of the products.
Actual Costs: The labor, material, and associated overhead costs that are charged against a job as it moves through the
production process.
Actual Demand: Actual demand is composed of customer orders (and often allocations of items, ingredients, or raw
materials to production or distribution). Actual demand nets against or consumes the forecast, depending on the rules
chosen over a time horizon.
Administrative Monetary Penalty System (AMPS): A Canada Customs system of monetary penalties that will be
imposed against violations of Canada Customs regulations.
Advance Material Request: Ordering materials before the release of the formal product design. This early release is
required because of long lead times.
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Advanced Planning and Scheduling (APS): Techniques that deal with analysis and planning of logistics and
manufacturing over the short, intermediate, and long-term time periods. APS describes any computer program that uses
advanced mathematical algorithms or logic to perform optimization or simulation on finite capacity scheduling, sourcing,
capital planning, resource planning, forecasting, demand management, and others. These techniques simultaneously
consider a range of constraints and business rules to provide real-time planning and scheduling, decision support,
available-to-promise, and capable-to-promise capabilities. APS often generates and evaluates multiple scenarios.
Management then selects one scenario to use as the official plan. The five main components of an APS system are
demand planning, production planning, production scheduling, distribution planning, and transportation planning.
Advanced Shipping Notice (ASN): Detailed shipment information transmitted to a customer or consignee in advance of
delivery, designating the contents (individual products and quantities of each) and nature of the shipment. May also
include carrier and shipment specifics, including time of shipment and expected time of arrival.
After-Sale Service: Services provided to the customer after products have been delivered. This can include repairs,
maintenance, and/or telephone support.
Agent: An enterprise authorized to transact business for, or in the name of, another enterprise.
Aging: The separation of invoices, orders, inventory and production lots into time buckets based on due dates, receipt
dates, expiration dates, or other factors. Used to focus attention on past due and most urgent items.
Aggregate Forecast: An estimate of sales, oftentimes phased, for a grouping of products or product families produced by
a facility or firm. Stated in terms of units, dollars, or both, the aggregate forecast is used for sales and production
planning (or for sales and operations planning) purposes.
Aggregate Planning: A process to develop tactical plans to support the organization’s business plan. Aggregate planning
usually includes the development, analysis and maintenance of plans for total sales, total production, targeted
inventory, and targeted inventory, and targeted customer backlog for families of products. The production plan is the
result of the aggregate planning process. Two approaches to aggregate planning exist – production planning and sales
and operations planning.
Agility: The ability to successfully manufacture and market a broad range of low-cost, high-quality products and services
with short lead times and varying volumes that provides enhanced value to customers through customization. Agility
merges the four distinctive competencies of cost, quality, dependability, and flexibility.
Air Cargo: Freight that is moved by air transportation.
Air Cargo Agent: An agent appointed by an airline to solicit and process international airfreight shipments.
Air Cargo Containers: Containers designed to conform to the inside of an aircraft. There are many shapes and sizes of
containers. Air cargo containers fall into three categories: 1) air cargo pallets 2) lower deck containers 3) box type
containers.
Air Carrier: An enterprise that offers transportation service via air.
Air Taxi: An exempt for-hire air carrier that will fly anywhere on demand; air taxis are restricted to a maximum payload
and passenger capacity per plane.
Air Waybill (AWB): A bill of lading for air transport that serves as a receipt for the shipper indicates that the carrier has
accepted the goods listed obligates the carrier to carry the consignment to the airport of destination according to
specified conditions.
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Allocation: 1) A distribution of costs using calculations that may be unrelated to physical observations or direct or
repeatable cause-and-effect relationships. Because of the arbitrary nature of allocations, costs based on cost causal
assignment are viewed as more relevant for management decision-making. 2) Allocation of available inventory to
customer and production orders.
American National Standards Institute (ANSI): A non-profit organization chartered to develop, maintain, and
promulgate voluntary US national standards in a number of areas, especially with regards to setting EDI standards. ANSI
is the US representative to the International Standards Organization (ISO).
American Society of Transportation & Logistics: A professional organization in the field of logistics.
American Trucking Associations:A motor carrier industry association composed of sub-conferences representing
various motor carrier industry sectors.
Any-Quantity (AQ) rate: A rate that applies to any size shipment tendered to a carrier; no discount rate is available for
large shipments.
Arrival Notice: A notice from the delivering carrier to the Notify Party indicating the shipment’s arrival date at a specific
location (normally the destination).
Assemble to Order: A production environment where a good or service can be assembled after receipt of a customer’s
order. The key components (bulk, semi finished, intermediate, sub-assembly, fabricated, purchased, packing, and so on)
used in the assembly or finishing process are planned and usually stocked in anticipation of a customer order. Receipt of
an order initiates assembly of the customized product. This strategy is useful where a large number of end products
(based on the selection of options and accessories) can be assembled from common components.
Assembly: A group of subassemblies and/or parts that are put together and constitute a major subdivision for the final
product. An assembly may be an end item or a component of a higher-level assembly.
Association of American Railroads: A railroad industry association that represents the larger U.S. railroads.
ATA: Actual time of arrival, or also known as the American Trucking Associations.
ATD: Actual time of departure
Attributes: A label used to provide additional classification or information about a resource, activity, or cost object. Used
for focusing attention and may be subjective. Examples are a characteristic, a score or grade of product or activity, or
groupings of these items, and performance measures.
Audit: In reference to freight bills, the term audit is used to determine the accuracy of freight bills.
Auditability: A characteristic of modern information systems gauged by the ease with which data can be substantiated
by tracing it to source documents, and the extent to which auditors can rely on pre-verified and monitored control
processes.
Audit Trail: Manual or computerized tracing of the transactions affecting the contents or origin or a record.
AutoID: Referring to an automated identification system. This includes technology such as bar coding and radio
frequency tagging (RFID).
Automated Guided Vehicle System (AGVS): A computer-controlled materials handling system consisting of small
vehicles (carts) that move along a guideway.
Automated Storage/Retrieval System (AS/RS): A high-density rack inventory storage system with unmanned vehicles
automatically loading and unloading products to/from the racks.
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Available to Promise (ATP): The uncommitted portion of a company’s inventory and planned production maintained in
the master schedule to support customer-order promising. The ATP quantity is the uncommitted inventory balance in
the first period and is normally calculated for each period in which an MPS receipt is scheduled. In the first period, ATP
includes on-hand inventory less customer orders that are due and overdue. Three methods of calculation are used:
discrete ATP, cumulative ATP with look ahead, and cumulative ATP without look ahead.
Average Cost: Total cost, fixed plus variable, divided by total output.
B2B – business-to-business dealings, where one business buys materials from another business
B2C – business-to-customer dealings, where a final customer buys from a business
Back Order: Product ordered but out of stock and promised to ship when the product becomes available.
Backflush: method for issuing (reducing on-hand quantities) materials to a production order. With backflushing, the
material is issued automatically when production is posted against an operation. The backflushing program will use the
quantity completed to calculate through the bill of materials the quantities of the components used, and reduce onhand balances by these quantities.
Backhaul: The process of a transportation vehicle returning from the original destination point to the point of origin. The
1980 Motor Carrier Act deregulated interstate commercial trucking, thereby allowing carriers to contract for the return
trip. The backhaul can be with a full, partial, or empty load. An empty backhaul is called deadheading.
Backorder: (1) The act of retaining a quantity to ship against an order when other order lines have already been shipped.
Backorders are usually caused by stock shortages. (2) The quantity remaining to be shipped if an initial shipment(s) has
been processed. Note: In some cases, backorders are not allowed. This results in a lost sale when sufficient quantities
are not available to completely ship an order or order line.
Bale: A large compressed, bound, and often wrapped bundle of a commodity, such as cotton or hay.
Bar Code: A symbol consisting of a series of printed bars representing values. A system of optical character reading,
scanning, tracking of units by reading a series of printed bars for translation into a numeric or alphanumeric
identification code. A popular example is the UPC code used on retail packaging.
Bar Code Scanner: A device to read bar codes and communicate data to computer systems.
Bar Coding: A method of encoding data for fast and accurate readability. Bar codes are a series of alternating bars and
spaces printed or stamped on products, labels, or other media, representing encoded information which can be read by
electronic readers called bar.
Base Currency: The currency whose value is “one” whenever a quote is made between two currencies.
Basing-Point Pricing: A pricing system that includes a transportation cost from a particular city or town in a zone or
region even though the shipment does not originate at the basing point.
Batch Terminal Communications: The connection between the PC and Batch handheld for purposes of transferring data
or WMS program setting.
Benchmarking: The process of comparing performance against the practices of other leading companies for the purpose
of improving performance. Companies also benchmark internally by tracking and comparing current performance with
past performance.
Benefit-Cost Ratio: An analytical tool used in public planning; a ratio of total measurable benefits divided by the initial
capital cost.
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Best Practice: A specific process or group of processes which have been recognized as the best method for conducting
an action. Best practices may vary by industry or geography depending on the environment being used. Best-practices
methodology may be applied with respect to resources, activities, cost object, or processes.
Bill of Activities: A listing of activities required by a product, service, process output, or other cost object. Bill of activity
attributes could include volume and/or cost of each activity in the listing.
Bill of Lading (BOL): A transportation document that is the contract of carriage containing the terms and conditions
between the shipper and carrier.
Bill of Lading Number: The number assigned by the carrier to identify the bill of lading.
Bill of Materials: lists materials (components) required to produce an item. Multilevel BOMs also show subassemblies
and their components. Other information such as scrap factors may also be included in the BOM for use in materials
planning and costing. Commonly known as a BOM or just a Bill.
Bill of Material Accuracy: Conformity of a list of specified items to administrative specifications, with all quantities
correct.
Bill of Resources: A listing of resources required by an activity. Resource attributes could include cost and volumes.
Bin Center: A drop off facility that is smaller than a public warehouse
Binder: A strip of cardboard, thin wood, burlap, or similar material placed between layers of containers to hold a stack
together.
Blanket Purchase Order: A long-term commitment to a supplier for material against which short-term releases will be
generated to satisfy requirements. Oftentimes, blanket orders cover only one item with predetermined delivery dates.
Blanket Rate: A rate that does not increase according to the distance a commodity is shipped.
Blanket Release: The authorization to ship and/or produce against a blanket agreement or contract.
Blind Receiving: Receiving goods in a DC without any PO or ASN is termed as blind receiving.
Bonded Warehouse: Warehouse approved by the Treasury Department and under bond/guarantee for observance of
revenue laws. Used for storing goods until duty is paid or goods are released in some other proper manner.
Booking: The act of requesting space and equipment aboard a vessel for cargo which is to be transported.
Booking Number: The number assigned to a certain space reservation by the carrier or the carrier’s agent.
Bottleneck: A constraint, obstacle, or planned control that limits throughput or the utilization of capacity.
Boxcar: An enclosed railcar used to transport freight
Bracing: To secure a shipment inside a carrier’s vehicle to prevent damage.
Bracketed Recall: Recall from customers of suspect lot numbers, plus a specified number of lots produced before and
after the suspect ones.
Break-Bulk: The separation of a consolidated bulk load into smaller individual shipments for delivery to the ultimate
consignee. The freight may be moved intact inside the trailer, or it may be interchanged and rehandled to connecting
carriers.
Break Bulk Cargo: Cargo that is shipped as a unit or package (for example: palletized cargo, boxed cargo, large
machinery, trucks) but is not containerized.
Break Bulk Vessel: A vessel designed to handle break bulk cargo.
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Break-Even Point: The level of production or the volume of sales at which operations are neither profitable nor
unprofitable. The break-even point is the intersection of the total revenue and total cost curves.
Buffer: 1) A quantity of materials awaiting further processing. It can refer to raw materials, semi-finished stores, or hold
points, or a work backlog that is purposely maintained behind a work center. 2) In the theory of constraints, buffers can
be time or material, and support throughput and/or due date performance. Buffers can be maintained at the constraint,
convergent points (with a constraint part), divergent points, and shipping points.
Buffer Management: In the theory of constraints, a process in which all expediting in a shop is driven by what is
scheduled to be in the buffers (constraint, shipping, and assembly buffers). By expediting this material into the buffers,
the system helps avoid idleness at the constraint and missed customer due dates. In addition, the causes of items
missing from the buffer are identified, and the frequency of occurrence is used to prioritize improvement activities.
Buffer Stock: A quantity of goods or articles kept in storage to safeguard against unforeseen shortages or demands.
Build to Inventory: A “push” system of production and inventory management. Product is manufactured or acquired in
response to sales forecasts.
Build to Order: A method of reducing inventory by not manufacturing product until there is an actual order from the
customer.
Bulk Area: A storage area for large items which at a minimum are most efficiently handled by the pallet load.
Bulk Cargo: Unpacked dry cargo such as grain, iron ore or coal. Any commodity shipped in this way is said to be in bulk.
Bullwhip Effect: An extreme change in the supply position upstream in a supply chain generated by a small change in
demand downstream in the supply chain. Inventory can quickly move from being backordered to being in excess. This is
caused by the serial nature of communicating orders up the chain with the inherent transportation delays of moving
product down the chain. The bullwhip effect can be eliminated by synchronizing the supply chain.
Bundling: An occurrence where two or more products are combined into one transaction for a single price.
Business Application: Any computer program, set of programs, or package of programs created to solve a particular
business problem or function.
Business Logistics: The process of planning, implementing, and controlling the efficient, effective flow and storage of
goods, services, and related information from the point of origin to the point of consumption for the purpose of
conforming to customer requirements.
Business Plan: (1) A statement of long-range strategy and revenue, cost, and profit objectives usually accompanied by
budgets, a projected balance sheet, and a cash flow (source and application of funds) statement. A business plan is
usually stated in terms of dollars and grouped by product family. The business plan is then translated into synchronized
tactical functional plans through the production planning process (or the sales and operations planning process).
Although frequently stated in different terms (dollars versus units), these tactical plans should agree with each other
and with the business plan. (2) A document consisting of the business details (organization, strategy, and financing
tactics) prepared by an entrepreneur to plan for a new business.
Business Performance Measurement (BPM): A technique that uses a system of goals and metrics to monitor
performance. Analysis of these measurements can help businesses periodically set business goals, and then provide
feedback to managers on progress towards those goals. A specific measure can be compared to itself over time,
compared with a present target, or evaluated along with other measures.
Business Process Outsourcing (BPO): The practice of outsourcing non-core internal functions to third parties. Functions
typically outsourced include logistics, accounts payable, accounts receivable, payroll, and human resources. Other areas
can include IT development or complete management of the IT functions of the enterprise.
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Business Process Reengineering (BPR): The fundamental rethinking and radical redesign of business processes to
achieve dramatic organizational improvements.
Business Unit: A division or segment of an organization generally treated as a separate profit-and-loss center.
Buyer: An enterprise that arranges for the acquisition of goods or services and agrees to payment terms for such goods
or services.
Cab Extenders: Also called gap seals, which help to close the gap between the tractor and the trailer
Cabotage: A federal law that requires coastal and inter-coastal traffic to be carried in U.S.-built and registered ships.
Cage: (1) A secure enclosed area for storing highly valuable items (2) A pallet-sized platform with sides that can be
secured to the tines of a forklift and in which a person may ride to inventory items stored well above the warehouse
floor.
Caged: Referring to the practice of placing high-value or sensitive products in a fenced off area within a warehouse.
Can-Order Point: An ordering system used when multiple items are ordered from one vendor. The can-order point is a
point higher than the original order point. When any one of the items triggers an order by reaching the must-order
point, all items below their can-order point are also ordered. The can-order point is set by considering is set by
considering the additional holding cost that would be incurred if the item were ordered early.
Capacity Management: The concept that capacity should be understood, defined, and measured for each level in the
organization to include market segments, products, processes, activities, and resources. In each of these applications,
capacity is defined in a hierarchy of idle, non-productive, and productive views.
Capacity Requirements Planning: CRP is a capacity planning tool used to verify the ability of resources to meet
scheduled production. CRP uses the routings to calculate loads on work centers, and then compares these loads to the
capacity of these work centers. CRP is more detailed than either rough-cut capacity planning or resources requirements
planning.
CAPEX: A term used to describe the monetary requirements (CAPital EXpenditure) of an initial investment in new
machines or equipment.
Capital: The resources, or money, available for investing in assets that produce output.
Cargo: Merchandise carried by a means of transportation.
Carnet: A Customs document permitting the holder to carry or send special categories of goods temporarily into certain
foreign countries without paying duties or posting bonds.
Carrier: This refers to the business that is used for delivery. Examples of carriers include: Royal Mail, Parcelforce, UPS,
Yodel, City Link, etc.
Carrier Assets: Items that a carrier owns (technically or outright) to facilitate the services they provide.
Carrier Certificate and Release Order: Used to advise customs of the shipment’s details. By means of this document, the
carrier certifies that the firm or individual named in the certificate is the owner or consignee of the cargo.
Carrier Liability: A common carrier is liable for all shipment loss, damage, and delay with the exception of that caused by
act of God, act of a public enemy, act of a public authority, act of the shipper, and the goods’ inherent nature.
Carrier Service: This term refers to the type of service that a carrier offers. This may relate to speed, package or
shipment size, special handling requirements or signature.
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Carrying costs: the costs associated with having specific quantities of inventory. Carrying costs primarily include the cost
of the inventory investment and the costs associated with storing the inventory. Carrying costs are used in cost-based lot
sizing calculations such as EOQ.
Cartage: There are two definitions for this term: 1) charge for pick-up and delivery of goods 2) movement of goods
locally (short distances).
Carton Flow Rack: A storage rack consisting of multiple lines of gravity flow conveyors.
Case picking: Retrieval of full carton loads of each item or inner packs of items from cartons (the latter a.k.a. split-case
picking).
Cash Conversion Cycle: 1) In retailing, the length of time between the sale of products and the cash payments for a
company’s resources. 2) In manufacturing, the length of time from the purchase of raw materials to the collection of
accounts receivable from customers for the sale of products or services.
Cash-to-Cash Cycle Time: The time it takes for cash to flow back into a company after it has been spent for raw
materials. Total Inventory Days of Supply + Days of Sales Outstanding – Average Payment Period for Material in Days.
Category Management: The management of product categories as strategic business units. This practice empowers a
category manager with full responsibility for the assortment decisions, inventory levels, shelf-space allocation,
promotions, and buying. With this authority and responsibility, the category manager is able to more accurately judge
the consumer buying patterns, product sales, and market trends of that category.
Causal forecast – a method that uses a known (possibly cause and effect) relationship to forecast the value of one
variable from known values of another
CCD Scanner: A nice compromise in price and performance between a pen and a laser, this Charged Coupled Device
(CCD) scans up to 200 times per second and reads from as far as 4 inches from the bar code. Very durable.
CELL: A manufacturing or service unit consisting of a number of workstations, and the materials transport mechanisms
and storage buffers that interconnect them.
Central Dispatching: The organization of the dispatching function into one central location. This structure often involves
the use of data collection devices for communication between the centralized dispatching function which usually reports
to the production control department and the shop manufacturing departments.
Centralized Inventory Control: Inventory decision-making (for all SKUs) exercised from one office or department for an
entire company.
Certificate of Compliance: A supplier’s certification that the supplies or services in question meet specified
requirements.
Certificate of Insurance: A negotiable document indicating that insurance has been secured under an open policy to
cover loss or damage to a shipment while in transit.
Certificate of Origin: A document containing an affidavit to prove the origin of imported goods. Used for customs and
foreign exchange purposes.
Certificated Carrier: A for-hire air carrier that is subject to economic regulation and requires an operating certification to
provide service.
Certified Supplier: A status awarded to a supplier who consistently meets predetermined quality, cost, delivery,
financial, and count objectives. Incoming inspection may not be required.
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Change Management: The business process that coordinates and monitors all changes to the business processes and
applications operated by the business, as well as to their internal equipment, resources, operating systems, and
procedures. The change management discipline is carried out in a way that minimizes the risk of problems that will
affect the operating environment and service delivery to the users.
Change Order: A formal notification that a purchase order or shop order must be modified in some way. This change can
result from a revised quantity, date, or specification by the customer; an engineering change; a change in inventory
requirement data; etc.
Changeover: Process of making necessary adjustments to change or switchover the type of products produced on a
manufacturing line. Changeovers usually lead to downtime and for the most part, companies try to minimize changeover
time to help reduce costs.
Channel: 1. A method whereby a business dispenses its product, such as a retail or distribution channel, call center, or a
web-based electronic storefront. 2. A push technology that allows users to subscribe to a web site to browse offline,
automatically display updated pages on their screen savers, and download or receive notifications when pages in the
web site are modified. Channels are available only in browsers that support channel definitions such as Microsoft
Internet Explorer version 4.0.
Channel Conflict: This occurs when various sales channels within a company’s supply chain compete with each other for
the same business. An example is where a retail channel is in competition with a web-based channel set up by the
company.
Channel Partners: Members of a supply chain (i.e., suppliers, manufacturers, distributors, retailers, etc.) who work in
conjunction with one another to manufacture, distribute, and sell a specific product.
