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332 Cards in this Set

  • Front
  • Back
The classification of a group of items in decreasing order of
annual dollar volume (price multiplied by projected volume)
or other criteria. This array is then split into three classes,
called A, B, and C. The A group usually represents 10% to
20% by number of items and 50% to 70% by projected dollar
volume. The next grouping, B, usually represents about 20%
of the items and about 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 Classification
An RFID tag which broadcasts information and contains its
own power source.
Active tag
Techniques that deal with analysis and planning of logistics
and manufacturing over the short-, intermediate-, and longterm
time periods and describe 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.
Advanced planning and scheduling
One who acts on behalf of another (the principal) in dealing
with a third party.
Additional inventory above basic pipeline stock to cover
projected trends of increasing sales, planned sales promotion
programs, seasonal fluctuations, plant shutdowns, and
Anticipation inventories
Computer programs that can learn and reason in a manner
similar to humans. The problem is defined in terms of states
and operators to generate a search space that is examined for
the best solution. In contrast, conventional programming
collects and processes data by algorithm or fixed step-by-step
Artificial intelligence
A production environment where a good or service can be
assembled after receipt of a customer’s order.
A set of technologies that collect data about objects and then
send these data to a computer without human intervention.
Examples include radio frequency wireless devices and
terminals, bar code scanners, and smart cards.
Automatic identification and data
capture system
The on-hand inventory balance minus allocations,
reservations, backorders, and (usually) quantities held for
quality problems. Often called beginning available balance.
Available Inventory
The uncommitted portion of a company's inventory and
planned production maintained in the master schedule to
support customer-order promising.
All the customer orders received but not yet shipped.
Sometimes referred to as open orders or the order board.
An immediate (or past due) demand against an item whose
inventory is insufficient to satisfy the demand.
A financial statement showing the resources owned, the debts
owed, and the owner’s share of a company at a given point in
Balance Sheet
A method of encoding data using bar code for fast and
accurate readability.
Bar Coding
1) A manufacturing technique in which parts are accumulated
and processed together in a lot. 2) A computer technique in
which transactions are accumulated and processed together or
in a lot.
Batch Processing
A carrier’s contract and receipt for goods the carrier agrees to
transport from one place to another and to deliver to a
designated person. In case of loss, damage, or delay, the bill of
lading is the basis for filing freight claims.
Bill of Lading
1) A listing of all the subassemblies, intermediates, parts, and
raw materials that go into a parent assembly showing the
quantity of each required to make an assembly. It is used in
conjunction with the master production schedule to determine
the items for which purchase requisitions and production
orders must be released. 2) A list of all the materials needed to
make one production run of a product, by a contract
manufacturer, of piece parts/components for its customers.
Bill of Material
A long-term commitment to a supplier for material against
which short-term releases will be generated to satisfy
requirements. Often covers only one item with predetermined
delivery dates.
Blanket Order
A facility, function, department, or resource whose capacity is
less than the demand placed upon it.
1) A quantity of materials awaiting further processing. It can refer to raw materials, semifinished stores or hold points, or a work backlog that is purposely maintained behind a work center. 2) In the theory of constraints, time or material and
support throughput and/or due date performance. Can be
maintained at the constraint, convergent points (with a
constraint part), divergent points, and shipping points.
Information collected by an organization on customers,
competitors, products or services, and processes.
Business Intelligence
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. 2) A document consisting of the business
details (organization, strategy, and financing tactics) prepared
by an entrepreneur to plan for a new business.
Business Plan
Business being conducted over the Internet between
businesses. The implication is that this connectivity will cause
businesses to transform themselves via supply chain
management to become virtual organizations, reducing costs,
improving quality, reducing delivery lead time, and improving
due-date performance.
Business-to-business commerce
1) The ability of a system to perform its expected function. 2)
The ability of a worker, machine, work center, plant, or
organization to produce output per time period. 3) Required
mental ability to enter into a contract.
A percentage of the dollar value of inventory per unit of time
(generally one year).
Carrying Cost
The net flow of dollars into or out of the proposed project. The
algebraic sum, in any time period, of all cash receipts,
expenses, and investments. Also called cash proceeds or cash
Cash Flow
1) An indicator of how efficiently a company manages its assets
to improve cash flow. Inventory days + accounts receivable
days - accounts payable days.

2) The time it takes for an investment to flow back into a company after it has been spend for raw materials. Inventory days of supply+Days of sales outstanding-Days of Payable Outstanding
Cash-to-cash Cycle Time
A production planning method that maintains a stable
inventory level while varying production to meet demand.
Chase Product Method
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.
Collaborative planning, forecasting, and replenishment
A method of sharing information among suppliers, buyers, and
transporters to add value to the service.
Collaborative Transportation Management
An analysis of a competitor that includes its strategies,
capabilities, prices, and costs.
Competitive Analysis
A form of design standardization where a single part is used to
replace a variety of similar parts.