Channels of Distribution: Any series of firms or individuals that participates in the flow of goods and services from the
raw material supplier and producer to the final user or consumer.
Chargeable Weight: The shipment weight used in determining freight charges. The chargeable weight may be the
dimensional weight or, for container shipments, the gross weight of the shipment less the tare weight of the container.
Charging Area: A warehouse area where a company maintains battery chargersand extra batteries to support a fleet of
electrically powered materials handling equipment. The company must maintain this area in accordance with
government safety regulations.
Chock: A wedge usually made of hard rubber or steel that is firmly placed under the wheel of a trailer, truck, or boxcar
to stop it from rolling.
CL: Carload rail service requiring shipper to meet minimum weight.
Claim: A charge made against a carrier for loss, damage, delay, or overcharge.
Class I Carrier: A classification of regulated carriers based upon annual operating revenues — motor carriers of property;
$5 million; railroads; $50 million; motor carriers of passengers; $3 million.
Class II Carrier: A classification of regulated carriers based upon annual operating revenues — motor carriers of property:
$1-$5 million; railroads: $10-$50 million; motor carriers of passengers: $3 million.
Class III Carrier: A classification of regulated carriers based upon annual operating revenues — motor carriers of
property: $1 million; railroads $10 million.
Class 1 Railroad: A line haul freight railroad of US ownership with operating revenue in excess of $272.0 million. There
are seven (7) Class 1 Railroads in the United States. Two Mexican and two Canadian railroads would also qualify, if they
were US companies.
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Class Rates: A grouping of goods or commodities under one general heading. All the items in the group make up a class.
The freight rates that apply to all items in the class are called “class rates.”
Classification: An alphabetical listing of commodities, the class or rating into which the commodity is placed, and the
minimum weight necessary for the rate discount; used in the class rate structure.
Classification yard: A railroad terminal area where railcars are grouped together to form train units.
Clearance: A document stating that a shipment is free to be imported into the country after all legal requirements have
been met.
Clearinghouse: A conventional or limited-purpose entity generally restricted to providing specialized services, such as
clearing funds or settling accounts.
CLM: Council of Logistics Management, now known as The Council of Supply Chain Management Professionals.
Closed Loop MRP: A system build around material requirements planning that includes the additional planning
processes of production planning (sales and operations planning), master production scheduling, and capacity
requirements planning. Once this planning phase is complete and the plans have been accepted as realistic and
attainable, the execution processes come into play. These processes include the manufacturing control process of inputoutput (capacity) measurement, detailed scheduling and dispatching, as well as anticipated delay reports from both the
plant and suppliers, supplier scheduling, and so on. The term “closed loop implies not only that each of these processes
is included in the overall system, but also that feedback is provided by the execution processes so that the planning can
be kept valid at all times..
Co-Packer: A contract co-packer produces goods and/or services for other companies, usually under the other
company’s label or name. Co-packers are more frequently seen in consumer packaged goods and foods.
Co-Managed Inventory (CMI): A form of continuous replenishment in which the manufacturer is responsible for
replenishment of standard merchandise, while the retailer manages the replenishment of promotional merchandise.
Coastal Carriers: Water carriers that provide service along coasts serving ports on the Atlantic or Pacific Oceans or on
the Gulf of Mexico.
Collaborative Planning, Forecasting, and Replenishment (CPFR): (1) A collaboration process whereby supply chain
trading partners can jointly plan key supply chain activities from production and delivery of raw materials, to production
and delivery of final products to end customers. Collaboration encompasses business planning, sales forecasting, and all
operations required to replenish raw materials and finished goods. (2) A process philosophy for facilitating collaborative
communications. CPFR is considered a standard, endorsed by the Voluntary Inter-Industry Commerce Standards.
Collect Freight: Freight payable to the carrier at the port of discharge or ultimate destination. The consignee does not
pay the freight charge if the cargo does not arrive at the destination.
Commercial Invoice: A document created by the seller. It is an official document which is used to indicate, among other
things, the name and address of the buyer and seller, the product(s) being shipped, and their value for customs,
insurance, or other purposes.
Commercial zone: The area surrounding a city or town to which rate carriers quote for the city or town also apply; the
ICC defines the area.
Committed Capability: The portion of the production capability that is currently in use, or is scheduled for use.
Commodity Code: A code describing a commodity or a group of commodities pertaining to goods classification. This
code can be carrier tariff or regulating in nature.
Commodity Procurement Strategy: The purchasing plan for a family of items. This would include the plan to manage the
supplier base and solve problems.
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Commodity Rate: A rate for a specific commodity and its origin-destination.
Common Carrier: Transportation available to the public that does not provide special treatment to any one party and is
regulated as to the rates charged, the liability assumed, and the service provided. A common carrier must obtain a
certificate of public convenience and necessity from the Federal Trade Commission for interstate traffic.
Competitive Benchmarking: Benchmarking a product or service against competitors.
Competitive Bid: A price/service offering by a supplier that must compete with offerings from other suppliers.
Complete and On-Time Delivery (COTD): A measure of customer service. All items on any given order must be delivered
on time for the order to be considered as complete and on time.
Complete Manufacture to Ship Time: Average time from when a unit is declared shippable by manufacturing until the
unit actually ships to a customer.
Compliance: Meaning that products, services, processes, and/or documents comply with requirements.
Component: Material that will contribute to a finished product but is not the finished product itself. Examples include
tires for an automobile, power supply for a personal computer, or a zipper for a ski parka.
Composite forecast: a forecast that is created by combining (through averaging or weighted averaging) the results of
multiple forecasting methods.
Conference Carrier: An ocean carrier who is a member of an association known as a “conference.” The purpose of the
conference is to standardize shipping practices, eliminate freight rate competition, and provide regularly scheduled
service between specific ports.
Configuration: The arrangement of components as specified to produce an assembly.
Configure/Package to Order: A process where the trigger to begin to manufacture, final assembly, or packaging of a
product is an actual customer order or release rather than a market forecast. In order to be considered a configure-toorder environment, less than 20% of the value added takes place after the receipt of the order or release, and virtually
all necessary design and process documentation is available at time of order receipt.
Confirmation: With regards to EDI, a formal notice (by message or code) from an electronic mailbox system or EDI
server indicating that a message sent to a trading partner has reached its intended mailbox or has been retrieved by the
addressee.
Consignee: The party to whom goods are shipped and delivered. The receiver of a freight shipment.
Consignment inventory: inventory that is in the possession of the customer, but is still owned by the supplier. The
supplier places some of his inventory in his customer’s possession (in their store, warehouse, or plant) and allows them
to sell or consume directly from his stock. The customer purchases the inventory only after he has resold or consumed
it.
Consignor: The party who originates a shipment of goods (shipper). The sender of a freight shipment, usually the seller.
Consolidation: Combining two or more shipments in order to realize lower transportation rates. Inbound consolidation
from vendors is called make-bulk consolidation; outbound consolidation to customers is called break-bulk consolidation.
Consolidation Point: The location where consolidation takes place.
Consolidator: An enterprise that provides services to group shipments, orders, and/or goods to facilitate movement.
Consolidator’s Bill of Lading: A bill of lading issued by a consolidator as a receipt for merchandise that will be grouped
with cargo obtained from other shippers.
Consortium: A group of companies that works together to jointly produce a product, service, or project.
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Consumables – stocks of materials needed to support operations, but which do not form part of the final product, such
as oil, paper, cleaners, etc.
Container: (1) A box, typically 10 to 40 feet long, which is primarily used for ocean freight shipments. For travel to and
from ports, containers are loaded onto truck chassis or on railroad flatcars. (2) The packaging, such as a carton, case,
box, bucket, drum, bin, bottle, bundle, or bag, that an item is packed and shipped in.
Container Chassis: A vehicle built for the purpose of transporting a container so that, when a container and chassis are
assembled, the produced unit serves as a road trailer.
Container Freight Station (CFS): The location designated by carriers for receipt of cargo to be packed into
containers/equipment by the carrier. At destination, CFS is the location designated by the carrier for unpacking of cargo
from equipment/containers.
Container Freight Station Charge: The charge assessed for services performed at the loading or discharge location.
Container Freight Station to Container Freight Station (CFS/CFS): A type of steamship-line service in which cargo is
transported between container freight stations, where containers may be stuffed, stripped, or consolidated. Usually
used for less-than-container load shipments.
Container I.D.: An identifier assigned to a container by a carrier.
Containerization: A shipment method in which commodities are placed in containers, and after initial loading, the
commodities, per se, are not rehandled in shipment until they are unloaded at the destination.
Container on Flat Car (COFC): A container that is transported on a rail flatcar. It can be shipped via tractor/trailer using a
chassis as the wheel section.
Container Yard: The location designated by the carrier for receiving, assembling, holding, storing, and delivering
containers, and where containers may be picked up by shippers or redelivered by consignees.
Continuous Flow Distribution (CFD): The streamlined pull of products in response to customer requirements while
minimizing the total costs of distribution.
Continuous-Flow, Fixed-Path Equipment: Materials handling devices that include conveyors and drag lines.
Continuous Improvement (CI): A structured, measurement-driven process that continually reviews and improves
performance.
Continuous Replenishment:Continuous replenishment is the practice of partnering between distribution channel
members that changes the traditional replenishment process from distributor-generated purchase orders based on
economic order quantities to the replenishment of products based on actual and forecasted product demand.
Contract: An agreement between two or more competent persons or companies to perform or not to perform specific
acts or services or to deliver merchandise. A contract may be oral or written. A purchase order, when accepted by a
supplier, becomes a contract. Acceptance may be in writing or by performance, unless the purchase order requires
acceptance in writing.
Contract Carrier: A for-hire carrier that does not serve the general public but serves shippers with whom the carrier has
a continuing contract. The contract carrier must secure a permit to operate.
Contract of Affreightment: A contract between a cargo shipper and carrier for the transport of multiple cargoes over a
period of time. Contracts are individually negotiated and usually include cargo description, quantities per shipment and
in total, load and discharge ports, freight rates and duration of the contract.
Contract warehouse:Business that handles shipping, receiving, and storage of products on a contract basis
Contribution: The difference between sales price and various costs. Contribution is used to cover fixed costs and profits.
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Contribution Margin: An amount equal to the difference between sales revenue and variable costs.
Control system – part of a scheduling system that checks progress and makes sure that plans are actually being achieved
Controlled Access: Referring to an area within a warehouse or yard that is fenced and gated. These areas are typically
used to store high-value items and may be monitored by security cameras.
Conveyance: The application used to describe the function of a vehicle of transfer.
Conveyor: A materials handling device that moves freight from one warehouse area to another. Roller conveyors utilize
gravity, whereas belt conveyors use motors.
Cooperative Associations: Groups of firms or individuals having common interests; agricultural cooperative associations
may haul up to 25 percent of their total interstate non-farm, nonmember goods tonnage in movements incidental and
necessary to their primary business.
Coordinated Transportation:Two or more carriers of different modes transporting a shipment.
Core Competency: Bundles of skills or knowledge sets that enable a firm to provide the greatest level of value to its
customers in a way that’s difficult for competitors to emulate and that provides for future growth. Core competencies
are embodied in the skills of the workers and in the organization. They are developed through collective learning,
communication, and commitment to work across levels and functions in the organization and with the customers and
suppliers. A core competency could be the capability of a firm to coordinate and harmonize diverse production skills and
multiple technologies.
Core Process: That unique capability that is central to a company’s competitive strategy.
Corporate strategy: the set of strategic decisions that affect the whole corporation
Cost Allocation: In accounting, the assignment of costs that cannot be directly related to production activities via more
measurable means, e.g., assigning corporate expenses to different products via direct labor costs or hours.
Cost Center: In accounting, a sub-unit in an organization that is responsible for costs.
Cost Driver: In accounting, any situation or event that causes a change in the consumption of a resource, or influences
quality or cycle time. An activity may have multiple cost drivers. Cost drivers do not necessarily need to be quantified;
however, they strongly influence the selection and magnitude of resource drivers and activity drivers.
Cost Driver Analysis: In cost accounting, the examination, quantification, and explanation of the effects of cost drivers.
The results are often used for continuous improvement programs to reduce throughput times, improve quality, and
reduce cost.
Cost, Insurance, Freight: A freight term indicating that the seller is responsible for cost, the marine insurance, and the
freight charges on an ocean shipment of goods.
Cost Management: The management and control of activities and drivers to calculate accurate product and service
costs, improve business processes, eliminate waste, influence cost drivers, and plan operations. The resulting
information can be very useful in setting and evaluating an organization’s strategies.
Cost of capital: costs associated with having money tied up in inventory. Generally this would be the interest rate paid
on business debt, but could optionally be the return on investment a company could expect if it had access to money to
invest.
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Cost of goods sold: accounting term used to describe the total value (cost) of products sold during a specific period of
time. Since inventory is an asset, it is not expensed when it is purchased or produced; it instead goes into an asset
account (the inventory account). When product is sold, the value of the product (the cost, not the sell price) is moved
from the asset account to an expense account called “cost of goods sold” or COGS. COGS appear on the profit and loss
statement and are also used in some inventory measurements (such as inventory turns).
Cost of Lost Sales: The forgone profit companies associate with a stockout.
Council of Supply Chain Management Professionals (CSCMP): The CSCMP is a not-for-profit professional business
organization consisting of individuals throughout the world who have interests and/or responsibilities in logistics and
supply chain management, and the related functions that make up these professions. Its purpose is to enhance the
development of the logistics and supply chain management professions by providing these individuals with educational
opportunities and relevant information through a variety of programs, services, and activities.
Countertrade: A reciprocal trading agreement that includes a variety of transactions involving two or more parties.
Courier Service: A fast, door-to-door service for high-valued goods and documents; firms usually limit service to
shipments weighing fifty pounds or less.
Crane: A materials handling device that lifts heavy items. There are two types: bridge and stacker.
Credit Terms: The agreement between two or more enterprises concerning the amount and timing of payment for
goods or services.
Critical Differentiators: This is what makes an idea, product, service, or business model unique.
Critical Stock: Commodity that must be maintained in inventory, though little used, to respond to expressed need.
Critical Success Factor (CSF): Those activities and/or processes that must be completed and/or controlled to enable a
company to reach its goals.
Cross Docking: A distribution system in which merchandise received at the warehouse or distribution center is not put
away, but instead is readied for shipment to retail stores. Cross docking requires close synchronization of all inbound
and outbound shipment movements. By eliminating the put-away, storage, and selection operations, it can significantly
reduce distribution costs.
Cubage: Cubic volume of space being used or available for shipping or storage.
Cube Out: The situation when a piece of equipment has reached its volumetric capacity before reaching the permitted
weight limit.
Cube Utilization: In warehousing, a measurement of the utilization of the total storage capacity of a vehicle or
warehouse.
Cubic Capacity: The carrying capacity of a piece of equipment according to measurement in cubic feet.
Cubic Space: In warehousing, a measurement of space available, or required, in transportation and warehousing.
Cubing: The cubic size of the item may be created for the item’s units of measurement (i.e., each, box, and case) and
stored in the item’s record (at the Item Data form). When prompted to perform a move, receipt, or put away, the
system is able to determine space availability in a particular location. If a location has insufficient space to accommodate
the material, the system directs the user to select another location. The user can also override and store the item in the
location.
Cumulative Lead Time: The total time required to source components, build, and ship a product.
Currency Adjustment Factor (CAF): A surcharge imposed by a carrier on ocean freight charges to offset foreign currency
fluctuations.
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Current-demand inventory: inventory carried to meet immediate expected demand. For example, the inventory that
will be shipping in today’s orders. The definition of “current demand” is somewhat subject to interpretation since you
must apply a period of time to determine what is considered “current demand” as opposed to “future demand”.
Customer Acquisition or Retention:The rate at which new customers are acquired, or existing customers are retained.
A key selling point to potential marquis partners.
Customer Order: An order from a customer for a particular product or a number of products. It is often referred to as an
actual demand to distinguish it from a forecasted demand.
Customer/Order Fulfillment Process: A series of customers’ interactions with an organization through the order-filling
process, including product/service design, production and delivery, and order stats reporting.
Customer Relationship Management (CRM): This refers to information systems that help sales and marketing functions
as opposed to the ERP (Enterprise Resource Planning), which is for back-end integration.
Customer Segmentation: Dividing customers into groups based on specific criteria, such as products purchased,
customer geographic location, etc.
Customer-Supplier Partnership: A long-term relationship between a buyer and a supplier characterized by teamwork
and mutual confidence. The supplier is considered an extension of the buyer’s organization. The partnership is based on
several commitments. The buyer provides long-term contracts and uses fewer suppliers. The supplier implements
quality assurance processes so that incoming inspection can be minimized. The supplier also helps the buyer reduce
costs and improve product and process designs.
Customization: Creating a product from existing components into an individual order.
Customs: The authorities designated to collect duties levied by a country on imports and exports.
Customs Broker: A firm that represents importers/exporters in dealings with customs. Normally responsible for
obtaining and submitting all documents for clearing merchandise through customs, arranging inland transport, and
paying all charges related to these functions.
Customs Clearance: The act of obtaining permission to import merchandise from another country into the importing
nation.
Customs House Broker: A business firm that oversees the movement of international shipments through Customs, and
ensures that the documentation accompanying a shipment is complete and accurate.
Customs Invoice: A document that contains a declaration by the seller, the shipper, or the agent as to the value of the
shipment.
Customs Value: The value of the imported goods on which duties will be assessed.
CWT: The abbreviation for hundredweight, which is the equivalent of 100 pounds.
Cycle Inventory: An inventory system where counts are performed continuously, often eliminating the need for an
annual overall inventory. It is usually set up so that A items are counted regularly (i.e., every month), B items are
counted semi-regularly (every quarter or six months), and C Items are counted perhaps only once a year.
Cycle service level : the probability of meeting all demand in a stock cycle
Cycle stock: normal stock used during operations
Cycle Time: The amount of time it takes to complete a business process.
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Dashboard: A performance measurement tool used to capture a summary of the key performance indicators/metrics of
a company. Metrics dashboards/scorecards should be easy to read and usually have red, yellow, green indicators to flag
when the company is not meeting its metrics targets. Ideally, a dashboard/scoreboard should be cross functional in
nature and include both financial and non-financial measures. In addition, scorecards should be reviewed regularly – at
least on a monthly basis, and weekly in key functions such as manufacturing and distribution where activities are critical
to the success of a company. The dashboards/scorecards philosophy can also be applied to external supply chain
partners like suppliers to ensure that their objectives and practices align.
Data Dictionary: Lists the data elements for which standards exist. The Joint Electronic Document Interchange (JEDI)
committee developed a data dictionary that is employed by many EDI users.
Data Mining: The process of studying data to search for previously unknown relationships. This knowledge is then
applied to achieving specific business goals.
Data Synchronization: The data transfer process between a handheld device and a desktop computer.
Data Warehouse: A repository of data that has been specially prepared to support decision-making applications.
Date Code: A label on products with the date of production. In food industries, it’s often an integral part of the lot
number.
Days of Supply: Measure of quantity of inventory on hand in relation to number of days for which usage will be covered.
For example, if a component is consumed in manufacturing at the rate of 100 per day and there are 1,585 units available
on hand, this represents 15.85 days’ supply.
DDP: Delivered Duty Paid. Relates to international delivery where the price quoted by a seller and/or paid by the
customer for their order includes all of the relevant charges such as customs import fees, any taxes and/or duty charges.
These fees / taxes / duties are to be paid for by the shipper of the order.
DDU: Delivered Duty Unpaid. Relates to international delivery where the quoted by a seller and/or paid by the customer
does not include all charges, such as customs import fees, any taxes and/or duty charges. These fees / taxes / duties are
to be paid for by the recipient of the shipment on delivery.
Deadweight Tons (DWT): The cargo carrying capacity of a vessel, including fuel oil, stores and provisions.
Declaration of Dangerous Goods: To comply with the U.S. regulations, exporters are required to provide special notices
to inland and ocean transport companies when goods are hazardous.
Declared Value for Carriage: The value of the goods, declared by the shipper on a bill of lading, for the purpose of
determining a freight rate or the limit of the carrier’s liability.
Deconsolidator: An enterprise that provides services to un-group shipments, orders, goods, etc., to facilitate
distribution.
Dedicated Contract Carriage: A third party service that dedicates equipment (vehicles) and drivers to a single customer
for its exclusive use on a contractual basis.
Defective goods inventory (DGI): Those items that have been returned, have been delivered damaged and have a
freight claim outstanding, or have been damaged in some way during warehouse handling.
Delivery Appointment: The time agreed upon between two enterprises for goods or transportation equipment to arrive
at a selected location.
Delivery Confirmation: An electronic message sent by the carrier to confirm that the shipment has been successfully
delivered. Depending on the carrier service, this may be the final delivery status update message.
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Delivery-Duty-Paid: Supplier/manufacturer arrangement in which suppliers are responsible for the transport of the
goods they’ve produced, which are being sent to a manufacturer. This responsibility includes tasks such as ensuring that
products get through Customs.
Delivery Order: A document issued by the customs broker to the ocean carrier as authority to release the cargo to the
appropriate party.
Delivery Option: This is the choice of delivery that a customer may choose when placing an order.
Delivery Service: This term refers to the type of service that a retailer/shipper offers and might be agnostic to
carrier/carrier service. A delivery usually relates to speed of delivery, timeslot for delivery or the type of delivery. For
example, “standard”, “next day”, “pre 12pm” or “deliver to locker” are all examples of delivery service.
Demand Chain Management: The same as supply chain management, but with an emphasis on consumer pull versus
supplier push.
Demand: the need for a specific item in a specific quantity.
Demand override: any adjustment that is used to supersede your demand history (usually for the purposes of
forecasting or calculating safety stock). A demand override can be a fixed quantity that will be used to replace the actual
demand, or it can be a factor that can be used to adjust the demand.
Demand Planning Systems: The systems that assist in the process of identifying, aggregating, and prioritizing all sources
of demand for the integrated supply chain of a product of service at the appropriate level, horizon, and interval.
Demand Signal: A signal from a consumer, customer or using operation that triggersthe issue of product or raw
material.
Demand Supply Balancing: The process of identifying and measuring the gaps and imbalances between demand and
resources in order to determine how to best resolve the variances through marketing, pricing, packaging, warehousing,
outsource plans, or some other action that will optimize service, flexibility, costs, assets, (or other supply chain
inconsistencies) in an iterative and collaborative environment.
Demand variability: changes in demand from period to period. Demand variability is the result of trend, seasonality,
events, and noise.
Demurrage: The carrier charges and fees applied when rail freight cars and ships are retained beyond a specified loading
or unloading time.
Deregulation: Revisions or complete elimination of economic regulations controlling transportation. The Motor Carrier
Act of 1980 and the Staggers Act of 1980 revised the economic controls over motor carriers and railroads, and the
Airline Deregulation Act of 1978 eliminated economic controls over air carriers.
Dispatch Confirmation: An electronic message sent by the warehouse to confirm that a specific parcel, package or
shipment has successfully left the warehouse. A dispatch confirmation may contain the parcel tracking number.
Destination: The location designated as a receipt point for goods/shipment.
Destock: reduce the amount of stock held
Devanning: The unloading of cargo from a container or other piece of equipment.
Differential: A discount offered by a carrier that faces a service time disadvantage over a route.
Direct Cost: A cost that can be directly traced to a cost object since a direct or repeatable cause-and-effect relationship
exists. A direct cost uses a direct assignment or cost causal relationship to transfer costs.
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Direct Product Profitability (DPP): Calculation of the net profit contribution attributable to a specific product or product
line.
Direct Production Material: Material that is used in the manufacturing/content of a product. (Example: purchased parts,
solder, SMT glues, adhesives, mechanical parts, bill-of-materials parts, etc.)
Direct Retail Locations: A retail location that purchases products directly from your organization or responding entity.
Direct shipping: a procurement strategy that allows a company to sell product without ever stocking or even handling
the product. When a customer places an order with a seller, the order is passed on to the seller’s supplier who will then
ship the product directly to the customer.
Direct Store Delivery (DSD): Process of shipping direct from a manufacturer’s plant or distribution center to the
customer’s retail store, thus bypassing the customer’s distribution center.
Discrete Manufacturing: Discrete manufacturing processes create products by assembling unconnected distinct parts as
in the production of distinct items such as automobiles, appliances, or computers.
Discrete picking: An order picking method where a single picker picks all of the items for a single order.
Distributed Inventory: Inventory that is geographically dispersed. For example, where a company maintains inventory in
multiple distribution centers to provide a higher level of customer service.
Distribution: Outbound logistics, from the end of the production line to the end user. The activities associated with the
movement of material, usually finished goods or service parts, from the manufacturer to the customer. These activities
encompass the functions of transportation, warehousing, inventory control, material handling, order administration, site
and location analysis, industrial packaging, data processing, and the communications network necessary for effective
management. It includes all activities related to physical distribution, as well as the return of goods to the manufacturer.
In many cases, this movement is made through one or more levels of field warehouses. The systematic division of a
whole into discrete parts having distinctive characteristics.
Distribution Center (DC): The warehouse facility which holds inventory from manufacturing pending distribution to the
appropriate stores.
Distribution Channel: One or more companies or individuals who participate in the flow of goods and services from the
manufacturer to the final user or consumer.
Distribution Channel Management: The organizational and pipeline strategy for getting products to customers. Direct
channels involve company sales forces, facilities, and/or direct shipments to customers; indirect channels involve the
use of wholesalers, distributors, and/or other parties to supply the products to customers. Many companies use both
strategies, depending on markets and effectiveness.
Distribution inventory: distribution inventory is the result of a distribution network and the increases in inventory
required to operate out of multiple distribution points. When you decide to have two or three or more strategically
located distribution centers rather than a single centrally located distribution center, you will generally increase your
overall inventory levels. The reason for this is you are now breaking up your demand among three locations. When
demand is broken up (disaggregated) you will usually find greater variability in the demand at each location. This
increase in variability results in increases in safety stock in order to meet desired service levels. This increase in safety
stock is essentially your distribution inventory. Some practitioners consider all inventory in the distribution network to
be distribution inventory. I disagree with that definition, since much of that inventory would exist regardless of the
distribution network.
Distribution Planning: The planning activities associated with transportation, warehousing, inventory levels, materials
handling, order administration, site and location planning, industrial packaging, data processing, and communications
networks to support distribution.
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Distribution Requirements Planning (DRP): A system of determining demands for inventory at distribution centers and
consolidating demand information in reverse as input to the production and materials system.
Distribution Resource Planning (DRP II): The extension of distribution requirements planning into the planning of the
key resources contained in a distribution system: warehouse space, workforce, money, trucks, freight cars, etc.
Distribution Warehouse: A finished goods warehouse from which a company assembles customer orders.
Distributor: A business that does not manufacture its own products, but purchases and resells these products. Such a
business usually maintains a finished goods inventory. Synonym: Wholesaler.
Dock Receipt: A document used to accept materials or equipment at an ocean pier or accepted location. Provides the
ocean carrier with verification of receipt and the delivering carrier with proof of delivery.
Dock-to-stock cycle measurement: measuring the amount of time it takes between the time something arrives at your
dock, and the time it is in stock and available for sale or use.
Document: In EDI, a form, such as an invoice or purchase order, that trading partners have agreed to exchange and that
the EDI software handles within its compliance-checking logic.
Domestic Trunk Line Carrier: A classification for air carriers that operate between major population centers. These
carriers are now classified as major carriers.
Double-Pallet Jack: A mechanized device for transporting two standard pallets simultaneously.
Drayage: The service offered by a motor carrier for pick-up and delivery of ocean containers or rail containers. Drayage
agents usually handle full-load containers for ocean and rail carriers.
Drayage Firms: Motor carriers that provide local pickup and delivery of trailers and containers (on chassis)
Driving Time Regulations: U.S. Department of Transportation rules that limit the maximum time a driver may drive in
interstate commerce; the rules prescribe both daily and weekly maximums.
Drop: A situation in which an equipment operator deposits a trailer or boxcar at a facility at which it is to be loaded or
unloaded.
Drop Ship: To take the title of the products but not actually handle, stock, or deliver it, e.g., to have one supplier ship
directly to another or to have a supplier ship directly to the buyer’s customer.
Dual Operation: A motor carrier that has both common and contract carrier operating authority.
Dual rate system: An international water carrier pricing system in which a shipper signing an exclusive use agreement
with the conference pays a rate 10 to 15 percent lower than non-signing shippers do for an identical shipment.
Dumping: When a product is sold below cost in a foreign market and/or when a product is sold at a lower price in the
foreign market than in a domestic market, with the intention of driving out competition in the foreign market.
Dunnage: The packing material used to protect a product from damage during transport.
DUNS Number: A coded, numerical representation assigned to a specific company (USA).
Duty Free Zone (DFZ): An area where goods or cargo can be stored without paying import customs duties while awaiting
manufacturing or future transport.
EAN.UCC: European Article Numbering/Uniform Code Council. The EAN.UCC System provides identification standards to
uniquely identify trade items, logistics units, locations, assets, and service relations worldwide. The identification
standards define the construction of globally-unique and unambiguous numbers.
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Economic Order Quantity (EOQ): An inventory model that determines how much to order by determining the amount
that will meet customer service levels while minimizing total ordering and holding costs.
Economic Value Added (EVA): A measurement of shareholder value as a company’s operating profits after tax, less an
appropriate charge for the capital used in creating the profits.
Economy of Scale: A phenomenon whereby larger volumes of production reduce unit cost by distributing fixed costs
over a larger quantity.
EDI Interchange:Communication between partners in the form of a structured set of messages and service segments
starting with an interchange control header and ending with an interchange control trailer. In the context of X.400 EDI
messaging, the contents of the primary body of an EDI message.
EDI Standards: Criteria that define the data content and format requirements for specific business transactions (e.g.,
purchase orders). Using standard formats allows companies to exchange transactions with multiple trading partners
more easily.
EDI Transmission: A functional group of one or more EDI transactions that are sent to the same location in the same
transmission, and are identified by a functional group header and trailer.
Effective dates: dates on the detail lines of bills of materials and routings that let the system know when these lines
should be included in planning and execution activities.
Effective lead time: a lead time that has been adjusted to take into account additional factors. For example, in a fixedschedule ordering system (periodic review) you may adjust your lead time to include the time between ordering
opportunities.
Electronic Commerce (EC): Also written as e-commerce. Conducting business electronically via traditional EDI
technologies, or online via the Internet. In the traditional sense of selling goods, it’s possible to do this electronically
because of certain software programs that run the main functions of e-commerce support, such as product display,
ordering, shipment, billing, and inventory management. The definition of e-commerce includes business activity that is
business-to-business (B2B) and/or business-to-consumer (B2C)
Electronic Data Interchange (EDI): Intercompany, computer-to-computer transmission of business information in a
standard format. For EDI purists, computer to computer means direct transmission from the originating application
program to the receiving or processing application program. An EDI transmission consists only of business data, not any
accompanying verbiage or free-form messages. Purists might also contend that a standard format is one that is
approved by a national or international standards organization, as opposed to formats developed by industry groups or
companies.
Electronic Data Interchange Association:A national body that propagates and controls the use of EDI in a given country.
All EDIAs are nonprofit organizations dedicated to encouraging EDI growth. The EDI in the United States was formerly
TDCC and administered the development of standards in transportation and other industries.
Electronic Funds Transfer (EFT): A computerized system that processes financial transactions and information about
these transactions or performs the exchange of value. Sending payment instructions across a computer network, or the
company-to-company, company-to-bank, or bank-to bank electronic exchange of value.
EPC (Electronic Product Code): A globally unique serial number for physical objects identified using RFID tags.
Emergency Stock: Quantity of a commodity that must be maintained on hand at all times to provide for initial response
to an unplanned catastrophic event.
End Item: A product sold as a completed item or repair part; any item subject to a customer order or sales forecast.
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End-of-Life Inventory: Inventory on hand that will satisfy future demand for products that are no longer in production at
your company.
Engineer-to-order: a variation of a make-to-order manufacturing strategy. An engineer-to-order strategy is used when
the end product is truly custom. In this strategy, design or engineering tasks must be completed as part of the order
process. This strategy has the longest lead time to the customer, but is necessary since the detailed specifications of the
product are not known in advance.
Engineering Change: A revision to a drawing or design released by engineering to modify or correct a part. The request
for the change can be from a customer or from production, quality control, another department, or a supplier.
Enterprise Resource Planning (ERP) System: A class of software for planning and managing enterprise-wide the
resources needed to take customer orders, ship them, account for them, and replenish all needed goods according to
customer orders and forecasts. Often includes electronic commerce with suppliers. Examples of ERP systems are the
application suites from SAP, Oracle, PeopleSoft, and others.
EPC or ePC: Electronic Product Code. An electronically coded tag that is intended as an improvement to the UPC bar
code system. 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.
Equipment: The rolling stock carriers use to facilitate the transportation services that they provide, including containers,
trucks, chassis, vessels, and airplanes, among others.
Equipment I.D.: An identifier assigned by the carrier to a piece of equipment.
Equipment Positioning: The process of placing equipment at a selected location.
Evaluated Receipts Settlement (ERS): A process for authorizing payment for goods based on actual receipts with
purchase order data when price has already been negotiated. The basic premise behind ERS is that all of the information
in an invoice has already been transmitted in the shipping documentation. Therefore, the invoice is eliminated and the
shipping documentation is used to pay the vendor.
Exempt Carrier: A for-hire carrier that is free from economic regulation. Trucks hauling certain commodities are exempt
from Interstate Commerce Commission economic regulation. By far, the largest portion of exempt carriers transports
agricultural commodities or seafood.
Expediting: (1) Moving shipments through regular channels at an accelerated rate. (2) To take extraordinary action
because of an increase in relative priority. Synonym: Stock chase
Expiration Date: In the WMS, the product expiration date may be used to assign an expiration date to an inventoried
item. Commonly used with perishable inventory items, medicines, etc.
Export: To send goods and services to another country.
Export Broker: An enterprise that brings together buyer and seller for a fee, then eventually withdraws from the
transaction.
Export Declaration: A document required by the U.S. Treasury department and completed by the exporter to show the
value, weight, consignee, destination, etc., pertinent to the export shipment. The document serves two purposes: to
gather trade statistics and to provide a control document if the goods require a valid export license.
Export License: A document secured from a government authorizing an exporter to export a specific quantity of a
controlled commodity to a certain country. An export license is often required if a government has placed embargoes or
other restrictions upon exports.
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Exporter Identification Number (EIN): A number required for the exporter on the Shipper’s Export Declaration. A
corporation may use their Federal Employer Identification Number as issued by the IRS; individuals can use their Social
Security Numbers.
Extended Enterprise:The notion that supply chain partners form a larger entity which works together as though it were
a single unit.
Extensible Markup Language (XML): A computer term for a language that facilitates direct communication of data
among computers on the Internet. Unlike the older hypertext markup language (HTML) which provides data tags that
give instructions to a web browser on how to display information, XML tags give instructions to a browser or to
application software which help to define specifics about the category of information.
External Factory: A situation where suppliers are viewed as an extension of the firm’s manufacturing capabilities and
capacities. The same practices and concerns that are commonly applied to the management of the firm’s manufacturing
system should also be applied to the management of the external factory.
Ex Works: The price that the seller quotes applies only at the point of origin. The buyer takes possession of the shipment
at the point of origin and bears all costs and risks associated with transporting the goods to the destination.
Facilities: The physical plant, distribution centers, service centers, and related equipment.
Federal Maritime Commission: Regulatory agency responsible for rates and practices of ocean carriers shipping to and
from the United States.
FEU: Forty-foot equivalent unit, a standard size intermodal container.
Final Assembly: The highest level assembled product, as it is shipped to customers. This terminology is typically used
when products consist of many possible features and options that may only be combined when an actual order is
received.
Final Assembly Schedule (FAS): A schedule of end items to finish the product for specific customers’ orders in a maketo-order or assemble-to-order environment. It’s also referred to as the finishing schedule because it may involve
operations other than just the final assembly; also, it may not involve assembly, but simply final mixing, cutting,
packaging, etc. The FAS is prepared after receipt of a customer order as constrained by the availability of material and
capacity, and it schedules the operations required to complete the product from the level where it is stocked (or master
scheduled) to the end-item level.
Finished Goods Inventory (FG or FGI): Products completely manufactured, packaged, stored, and ready for distribution.
Firm Planned Order: In a DRP or MRP system, a planned order whose status has been updated to a fixed order.
First In First Out (FIFO): In inventory control and financial accounting, this refers to the practice of using stock from
inventory on the basis of what was received first and is consumed first. Antonym: Last In First Out.
Fixed Costs: Costs which do not fluctuate with business volume in the short run. Fixed costs include items such as
depreciation on buildings and fixtures.
Fixed Order Quantity: A lot-sizing technique in MRP or inventory management that will always cause planned or actual
orders to be generated for a pre-determined fixed quantity, or multiples thereof, if net requirements for the period
exceed the fixed order quantity.
Fixed reorder point: also called fixed order point, fixed reorder point is a preset (fixed) quantity that triggers the need
for a new order being placed.
Flexibility: Ability to respond quickly and efficiently to changing customer and consumer demands.
Float: The time required for documents, payments, etc. to get from one trading partner to another.
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Flow Rack: A storage method where product is presented to picking operations at one end of a rack and replenished
from the opposite end.
FOB: A term of sale defining who is to incur transportation charges for the shipment, which is to control the shipment
movement, or where title to the goods passes to the buyer; originally meant “free on board ship.”
FOB Destination: Title passes at destination, and seller has total responsibility until shipment is delivered.
FOB Origin: Title passes at origin, and buyer has total responsibility over the goods while in shipment.
Forecast: An estimate of future demand. A forecast can be constructed using quantitative methods, qualitative
methods, or a combination of methods, and can be based on extrinsic (external) or intrinsic (internal) factors. Various
forecasting techniques attempt to predict one or more of the four components of demand: cyclical, random, seasonal,
and trend.
Forecasting: Predictions of how much of a product will be purchased by customers. Relies upon both quantitative and
qualitative methods.
Foreign Trade Zone (FTZ): An area or zone set aside at or near a port or airport under the control of the US Customs
Service, for holding goods duty-free pending Customs clearance.
Forklift Truck: A machine-powered device used to raise and lower freight and to move freight to different warehouse
locations.
Forward picking: A storage area designed for efficient piece and case order picking that is usually replenished from
reserve storage but sometimes directly from receiving.
Fourth Party Logistics (4PL): Differs from third party logistics in the following ways: (1) 4PL organization is often a
separate entity established as a joint venture or long-term contract between a primary client and one or more partners;
(2) 4PL organization acts as a single interface between the client and multiple logistics service providers; (3) All aspects
(ideally) of the client’s supply chain are managed by the 4PL organization; (4) It is possible for a major third party
logistics provider to form a 4PL organization within its existing structure (Strategic Supply Chain Alignment; John
Gattorna).
FPA: Free of Particular Average.
Free Along Side (FAS): The seller agrees to deliver the goods to the dock alongside the overseas vessel that is to carry
the shipment. The seller pays the cost of getting the shipment to the dock; the buyer contracts the carrier, obtains
documentation, and assumes all responsibility from that point forward.
Free Alongside Ship: A term of sale indicating that the seller is liable for all changes and risks until the goods sold are
delivered to the port on a dock that will be used by the vessel. Title passes to the buyer when the seller has secured a
clean dock or ship’s receipt of goods.
Free on Board (FOB): Contractual terms between a buyer and a seller that define where title transfer takes place.
Freight: Goods being transported from one place to another.
Freight Bill: The carrier’s invoice for payment of transport services rendered.
Freight Charge: The rate established for transporting freight.
Freight Consolidation: The grouping of shipments to obtain reduced costs or improved utilization of the transportation
function. Consolidation can occur by market area grouping, grouping according to scheduled deliveries, or using third
party pooling services such as public warehouses and freight forwarders.
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Freight Forwarder: An organization which provides logistics services as an intermediary between the shipper and the
carrier, typically on international shipments. Freight forwarders provide the ability to respond quickly and efficiently to
changing customer and consumer demands and international shipping (import/export) requirements.
Freight terms: an agreement between a supplier and customer that describes the responsibility for transportation costs.
Fronthaul: The first leg of the truck trip that involves hauling a load or several loads to targeted destinations.
Fulfillment: The act of fulfilling a customer order. Fulfillment includes order management, picking, packaging, and
shipping.
Fulfillment Services Provider: A fulfillment services provider is an organization that operates on your behalf to receive
delivery of stock from your suppliers, store inventory on your behalf and fulfill your customer orders. May also be
referred to as a fulfillment house or fulfillment company or a 3PL.
Full Containerload (FCL): A term used when goods occupy a whole container.
Full-Service Leasing: An equipment-leasing arrangement that includes a variety of services to support the leased
equipment; a common method for leasing motor carrier tractors.
Full-time Connection: A communication link between two (or more) entities which is normally maintained continuously.
Full Truckload (FTL): Same as Full Container load, but in reference to motor carriage instead of containers.
Functional Acknowledgement (FA): A specific EDI Transaction Set (997) sent by the recipient of an EDI message to
confirm the receipt of data but with no indication as to the recipient application’s response to the message. The FA will
confirm that the message contained the correct number of lines, etc., via control summaries, but does not report on the
validity of the data.
Functional Group: Part of the hierarchical structure of EDI transmissions, a functional group contains one or more
related transaction sets preceded by a functional group header and followed by a functional group trailer.
General Agreement on Tariffs and Trade (GATT): A multilateral trade agreement aimed at expanding international trade
as a means of raising world welfare.
General-Merchandise Warehouse: A warehouse used to store goods that are readily handled, are packaged, and do not
require a controlled environment.
General Order (GO): A customs term referring to a warehouse where merchandise not entered within five working days
after the carrier’s arrival is stored at the risk and expense of the importer.
GTIN (Global Trade Item Number): All-numeric system for assigning globally unique codes to trade items (products and
services). GTIN includes UPC, ISBN, and NDC.