Component Commonality
1) A shipment that is handled by a common carrier. 2) The
process of a supplier placing goods at a customer location
without receiving payment until after the goods are used or
A Web-based marketplace, usually owned by a third party,
that allows members to trade with each other.
Consortia trade exchange
Any element or factor that prevents a system from achieving a higher level of performance with respect to its goal.
Applications that support the evolutionary life cycle of digitalbased information and make information dynamically
updatable online.
Content Management
A graphic comparison of process performance data with
predetermined computed limits.
Control Chart
An accounting classification useful for determining the
amount of direct materials, direct labor, and allocated
overhead associated with the products sold during a given
period of time.
Cost of Goods Sold
The costs associated with providing poor quality products or services.
Cost of Poor Quality
A selling method that occurs when customers buy additional
products or services after the initial purchase.
The longest planned length of time to accomplish the activity
in question. It is found by reviewing the lead time for each bill
of material path below the item; whichever path adds up to the
greatest number defines cumulative lead time.
Cumulative Lead-time
A marketing philosophy based on putting the customer first.
Customer Relationship Management (CRM).
1) The ability of a company to address the needs of and
inquiries and requests from customers. 2) A measure of the
delivery of a product to the customer at the time the customer
Customer Service
A measure of delivery performance of finished goods, usually expressed as a percentage.
Customer Service Ratio
1) The interval of time during which a system or process, such
as seasonal demand or a manufacturing operation, periodically returns to similar initial conditions. 2) The interval of time during which an event or set of events is completed.
An inventory accuracy audit technique where inventory is
counted on a cyclic schedule rather than once a year.
Cycle Counting
The most active component of inventory which depletes
gradually as customer orders are received and is replenished
cyclically when supplier orders are received.
Cycle Stock
1) In materials management, it refers to the length of time
from when material enters a production facility until it exits.
2) In industrial engineering, the time between completion of
two discrete units of production.
Cycle Time
Sifting through a database to find and fix mistakes such as
misspelling, missing information, and false data.
Data Cleansing
1) A catalog of requirements and specifications for an
information system. 2) A file that stores facts about the files
and databases for all systems that are currently being used or
for the software involved.
Data Dictionary
Hardware or software enabling one device or software
application to transfer data to another device or software
Data Interface Device
A database maintenance term used in the context of relational
databases, which helps to minimize the duplication of
information or safeguard the database against certain types of
logical or structural data anomalies.
Data Normalization
A repository of data that has been specially prepared to
support decision-making applications.
Data Warehouse
Software designed for organizing data and providing the
mechanism for storing, maintaining, and retrieving that data on a physical medium.
Database Management
Creating independence between supply and use of material.
Commonly denotes providing inventory between operations so
that fluctuations in the production rate of the supplying
operation do not constrain production or use rates of the next operation.
A need for a particular product or component.
Forecasting the demand for a particular good, component, or
Demand Forecasting
1) The function of recognizing all demands for goods and
services to support the marketplace. It involves prioritizing
demand when supply is lacking and can facilitate the planning
and use of resources for profitable business results. 2) In
marketing, the process of planning, executing, controlling, and monitoring the design, pricing, promotion, and distribution of products and services to bring about transactions that meet
organizational and individual needs.
Demand Management
Approach to production planning where output is increased
and decreased to closely match demand.
Demand Matching
The process of planning all demands for products and services to support the marketplace. The process involves updating the
supporting plans and assumptions and reaching consensus on an updated demand plan.
Demand Planning
The triggering of material movement to a work center only
when that work center is ready to begin the next job. It in
effect eliminates the queue from in front of a work center, but
it can cause a queue at the end of a previous work center.
Demand Pull
Demand that is directly related to or derived from the bill of
material structure for other items or end products. Such demands are therefore calculated and need not and should not be forecast.
Dependent Demand
A term used in conjunction with the concurrent design of a
firm’s products, enhancing the product design in consideration
of the issues that will arise in the overall supply chain, from
raw material to the final stage of the product’s life cycle.
Design for the Supply Chain
Material that becomes a part of the final product in measurable
Direct Material
1) 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. 2)
The systematic division of a whole into discrete parts having
distinctive characteristics.
Product, usually spare parts and finished goods, located in the
distribution system (e.g., in warehouses, in-transit between
warehouses and the consumer).
Distribution Inventory
The function of determining the need to replenish inventory at
branch warehouses.
Distribution Requirements Planning
The function of determining the need to replenish inventory at
branch warehouses.
A measurement (usually expressed as a percentage) of the actual output compared to the standard output expected. It
measures how well something is performing relative to existing standards.
The backbone system for other information technology
Electronic Business System
The use of computer and telecommunication technologies to conduct business via electronic transfer of data and
Electronic Commerce
The paperless (electronic) exchange of trading documents,
such as purchase orders, shipment authorizations, advanced shipment notices, and invoices, using standardized document formats.
Electronic Data Interchange (EDI)
The electronic representation of a document that can be printed.
Electronic Document
Codes that are used with RFID tags to carry information on
the product that will support warranty programs.
Electronic Product Code
Products whose customer specifications require unique
engineering design, significant customization, or new
purchased materials. Each customer order results in a unique set of part numbers, bills of material, and routings.
Framework for organizing, defining, and standardizing the
business processes necessary to effectively plan and control an
organization so the organization can use its internal knowledge to seek external advantage.
Enterprise Resource Planning (ERP)
A language that facilitates direct communication among
computers on the Internet. Unlike the older hypertext markup
language (HTML), which provides HTML tags giving
instructions to a Web browser about how to display
information, tags in this language give instructions to a Web browser about the category of information.
Extensible markup language (EML)
A network connection to a partner’s network using secure
information processing and Internet protocols to do business.
A forecast method on a correlated leading indicator, such as estimating furniture sales based on housing starts. Tend to be more useful for large aggregations, such as total company sales, than for individual product sales.
Extrinsic Forecast Method
The flow of information back into the control system so that
actual performance can be compared with planned
The manner in which records are stored within a file (e.g.,
sequential, random, index-sequential).
File Structure
A protocol used to transfer files over the Internet.
File Transfer Protocol (FTP)
A production environment where a good or service can be
assembled after receipt of a customer’s order. The key
components (bulk, semifinished, intermediate, subassembly,
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.
Inventory that is carried as a cushion to protect against
forecast error.
Fluctuation Inventory
The difference between actual demand and forecast demand,
stated as an absolute value or as a percentage.
Forecast Error
The business function that attempts to predict sales and use of products so they can be purchased or manufactured in
appropriate quantities in advance.
A supply chain integrator that assembles and manages the
resources, capabilities, and technology of its own organization
with those of complementary service providers to deliver a
comprehensive supply chain solution.
Fourth-party logistics (4PL) provider
The category of expenses on an income statement that
includes the costs of general managers, computer systems,
research and development, and others.
General and administrative expenses
A connection between the computer and the user employing a
mouse and icons so that the user makes selections by pointing at icons and clicking the mouse.
Graphical user interface (GUI)
The difference between total revenue and the cost of goods
Gross Margin
An internationally standardized description of goods that uses
a system of numbers to provide increasingly detailed
classification and descriptions.
Harmonized system classification
A Web-based marketplace used by buyers and sellers from
multiple industries. This marketplace lowers prices by
lowering transaction costs.
Horizontal marketplace
A financial statement showing the net income for a business
over a given period of time.
Income Statement
Short for International Commercial Terms; created to simplify international transactions.
The International Chamber of Commerce Official Rules for
Interpretation of Trade Terms.
Incoterms 2000
The demand for an item that is unrelated to the demand for
other items. Demand for finished goods, parts required for
destructive testing, and service parts requirements are
examples of independent demand.
Independent Demand
The demand for an item that is unrelated to the demand for
other items. Demand for finished goods, parts required for destructive testing, and service parts requirements are examples of independent demand.
Independent demand
Interrelated computer hardware and software along with
people and processes designed for the collection, processing,
and dissemination of information for planning, decision
making, and control.
Information System
A model of how an organization operates regarding
information. Considers four factors: (1) organizational
functions, (2) communication of coordination requirements,
(3) data modeling needs, and (4) management and control
Information system architecture
The technology of computers, telecommunications, and other
devices that integrate data, equipment, personnel, and problem
-solving methods in planning and controlling business activities. Provides the means for collecting, storing, encoding,
processing, analyzing, transmitting, receiving, and printing text, audio, or video information.
Information Technology (IT)
One plant’s need for a part or product that is produced by
another plant or division within the same organization.
Although it is not a customer order, it is usually handled by
the master production scheduling system in a similar manner.
Interplant Demand
A privately owned network that makes use of Internet
technology and applications to meet the needs of an enterprise.
It resides entirely within a department or company, providing communication and access to information, similar to the Internet, with Web pages, and so on for internal use only.
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
A forecast based on internal factors, such as an average of past sales.
Intrinsic forecasting method
1) Those stocks or items used to support production (raw
materials and work-in-process items), supporting activities
(maintenance, repair, and operating supplies), and customer service (finished goods and spare parts). Demand for inventory may be dependent or independent. Inventory functions are anticipation, hedge, cycle (lot size), fluctuation (safety, buffer, or reserve), transportation (pipeline), and service parts. 2) All the money currently tied up in the system.
The branch of business management concerned with planning and controlling inventories.
Inventory Management
The number of times that an inventory cycles during the year.
Frequently computed by dividing the average inventory level
into the annual cost of sales.
Inventory Turnover
Coordinating the lot sizing and order release decision for
related items and treating them as a family of items. The
objective is to achieve lower costs because of ordering, setup,shipping, and quantity discount economies.