Goods: A term associated with more than one definition: 1) Common term indicating movable property, merchandise,
or wares. 2) All materials which are used to satisfy demands. 3) Whole or part of the cargo received from the shipper,
including any equipment supplied by the shipper.
Goods Receipt: This is where the warehouse confirms that the products have been received from a supplier, as per an
issued purchase order and are put into stock. On receipt, products may be checked against a packing list or ASN, go
through QA, are labeled and put away in bin or shelf location.
Government Bill of Lading (GB/L): The bill of lading used for shipments made by U.S. Government agencies.
Grandfather Clause: A provision that enabled motor carriers engaged in lawful trucking operations before the passage
of the Motor Carrier Act of 1935 to secure common carrier authority w/o proving public convenience and necessity; a
similar provision exists for other modes.
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Granger Laws: State laws passed before 1870 in Midwestern states to control rail transportation.
Great Lakes Carriers: Water carriers that operate on the five Great Lakes.
Gross Margin: The difference between total revenue and the cost-of-goods sold.
Gross Weight: The total weight of the vehicle and the payload of freight or passengers.
Group logic: methods used to manage inventory based on groups of items rather than single items
GTDI: European Guidelines for Trade Data Interchange.
GTIN: Global Tracking Identification Number or Global Trade Item Number. GTIN is the globally-unique EAN.UCC System
identification number, or key, used for trade items (products and services). It’s used for uniquely identifying trade items
(products and services) sold, delivered, warehoused, and billed throughout the retail and commercial distribution
channels. 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.
Handling Costs: The cost involved in moving, transferring, preparing, and otherwise handling inventory.
Haulage: The inland transport service which is offered by the carrier under the terms and conditions of the tariff and of
the relative transport document.
Hazardous Material: A substance or material which the Department of Transportation has determined to be capable of
posing a risk to health, safety, and property when stored or transported in commerce.
Hedge inventory:inventory that is purchased to protect against or take advantage of price fluctuations. The price
fluctuations may be the result of seasonal or cyclical variations that result with imbalances in supply and demand (supply
exceeds demand or vice versa), changes in exchange rates with international purchases, or even special promotions.
Heijunka: In the just-in-time philosophy, an approach to level production throughout the supply chain to match the
planned rate of end product sales.
Highway Trust Fund: A fund into which highway users (carriers and automobile operators) pay; the fund pays for federal
government’s highway construction share.
Highway Use Taxes: Taxes that federal and state governments assess against highway users (the fuel tax is an example).
The government uses the use tax money to pay for the construction, maintenance, and policing of highways.
Holding cost: cost of holding a unit of an item in stock for a unit time
House Air Waybill (HAWB): A bill of lading issued by a forwarder to a shipper as a receipt for goods that the forwarder
will consolidate with cargo from other shippers for transport.
Hub: 1) A large retailer or manufacturer having many trading partners. 2) A reference for a transportation network as a
“hub and spoke” which is common in the airline and trucking industry. For example, a hub airport serves as the focal
point for the origin and termination of long-distance flights where flights from outlying areas are fed into the hub airport
for connecting flights. 3) A common connection point for devices in a network. 4) A web “hub” is one of the initial names
for what is now known as a “portal.” It came from the creative idea of producing a web site which would contain many
different “portal spots” (small boxes that looked like ads with links to different, yet related content). This content,
combined with Internet technology, made the idea a milestone in the development and appearance of web sites,
primarily due to the ability to display a lot of useful content and store one’s preferred information on a secured server.
The web term “hub” was replaced with portal.
5) An Internet web site that provides a central repository for data or a central planning capability in an industry or supply
network.
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Hub Airport: An airport that serves as the focal point for the origin and termination of long-distance flights; flights from
outlying areas meet connecting flights at the hub airport.
Hundredweight (CWT): a pricing unit used in transportation (equal to 100 pounds).
Igloos: Pallets and containers used in air transportation; the igloo shape fits the internal wall contours of a narrow-body
airplane.
Import: Movement of products from one country into another. The import of automobiles from Germany into the US is
an example.
Importation Point: The location where goods will be cleared for importation into a country.
Import/Export License: Official authorization issued by a government allowing the shipping or delivery of a product
across national boundaries.
In Bond: Goods are held or transported In-Bond under customs control either until import duties or other charges are
paid, or to avoid paying the duties or charges until a later date.
Inbound logistics:The management of materials from suppliers and vendors into production processes or storage
facilities.
Incentive Rate: A rate that induces the shipper to ship heavier volumes per shipment.
INCOTERMS: International terms of sale developed by the International Chamber of Commerce to define sellers’ and
buyers’ responsibilities.
Independent demand methods: assume that the demand for an item is independent of the demand for any other item
Indirect Cost: A resource or activity cost that cannot be directly traced to a final cost object since no direct or repeatable
cause-and-effect relationship exists. An indirect cost uses an assignment or allocation to transfer cost.
Infinite capacity scheduling: a manufacturing planning system that completely ignores capacity constraints and
schedules purely based on demand. MRP is an example of an infinite capacity scheduling system. It requires that
planners check the production schedule against capacity and make adjustments accordingly.
Inland Bill of Lading: The carriage contract used in transport from a shipping point overland to the exporter’s
international carrier location.
Inland Carrier: An enterprise that offers overland service to or from a point of export.
Inner pack: Package used inside of a carton to allow more efficient split-case picking instead of individual piece picking
when a less-than-carton-size number of units are to be picked.
Inspection Certificate: A document certifying that merchandise (such as perishable goods) was in good condition
immediately prior to shipment.
Insurance Certificate: A document issued to the consignee to certify that insurance is provided to cover loss of or
damage to the cargo while in transit.
Integrated Carrier: An airfreight company that offers a blend of transportation services such as air carriage, freight
forwarding, and ground handling.
Integrated Logistics: A comprehensive, system-wide view of the entire supply chain as a single process, from raw
materials supply through finished goods distribution. All functions that make up the supply chain are managed as a
single entity rather than managing individual functions separately.
Interchange: In EDI, the exchange of electronic information between companies. Also, the group of transaction sets
transmitted from one sender to one receiver at one time. Delineated by interchange control segments.
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Intercoastal carriers: Water carriers that transport freight between East and West Coast ports, usually by way of the
Panama Canal.
Intercorporate hauling: A private carrier hauling a subsidiary’s goods and charging the subsidiary a fee; this is legal if the
subsidiary is wholly owned or if the private carrier has common carrier authority.
Interleaving: The practice of assigning an employee multiple tasks which are performed concurrently.
Intermittent-Flow, Fixed-Path Equipment: Materials handling devices that include bridge cranes, monorails, and stacker
cranes.
Intermodal Container Transfer Facility: A facility where cargo is transferred from one mode of transportation to
another, usually from ship or truck to rail.
Intermodal Transportation: Transporting freight by using two or more transportation modes, such as by truck and rail or
truck and oceangoing vessel.
International Import Certificate: A document required by the importing country indicating that the importing country
recognizes that a controlled shipment is entering their country. The importing country pledges to monitor the shipment
and prevent its re-export, except in accordance with its own export control regulations.
International Maritime Bureau (IMB): A special division of the International Chamber of Commerce.
International Maritime Organization (IMO): A United Nations-affiliated organization representing all maritime countries
in matters affecting maritime transportation, including the movement of dangerous goods. The organization also is
involved in deliberations on marine environmental pollution.
International Standards Organization (ISO): An organization within the United Nations to which all national and other
standard-setting bodies (should) defer. Develops and monitors international standards, including OSI, EDIFACT, and
X.400.
Internet: A computer term which refers to an interconnected group of computer networks from all parts of the world,
i.e., a network of networks. Accessed via a modem and an online service provider, it contains many information
resources and acts as a giant electronic message routing system.
Interstate Commerce: The transportation of persons or property between states; in the course of the movement, the
shipment crosses a state boundary.
Interstate Commerce Commission (ICC): An independent regulatory agency that implements federal economic
regulations controlling railroads, motor carriers, pipelines, domestic water carriers, domestic surface freight forwarders,
and brokers.
In-Transit Inventory: Material moving between two or more locations, usually separated geographically; for example,
finished goods being shipped from a plant to a distribution center. In-transit inventory is an easily overlooked
component of total supply chain availability.
Intrastate Commerce: The transportation of persons or property between points within a state. A shipment between
two points within a state may be interstate if the shipment had a prior or subsequent move outside of the state and the
shipper intended an interstate shipment at time of shipment.
In-transit quantity: a quantity that has been shipped from one facility and has not yet been received into another facility
Inventory: This is the products and quantity that you own and store in order to sell to your customers.
Inventory Accuracy: When the on-hand quantity is equivalent to the perpetual balance (plus or minus the designated
count tolerances).
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Inventory Carrying Cost: One of the elements comprising a company’s total supply chain management costs. These costs
consist of the following:
1. Opportunity Cost: The opportunity cost of holding inventory. This should be based on your company’s own cost of
capital standards using the following formula.
Calculation: Cost of Capital x Average Net Value of Inventory
2. Shrinkage: The costs associated with breakage, pilferage, and deterioration of inventories. Usually pertains to the loss
of material through handling damage, theft, or neglect.
3. Insurance and Taxes: The cost of insuring inventories and taxes associated with the holding of inventory.
4. Total Obsolescence for Raw Material, WIP, and Finished Goods Inventory: Inventory reserves taken due to
obsolescence and scrap and includes products exceeding the shelf life, i.e., spoils and is no good for use in its original
purpose (do not include reserves taken for Field Service Parts).
5. Channel Obsolescence: Aging allowances paid to channel partners, provisions for buy-back agreements, etc. Includes
all material that becomes obsolete while in a distribution channel. Usually, a distributor will demand a refund on
material that goes bad (shelf life) or is no longer needed because of changing needs.
6. Field Service Parts Obsolescence: Reserves taken due to obsolescence and scrap. field service parts are those
inventories kept at locations outside the four walls of the manufacturing plant i.e., distribution center or warehouse.
Inventory Cost: The cost of holding goods usually expressed as a percentage of the inventory value; includes the cost of
capital, warehousing, taxes, insurance, depreciation, and obsolescence.
Inventory, Days of: The number of days of inventory on-hand at any given time.
Inventory Management Information System: the part of a management information system that deals with the
information needed for stock control
Inventory Master File: File maintained by a WMS that contains the total quantity and storage locations of each items
stored in the warehouse. Used together like the location master file to control material transport operations.
Inventory Planning Systems: The systems that help to strategically balance the inventory policy and customer service
levels throughout the supply chain. These systems usually calculate time-phased order quantities and safety stock using
selected inventory strategies. Some inventory planning systems conduct what-if analysis and compare the current
inventory policy with simulated inventory scenarios to improve the inventory ROI.
Inventory Turns: The cost of goods sold divided by the average level of inventory on hand. This ratio measures how
many times a company’s inventory has been sold during a period of time. Operationally, inventory turns are measured
as total throughput divided by average level of inventory for a given period. How many times a year the average
inventory for a firm changes over or is sold.
Invoice: A detailed statement showing goods sold or shipped and amounts for each. The invoice is prepared by the seller
and acts as the document that the buyer will use to make payment.
ISO 9000: A series of quality assurance standards compiled by the Geneva, Switzerland-based International Standards
Organization. In the United States, ISO is represented by the American National Standards Institute based in
Washington, DC.
ISO 14000 Series Standards: A series of generic environmental management standards under development by the
International Organization of Standardization which provide structure and systems for managing environmental
compliance with legislative and regulatory requirements and affect every aspect of a company’s environmental
operations.
Issuing Carrier: The carrier whose name is printed on the bill of lading and with whom the contract of carriage exists.
Item: Any unique manufactured or purchased part, material, intermediate, sub-assembly, or product.
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Item coding: an arrangement for giving every package of material moved an identifying tag, usually a bar code or
magnetic strip
Item master: a collection of data that describes a specific item. Item master is also used to describe the database table
that contains this data.
Item number: the identification number assigned to an item. Also called the part number, SKU number, or SKU.
Jidoka: The concept of adding an element of human judgment to automated equipment. In doing this, the equipment
becomes capable of discriminating against unacceptable quality, and the automated process becomes more reliable.
Joint Cost: A common cost in cases where a company produces products in fixed proportions and the cost the company
incurs to produce one product entails producing another; the backhaul is an example.
Joint Rate: A rate over a route that requires two or more carriers to transport the shipment.
Just In Time (JIT): An inventory control system that controls material flow into assembly and manufacturing plants by
coordinating demand and supply to the point where desired materials arrive just in time for use. An inventory reduction
strategy that feeds production lines with products delivered just in time. Developed by the auto industry, it refers to
shipping goods in smaller, more frequent lots.
Just in Time II (JIT II): Vendor-managed operations taking place within a customer’s facility. JIT II was popularized by the
Bose Corporation. The supplier reps, called “implants,” place orders to their own companies, relieving the customer’s
buyers from this task. Many also become involved at a deeper level such as participating in new product development
projects and manufacturing planning (concurrent planning).
Just-in-Time Logistics (or Quick Response): The process of minimizing the times required to source, handle, produce,
transport, and deliver products in order to meet customer requirements.
Kaizen: A Japanese term for improvement – continuing improvement involving everyone – managers and workers. In
manufacturing, kaizen relates to finding and eliminating waste in machinery, labor, or production methods.
Kanban: replenishment system where replenishment is triggered by emptying a container and a physical notification
such as a card or the empty container is sent up the line to the previous operation or supplier to be refilled.
Keiretsu: A form of cooperative relationship among companies in Japan where the companies largely remain legally and
economically independent, even though they work closely in various ways, such as sole sourcing and financial backing. A
member of a keiretsu generally owns a limited amount of stock in other member companies. A keiretsu generally forms
around a bank and a trading company but distribution (supply chain) keiretsus exist, linking companies from raw
material suppliers to retailers.
Key Performance Indicator (KPI): A measure which is of strategic importance to a company or department. For example,
a supply chain flexibility metric is Supplier On-Time Delivery Performance which indicates the percentage of orders that
fulfilled on or before the original requested date.
Kitting: Light assembly of components or parts into defined units, Kitting reduces the need to maintain an inventory of
pre-build, completed products, but increases the time and labor consumed at shipment.
Lading: The cargo carried in a transportation vehicle.
Land bridge: The movement of containers by ship-rail-ship on Japan-to-Europe moves; ships move containers to the U.S.
Pacific Coast, rails move containers to an East Coast port, and ships deliver containers to Europe.
Landed Cost: Cost of product plus relevant logistics costs, such as transportation, warehousing, handling, etc. Also called
Total Landed Cost of Net Landed Costs.
Lash Barges: Covered barges that carriers load on board oceangoing ships for movement to foreign destinations.
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LASH Vessel: A ship measuring at least 820 feet long with a deck crane able to load and unload barges through a stern
section that projects over the water. The acronym LASH stands for Lighter (barge) Aboard Ship.
Last In First Out (LIFO): In inventory control and financial accounting, this refers to the practice of using stock from
inventory on the basis of what was received last is consumed first. This has limited use in stock keeping and is primarily a
cost-accounting method.
Last Mile: Description for the final leg of home delivery, where the carrier, courier (or delivery agent) is responsible for
final handover to the customer.
Last Updated: A date and time stamp that is recorded when a field or record was last modified by the user.
Lead Logistics Provider (LLP): An organization that organizes other third party logistics partners for outsourcing of
logistics functions.
Lead Time: The total time that elapses between an order’s placement and its receipt. It includes the time required for
order transmittal, order processing, order preparation, and transit.
Lead time demand: demand for an item during its lead time
Lean strategy: a business strategy that aims at doing every operation using the least possible resource – people, space,
stock, equipment, time, etc.
Leg: A leg has an origin, destination, and carrier and is composed of all consecutive segments of a route booked through
the same carrier
Less-Than-Carload (LCL): Shipment that is less than a complete rail car load (lot shipment).
Less-Than-Containerload (LCL): A term used when goods do not completely occupy an entire container. When many
shippers’ goods occupy a single container, each shipper’s shipment is considered to be LCL.
Less-Than-Truckload (LTL) Carriers: Trucking companies that consolidate and transport smaller (less than truckload)
shipments of freight utilizing a network of terminals and relay points.
Less-Than-Truckload (LTL): Trucking companies that consolidate and transport smaller (less than truckload) shipments
of freight by utilizing a network of terminals and relay points.
Lessee: A person or firm to whom a lessor grants a lease.
Lessor: A person or firm that grants a lease.
Letter of Credit (LOC): A method of payment for goods in which the buyer established his credit with a local bank, clearly
describing the goods to be purchased, the price, the documentation required, and a time limit for completion of the
transaction. Upon receipt of documentation, the bank is either paid by the buyer or takes title to the goods themselves
and proceeds to transfer funds to the seller.
License Plate Number (LPN): A document, tag, or label used to identify a unitized load.
Life Cycle Cost: In cost account, a product’s life cycle is the period that starts with the initial product conceptualization
and ends with the withdrawal of the product from the marketplace and final disposition. A product life cycle is
characterized by certain defined stages, including research, development, introduction, maturity, decline, and
abandonment. Life cycle cost is the accumulated costs incurred by a product during these stages.
Lighter: A barge-type vessel used to carry cargo between shore and cargo ship. While the terms barge and lighter are
used interchangeably, a barge usually refers to a vessel used for a long haul, while a lighter is used for a short haul.
Lighterage: The cost of loading or unloading a vessel by means of barges.
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Line Functions: The decision-making areas companies associate with daily operations. Logistics line functions include
traffic management, inventory control, order processing, warehousing, and packaging.
Line Item: A specific and unique identifier assigned to a product by the responsible enterprise.
Liner Service: International water carriers that ply fixed routes on published schedules.
Link: The transportation method a company uses to connect nodes (plants, warehouses) in a logistics system.
Local Area Network (LAN): A data communications network spanning a limited geographical area, usually a few miles at
most, providing communications between computers and peripheral devices.
Loading Allowance: A reduced rate that carriers offer to shippers and/or consignees who load and/or unload LTL or Any
Quantity shipments.
Loading Port: The port where the cargo is loaded onto the exporting vessel. This port must be reported on the Shipper’s
Export Declaration, Schedule D. Schedule D is used by U.S. companies when exporting to determine which tariff is used
to freight rate the cargo for carriers with more than one tariff.
Locational Determinant: The factors that determine a facility’s location. For industrial facilities, the determinants
include logistics.
Location master file: File maintained by a WMS that contains the quantity of the item available at each storage location
in the warehouse. Used together with the inventory master file to control material transport operations.
Locator System: Inventory-tracking systems that allow you to assign locations to your inventory to facilitate greater
tracking and the ability to store product randomly. Prior to locator systems, warehouses needed to store product in
some logical manner in order to be able to find it (stored in item number sequence, by vendor, by product description,
etc.)
Logbook: A daily record of the hours an interstate driver spends driving, off duty, sleeping in the berth, or on duty but
not driving.
Logistics: The process of planning, implementing, and controlling procedures for the efficient and effective storage of
goods, services, and related information from the point of origin to the point of consumption for the purpose of
conforming to customer requirements. This definition includes inbound, outbound, internal, and external movements.
Logistics Center: locations in the supply chain for performing logistic activities, often including stocks and warehousing
Logistics Channel: The network of supply chain participants engaged in storage, handling, transfer, transportation, and
communications functions that contribute to the efficient flow of goods.
Logistics Costs: The factors associated with the acquisition, storage, movement, and disposition of goods.
Logistics Data Interchange (LDI): A computerized system that electronically transmits logistics information.
Logistics Management as defined by the Council of Supply Chain Management Professionals (CSCMP): Logistics
management is that part of supply chain management that plans, implements, and controls the efficient, effective
forward and reverse flow and storage of goods, services, and related information between the point of origin and the
point of consumption in order to meet customers’ requirements. Logistics management activities typically include
inbound and outbound transportation management, fleet management, warehousing, materials handling, order
fulfillment, logistics network design, inventory management, supply/demand planning and management of third party
logistics services providers. To varying degrees, the logistics function also includes sourcing and procurement,
production planning and scheduling, packaging and assembly, and customer service. It is involved in all levels of planning
and execution – strategic, operational, and tactical. Logistics management is an integrating function which coordinates
and optimizes all logistics activities with other functions, including marketing, sales, manufacturing, finance, and
information technology.
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Long Ton: 2,240 pounds.
Lost sales: when customer demand cannot be met, and the customer withdraws their demand (perhaps moving to
another supplier)
Lot: A production run or batch that can be isolated from other runs and identified with a specific set of material,
production facility and process characteristics.
Lot Control: A set of procedures (e.g., assigning unique batch numbers and tracing each batch) used to maintain lot
integrity from raw materials, from the supplier through manufacturing to consumers.
Lot sizing: combining several small orders into larger ones for MRP
Lot Tracking: The process of tracking a given material lot up (into upper level items and customer/interplant orders) or
down (into the lower level lots it consumed when produced, or the lot received from a vendor). Physical and system
controls are required to provide the true source and destination of a given lot in a product recall or similar situation.
Lot-for-lot: a very basic lot sizing method that uses demand during the specified planning time period (time bucket) as
the lot size. In most cases the planning periods would be your forecast periods, therefore your lot would be equal to the
net demand in the forecast period in which the order is planned on being received.