Joint Replenishment
A philosophy of manufacturing based on planned elimination
of all waste and on continuous improvement of productivity.
The primary elements include having only the required
inventory when needed; to improve quality to zero defects; to reduce lead times by reducing setup times, queue lengths, and lot sizes; to incrementally revise the operations themselves;
and to accomplish these activities at minimum cost.
Just-in-Time (JIT)
The Japanese term for improvement; continuing improvement involving everyone: managers and workers. In manufacturing, relates to finding and eliminating waste in machinery, labor, or production methods.
A method of Just-in-Time production that uses standard
containers or lot sizes with a single card attached to each. It is
a pull system in which work centers signal with a card that
they wish to withdraw parts from feeding operations or
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 generally owns a limited amount of stock in other member companies.
Financial and non-financial measures that are used to define
and assess progress toward specific organizational goals and
are typically tied to an organization's strategy and business stakeholders.
Key performance indicator
Product cost plus the costs of logistics, such as warehousing,
transportation, and handling fees.
Landed cost
1) A span of time required to perform a process (or series of
operations). 2) In a logistics context, the time between
recognition of the need for an order and the receipt of goods.
Individual components can include order preparation time,
queue time, processing time, move or transportation time, and
receiving and inspection time.
A philosophy of production that emphasizes the minimization
of the amount of all the resources (including time) used in the various activities of the enterprise. Involves identifying and eliminating non-value-adding activities in design, production, supply chain management, and dealing with customers. Contains a set of principles and practices to reduce cost through the relentless removal of waste and through the simplification of all manufacturing and support processes.
Lean production
A computer application program that is old and interfaces
poorly with other applications but is too expensive to replace.
It often runs on antiquated hardware.
Legacy system
A measure (usually expressed as a percentage) of satisfying
demand through inventory or by the current production
schedule in time to satisfy the customers’ requested delivery
dates and quantities.
Level of Service
Mathematical models for solving linear optimization problems
through minimization or maximization of a linear function
subject to linear constraints.
Linear Programming
The amount of planned work scheduled for and actual work
released to a facility, work center, or operation for a specific span of time.
Spreading orders out in time or rescheduling operations so that
the amount of work to be done in sequential time periods tends
to be distributed evenly and is achievable.
Load Leveling
A high-speed data communication system for linking
computer terminals, programs, storage, and graphic devices at
multiple workstations distributed over a relatively small
geographic area such as a building or campus.
Local Area Network (LAN)
In an industrial context, the art and science of obtaining,
producing, and distributing material and product in the proper place and in proper quantities.
The planning and coordination of the physical movement
aspects of a firm's operations such that a flow of raw
materials, parts, and finished goods is achieved in a manner
that minimizes total costs for the levels of service desired.
Logistics System
The amount of a particular item that is ordered from the plant
or a supplier or issued as a standard quantity to the production process.
Lot Size
A production environment where a good or service can be
made after receipt of a customer's order. The final product is usually a combination of standard items and items custom designed to meet the special needs of the customer.
A production environment where products can be and usually
are finished before receipt of a customer order. Customer
orders are typically filled from existing stocks, and production
orders are used to replenish those stocks.
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 and then generate reports; graphical
displays; and alarms that inform operations personnel what is
going on in the plant currently and a very short history into the
Manufacturing Execution system (MES)
The total time required to manufacture an item, exclusive of lower-level purchasing lead time.
Manufacturing Lead-time
The series of operations performed upon material to convert it from the raw material or a semifinished state to a state of further completion.
Manufacturing process
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.
Manufacturing resource planning (MRP)
Responding to customers’ needs.
Market Driven
The actual portion of current market demand that a company
or product achieves.
Market Share
The systematic gathering, recording, and analyzing of data
about problems relating to the marketing of goods and
Marketing research
A group of business processes that includes demand
management (which includes forecasting and order servicing);
production and resource planning; and master scheduling
(which includes the master schedule and the rough-cut
capacity plan).
Master Planning
A line on the master schedule grid that reflects the anticipated
build schedule for those items assigned to the master
scheduler. The master scheduler maintains this schedule, and
in turn, it becomes a set of planning numbers that drives
material requirements planning. It represents what the
company plans to produce expressed in specific
configurations, quantities, and dates.
Master Production Schedule (MPS)
A schedule format that includes time periods (dates), the
forecast, customer orders, projected available balance,
available-to-promise, and the master production schedule. It
takes into account the forecast; the production plan; and other
important considerations such as backlog, availability of
material, availability of capacity, and management policies
and goals.
Master schedule
A set of techniques that uses bill of material data, inventory
data, and the master production schedule to calculate
requirements for materials.
Materials Requirements Planning (MRP)
The grouping of management functions supporting the
complete cycle of material flow, from the purchase and
internal control of production materials to the planning and
control of work in process to the warehousing, shipping, and
distribution of the finished product.
Materials Management
The general problem of optimizing a function of several
variables subject to a number of constraints.
Mathematical programming
The average of the absolute values of the deviations of
observed values from some expected value. It can be
calculated based on observations and the arithmetic mean of those observations. An alternative is to calculate absolute
deviations of actual sales data minus forecast data. These data
can be averaged in the usual arithmetic way or with
exponential smoothing.
Mean absolute deviation (MAD)
Software that interconnects incompatible applications software and databases from various trading partners into decision support tools such as ERP.
The strategy of planning products so the components can be used in current and future products or that the components can be assembled or arranged to produce multiple configurations
of a product.
Modular design strategy
A system architecture design in which related tasks are
grouped in self-contained packages. Each package of tasks performs all of the tasks related to a specific function, and advances in functions can be implemented without affecting
other packages.
Modular system
A display of all the components directly or indirectly used in a
parent, together with the quantity required of each component.
Multilevel Bill of Material
The simultaneous use by a computer of two or more central
processing units, with each executing its own instruction set
and each controlled by a single operating system.
Procurement of a good or service from more than one
independent supplier.
1) The interconnection of computers, terminals, and
communications channels to facilitate file and peripheral
device sharing as well as effective data communication. 2) A graph consisting of nodes connected by arcs.
A software system loosely based on how the brain works.
Neural Network
Programming similar to linear programming but incorporating
a nonlinear objective function and linear constraints or a linear
objective function and nonlinear constraints or both a
nonlinear objective function and nonlinear constraints.
The capability of software and diverse hardware environments
to communicate with each other through the use of standard
messaging protocols respectively.
Open system architecture
A set of software programs that control the execution of the
hardware and application programs. Manages the computer and network resources through storage management, disk
input/output, communications linkages, program scheduling,
and monitoring system usage for performance and cost
Operating System (OS)
Capabilities of an organization in which poor performance can
cause loss of business.
Order Losers
The process of making a delivery commitment (i.e., answering the question "When can you ship?").
Order promising
Those competitive characteristics that a firm must exhibit to be a viable competitor in the marketplace.
Order qualifiers
Those competitive characteristics that cause a firm’s customers to choose that firm’s goods and services over those of its competitors.
Order winners
Used in calculating order quantities, the costs that increase as the number of orders placed increases. It includes costs related
to the clerical work of preparing, releasing, monitoring, and
receiving orders, the physical handling of goods, inspections,
and setup costs, as applicable.
Order Cost
A production environment in which a good or service can be
packaged after receipt of a customer order.
A concept developed by Vilfredo Pareto, an Italian economist,
that states that a small percentage of a group accounts for the largest fraction of the impact, value, etc.
Pareto's Law
An RFID tag which does not broadcast information and does
not contain its own power source.
Passive Tag
A system for collecting, measuring, and comparing a measure to a standard for a specific criterion for an operation, item, good, service, business, etc. Consists of a criterion, a standard, and a measure.
Performance Measurement System
1) The actual inventory itself. 2) The determination of
inventory quantity by actual count. Can be taken on a
continuous, periodic, or annual basis.
Physical Inventory
Inventory in the transportation network and the distribution
system, including the flow through intermediate stocking
Pipeline Inventory
A multiservice Web site that provides access to data that may
be secured by each user’s role. Users can aggregate data and
perform basic analysis.
A trade exchange hosted by a single company to facilitate
collaborative e-commerce with its trading partners.
Private Trading Exchange
A diagram of the flow of a production process or service
process through the production system. Standardized symbols
are used to designate processing, flow directions, branching decisions, input/output, and other aspects of the process.
Process Map
A strategy of making a product distinct from the competition
on a nonprice basis such as availability, durability, quality, or
Product Differentiation
A group of products with similar characteristics, often used in
production planning (or sales and operations planning).
Product Family
1) The stages a new product goes through from beginning to
end, i.e., the stages that a product passes through from
introduction through growth, maturity, and decline. 2) The
time from initial research and development to the time at
which sales and support of the product to customers are
withdrawn. 3) The period of time during which a product can
be produced and marketed profitably.
Product Life Cycle (PLC)
A process to develop tactical plans based on setting the overall
level of manufacturing output (production plan) and other
activities to best satisfy the current planned levels of sales
(sales plan or forecasts), while meeting general business
objectives of profitability, productivity, competitive customer lead times, and so on, as expressed in the overall business plan.
Production Planning
The difference between the sales and cost of goods sold for an organization, sometimes expressed as a percentage of sales.
Profit Margin
1) In production, the production of items only as demanded for
use or to replace those taken for use. 2) In material control, the
withdrawal of inventory as demanded by the using operations. Material is not issued until a signal comes from the user. 3) In distribution, a system for replenishing field warehouse inventories where replenishment decisions are made at the field warehouse itself, not at the central warehouse or plant.
Pull system
The term used in industry and management to denote the
function of and the responsibility for procuring materials,
supplies, and services.