LTL shipment: A less-than-truckload shipment, one weighing less than the minimum weight a company needs to use the
lower truckload rate.
Machine Downtimes: Time during which a machine cannot be utilized. Machine downtimes may occur during
breakdowns, maintenance, changeovers, etc.
Maintenance, Repair, and Operating Supplies (MRO): Items used in support of general operations and maintenance,
such as maintenance supplies, spare parts, and consumables used in the manufacturing process and supporting
operations.
Major Carrier: A for-hire certificated air carrier that has annual operating revenues of $1 billion or more; the carrier
usually operates between major population centers.
Make-or-Buy Decision: The act of deciding whether to produce an item internally or buy it from an outside supplier.
Factors to consider in the decision include costs, capacity availability, proprietary and/or specialized knowledge, quality
considerations, skill requirements, volume, and timing.
Make-to-order: a manufacturing strategy where you do not manufacture your product until after you receive actual
orders from your customers. The primary advantage to this strategy is that you do not have to carry finished goods
inventory. This strategy does not necessarily result in zero inventories. Many make-to-order manufactures will forecast
and procure some raw materials and components in advance of receiving orders in an effort to reduce the lead time to
their customers.
Make-to-stock: manufacturing strategy where you must carry adequate finished goods inventory to meet upcoming
forecasted demand. The reason this stocking strategy is so common is not that it is the most cost-effective inventory
strategy overall, but rather it is a necessary strategy when market conditions require shipment of goods quicker than
you can manufacture them.
Management information system (MIS): system that controls the flow of information throughout an organization and
makes sure that everyone has the information they need to work properly
Management of All Logistics: The effective management of all costs associated with logistics functions and activities so
as to minimize their sum across the product supply chain.
Manifest: A document which describes individual orders contained within a shipment.
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Manufacture Cycle Time: The average time between commencement and completion of a manufacturing process, as it
applies to make-to-stock products.
Calculation: [Average # of units in WIP]/[Average daily output in units]
Manufacturer’s Representative: One who sells goods for several firms but does not take title to them.
Manufacturing Calendar: A calendar used in inventory and production planning functions that consecutively numbers
only the working days so that the component and work order scheduling may be done based on the actual number of
workdays available.
Manufacturing Execution Systems (MES): Programs and systems that participate in shop-floor control, including
programmed logic controllers and process control computers for direct and supervisory control of manufacturing
equipment; process information systems that gather historical performance information, then generate reports;
graphical displays; and alarms that inform operations personnel what is going on in the plant currently and a short
history into the past. Quality control information is also gathered – a laboratory information management system may
be part of this configuration to tie process conditions to the quality data that are generated. Thereby, cause-and-effect
relationships can be determined. The quality data at times affect the control parameters that are used to meet product
specifications, either dynamically or offline.
Manufacturing Lead Time: The total time required to manufacture an item, exclusive of lower-level purchasing lead
time. For make-to-order products, it’s the length of time between the release of an order to the production process and
shipment to the final customer. For make-to-stock products, it’s the length of time between the release of an order to
the production process and receipt into finished goods inventory. Included are order preparation time, queue time, setup time, run time, move time, inspection time, and put-away time.
Manufacturing Resource Planning (MRP-II): A method for the effective planning of all resources of a manufacturing
company. Ideally, it addresses operational planning in units, financial planning in dollars, and has a simulation capability
to answer what-if questions. It consists of a variety of processes, each linked together: business planning, production
planning (sales and operations planning), master production scheduling, material requirements planning, capacity
requirements planning, and the execution support systems for capacity and material. Output from these systems is
integrated with financial reports, such as business plan, purchase commitment report, shipping budget, and inventory
projections in dollars. Manufacturing resource planning is a direct outgrowth and extension of closed-loop MRP.
Marginal Cost: The cost to produce one additional unit of output. The change in total variable cost resulting from a oneunit change in output.
Market Demand: In marketing, the total demand that would exist within a defined customer group in a given
geographical area during a particular time period given a known marketing program.
Market Dominance: The absence of effective competition for railroads from other carriers and modes for the traffic to
which the rail rate applies. The Staggers Act stated that market dominance does not exist if the rate is below the
revenue-to-variable-cost ratio of 160 percent in 1981 and 170 percent in 1983.
Market-Positioned Warehouse: Warehouse positioned to replenish customer inventory assortments and afford
maximum inbound transport consolidation economies from inventory origin points with relatively short-haul local
delivery.
Market Segment: A group of potential customers sharing some measurable characteristics based on demographics,
psychographics, lifestyle, geography, benefits, etc.
Marks and Numbers: Marks and numbers placed on goods used to identify a shipment or parts of a shipment.
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Mass Customization: The creation of a high-volume product with large variety so that a customer may specify his or her
exact model out of a large volume of possible end items, while manufacturing cost is low because of the large volume.
An example is a personal computer order in which the customer may specify processor speed, memory size, hard disk
size and speed, removable storage device characteristics, and many other options when PCs are assembled on one line
and at a low cost.
Master Air Waybill (MAWB): The bill of lading issued by air carriers to their customers.
Master schedule: detailed timetable for production of individual products, typically by week
Material: anything that is kept in stock
Material Acquisition Costs: One of the elements comprising a company’s total supply chain management costs. These
costs consist of the following:
1. Materials (Commodity) Management and Planning: All costs associated with the supplier sourcing, contract
negotiation and qualification, and the preparation, placement, and tracking of a purchase order – including all costs
related to buyer/planners.
2. Supplier Quality Engineering: The costs associated with the determination, development/certification, and
monitoring of suppliers’ capabilities to fully satisfy the applicable quality and regulatory requirements. 3. Inbound
Freight and Duties: Freight costs associated with the movement of material from a vendor to the buyer, including all
associated administrative tasks. Duties are those fees and taxes levied by government for moving purchased material
across international borders. Customs broker fees should also be included in this category.
4. Receiving and Put Away: all costs associated with taking possession of material and storing it. Note – inventorycarrying costs are normally covered in a separate worksheet. 5. Incoming Inspection: All costs associated with the
inspection and testing of received materials to verify compliance with specifications.
Materials Handling: The physical handling of products and materials between procurement and shipping.
Material Index: The ratio of the sum of the localized raw material weights to the weight of the finished product.
Materials Management: Inbound logistics from suppliers through the production process. The movement and
management of materials and products from procurement through production.
Materials Planning: The materials management function that attempts to coordinate materials supply with materials
demand.
Maximum Order Quantity: An order quantity modifier applied after the lot size has been calculated that limits the order
quantity to a pre-established maximum.
m-Commerce: Mobile commerce applications involve using a mobile phone to carry out financial transactions. This
usually means making a payment for goods or transferring funds electronically. Transferring money between accounts
and paying for purchases are electronic commerce applications. An emerging application, electronic commerce has been
facilitated by developments in other areas in the mobile world, such as dual slot phones and other smarter terminals,
and more standardized protocols which allow greater interactivity and therefore, more sophisticated service.
Mean absolute deviation: the average of the absolute values of a series of variances. MAD is used in forecast error
measurement, safety stock calculations, and other applications of statistics.
Mean error: a measure of bias in a forecast
Mean squared error: a measure of the error in a forecast, which does not have a precise meaning, but is useful for other
analyses
Measurement Ton: Forty cubic feet; used in water transportation ratemaking.
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Merge In Transit: The process of “merging” shipments from suppliers and going directly to the buyer or to the store,
bypassing the seller. A “drop shipment” from several vendors to one buyer.
Micro-Land Bridge: An intermodal movement in which the shipment is moved from a foreign country to the U.S. by
water and then moved across the U.S. by railroad to an interior, non-port city, or vice versa for exports from a non-port
city.
Middleware: Connectivity software, enabling an enterprise-wide range of data sources to be integrated into the
decision-making database of the common reference model, is a strong requirement for success. Interfaces to various
ERP, MRP, databases and specialized software are required for these translators between IT applications.
Mileage Allowance: An allowance, based upon distance, which railroads give to shippers using private railcars.
Mileage Rate: A rate based upon the number of miles the commodity is shipped.
Minimum Weight: The shipment weight the carrier’s tariff specifies as the minimum weight required to use the TL or CL
rate; the rate discount volume.
Mixed Loads: The movement of both regulated and exempt commodities in the same vehicle at the same time.
Modal Split: The relative use that companies make of transportation modes; the statistics include ton-miles, passengermiles, and revenue.
Movable unit: A single identifiable unit load (e.g. carton, pallet, trailer, etc.) that is moved between and stored at a
location.
Move time: the time it takes to physically relocate materials from one manufacturing operation (step in manufacturing
process) to the next.
Moving average: forecasting method that calculates the average demand over a fixed number of time periods relative
to the date the forecast is generated, and uses that as the forecast for subsequent periods. For example, if I am
calculating a three-month moving average on July 1st, I will calculate the average demand over April, May, and June.
Subsequently, on August 1st, I would use May, June, and July demand for the calculation.
Multi-Channel: Multi-channel was a term used to refer to how retailers offered their products to their customers across
many sales channels, i.e. Store Catalogue, Web or Call Centre. This has now evolved into Omni-channel.
Multi-Currency: The ability to process orders using a variety of currencies for pricing and billing.
Multi-Language: Pertaining to the ability to process orders in many different country-specific languages using voice and
text.
Multi-level bill of materials: a bill-of-materials structure where components on one BOM have their own BOMs below
them. Technically, a multi-level bill does not actually exist. Instead, you just have numerous single-level bills and your
computer software figures out that if an item on one bill has its own bill; it can logically link these together for planning
purposes.
Multiple-Car Rate: A railroad rate that is lower for shipping more than one carload at a time.
National Carrier: A for-hire certificated air carrier that has annual operating revenues of $75 million to $1 billion; the
carrier usually operates between major population centers and areas of lesser population.
National Motor Freight Classification (NMFC): A tariff, which contains descriptions and classifications of commodities
and rules for domestic movement by motor carriers in the US.
Negotiable BOL: Provides for the delivery of goods to a named enterprise or to their order (anyone they may designate),
but only upon surrender of proper endorsement and the bill of lading to the carrier or the carrier’s agents.
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Net Weight: The weight of the merchandise, unpacked, exclusive of any containers.
New Product Introduction (NPI): The process used to develop products that are new to the sales portfolio of a
company.
Node: A fixed point in a firm’s logistics system where goods come to rest; includes plants, warehouses, supply sources,
and markets.
No Location (No Loc): A received item for which the warehouse has no previously established storage slot.
Non-Certificated carrier: A for-hire air carrier that is exempt from economic regulation.
Non-Negotiable BOL: Provides for the delivery of goods to a named enterprise and to no one else. Also known as a
straight bill of lading.
Non-stock inventory: inventory that is not tracked within your perpetual inventory system. Non-stock inventory will
generally not have an item-master record or internal SKU number. An alternate meaning for non-stock inventory is
order-as-needed inventory. In this case, you do have an item-master record and an internal SKU number, but do not
carry stock of the item.
Non Vessel Operating Common Carrier (NVOCC): A firm that offers the same services as an ocean carrier, but which
does not own or operate a vessel. NVOCCs usually act as consolidators, accepting small shipments (LCL) and
consolidating them into full container loads. They also consolidate and disperse international containers that originate at
or are bound for inland ports. They then act as a shipper, tendering the containers to ocean common carriers. They are
required to file tariffs with the Federal Maritime Commission and are subject to the same laws and statutes that apply to
primary common carriers.
Notify Party: The name of an organization, or individual, which should be notified when a shipment reaches its
destination.
Not otherwise specified/Not elsewhere specified (NOS/NES): This term often appears in ocean or airfreight tariffs
respectively. If no rate for the specific commodity shipped appears in the tariff, then a general class rate (for example:
printed matter NES) will apply. Such rates usually are higher than rates for specific commodities.
Obsolete Inventory: Inventory for which there is no forecast demand expected. A condition of being out of date. A loss
of value occasioned by new developments that place the older property at a competitive disadvantage.
Ocean Bill of Lading: The bill of lading issued by the ocean carrier to its customer.
Ocean Carrier: An enterprise that offers service via ocean (water) transport.
Offshore: Utilizing an outsourcing service provider located in a country other than where the client is located.
Omni-Channel: Omni-channel is the seamless way in which a customer interacts and shops with a retailer across
multiple channels (such as store or web) and while using multiple devices, whilst experiencing no material difference in
customer experience.
On-Demand: Pertaining to work performed when demand is present. Typically used to describe products which are
manufactured or assembled only when a customer order is placed.
One-Piece Flow: Moving parts through a process in batches of one.
On-Line receiving: A system in which computer terminals are available at each receiving bay and operators enter items
into the system as they are unloaded.
On-time delivery: a fill-rate measurement generally used by manufacturers to describe the percentage of orders, lines,
dollars, or units filled by the requested (or promised) date. Tolerances or time breakdowns may be used to adjust or add
detail to this type of measurement.
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Operating Ratio: A measure of operating efficiency defined as operating expenses divided by the Operating revenues x
100.
Operational Performance Measurements: (1) In traditional management, performance measurements related to
machine worker, or department efficiency or utilization. These performance measurements are usually poorly
correlated with organizational performance. (2) In theory of constraints, performance measurements that link causally
to organizational performance measurements. Throughput, inventory, and operating expense are examples.
Optimization: the process of getting the “best” result from a stated problem. A typical optimization model would be
made up of a value that you would like to optimize (minimize or maximize), one or more changeable values that have a
mathematical relationship to the value you want to optimize, and one or more constraints (limits). Though optimization
implies an optimal (best) solution, the reality is in most cases we are looking for the “best practical” solution, which is
not necessarily the best solution.
Order: Request to ship, receive, or transport material as indicated in a customer order, purchase order, or shop order,
respectively.
Order cost: the sum of the fixed costs that are incurred each time an item is ordered or produced. Order costs are the
costs associated with the instance, but not the quantity, of an order; which is not necessarily the same as all costs
associated with ordering and receiving inventory. Order cost is used in cost-based lot sizing calculations such as EOQ.
Order cycle: the length of time between receipts of an item. You can also think of it as the length of time an ordered
quantity should last.
Order Entry and Scheduling: The process of receiving orders from the customer and entering them into a company’s
order processing system. Orders can be received through phone, fax, or electronic media. Activities may include
“technically” examining orders to ensure an orderable configuration and provide accurate price, checking the customer’s
credit and accepting payment (optionally), identifying and reserving inventory (both on hand and scheduled), and
committing and scheduling a delivery date.
Order Fill: A measure of the number of orders processed without stockouts, or the need to back order, expressed as a
percentage of all orders processed in the distribution center or warehouse.
Order Management: The planning, directing, monitoring, and controlling of the processes related to customer orders,
manufacturing orders, and purchase orders. Regarding customer orders, order management includes order promising,
order entry, order pick, pack and ship, billing, and reconciliation of the customer account. Regarding manufacturing
orders, order management includes order release, routing, manufacture, monitoring, and receipt into stores or finished
goods inventories. Regarding purchase orders, order management includes order placement, monitoring, receiving,
acceptance, and payment of supplier.
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Order Management Costs: One of the elements comprising a company’s total supply chain management costs. These
costs consist of the following:
1. New Product Release Phase In and Maintenance: This includes costs associated with releasing new products to the
field, maintaining released products, assigning product ID, defining configurations and packaging, publishing availability
schedules, release letters and updates, and maintaining product databases.
2. Create Customer Order: This includes costs associated with creating and pricing configurations to order and preparing
customer order documents.
3. Order Entry and Maintenance: This includes costs associated with maintaining the customer database, credit check,
accepting new orders, and adding them to the order system, as well as later order modifications.
4.Contract/Program and Channel Management: This includes costs related to contract negotiation, monitoring
progress, and reporting against the customer’s contract, including administration of performance or warranty-related
issues.
5. Installation Planning: This includes costs associated with installation engineering, scheduling and modification,
handling cancellations, and planning the installation.
6. Order Fulfillment: This includes costs associated with order processing, inventory allocation, ordering from internal or
external suppliers, shipment scheduling, order status reporting, and shipment initiation.
7. Distribution: This includes costs associated with warehouse space and management, finished goods receiving and
stocking, processing shipments, picking and consolidating, selecting carriers, and staging products/systems.
8. Transportation, Outbound Freight, and Duties: This includes costs associated with all company-paid freight duties
from point of manufacturer to end customer or channel.
9. Installation: This includes costs associated with verification of site preparation, installation, certification, and
authorization of billing.
10. Customer Invoicing/Accounting: This includes costs associated with invoicing, processing customer payments, and
verification of customer receipt.
Order Picking: Assembling a customer’s order from items in storage.
Order Processing: Activities associated with filling customer orders.
Ordering Cost: The cost of placing an inventory order with a supplier.
Original Equipment Manufacturer (OEM): A manufacturer that buys and incorporates another supplier’s products into
its own products. Also, products supplied to the original equipment manufacturer or sold as part of an assembly. For
example, an engine may be sold to an OEM for use as that company’s power source for its generator units.
Outbound Logistics: The process related to the movement and storage of products from the end of the production line
to the end user.
Outlier: A data point that differs significantly from other data for a similar phenomenon. For example, if the average
sales for a product were ten units per month, and one month the product had sales of 500 units, this sales point might
be considered an outlier.
Outpartnering: The process of involving the supplier in a close partnership with the firm and its operations management
system. Outpartnering is characterized by close working relationships between buyers and suppliers, high levels of trust,
mutual respect, and emphasis on joint problem solving and cooperation. With outpartnering, the supplier is not viewed
as an alternative source of goods and services (as observed under outsourcing), but rather as a source of knowledge,
expertise, and complementary core competencies. Outpartnering is typically found during the early stages of product
life cycle when dealing with products that are viewed as critical to the strategic survival of the firm.
Outsource: To utilize a third party provider to perform services previously performed in house. Examples include
manufacturing of products and call center/customer support.
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Over, Short, and damaged (OS&D): This is typically a report issued at the warehouse when goods are damaged. Used to
file a claim with a carrier.
Over-the-Road: A motor carrier operation that reflects long-distance moves; the opposite of local operations.
Overhead: indirect costs associated with facilities and management that are applied to the costs of manufactured goods
through the manufacturing reporting process.
Packing: The process of preparing a container for shipment.
Packing List: A document containing information about the location of each Product ID in each package. It allows the
recipient to quickly find the item he or she is looking for without a broad search of all packages. It also confirms the
actual shipment of goods on a line item basis.
Pallet: The platform which cartons are stacked on and then used for shipment or movement as a group. Pallets may be
made of wood or composite materials.
Pallet picking: Retrieval of full pallets of cartons, or layers of cartonsfrom a pallet (a.k.a. unit-load picking).
Pallet Wrapping Machine:A machine that wraps a pallet’s contents in stretch-wrap to ensure safe shipment.
Parcel Manifest System: Automated shipping system.
Parcel Shipment: Parcels include small packages like those typically handled by providers such as UPS and FedEx.
Part Standardization: A program for planned elimination of superficial, accidental, and deliberate differences between
similar parts in the interest of reducing part and supplier proliferation. A typical goal of part standardization is to reduce
costs by reducing the number of parts that the company needs to manage.
Parts list: a listing of material required for a production order. The manufacturing planning system will use the bill of
materials to calculate the material requirements for a manufacturing order, resulting in the parts list (also called a
materials list). Parts lists can also be created or edited manually.
Pay on Use: Pay on use is a process where payment is initiated by product consumption, i.e., consignment stock based
on withdrawal of product from inventory. This process is popular with many European companies.
Payment terms: an agreement between a supplier and customer that describes how and when payment will be made
for products or services.
Peak Demand: The time period during which customers demand the greatest quantity.
Peer to Peer (P2P): A computer-networking environment which allows individual computers to share resources and data
without passing through an intermediate network server.
Pegging: A technique in which a DRP system traces demand for a product by date, quantity, and warehouse location.
Perfect Order: The definition of a perfect order is one which meets all of the following criteria:
* Delivered complete, with all items on the order in the quantity requested
* Delivered on time to customer’s request date, using the customer’s definition of on-time delivery
* Delivered with complete and accurate documentation supporting the order including packing slips, bills of lading and
invoices
* Delivered in perfect condition with the correct configuration, customer ready, without damage, and faultlessly
installed (as applicable)
Performance and Event Management Systems:The systems that report on the key measurements in the supply chain –
inventory days of supply, delivery performance, order cycle times, capacity use, etc. Using this information to identify
causal relationships to suggest actions in line with the business goals.
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Performance Measures: Indicators of the work performed and the results achieved in an activity, process, or
organizational unit. Performance measures should be both non-financial and financial. Performance measures enable
periodic comparison and benchmarking.
Performance Measurement Program: A performance measurement program goes beyond just having performance
metrics in place. Typical characteristics of a good performance measurement program include the following:
* Metrics that are aligned to strategy, and linked to the shop floor or line-level workers.
* A process and culture that drives performance and accountability to deliver performance against key performance
indicators.
* An incentive plan that is tied to performance goals, objectives, and metrics.