1) In production, the production of items at times required by
a given schedule planned in advance. 2) In material control,
the issuing of material according to a given schedule or
issuing material to a job order at its start time. 3) In
distribution, a system for replenishing field warehouse
inventories where replenishment decision making is
centralized, usually at the manufacturing site or central supply facility.
Push System
Conformance to requirements or fitness for use.
A system of linking final retail sales with production and
shipping schedules back through the chain of supply; employs
point-of-sale scanning and electronic data interchange and
may use direct shipment from a factory to a retailer.
Quick Response Program
A system using electronic tags to store data about items.
Radio frequency identification
(RFID) tag
A fluctuation in data that is caused by uncertain or random
Random variation
A software program that allows users to obtain information
drawn from two or more databases that are made up of two dimensional
arrays of data.
Relational database
The total period of time that elapses from the moment it is
determined that a product should be reordered until the
product is back on the shelf available for use.
Replenishment Lead-time
Capacity planning conducted at the business plan level. The
process of establishing, measuring, and adjusting limits or levels of long-range capacity. Normally based on the
production plan but may be driven by higher-level plans
beyond the time horizon for the production plan, e.g., the
business plan. It addresses those resources that take long
periods of time to acquire.
Resource Planning
Net income for the previous 12 months divided by total assets.
Return of Assets
A relative measure of financial performance that provides a
means for comparing various investments by calculating the
profits returned during a specified time period.
Return on Investment (ROI)
An Internet auction in which suppliers attempt to underbid
their competitors.
Reverse Auction
A complete supply chain dedicated to the reverse flow of
products and materials for the purpose of returns, repair,
remanufacture, and/or recycling.
Reverse Logistics
The systematic process of planning, implementing, and
controlling the efficient, cost-effective flow of material or
goods from their typical final destination or point of
consumption for the purpose of capturing or creating value
(i.e., returns, rework, remanufacture, refurbish, reconfigure,
reuse, repair, etc.) or for proper disposal (i.e., recycle,
incinerate, landfill, etc.); also included is the reduction of
materials used in the forward flow of materials and goods for a
reduced volume of reverse flow.
Reverse Supply Chain
A method often associated with the management of inventory
risk. Manufacturers and retailers that experience high
variability in demand for their products can pool together
common inventory components associated with a broad family
of products to buffer the overall burden of having to deploy
inventory for each discrete product.
Risk Pooling
1) In general, a quantity of stock planned to be in inventory to
protect against fluctuations in demand or supply. 2) In the
context of master production scheduling, the additional
inventory and capacity planned as protection against forecast
errors and short-term changes in the backlog.
Safety Stock
A process to develop tactical plans that provide management
the ability to strategically direct its businesses to achieve
competitive advantage on a continuous basis by integrating
customer-focused marketing plans for new and existing
products with the management of the supply chain.
Sales and Operations Planning (S&OP)
A repetitive pattern of demand from year to year (or other
repeating time interval) with some periods considerably higher than others.
An RFID tag which broadcasts information, contains its own
power supply, and harvests transmission power from the
reader to extend its broadcast range.
Semipassive tag
1) In its narrowest sense, an organization that provides an
intangible product (e.g., medical or legal advice). 2) In its
broadest sense, all organizations except farming, mining, and manufacturing.
Service industry
Those modules, components, and elements that are planned to
be used without modification to replace an original part.
Service parts
A style of information technology (IT) design that guides all aspects of creating and using business services throughout their life cycles—as well as defining and provisioning the IT infrastructure that enables different computer applications to
exchange data and participate in business processes, regardless
of the operating systems or programming languages
underlying those applications.
Service-oriented architecture
1) The work required to change a specific machine, resource,
work center, or line from making the last good piece of item A
to making the first good piece of item B. 2) The refitting of
equipment to neutralize the effects of the last lot produced
(e.g., teardown of the just-completed production, preparation of the equipment for production of the next scheduled item).
1) The technique of using representative or artificial data to
reproduce in a model various conditions that are likely to
occur in the actual performance of a system. It is frequently
used to test the behavior of a system under different operating
policies. 2) Within MRP II, using the operational data to
perform what-if evaluations of alternative plans to answer the
question, Can we do it?
A company that is selected to have 100% of the business for a
part although alternate suppliers are available.
Single-source supplier
A methodology that furnishes tools for the improvement of
business processes. The intent is to decrease process variation
and improve product quality.
Six sigma
The programs and documentation necessary to make use of a computer.
The target costs of an operation, process, or product including
direct material, direct labor, and overhead charges.
Standard costs
The application of statistical techniques to monitor and adjust
an operation. Often the term statistical process control is used
interchangeably with statistical quality control.
Statistical process control (SPC)
1) An inventory item. 2) In a distribution system, an item at a
particular geographic location.
Stockkeeping unit (SKU)
The costs associated with a stockout. Those costs may include lost sales, backorder costs, expediting, and additional
manufacturing and purchasing costs.
Stockout costs
A relationship formed by two or more organizations that share
information (proprietary), participate in joint investments, and develop linked and common processes to increase the
performance of both companies.
Strategic alliance
The process of developing a strategic plan.
Strategic planning
A computer language that is a relational model database
language. Such a language has an English vocabulary, is
nonprocedural, and provides the ability to define tables, screen
layouts, and indices.
Structured query language (SQL)
Sending production work outside to another manufacturer.
1) Provider of goods or services. 2) Seller with whom the
buyer does business, as opposed to vendor, which is a generic term referring to all sellers in the marketplace.
The amount of time that normally elapses between the time an
order is received by a supplier and the time the order is
Supplier lead time
The establishment of a working relationship with a supplier
organization whereby two organizations act as one.
Supplier partnership
The global network used to deliver products and services from
raw materials to end customers through an engineered flow of
information, physical distribution, and cash.
Supply chain
A term associated with supply chain management software
applications where users have the ability to flag the occurrence
of certain supply chain events to trigger some form of alert or
action within another supply chain application.
Supply chain event management
The design, planning, execution, control, and monitoring of
supply chain activities with the objective of creating net value,
building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring
performance globally.
Supply chain management
A process reference model developed and endorsed by the
Supply-Chain Council as the cross-industry, standard
diagnostic tool for supply chain management.
Supply-Chain Operations Reference model (SCOR®)
The definition of the structural design of an information
system. It would typically identify the system components,
how the components relate to each other, a vision of future use
and integration, and how the users will interface with the
System architecture
The process of developing a set of tactical plans (e.g., production plan, sales plan, marketing plan, and so on).
Tactical planning
The length of time from when material enters a production
facility until it exits.
Throughput time
A policy or guideline established to note where various
restrictions or changes in operating procedures take place.
Time fence
A management approach to long-term success through
customer satisfaction.
Total quality management
The ratio of the cumulative algebraic sum of the deviations
between the forecasts and the actual values to the mean
absolute deviation.
Tracking signal
Inventory that is in transit between locations.
Transportation inventory
A computer application system designed to manage
transportation operations.
Transportation management system
General upward or downward movement of a variable over
time (e.g., demand, process attribute).
The strategy of designing a product initially intended for one
market in such a way that it can also be sold in other markets.
A measure (usually expressed as a percentage) of how
intensively a resource is being used to produce a good or
1) In accounting, the addition of direct labor, direct material,
and allocated overhead assigned at an operation. It is the cost
roll-up as a part goes through a manufacturing process to
finished inventory. 2) In current manufacturing terms, the
actual increase of utility from the viewpoint of the customer as
a part is transformed from raw material to finished inventory.
Value added
The functions within a company that add value to the goods or
services that the organization sells to customers and for which
it receives payment.
Value chain
The processes of creating, producing, and delivering a good or
service to the market. For a good, encompasses the raw
material supplier, the manufacture and assembly of the good,
and the distribution network. For a service, consists of
suppliers, support personnel and technology, the service
producer, and the distribution channel. May be controlled by a
single business or a network of several businesses.
Value stream
A network, often supporting EDI, providing services additional to those provided by common carriers.
Value-added network (VAN)
1) The difference between the expected (budgeted or planned)
value and the actual. 2) In statistics, a measurement of
dispersion of data.
A means of optimizing supply chain performance in which the
supplier has access to the customer's inventory data and is
responsible for maintaining the inventory level required by the
Vendor-managed inventory
A virtual or online trading exchange that enables both
information integration and collaboration between multiple
trading partners.
Virtual trading exchange
A computer application system designed to manage and
optimize workflows and storage of goods within a warehouse.
Warehouse management system
The activities related to receiving, storing, and shipping
materials to and from production or distribution locations.
1) 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
A list of Web pages that is structured hierarchically
Web directory
A document containing hypertext links to certain other
documents including multimedia documents.
Web page
A common framework that allows software developers to
define software components using a set of Internet-based
protocols, open standards, and extensible markup language
(XML) to utilize portions of Web services other developers
have created in order to build a new application in a more
timely manner.
Web services
A public or private data communication system for linking
computers distributed over a large geographic area.
Wide area network
A good or goods in various stages of completion throughout
the plant, including all material from raw material that has
been released for initial processing up to completely processed material awaiting final inspection and acceptance as finished goods inventory.
Work in process (WIP)
Perfect Order Fulfillment
= Total Perfect Orders/Total Number of Orders
Hours Worked / Available Hours x 100
Standard Hours of Work / hours worked x 100
Rated Capacity
Available Time x Utilization x Efficiency
Demonstrated Capacity
Outpuit for n Periods / n
Demand variablity among end user inceases at each stage in the chain because of inherent inaccuracies in each firm's demand forecasts.