* Tools/technology in place to support easy data collection and use.
Periodic review methods: approaches to inventory control that place orders of variable size at fixed intervals of time
Perpetual Inventory: An inventory record keeping system where each transaction in and out is recorded and a new
balance is computed.
Physical Inventory: the process of counting all inventories in a warehouse or plant in a single event. Also called a wall-towall inventory.
Physical Supply: The movement and storage of raw materials from supply sources to the manufacturing facility.
Pick/Pack: Picking and packing immediately into shipment containers.
Pick conveyor: A non-powered conveyor (e.g. wheel or roller) used in piece picking to support a tote or other container
while it is being filled.
Pick Ticket/ Pick Instruction: An instruction used in the warehouse that lists the products and the quantities to pick for
order processing.
Picking: The operations involved in pulling products from storage areas to complete a customer order.
Picking by Aisle: A method by which pickers pick all needed items in an aisle regardless of the items’ ultimate
destination; the items must be sorted later.
Picking by Source: A method in which pickers successively pick all items going to a particular destination regardless of
the aisle in which each item is located.
Pick List: A list of items to be picked from stock in order to fill an order; the pick list generation and the picking method
can be quite sophisticated.
Pick Sequence: The location travel sequence when picking items.
Pick to Light: A laser identifies the bin for the next item in the rack; when the picker completes the pick, the bar code is
scanned and the system then points the laser at the next bin.
Pick-Up Order: A document indicating the authority to pick up cargo or equipment from a specific location.
Piece picking: Retrieval of individual units (or ‘eaches’) of an item, where each piece picked is the unit of issue to the
final customer (a.k.a. broken-case picking).
Pipeline stock: stock that is currently being moved from one location to another
Place Utility: A value that logistics creates in a product by changing the product’s location. Transportation creates place
utility.
Planned Date: The date an operation such as a receipt, shipment, or delivery of an order is planned to occur.
Planned Order: In DRP and MRP systems, a future order the system plans in response to forecasted demand.
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Planned order receipt: term used within MRP and DRP systems to describe the date a planned order must be received in
order to fulfil net requirements.
Planned order release: term used within MRP and DRP systems to describe the date a planned order must be released
in order to meet the lead time. It is essentially the planned order receipt date offset by the lead time.
Plant Finished Goods: Finished goods inventory held at the end manufacturing location.
Point of Use Delivery: Delivery right to the production floor of an item.
Poka Yoke (mistake proof): The application of simple techniques that prevent process quality failure. A mechanism that
either prevents a mistake from being made or makes the mistake obvious at a glance.
Pooling: A shipping term for the practice of combining shipment from multiple shippers into a truckload in order to
reduce shipping charges.
Port: A harbor where ships will anchor.
Port Authority: A state or local government that owns, operates, or otherwise provides wharf, dock, and other terminal
investments at ports.
Port of Discharge: Port where vessel is off loaded.
Port of Entry: A port at which foreign goods are admitted into the receiving country.
Port of Loading : Port where cargo is loaded aboard the vessel.
Portable Data Collection Terminal (PDT): A portable device used to collect inventory data and perform inventory
functions. Interfaces with the WMS through a separate Batch Portable or RF Server application.
Portal: A web site that serves as a starting point to other destinations or activities on the Internet. Initially thought of as
a home base-type of web page, portals attempt to provide all Internet needs in one location. Portals commonly provide
services such as e-mail, online chat forums, shopping, searching, content, and news feeds.
POS: Point of Shipment, or Point of Sale
Postponement: The delay of final activities (i.e., assembly, production, packaging, etc.) until the latest possible time. A
strategy used to eliminate excess inventory in the form of finished goods which may be packaged in a variety of
configurations.
Pre-Expediting: The function of following up on open orders before the scheduled delivery date to ensure the timely
delivery of materials in the specified quantity.
Prepaid: A freight term which indicates that charges are to be paid by the shipper. Prepaid shipping charges may be
added to the customer invoice, or the cost may be bundled into the pricing for the product.
Prepaid Freight: Freight paid by the shipper to the carrier when merchandise is tendered for shipment that is not
refundable if the merchandise does not arrive at the intended destination.
Price: the amount charged by a supplier
Price discounts: all unit step reductions in price given for larger orders
Primary-Business Test: A test the ICC uses to determine if a trucking operation is bona fide private transportation; the
private trucking operation must be incidental to and in the furtherance of the firm’s primary business.
Primary Manufacturing Strategy:Your company’s dominant manufacturing strategy. The primary manufacturing
strategy generally accounts for 80-plus % of a company’s product volume. According to a study by Pittiglio Rabin Todd &
McGrath (PRTM), approximately 73% of all companies use a make-to-stock strategy.
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Private Carrier: A carrier that provides transportation service to the firm that owns or leases the vehicles and does not
charge a fee. Private motor carriers may haul at a fee for wholly owned subsidiaries.
Private Label: Products that are designed, produced, controlled by, and which carry the name of the store or a name
owned by the store; also known as a store brand or dealer brand. An example would be Wal-Mart’s “Sam’s Choice”
products.
Private Trucking Fleets: Private fleets serve the needs of their owners, and do not ordinarily offer commercial trucking
services to other customers. Private fleets typically perform distribution or service functions.
Private Warehousing: The storage of goods in a warehouse owned by the company that has title to the goods.
Process: A series of time-based activities linked to complete a specific output.
Process Benchmarking: Benchmarking a process (such as the pick, pack, and ship process) against organizations known
to be the best in class in this process. Process benchmarking is usually conducted on firms outside of the organization’s
industry.
Process Improvement:A design or activity which improves quality or reduces costs, often through the elimination of
waste on non-value-added tasks.
Process Manufacturing: Production that adds value by mixing, separating, forming, and/or performing chemical
reactions. It may be done in a batch, continuous, or mixed batch/continuous mode.
Procure-to-order: an inventory strategy where you do not procure your product until after you receive actual orders
from your customers.
Procure-to-stock: an inventory strategy where you must carry adequate finished goods inventory to meet upcoming
forecasted demand. The reason this stocking strategy is so common is not that it is the most cost-effective inventory
strategy overall, but rather it is a necessary strategy when market conditions require shipment of goods quicker than
you can procure them.
Procurement: The business functions of procurement planning, purchasing, inventory control, traffic, receiving,
incoming inspection, and salvage operations. Synonym: Purchasing
Procurement cycle: sequence of activities needed to acquire materials
Product: Something that has been or is being produced.
Product Characteristics: All of the elements that define a product’s character, such as size, shape, weight, etc.
Product Description: The user’s description of the product.
Product Family: A group of products with similar characteristics often used in production planning (or sales and
operations planning).
Product ID: A method of identifying a product without using a full description. These can be different for each document
type and must, therefore, be captured and related to the document in which they were used. They must then be related
to each other in context (also known as SKU, Item Code or Number, or other such name).
Product life cycle: the period of time in which a specific item is considered an active saleable item. Product life cycle
starts when a product is first introduced, and ends when a product is removed from active status. Some definitions of
product life cycle may also include the development time for a product.
Production Capacity: Measure of how much production volume may be experienced over a set period of time.
Production Line: A series of pieces of equipment dedicated to the manufacture of a specific number of products or
families.
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Production order: the document used to process a production run of an item. Also known as a job, work order, or
manufacturing order, a production order is usually made up of a production order header, a parts list, and a routing.
Production Planning and Scheduling: The systems that enable creation of detailed, optimized plans and schedules,
taking into account the resource, material, and dependency constraints to meet the deadlines.
Production-Related Material: Production-related material is an item classified as a material purchase and included in
cost-of-goods sold as a raw material purchase.
Productivity: A measure of resource utilization efficiency defined as the sum of the outputs divided by the sum of the
inputs.
Profit Ratio: The percentage of profit to sales–that is, profit divided by sales.
Profitability Analysis: The analysis of profit derived from cost objects with the view to improve or optimize profitability.
Multiple views may be analyzed, such as market segment, customer, distribution channel, product families, products,
technologies, platforms, regions, manufacturing capacity, etc.
Pro-forma: A type of quotation or offer that may be used when first negotiating the sales of goods or services. If the proforma is accepted, then the terms and conditions of the pro-forma may become the request.
Pro Forma Invoice: An invoice, forwarded by the seller of goods prior to shipment that advises the buyer of the
particulars and value of the goods. Usually required by the buyer in order to obtain an import permit or letter of credit.
Progressive assembly picking: Variation of zone picking where an order is passed from one zone to the next, eliminating
the need to consolidate the order but increasing its total picking time (a.k.a. pick-and-pass).
Projective forecast: a forecast that projects historical patterns into the future
Promised date: the date a supplier expects to be able to fulfil a customer order.
Promotion: The act of selling a product at a reduced price, or a buy one/get one free offer, for the purpose of increasing
sales.
Pro Number: Any progressive or serialized number applied for identification of freight bills, bills of lading, etc.
Proof of Delivery (POD): Information supplied by the carrier containing the name of the person who signed for the
shipment, the time and date of delivery and other shipment delivery-related information. POD is also sometimes used to
refer to the process of printing materials just prior to shipment (Print on Demand).
Proportional Rate: A rate lower than the regular rate for shipments that have prior or subsequent moves; used to
overcome combination rates’ competitive disadvantages.
Public Warehouse: The warehouse space that is rented or leased by an independent business providing a variety of
services for a fee or on a contract basis.
Public Warehousing: The storage of goods by a firm that offers storage service for a fee to the public.
Public Warehouse receipt: The basic document a public warehouse manager issues as a receipt for the goods a
company gives to the warehouse manager. The receipt can be either negotiable or nonnegotiable.
Pull Signal: A signal from a using operation that triggers the issue of raw material.
Pull Ordering System: A system in which each warehouse controls its own shipping requirements by placing individual
orders for inventory with the central distribution center. A replenishment system where inventory is “pulled” into the
supply chain (or “demand chain” by POS systems, or ECR programs). Associated with “build to order” systems.
Purchase Order (PO): The purchaser’s authorization used to formalize a purchase transaction with a supplier. The
physical form or electronic transaction a buyer uses when placing an order for merchandise.
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Purchase Price Discount: A pricing structure in which the seller offers a lower price if the buyer purchases a larger
quantity.
Purchasing: The functions associated with buying the goods and services the firm requires.
Push Distribution: The process of building product and pushing it into the distribution channel without receiving any
information regarding requirements.
Push system: an ordering or production scheduling system where production or procurement of a product is triggered
by expected (forecasted) demand rather than actual customer orders. Make-to-stock and procure-to-stock are examples
of push systems.
Put Away: Removing the material from the dock (or other location of receipt), transporting the material to a storage
area, placing that material in a staging area, and then moving it to a specific location and recording the movement and
identification of the location where the material has been place.
Quality: Conformance to requirements or fitness for use. Quality can be defined through five principal approaches:
1) Transcendent quality is an ideal, a condition of excellence.
2) Product-based quality is based on a product attribute.
3) User-based quality is fitness for use.
4) Manufacturing-based quality is conformance to requirements.
5) Value-based quality is the degree of excellence to an acceptable price.
Also, quality has two major components:
a) quality of conformance – quality is defined by the absence of defects.
b) quality of design – quality is measured by the degree of customer satisfaction with a product’s characteristics and
features.
Quality Assurance/ QA: Program planned to provide that goods purchased may be inspected and/or tested so that
compliance with specifications may be determined.
Quality Circle: In quality management, a small group of people who normally work as a unit and meet frequently to
uncover and solve problems concerning the quality of items produced, process capability, or process control.
Quality Control: The management function that attempts to ensure that the goods or services in a firm manufacturers
or purchases meet the product or service specifications.
Quality Function Deployment (QFD): A structured method for translating user requirements into detailed design
specifications using a continual stream of “what-how” matrices. QFD links the needs of the customer (end user) with
design, development, engineering, manufacturing, and service functions. It helps organizations seek out both spoken
and unspoken needs, translate these into actions and designs, and focus various business functions toward achieving
this common goal.
Quantity discount: a price structure that involves lower prices for larger purchase quantities. Quantity discounts
generally have specific “break points” that designate quantities at which the price changes.
Quarantine: The setting aside of items from availability for use or sale until all required quality tests have been
performed and conformance certified.
Queue time: the amount of time inventory is staged prior to processing.
Quick Response (QR): A strategy widely adopted by general merchandise and soft lines retailers and manufacturers to
reduce retail out of stocks, forced markdowns, and operating expenses. These goals are accomplished through shipping
accuracy and reduced response time. QR is a partnership strategy in which suppliers and retailers work together to
respond more rapidly to the consumer by sharing point-of-sale scan data, enabling both to forecast replenishment
needs.
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Radio Frequency (RF): A form of wireless communications that lets users relay information via electromagnetic energy
waves from a terminal to a base station which is linked, in turn, to a host computer. The terminal can be placed at a
fixed station, mounted on a forklift truck, or carried in a worker’s hand. The base station contains a transmitter and
receiver for communication with the terminal. RF systems use either narrow-band or spread-spectrum transmissions.
Narrow-band data transmissions move along a single limited radio frequency, while spread-spectrum transmissions
move across several different frequencies. When combines with a bar code system of identifying inventory items, a
radio frequency system can relay data instantly, thus updating inventory records in so-called real time.
Radio Frequency Identification (RFID): The use of radio frequency technology such as RFID tags and tag readers to
identify objects. Objects may include virtually anything physical, such as equipment, pallets of stock, or even individual
units of product.
Radio Frequency Server: The RF server that interfaces between the WMS database and an RF portable; it must be
opened as a separate application.
Radio Frequency Terminal: An RF enabled wireless portable data terminal that uses the WMS RF server application.
Ramp Rate: A statement which quantifies how quickly you grow or expand an operation growth trajectory. Can refer to
sales, profits, or margins.
Random-Location Storage: In warehouses, a storage technique in which received material is put away in any available
space rather than a specific decided logical criteria.
Rationing: The allocation of product among customers, or components among manufactured goods during periods of
short supply. When price is used to allocate product, it’s allocated to those willing to pay the most.
Raw Materials (RM): Crude or processed material that can be converted by manufacturing, processing, or a combination
thereof into a new and useful product.
Real Time: The processing of data in a business application as it happens, as contrasted with storing data for input at a
later time (batch processing).
Receiving: The function encompassing the physical receipt of material, the inspection of the shipment for conformance
with the purchase order (quantity and damage), the identification and delivery to destination, and the preparation of
receiving reports.
Receiving Dock: Distribution center location where the actual physical receipt of the purchased material from the carrier
occurs.
Reengineering: (1) A fundamental rethinking and radical redesign of business processes to achieve dramatic
improvements in performance. (2) A term used to describe the process of making (usually) significant and major
revisions or modifications to business processes. (3) Also called Business Process Reengineering.
Refrigerated Carriers: Truckload carriers designed to keep perishables good refrigerated. The food industry typically
uses this type of carrier.
Release-to-Start Manufacturing: Average time from order release to manufacturing to the start of the production
process. This cycle time may typically be required to support activities like material movement and line changeovers.
Reorder cost: cost associated with each order for materials placed with suppliers
Reorder level: the stock level at which it is time to place another order for materials (generally the lead time demand
plus safety stock minus any stock on order)
Replenishment: within a warehouse or plant, replenishment is the process of moving inventory from secondary storage
areas into fixed storage locations. Within a supply chain or a multi-plant environment, replenishment is the process of
moving inventory between facilities or from suppliers to meet demand.
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Replenishment rate: the (finite) rate at which materials are added to stock
Request for Information (RFI): A document used to solicit information about vendors, products, and services prior to a
formal RFQ/RFP process.
Request for Proposal (RFP): A document which provides information concerning needs and requirements for a
manufacturer. This document is created in order to solicit proposals from potential suppliers. For example, a computer
manufacturer may use an RFP to solicit proposals from suppliers of third party logistics services.
Request for Quote (RFQ): A document used to solicit vendor responses when a product has been selected and price
quotations are needed from several vendors.
Resellers: Organizations intermediate in manufacturing and distribution process such as wholesalers and retailers.
Reserve storage: An area intended for the storage of material in full pallet load sizes from which both forward picking.
Resources: Economic elements applied or used in the performance of activities or to directly support cost objects. They
include people, materials, supplies, equipment, technologies, and facilities.
Resources requirements planning: RRP is a capacity planning tool used to verify the ability of key resources to meet a
production plan or business plan. RRP deals primarily with resources that require long-term planning, such as facilities,
major equipment, capital, and workforce levels.
Retailer: A business that takes title to products and resells them to final consumers. Examples include Wal-Mart, Best
Buy, and Safeway, but also include the many smaller independent stores.
Return Goods Handling:Processes involved with returning goods from the customer to the manufacturer. Products may
be returned because of performance problems or simply because the customer doesn’t like the product.
Return Material Authorization or Return Merchandise Authorization (RMA): A number usually produced to recognize
and give authority for a faulty (perhaps) good to be returned to a distribution center or manufacturer. A form generally
required with a warranty/return which helps the company identify the original product and the reason for the return.
The RMA number often acts as an order form for the work required in repair situations, or as a reference for credit
approval.
Return on Assets (ROA): Financial measure calculated by dividing profit by assets.
Return on Sales: Financial measure calculated by dividing profit by sales.
Return Order Management Costs: The costs associated with managing Return Material Authorization (RMA). Includes all
applicable elements of the Level 2 component order management cost of total supply chain management cost.
Return Product Authorization (RPA): Also called Return Material or Goods Authorization (RMA or RGA). A form
generally required with a warranty/return which helps the company identify the original product and the reason for the
return. The RPA number often acts as an order form for the work required in repair situations or as a reference for credit
approval.
Return to Vendor (RTV): Material that has been rejected by the customer or the buyer’s inspection department and is
awaiting shipment back to the supplier for repair or replacement.
Returns Inventory Costs:The costs associated with managing inventory returned for any of the following reasons:
repair, refurbish, excess, obsolescence, end of life, ecological conformance, and demonstration. Includes all applicable
elements of the Level 2 component Inventory Carrying Cost of Total Supply Chain Management Cost.
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Returns Material Acquisition, Finance, Planning, and IT Costs: The costs associated with acquiring the defective
products and materials for repair or refurbishing items, plus any finance, planning, and information technology costs to
support return activity. Includes all applicable elements of the Level 2 components material acquisition cost (acquiring
materials for repairs), supply chain-related finance and planning costs, and supply chain management cost.
Returns Processing Cost: The total cost to process repairs, refurbished, excess, obsolete, and end-of-life products,
including diagnosing problems and replacing products. Includes the costs of logistics support, materials, centralized
functions, troubleshooting service requests, on-site diagnosis and repair, external repair, and miscellaneous. These costs
are broken into Returns Order Management, Returns Inventory Carrying, Returns Material Acquisition, Finance,
Planning, IT, Disposal, and Warranty Costs.
Returns to Scale: A defining characteristic of B2B. Bigger is better. It’s what creates the “winner takes all” quality of most
B2B hubs. It also places a premium on being first to market and first to achieve critical mass.
Reverse Engineering: A process whereby competitors’ products are disassembled and analyzed for evidence of the use
of better processes, components, and techniques.
Reverse Logistics: A specialized segment of logistics focusing on the movement and management of products and
resources after the sale and after delivery to the customer. Includes product returns for repair and/or credit.
Rewarehousing: The process of moving items to different storage locations to improve handling efficiency.
Routing or Routing Guide:(1) Process of determining how shipment will move between origin and destination. Routing
information includes designation of carrier(s) involved, actual route of carrier, and estimate time en route. (2) Right of
shipper to determine carriers, routes, and points for transfer shipments. (3) In manufacturing, this is the document
which defines a process of steps used to manufacture and/or assemble a product.
Routing Accuracy: When specified activities conform to administrative specifications, and specified resource
consumptions (both man and machine) are detailed according to administrative specifications and are within 10% of
actual requirements.
Run Time: in an operation step in a routing, run time is the amount of time it takes to produce (run) a single unit. It does
not include any setup time or queue time. The term can also be used to describe the accumulation of run time for
multiple operations or multiple units (based on an entire production order).
Safety Lead Time: a means of adding some time to your lead time as part of your ordering calculations. Though safety
lead time is used in the ordering calculation to determine when you need to order something, it is excluded from the
calculation that then determines the “requested date” for the order.
Safety Stock: The inventory a company holds above normal needs as a buffer against delays in receipt of supply or
changes in customer demand.
Salable Goods: A part of assembly authorized for sale to final customers through the marketing function.
Sales and Operations Planning (S&OP): A strategic planning process that reconciles conflicting business objectives and
plans future supply chain actions. S&OP usually involves various business functions, such as sales, operations, and
finance to agree on a single plan/forecast that can be used to drive the entire business.
Sales Mix: The proportion of individual product-type sales volumes that make up the total sales volume.
Sales Order: document used to approve, track, and process outbound customer shipments.
Sawtooth Diagram: A quantity-versus-time graphic representation of the order point/order quantity inventory system
showing inventory being received, used up, and reordered.
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Scalability:
1) How quickly and efficiently a company can ramp up to meet demand.
2) How well a solution to a problem will work when the size of the problem increases. The economies of scale don’t
really kick in until your reach the critical mass, and then revenues start to increase exponentially.
Scanlon Plan: A system of group incentives on a companywide or plant-wide basis that sets up one measure that reflects
the results of all efforts. The Scanlon plan originated in the 1930s by Joe Scanlon and MIT. The universal standard is the
ratio of labor costs to sales value added by production. If there’s an increase in production sales value with no change in
labor costs, productivity has increased while unit cost has decreased.
Scientific inventory control: the use of mathematical models to find optimal stock levels and ordering policies
SCOR: Supply Chain Operations Reference Model. This is the model developed by the Supply-Chain Council (SCC), and is
built around six major processes: plan, source, make, deliver, return, and enable. The aim of the SCOR is to provide a
standardized method of measuring supply chain performance, and to use a common set of metrics to benchmark against
other organizations.
Scorecard: A performance measurement tool used to capture a summary of the key performance indicators
(KPIs)/metrics of a company. Metrics dashboards/scorecards should be easy to read and usually have red, yellow, green
indicators to flag when the company is not meeting its metrics targets. Ideally, a dashboard/scorecard should be cross
functional in nature and include both financial and non-financial measures. In addition, scorecards should be reviewed
regularly – at least on a monthly basis and weekly in key functions, such as manufacturing and distribution where
activities are critical to the success of a company. The dashboard/scorecards philosophy can also be applied to external
supply chain partners like suppliers to ensure that their objectives and practices align.
Scrap: inventory that must be discarded or recycled as a result of a manufacturing process or damage that occurs during
storage or material handling.
Scrap rate: the rate of expected scrap for specific components within the context of manufacturing an item. A scrap rate
would be attached to a specific component on the bill of materials for a specific item
Seasonality: fluctuations in demand that repeat with the same pattern over equivalent time periods. The most common
representation of seasonality occurs with changing demand patterns measured weekly, monthly, or quarterly, that
repeat annually.
Seasonality index: consists of a number for each specific forecast period that describes the relationship of each period’s
demand to the average demand over the complete seasonal cycle. The average demand is represented by the number
one. If seasonality for a period results in demand greater than the average demand, it will be represented by a number
greater than one. For example, if December’s sales were, on average, 30% greater than the average monthly sales for
the year, you would have a seasonality index of 1.3 (1 plus .30) for December.
Secure Electronic Transaction (SET): In e-commerce, a system of guaranteeing the security of financial transactions
conducted over the Internet.
Self Billing: A transportation industry strategy which prescribes that a carrier will accept payment based on the tender
document provided by the shipper.
Self Correcting: A computer term for an online process that validates data and won’t allow the data to enter the system
unless all errors are corrected.
Semi-processed materials: stockable items (meaning they have their own unique item number) that have gone through
some processing, but will be later pulled from stock and undergo additional processing.
Sensitivity: the rate at which a forecast responds to changes in demand
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Serial Number: A unique number assigned for identification to a single piece that will never be repeated for similar
pieces. Serial numbers are usually applied by the manufacturer but can be applied at other points by the distributor or
wholesaler. Serial numbers can be used to support traceability and warranty programs.
SSCC (Serial Shipping Container Code): A globally unique serial number for identifying a movable unit (e.g., a pallet).
Service Parts Revenue: The sum of the value of sales made to external customers and the transfer price valuation of
sales within the company of repair or replacement parts and supplies, net of all discounts, coupons, allowances, and
rebates.
Setup costs: the costs associated with initiating a production run. May include labor and machine time to get equipment
ready, as well as scrap or tooling associated with the setup process.
Setup time: the time it takes to prepare (equipment and materials) for a production run.
Shared Services: Consolidation of a company’s back-office processes to form a spinout (0r a separate “shared services”
unit to be run like a separate business), providing services to the parent company and sometimes, to external
customers. Shared services typically lower overall cost due to the consolidation, and may improve support as a result of
focus.
Shelf Life: The amount of time an item may be held in inventory before it becomes unusable. Shelf life is a consideration
for food and drugs which deteriorate over time, and for high-tech products which become obsolete quickly.
Shingo’s Seven Wastes:Shigeo Shingo, a pioneer in the Japanese just-in-time philosophy, identified seven barriers to
improving manufacturing. They are the waste of overproduction, waste of waiting, waste of transportation, waste of
stocks, waste of motion, waste of making defects, and waste of the processing itself.
Shipper: The party that tenders goods for transportation.
Shipper-Carriers: Shipper-carriers (also called private carriers) are companies with goods to be shipped that own or
manage their own vehicle fleets. Many large retailers, particularly groceries and “big box” stores, are shipper-carriers.
Shipping: The function that performs the tasks for the outgoing shipment of parts, components, and products. It
includes packaging, marking, weighing, and loading for shipment.
Shipping Lane: A predetermined, mapped route on the ocean that commercial vessels tend to follow between ports.
This helps ships avoid hazardous areas. In general transportation, the logical route between the point of shipment and
the point of delivery used to analyze the volume of shipment between two points.
Shipping Manifest: A document that lists the pieces in a shipment. A manifest usually covers an entire load regardless of
whether the load is to be delivered to a single destination or many destinations. Manifests usually list the items, piece
count, total weight, and the destination name and address for each destination in the load.
Shipping order: document used to approve, track, and process outbound shipments.
Shop Floor Production Control Systems: The systems that assign priority to each shop order, maintaining work-inprocess quantity information, providing actual output data for capacity control purposes, and providing quantity by
location by shop order for work-in-process inventory and accounting purposes.
Shop order: Request that indicates the type and quantity of SKUs to be transported from a warehouse to a production
area; each SKU-quantity pair in the order is termed a line (cf. customer order and shop order).
Short Shipment: Piece of freight missing from shipment as stipulated by documents on hand.
Shortage: occurs when customer demand cannot be met from stock (resulting in backorders or lost sales)
Shortage cost: cost associated with each shortage (which may be dependent or independent of the amount of shortage
or its duration)
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Short-term schedules: detailed timetables for all resources used in an organization
Shrinkage: Reductions of actual quantities of items in stock, in process, or in transit. The loss may be caused by scrap,
theft, deterioration, evaporation, etc.
Simultaneous picking: Variation of zone picking and where the items for an order are picked simultaneously in each
zone and then consolidated, making it possible to minimize the total picking time required for an order (which is useful if
there are multiple waves per shift).
Simulation – uses a dynamic model to duplicate the continuous operation of a system over time
Six-Sigma Quality: A term generally used to indicate that a process is well controlled, I.e., tolerance limits are +-6 sigma
(3.4 defects per million events) from the centerline in a control chart. The term is usually associated with Motorola
which named one of its key operations initiatives Six-Sigma Quality.
Skills Matrix: A visible means of displaying people’s skill levels in various tasks. Used in a team environment to identify
the skills required by the team and which team members possess those skills.
Slotting: Warehouse slotting is defined as the placement of products within a warehouse facility. Its objective is to
increase picking efficiency and reduce warehouse handling costs through optimizing product location and balancing the
workload.
Small Group Improvement Activity: An organizational technique for involving employees in continuous improvement
activities.
Sortation: The process of merging, identifying, inducting, and separating material to be conveyed to specific
destinations.
Spare parts: items held in stock as replacements to keep machinery, equipment, etc. working properly
Split-case picking: Variation of case picking where inner packs of items from cartons are retrieved.
Split Delivery: A method by which a larger quantity is ordered on a purchase order to secure a lower price, but delivery
is divided into smaller quantities and is spread out over several dates to control inventory investment, save storage
space, etc.
Spot Demand: Demand with a short lead time that’s difficult to estimate. Usually supply for this demand is provided at a
premium price. An example of spot demand would be when there’s a spiked demand for building materials as a result of
a hurricane.
Staging: Pulling material for an order from inventory before the material is required. This action is often taken to identify
shortages, but it can lead to increased problems in availability and inventory accuracy.
Stakeholders: People with a vested interest in a company, including manager, employees, stockholders, customers,
suppliers, and others.
Standard business practices: business practices that are typical for general industry or specific industries.
Standard Components:Components (parts) of a product for which there is an abundance of suppliers. Not difficult to
produce. An example would be a power cord for a computer.
Standard Cost Accounting System: A cost accounting system that uses cost units determined before production for
estimating the cost of an order or product. For management control purposes, the standards are compared to actual
costs, and variances are computed.
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Statement of Work (SOW): 1) A description of products to be supplied under a contract. A good practice is for
companies to have SOWs in place with their trading partners- especially for all top suppliers. 2) In projection
management, the first project planning document that should be prepared. It describes the purpose, history,
deliverables, and measurable success indicators for a project. It captures the support required from the customer and
identifies contingency plans for events that could throw the project off course. Because the project must be sold to
management, staff, and review groups, the statement of work should be a persuasive document.
Statistical Process Control (SPC): A visual means of measuring and plotting process and product variation. Results are
used to adjust variables and maintain product quality.
Stickering: Placing customer-specific stickers on boxes of product. An example would be where Wal-Mart has a request
for their own product codes to be applied to retail boxes prior to shipment.
Stock: all the goods and materials that are stored by an organization until they are needed
Stock cycle: sequence of repeated events for stock holdings; the time between consecutive replenishments
Stocktaking: periodic checks to find differences between recorded and actual stock levels
Stock-Keeping Unit (SKU): A category of unit with a unique combination of form, fit, and function (i.e., unique
components held in stock). To illustrate: If two items are indistinguishable to the customer, or if any distinguishing
characteristics visible to the customer are not important to the customer so that the customer believes the two items to
be the same, these two items are part of the same SKU.
As a further illustration: consider a computer company that allows customers to configure a complete computer from a
selection of standard components. For example, they can choose from three keyboards, three monitors, and three CPUs.
Customers may also individually buy keyboards, monitors, and CPUs. If the stock were held at the configuration
component level, the company would have nine SKUs. If the company stocks at the component level, the company
would have 36 SKUs. (9 component SKUs + 3*3*3 configured product SKUs.) If, as part of a promotional campaign, the
company also specially packaged the products, the company would have a total of 72 SKUs.
Stocking type: a classification used by planning and execution systems to identify the primary stocking characteristic of
the inventory. Examples of stocking types would include classifications that distinguish manufactured inventory,
purchased inventory, direct ship inventory, or order-as-needed inventory.
Stocking unit of measure: the unit of measure used to track inventory within a facility. Stocking unit of measure is
usually, but not always, the smallest unit of measure handled.
Stockout: a situation where you have inadequate inventory levels to meet current demand.
Storage cost: the costs associated with the physical storage of inventory. This would include the cost of the physical
space dedicated to the inventory, as well as storage equipment (racking, shelving) used to store the inventory.
Storage location: An identifiable location in a warehouse assigned a unique address and used to store a single item,
where the capacity of the location corresponds to the maximum number of units of the item that can be stored at the
location.
Straight Truck: Straight trucks do not have a separate tractor and trailer. The driving compartment, engine and trailer
are one unit.
Strategic Alliance: Business relationship in which two or more independent organizations cooperate and willingly modify
their business objectives and practices to help achieve long-term goals and objectives.
Subassembly; a stockable item that has gone through an assembly process, but is also used in the assembly of other
items. A subassembly is also a component.
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Sub-Optimization: Decisions or activities in part made at the expense of the whole. An example of sub-optimization is
where a manufacturing unit schedules production to benefit its cost structure without regard to customer requirements
or the effect on other business units.
Subcontracting: Sending production work outside to another manufacturer. This can involve specialized operations such
as plating metals or complete functional operations.
Subhauler: A subhauler drives a tractor under contract for a company. Usually a subhauler is an owner/operator or a
small company.
Sunk Cost: 1) The unrecovered balance of an investment. It’s a cost already paid that is not relevant to the decision
concerning the future that is being made. Capital already invested that for some reason cannot be retrieved.2) A past
cost that has no relevance with respect to future receipts and disbursements of a facility undergoing an economic study.
This concept implies that since a past outlay is the same regardless of the alternative selected, it should not influence
the choice between alternatives.
Supplier:
1) A provider of goods or services.
2) A seller with whom the buyer does business, as opposed to vendor, which is a generic term referring to all sellers in
the marketplace.
Supplier Certification: Certification procedures verifying that a supplier operates, maintains, improves, and documents
effective procedures that relate to the customer’s requirements. Such requirements can include cost, quality, delivery,
flexibility, maintenance, safety, and ISO quality and environmental standards.
Supplier-Owned Inventory: A variant of Vendor-Managed Inventory and Consignment Inventory. In this case the
supplier not only manages the inventory, but also owns the stock close to or at the customer location until the point of
consumption or usage by the customer.
Supply Chain: (1) Starting with unprocessed raw materials and ending with the final customer using the finished goods,
the supply chain links many companies together. (2) The material and informational interchanges in the logistical
process, stretching from acquisition of raw materials to delivery of finished products to the end user. All vendors, service
providers, and customers are links in the supply chain.
Supply Chain Design: The determination of how to structure a supply chain. Design decisions include the selection of
partners, the location and capacity of warehouse and production facilities, the products, the modes of transportation,
and supporting information systems.
Supply Chain Execution (SCE): The ability to move the product out of the warehouse door. This is a critical capacity and
one that only brick-and-mortar firms bring to the B2B table. Dot coms have the technology, but that’s only part of the
equation. The need for SCE is what is driving the dot coms to offer equity partnerships to the wholesale distributors.
Supply Chain Event Management (SCEM): SCEM is an application that supports control processes for managing events
within and between companies. It consists of integrated software functionality that supports five business processes:
monitor, notify, simulate, control, and measure supply chain activities.
Supply Chain Integration (SCI): Likely to become a key competitive advantage of selected e-marketplaces. Similar
concept to the back-end integration, but with greater emphasis on the moving of goods and services.
Supply Chain Inventory Visibility: Software applications that permit monitoring events across a supply chain. These
systems track and trace inventory globally on a line-item level, and notify the user of significant deviations from the
plans. Companies are provided with realistic estimates of when the material will arrive.
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Supply Chain Management (SCM): Supply chain management encompasses the planning and management of all
activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also
includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party
service providers, and customers. In essence, supply chain management integrates supply and demand management
within and across companies. Supply chain management is an integrating function with primary responsibility for linking
major business functions and business processes within and across companies into a cohesive, high-performing business
model. It includes all of the logistics management activities noted above, as well as manufacturing operations, and it
drives coordination of processes and activities with and across marketing, sales, product design, finance, and
information technology. — as defined by the Council of Supply Chain Management Professionals (CSCMP)
Supply Chain Network Design Systems: The systems employed in optimizing the relationships among the various
elements of the supply chain manufacturing plants, distribution centers, points of sale, as well as raw materials,
relationships among product families, and other factors to synchronize supply chains at a strategic level.
Supply Chain-Related Finance and Planning Cost Element: One of the elements comprising a company’s total supply
chain management costs. These costs consist of the following:
1. Supply-Chain Finance Costs: Costs associated with paying invoices, auditing physical counts, performing inventory
accounting, and collecting accounts receivable. Does NOT include customer invoicing/accounting costs.
2. Demand/Supply Planning Costs: Costs associated with forecasting developing finished goods, intermediate,
subassembly or end-item inventory plans, and coordinating demand/supply.
Supply Chain-Related IT Costs: Information technology (IT) costs (in US dollars) associated with major supply chain
management processes as described below. These costs should include:
* Development costs (costs incurred in process reengineering, planning, software development, installation,
implementation, and training associated with new and/or upgraded architecture, infrastructure, and systems to support
the described supply chain management processes),
* Execution costs (operating costs to support supply chain process users, including computer and network operations,
EDI and telecommunications services, and amortization/depreciation of hardware)
* Maintenance costs (costs incurred in problem resolution, troubleshooting, repair, and routine maintenance associated
with installed hardware and software for described supply chain management processes. Includes costs associated with
database administration systems configuration control, release planning, and management).
These costs are associated with the following processes:
PLAN
1. Product Data Management – Product phase-in/phase-out and release; post-introduction support and expansion;
testing and evaluation; end-of-life inventory management. Item master definition and control.
2. Forecasting and Demand/Supply Manage and Finished Goods – Forecasting; end-item inventory planning, DRP,
production master scheduling for all products, all channels.
SOURCE
1. Sourcing/Material Acquisition – Material requisitions, purchasing, supplier quality engineering, inbound freight
management, receiving, incoming inspection, component engineering, tooling acquisition, accounts payable.
2. Component and Supplier Management – Part number cross references, supplier catalogs, approved vendor lists.
3. Inventory Management – Perpetual and physical inventory controls and tools.
MAKE
1. Manufacturing Planning – MRP, production scheduling, tracking, manufacturing engineering, manufacturing
documentation management, inventory/obsolescence tracking.
2. Inventory Management – Perpetual and physical inventory controls and tools.
3. Manufacturing Execution – MES detailed and finite interval scheduling, process controls, and machine scheduling.
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DELIVER
1. Order Management – Order entry/maintenance, quotes, customer database, product/price database, accounts
receivable, credits and collections, invoicing.
2. Distribution and Transportation Management – DRP, shipping, freight management, traffic management.
3. Inventory Management – Perpetual and physical inventory controls and tools.
4. Warehouse Management – Finished goods, receiving and stocking, pick/pack.
5. Channel Management – Promotions, pricing and discounting, customer satisfaction surveys.
6. Field Service/Support – Field service, customer and field support, technical service, service/call management, returns,
warranty tracking.
EXTERNAL ELECTRONIC INTERFACES
Plan/Source/Make/Deliver – Interfaces, gateways, and data repositories created and maintained to exchange supply
chain-related information with the outside world. E-commerce initiatives. Includes development and implementation
costs.
Note: Accurate assignment of IT-related cost is challenging. It can be done using activity-based costing methods or using
other approaches, such as allocation based on user counts, transactions counts, or departmental headcounts. The
emphasis should be on capturing all costs. Costs for any outsourced IT activities should be included.
Supply Chain Strategic Planning: The process of analyzing, evaluating, and defining supply chain strategies, including
network design, manufacturing and transportation strategy, and inventory policy.
Supply Planning: The process of identifying, prioritizing, and aggregating, as a whole with constituent parts, all sources
of supply that are required and add value in the supply chain of a product or service at the appropriate level, horizon,
and interval.
Supply Warehouse: A warehouse that stores raw materials. Goods from different suppliers are picked, sorted, staged, or
sequenced at the warehouse to assemble plant orders.
Support Costs: Costs of activities not directly associated with producing or delivering products or services. Examples are
the costs of information systems, process engineering, and purchasing.
Surrogate [item] Driver: In ABC costing, a substitute for the ideal cost driver, but closely correlated to the ideal driver,
where [item] is Resource, Activity, or Cost Object. A surrogate driver is used to significantly reduce the cost of
measurement while not significantly reducing accuracy. For example, the number of production runs is not descriptive
of the material-disbursing activity, but the number of production runs may be used as an activity driver if material
disbursements correlate well with the number of production runs.
Sustaining Activity: An activity that benefits an organizational unit as a whole, but not any specific cost object.
SWOT Analysis: An analysis of the strengths, weaknesses, opportunities, and threats of and to an organization. SWOT
analysis is useful in developing strategy.
Synchronization: The concept that all supply chain functions are integrated and interact in real time; when changes are
made to one area, the effect is automatically reflected throughout the supply chain.
3D Loading: 3D loading is a method of space optimizing designed to help quickly and easily plan the best compact
arrangement of any 3D rectangular object set (boxes) within one or more larger rectangular enclosures (containers). It’s
based on three-dimensional, most-dense packing algorithms.
Taguchi Method: A concept of offline quality control methods conducted at the product and process design states in the
product development cycle. This concept, expressed by Genichi Taguchi, encompasses three phases of product design,
parameter design, and tolerance design. The goal is to reduce quality loss by reducing the variability of a product’s
characteristics during the parameter phase of product development.
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Takeaway conveyor: A powered conveyor (e.g., belt or live roller) used in piece and case picking to transport completed
orders.
Takt Time: Sets the pace of production to match the rate of customer demand and becomes the heartbeat of any lean
production system. It’s computed as the available production time divided by the rate of customer demand. For
example, assume demand is 10,000 units per month, or 500 units per day and planned available capacity are 420
minutes per day. The takt time = 420 minutes per day/500 units per day = 0.84 minutes per unit. This takt time means
that a unit should be planned to exit the production system on average every 0.84 minutes.
Tare Weight: The weight of a substance obtained by deducting the weight of the empty container from the gross weight
of the full container.
Target Costing: A target cost is calculated by subtracting the desired profit margin from an estimated or market-based
price to arrive at a desired production, engineering, or marketing cost. This may not be the initial production cost, but
one expected to be achieved during the mature production stage. Target costing is a method used in the analysis of
product design that involves estimated a target cost, then designing the product/service to meet that cost.
Target stock level: determines the order size for a periodic review method (with order size equal to target stock level
minus current stock minus amount already on order)
Tariff: A tax assessed by a government on goods entering or leaving a country. The term is also used in transportation in
reference to the fees and rules applied by a carrier for its services.
Task interleaving: Term used in describing a warehouse management systems to mix tasks to reduce travel time.
Sending a forklift driver to put away a pallet on his way to his next pick is a task interleaving example.
Tasks: The breakdown of the work in an activity into smaller elements.
Tender: The document which describes a business transaction to be performed.
Theory of Constraints (TOC): A production management theory which dictates that volume is controlled by a series of
constraints related to work center capacity, component availability, finance, etc. Total throughput cannot exceed the
capacity of the smallest constraint, and any inventory buffers or excess capacity at non-related work center is waste.
Third Party Logistics: Outsourcing all or much of a company’s logistics operations to a specialized company.
Third Party Logistics Provider (3PL): A firm which provides multiple logistics services for use by customers. Preferably,
these services are integrated or bundled together, by the provider. These firms facilitate the movement of parts and
materials from suppliers to manufacturers, and finished products from manufacturers, and finished products from
manufacturers to distributors and retailers. Among the services they provide are transportation, warehousing, cross
docking, inventory management, packaging, and freight forwarding.
Third Party Warehousing: The outsourcing of the warehousing function by the seller of the goods.
Throughput: A measure of warehousing output volume (weight, number of units). Also, the total amount of units
received, plus the total amount of units shipped divided by two.
Tier 1, 2 supplier: A tier 1 supplier is the immediate or primary set of vendors directly used by a company, and tier 2 is a
vendor to tier 1. In some industries the final customers or dominant chain partners are consolidating (reducing) their
number of tier 1 suppliers, and requiring proof of the communications and fulfillment capabilities between tier 1 and
tier 2.
Total Annual Sales: Total Annual Sales are Total Product Revenue plus post-delivery revenues (e.g., maintenance and
repair or equipment, system integration) royalties, sales of other services, spare parts revenue, and rental/lease
revenues.
Total Average Inventory: Average normal use stock, plus average lead stock, plus safety stock.
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Total Cost Analysis: A decision-making approach that considers minimization of total costs and recognizes the interrelationship among system variables, such as transportation, warehousing, inventory, and customer service.
Total Cost Curve: 1) In cost-volume-profit (break-even) analysis, the total cost curve is composed of total fixed and
variable costs per unit multiplied by the number of units provided. Break-even quantity occurs where the total cost
curve and total sales revenue curve intersect.2) In inventory theory, the total cost curve for an inventory item is the sum
of the costs of acquiring and carrying the item.
Total Cost of Ownership (TCO): Total cost of a computer asset throughout its life cycle, from acquisition to disposal. TCO
is the combined hard and soft costs of owning networked information assets. “Hard” costs include items such as the
purchase price of the asset, implementation fees, upgrades, maintenance, contracts, support contracts, disposal costs,
and license fees that may or may not be up-front or charged annually. These costs are considered “hard costs” because
they are tangible and easily accounted for.
Total Cumulative Manufacture Cycle Time: Average time between commencement of upstream processing and
completion of final packaging for shipment operations as well as release of approval for shipment. Does not include WIP
storage time.
Calculation: [Average # of units in WIP]/[Average daily output in units] – WIP days of supply
Total Make Cycle Time: The average processing time between commencement of upstream processing and completion
of all manufacturing process steps up to, but not including, packaging and labeling operations (i.e., from start of
manufacturing to final formulated product ready for primary packaging.) Does not include hold or test and release
times. Calculation: [Average # of units in active manufacturing]/[Average daily output in units.]
Total Product Revenue: The total value of sales made to external customers plus the transfer price valuation of intracompany shipments, net of all discounts, coupons, allowances, and rebates. Includes only the intra-company revenue for
product transferring out of an entity, installation services if these services are sold bundled with end products, and
recognized leases to customers initiated during the same period as revenue shipments, with revenue credited at the
average selling price.
Note: Total Product Revenue excludes post-delivery revenues (maintenance and repair of equipment, system
integrations), royalties, sales of other services, spare parts revenue, and rental/lease revenues.
Total Productive Maintenance (TPM): Team-based maintenance process designed to maximize machine availability and
performance and product quality.
Total Quality Management: a management strategy that focuses on continuous improvement.
Total Supply Chain Management Cost (five elements): Total cost to manage order processing, acquire materials,
manage inventory, and manage supply chain finance, planning, and IT costs as represented as a percent of revenue.
Accurate assignment of IT-related cost is challenging. It can be done using activity-based costing methods, or more
traditional-based approaches. Allocation based on user counts, transaction counts, or departmental headcounts are
reasonable approaches. The emphasis should be on capturing all costs, whether incurred in the entity completing the
survey or in a supporting organization on behalf of the entity. Reasonable estimates founded in data were accepted as
means to assess overall performance. All estimates reflected fully-burdened actuals inclusive of salary, benefits, space
and facilities, and general and administrative allocations.
Calculation: [Order Management Costs + Material Acquisition Costs + Inventory Carrying Costs + Supply-Chain Related
Finance and Planning Costs + Total Supply Chain-Related IT Costs]/[Total Product Revenue]
Total Supply Chain Response Time: The time it takes to rebalance the entire supply chain after determining a change in
market demand. Also, a measure of a supply chain’s ability to change rapidly in response to marketplace changes.
Calculation: [Forecast Cycle Time] + [Re-Plan Cycle Time] + [Intra-Manufacturing Re-Plan Cycle Time] + [Cumulative
Source/Make Cycle Time] + [Order Fulfillment Lead Time]
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Total Test Release Cycle Time: The average total test and release time for all tests, documentation reviews, and batch
approval processes performed from start of manufacturing to release of final packaged product for shipment.
Calculation: [Average number of units in test and release]/[Average daily output in units]
Touch Labor: The labor that adds value to the product – assemblers, welders, packagers, etc. This does not include
indirect resources like material handlers who move and stage product, and mechanical and electrical technicians who
maintain equipment.
Tracing: The practice of relating resources, activities, and cost objects using the drivers underlying their cost causal
relationships. The purpose of tracing is to observe and understand how costs are arising in the normal course of business
operations.
Traceability: 1) The attribute allowing the ongoing location of a shipment to be determined. 2) The registering and
tracking of parts, processes, and materials used in production, by lot or serial number.
Tracking and Tracing: Monitoring and recording shipment movements from origin to destination.
Trading Partner: Companies that do business with each other via EDI (e.g., send and receive business documents such as
purchase orders).
Trading Partner Agreement: The written contract that spells out agreed upon terms between EDI trading partners.
Traffic: A department or function charged with the responsibility of arranging the most economic classification and
method of shipment for both incoming and outgoing materials and products.
Traffic Management: The management and controlling of transportation modes, carriers, and services.
Trailer: The part of the truck that carries the goods.
Trailer Drops: When a driver drops off a full truck at a warehouse and picks up an empty one.
Transaction: A single completed transmission, e.g., transmission of an invoice over an EDI network. Analogous to usage
of the term in data processing in which a transaction can be an inquiry or a range of updates and trading transactions.
The definition is important for EDI service operators who must interpret invoices and other documents.
Transaction Set: Commonly used business transactions (e.g., purchase order, invoice, etc.) organized in a formal,
structured manner consisting of a transaction set header control segment, one or more data segments, and a
transaction set trailer control data segment.
Transaction Set ID: A three digit numerical representation that identifies a transaction set.
Transit Time: The total time that elapses between a shipment’s pickup and delivery.
Transparency: The ability to gain access to information without regard to the system’s landscape or architecture. An
example would be where an online customer could access a vendor’s web site to place an order and receive availability
information supplied by a third party outsource manufacturer or shipment information from a third party logistics
provider.
Transportation inventory: the amount of inventory that is currently in-transit. That is, it is the inventory that has left the
shipper’s facility (either an owned facility or a supplier’s facility) and has yet to arrive at the consignee’s facility (may be
an owned facility or a customer’s facility).
Transportation Management System: A computer system designed to provide optimized transportation management in
various modes along with associated activities, including managing shipping units, labor planning and building, shipment
scheduling through inbound, outbound, intra-company shipments, documentation management (especially when
international shipping is involved), and third party logistics management.
Transportation Mode: The method of transportation: land, sea, or air shipment.
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Transportation Planning: The process of defining an integrated supply chain transportation plan and maintaining the
information which characterizes total supply chain transportation requirements, and the management of transporters,
both inter- and intra- company.
Transportation Planning Systems: The systems used in optimizing assignments from plants to distribution centers, and
from distribution centers to stores. The systems combine moves to ensure the most economical means are employed.
Trend: a gradual increase or decrease in demand over a period of time.
Trend Forecasting Models: Methods for forecasting sales data when a definite upward or downward pattern exists.
Models include double exponential smoothing, regression, and triple smoothing.
Truck Stop Electrification (TSE): Provides power outlets at truck parking spaces in which truck drivers can simply plug in,
and turn off their engines, rather than idle their truck engine.
Truckload Carriers (TL): Trucking companies which move full truckloads of freight directly from the point of origin to
destination.
Truckload Lot: A truck shipment that qualifies for a lower freight rate because it meets a minimum weight and/or
volume.
Turnover:
1) Typically refers to inventory turnover
2) In the United Kingdom and certain other countries, turnover refers to annual sales volume.
Umbrella Rate: An ICC ratemaking practice that held rates to a particular level to protect another mode’s traffic.
Unattended Delivery: A carrier service or event where neither the customer nor the carrier need both be present in
order to enable a successful delivery. Usually used with a postal service or a lockbox service.
Unbundled Payment/Remittance: The process where payment is delivered separately from its associated detail.
UNECE: United Nations Economic Commission for Europe.
Unfinished goods: items that are used to produce finished goods items. Unfinished goods are often called components,
ingredients, raw materials, semi-processed materials, and subassemblies.
Uniform Code Council (UCC): A US association that administrates UCS, WINS, and VICS and provides UCS identification
codes and UPC codes. Also, a model set of legal rules governing commercial transmissions, such as sales, contracts, bank
deposits and collections, commercial paper, and letters or credit. Individual states give legal power to the UCC by
adopting its articles of law.
Uniform Product Code (UPC): A standard product numbering and bar coding system used by the retail industry. UPC
codes are administered by the Uniform Code Council. They identify the manufacturer as well as the item, and are
included on virtually all retail packaging.
Uniform Warehouse Receipts Act: The act that sets forth the regulations governing public warehousing. The regulations
define a warehouse manager’s legal responsibility and define the types of receipts he or she issues.
Unit Cost: The cost associated with a single unit of product. The total cost of producing a product or service divided by
the total number of units. The cost associated with a single unit of measure underlying a resource, activity, product, or
service. It’s calculated by dividing the total cost by the measured volume. Unit cost measurement must be used with
caution as it may not always be practical or relevant in all aspects of cost management.
Unit load: Either a single unit of an item or multiple units so arranged or restricted that they can be handled as a single
entity and maintain their integrity.
Unit Load Device (ULD): Refers to airfreight containers and pallets.
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Unit of Measure (UOM): The unit in which the quantity of an item is managed, e.g., pounds, each, box of 12, package of
20, or case of 144. Various UOMs may exist for a single item. For example, a product may be purchased in cases, stocked
in boxes, and issued in single units.
Unit Train: An entire, uninterrupted locomotive, car, and caboose movement between an origin and destination.
United Nations Standard Product and Service Code (UN/SPSC): Developed jointly between the United Nations and Dun
& Bradstreet (D&B). It has a five-level coding structure (segment, family, class, commodity, business function) for nearly
9,000 products.
United States Railway Association: The planning and funding agency for Conrail; created by the 3-R Act of 1973.
Unitization: In warehousing, the consolidation of several units into larger units into larger units for fewer handlings.
Unitize: To consolidate several packages into one unit; carriers strap, band, or otherwise attach the several packages
together.
UPC (Universal Product Code): The standard bar code for retail items in North America.
Unplanned Order: Orders which are received that do not fit into the volumes prescribed by the plans developed from
forecasts.
Unique Parcel Identifier (UPI): A series of characters that are assigned to a specific parcel that enables it to be tracked
throughout delivery by a carrier.
Upsell: The practice of attempting to sell a higher-value product to the customer.
Upside Production Flexibility: The number of days required to complete manufacture and delivery of an unplanned
sustainable 20% increase in end-product supply of the predominant product line. The one constraint that is estimated to
be the principal obstacle to a 20% increase in end-product supply as represented in days is Upside Flexibility: Principal
Constraint. Upside flexibility can affect three possible areas: direct labor availability, internal manufacturing capacity,
and key components or material availability.
Utility: perceived value of materials (often considered as place utility when materials are in the right locations and time
utility when they are available at the right time)
Valid minimum: an EOQ that corresponds to a point on the valid total cost curve when costs are discounted
Valid total cost curve: the stepped curve that connects valid sections of a family of cost curves when there are price
discounts
Valuation Charges: Transportation charges to shippers who declare a value of goods higher than the value of the
carriers’ limits of liability.
Value Added: Increased or improved value, worth, functionality, or usefulness.
Value-Added Network (VAN): A company that acts as a clearinghouse for electronic transactions between trading
partners. A third party supplier that receives EDI transmissions from sending trading partners and holds them in a
mailbox until retrieved by the receiving partners.
Value-Added Productivity Per Employee: Contribution made by employees to total product revenue minus the material
purchases divided by total employment. Total employment is total employment for the entity being surveyed. This is the
average full-time equivalent employee in all functions, including sales and marketing, distribution, manufacturing,
engineering, customer service, finance, general and administrative, and other. Total employment should include
contract and temporary employees on a full-time equivalent (FTE) basis.
Calculation: Total Product Revenue-External Direct Material/[FTEs]
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Value Adding/Non-Value Adding: Assessing the relative value of activities according to how they contribute to customer
value or to meeting an organization’s needs. The degree of contribution reflects the influence of an activity’s cost
driver(s).
Value Analysis: A method to determine how features of a product or service relate to cost, functionality, appeal and
utility to a customer (i.e., engineering value analysis).
Value Chain: A series of activities, when combined, define a business process; the series of activities from manufacturers
to the retail stores that define the industry supply chain.
Value Chain Analysis: A method of identifying all the elements in the linkage of activities a firm relies on the secure the
necessary materials and services starting from their point of origin to manufacture, and to distribution of their products
and services to an end user.
Value-of-Service Pricing: Pricing according to the value of the product the company is transporting; third-degree price
discrimination; demand-oriented pricing; charging what the traffic will bear.
Value Proposition: What the hub offers to members. To be truly effective, the value proposition has to be two-sided – a
benefit to both buyers and sellers.
Variable Cost: A cost that fluctuates with the volume or activity level of business.
Velocity: Rate of product movement through a warehouse.
Vendor: The manufacturer or distributor of an item or product line.
Vendor Code: a unique identifier, usually a number and sometimes the company’s DUNS number, assigned by a
customer for the vendor it buys from.
Example: a grocery store chain buys Oreo cookies from Nabisco. For accounting purposes, the grocery store chain
identifies Nabisco as Vendor #76091. One company can have multiple vendor codes. Example: Welch’s Foods sells many
different products – frozen grape juice concentrate, chilled grape juice, bottled grape juice, and grape jelly. Because each
of these items is a different type of product (frozen food, chilled food, beverages, dry food), they may also have a
different buyer at the grocery store chain, requiring a different vendor code for each product line.
Vendor-Managed Inventory (VMI): The practice of retailers making suppliers responsible for determining order size and
timing usually based on receipt of retail POS and inventory data. Its goal is to increase retail inventory turns and reduce
stock outs.
Vertical Hub/Vertical Portal: Serving one specific industry. Vertical portal web sites are ones that cater to customers
within a particular industry. Similar to the term “vertical industry,” these web sites are industry specific, and, like a
portal, they make use of Internet technology by using the same kind of personalization technology. In addition to
industry-specific vertical portals that cater to consumers, another definition of a vertical portal is one that caters solely
to other businesses.
Vertical Integration: The degree to which a firm has decided to directly produce multiple value-adding stages, from raw
material to the sale of the product to the ultimate consumer. The more steps in the sequence, the greater the vertical
integration. A manufacturer that decides to begin producing parts, components, and materials that it normally
purchases is said to be backward integrated. Likewise, a manufacturer that decides to take over distribution and perhaps
sale to the ultimate consumer is said to be forward integrated.
Vessel: A floating structure designed for transport.
Vessel Manifest: A list of all cargoes on a vessel.
Visibility: The ability to access or view pertinent data or information as it relates to logistics and the supply chain,
regardless of the point in the chain where the data exists.
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Vision: The shared perception of the organization’s future – what the organization will achieve and a supporting
philosophy. This shared vision must be supported by strategic objectives, strategies, and action plans to move in in the
desired direction.
Voice Activated: Systems which guide users such as warehouse personnel via voice commands.
Warehouse: Storage place for products. Principal warehouse activities include receipt of product, storage, shipment,
and order picking.
Warehousing: The storage (holding) of goods.
Warehouse Management System (WMS): The systems used in effectively managing warehouse business processes and
direct warehouse activities, including receiving, putaway, picking, shipping, and inventory cycle counts. Also includes
support of radio frequency communications, allowing real-time data transfer between the system and warehouse
personnel. They also maximize space and minimize material handling by automating putaway processes.
Warranty Costs: Includes materials, labor, and problem diagnosis for products returned for repair or refurbishment.
Waste:
1) In just in time, any activity that does not add value to the good or service in the eyes of the consumer.
2) A by-product of a process or task with unique characteristics requiring special management control. Waste production
can usually be planned and controlled. Scrap is typically not planned and may result from the same production run as
waste.
Waterway Use Tax: A per-gallon tax assessed barge carriers for waterway
Wave: A planning period for picking groups of orders that can be used to coordinate picking with shipping schedules or
because downstream sortation has limited order capacity; there are usually multiple waves during each shift.
Wave Picking: A method of selecting and sequencing picking lists to minimize the waiting time of the delivered material.
Shipping orders may be picked in waves combined by a common product, common carrier, or destination, and
manufacturing orders in waves related to work centers.
Waybill: Document containing description of goods that are part of common carrier freight shipment. Shows origin,
destination, consignee/consignor, and amount charged. Copies travel with goods and are retained by
originating/delivering agents. Used by carrier for internal record and control, especially during transit. Not a
transportation contract.
Wedge: Refers to any device inserted between the keyboard and the terminal that translates digital signals into
keyboard codes. In a keyboard wedge application, the data resulting from the scanning of a bar code symbol is treated
by the PC or terminal as if it originated from the keyboard, while the keyboard itself remains fully functional. Because
the terminal or PC cannot differentiate between bar coded data and actual keyboard data, a keyboard wedge interface
allows bar code reading capability to be rapidly added to an existing computer without changing the application
software.
Weight Break: The shipment volume at which the LTL charges equal the TL charges at the minimum weight.
Weight Confirmation: The practice of confirming or validating receipts or shipments based on the weight.
Weight-Losing Raw Material: A raw material that loses weight in processing.
Wharfage: A charge assessed by a pier or dock owner against the cargo or a steamship company for use of the pier or
dock for the handling of incoming or outgoing cargo.
Wide-Area Network (WAN): A public or private data communications system for linking computers distributed over a
large geographic area.
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Work in Process (WIP): Parts and subassemblies in the process of becoming completed finished goods. Work in process
generally includes all of the material, labor, and overhead charged against a production order which has not been
absorbed back into inventory through receipt of completed products.
World Trade Organization (WTO): An organization established on January 1, 1995 replacing the previous General
Agreement on Tariffs and Trade GATT that forms the cornerstone of the world trading system.
Yield: The ratio of usable output from a process to its input.
Yield rate: the expected “success” rate in the manufacturing process for an item. Yield rate exists at the parent-item
level, as opposed to scrap rate that exist at the component level.
Zero Inventory: A term initially used to represent the optimum stock level in a just-in-time system and the idea that
inventory is a liability instead of an asset.
Zone-batch picking: A combination of zone and batch picking, where multiple pickers each pick portions of multiple
orders.
Zone of Rate Flexibility: Railroads may raise rates by a percentage increase in the railroad cost index that the ICC
determines; the railroads could raise rates by 6 percent per year through 1984 and 4 percent thereafter.
Zone of Rate Freedom: Motor carriers may raise or lower rates by 10 percent in one year without ICC interference; if the
rate change is within the zone of freedom, the rate is presumed to be reasonable.
Zone of Reasonableness: A zone or limit within which air carriers may change rates without regulatory scrutiny; if the
rate change is within the zone, the new rate is presumed to be reasonable.
Zone Picking: A method of subdividing a picking list by arrears within a storeroom for more efficient and rapid order
picking. A zone-picked order must be grouped to a single location and the separate pieces combined before delivery, or
must be delivered to different locations such as a work center.
Zone Price: The constant price of a product at all geographic locations within a zone.
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References for this Publication:
http://www.inboundlogistics.com/cms/logistics-glossary/#Consignment_Inventory
http://www.wiley.com/legacy/wileychi/waters/supp/Glossary.pdf
http://www.inventoryexplained.com/glossary.html
http://quizlet.com/9602364/warehousing-terminology-flash-cards/
http://quizlet.com/9602364/warehousing-terminology-flash-cards/
http://www.bestwms.com/glossary.htm
http://ecommpoint.com/glossary-ecommerce-fulfilment-words-terms/