Bullwhip Effect
Functional Product Strategy
*High average utilization rate
*Minimal inventory/high turns
*Short Lead-time
*Suppliers offering cost, quality
*Products with maximum performance with minimal cost.
*Buffer capacity (safe stock)
*Aggressive lead-time reduction
*Supplier chosen for speed, flexibility, quality (less on cost)
*Module design with postponement or differentation.
Innovative Product Strategy
Cash-to-Cash Cycle Time
Inv Days of Supply + Days of Sale Outstanding - Days Payable Outstanding.
Days Sales Outstanding
Accounts receivable / Sales on Credit / Number of days used
Inventory Turns
COGS / Inventory
Return On Assets
Net Income / Assets
Gross Profit Margin
Sales - COGS
Net Profit Margin
Gross Profit - G&A
Inv Days Of Supply
Average / COGS for a day
Shipper and seller of the cargo
The exporter's customer, who buys the cargo and is responsible for payment of import duties at customs.
NVOCC (non-vessel operating common carrier)
Non-vessel common carrier that arranges transport of cargo fro port to importer and contracts for or purchases space on the ocean vessell for resale or its own use.
Firm that consolidates shipments to load into empty vehicles for teturn trip fro importer's dock to port.
Customs houe broker has the expertise to move a shipment through customs expeditiously and to ensure complete documentation.
Customs house broker
Company that consults with exporter on import market (EMC) or that buys cargo and resells to importer (ETC).
Shipping Association
Nonprofit asociation of smaller shippers banded together to negiotated better rates fro carriers.
Ship broker is an independent contractor who brings together the exporter with a ship operator that has a vessell available with the right services at the right time.
Ship Broker
Ship Agent
Representative of a ship operator who is available to coordinate inport activities for the shipper wit cargo to export.
Ship Agent
Representative of a ship operator who is available to coordinate in-port acitivities for the shipper with cargo to export.
Export packing company
Specialist in packaging cargo for export so as to combine the lightest pratice weight (for reduce dutires) with maximum protection.
Incoterms E (exit from sellers location) Terms
EXW--Seller makes goods available for export at its facility.
Incoterms F (free; not paid by seller) Terms
E terms plus seller arranges and Pays for export doc and delivery goods, ready for export to specified point or port in sellers country.
Incoterms C (carriage paid by seller) Terms
F terms plus seller arranges and pays for international transport services to point or port in buyer's country.
Incoterms D (delivery at seller's costs) Terms
C terms plus seller arranges and pays for delivery and documentation services inside buyer's country.
The ATA Carnet
Containers traveling under an ATA Carnet can cross seeral boundaries duty freen and tax-free without customs inspections. Intented for passing through a jurisdiction, not being imported into it, i.e., samples, trade shows, professional equipment.
A certificate which accompanies cargo exported into a country that has signed a treaty granting favorable import duty rates to the exporting country,
Certificate of Origin
Commerical Invoice
Commerical invoice states the value of the commodities in the shipment, and it constittues the seller's and buyer's invoice for the transaction.
Bill of Ladding B/L's and Air waybills
All international shipments are inittiated by a bill of lading (B/L) that serves as the carrier's contract and receipt for goods the carrier will transport from one destination and shipper to another specifified destination and recipient.
Dock Receipt
A dock receipt, issue by a ship agent, signfifies that the steamship company has received the cargo from the domesitc carrier.
Letter Of Credit
A letter of credit is a letter which a bank assures the seller that the buyer is good for the purchase price of the goods and that thebank will therefore honor the buyer's checks to the seller up to that amount. In sum, the usual method of financing export-import transactions is the letter of credit, issued by the importer's bank and honored by the seller's bank.
Private Carrier
Shippers own Fleet
Comon Carrier
Perform shipping, required to serve commerical shippers, most economical.
Contract Carrier
Work on contract with specfic clients. Custom services.
Exempt Carrier
Free from Fed req, mostly agriculture. Limited range of operation.
SCOR (Supply -Chain Operations Reference Model Process
Plan, Source Make, Delivery, Return
SCOR Activities
*All customer interactions from orerder entry through paid invoice.
*All product tranasactions (define as physical materials and services.). Including equipment, spare parts, bulk product, and software.
*All market interactions from understanding aggregate demand through order fulfillment.
Basic Supply Chain Entities
Supplier, producer, customer.
Basic supply Chain Flows
Information flow, cash flow, product flow, reverse product flow
Creating net value
Building a competitive Infrastructure
Leveraging WW logistics
sync supply with demand
Measure performance globally
Vertical Integration
Degree to which a firm direclt controls multiple links in the chain from RM to retail sales.
Lateral (Horizontal) Integration
Coordinated management of separately owned link in the SC (outsourcing).
Stage 1 Multiple Dysfuction
*Implusive acitivity
*Pep talks, threats
*No team work
*Little info exchange
Stage 2 Semifuctional Enterprise
*Mostly manual ops
*Inv reduction in owned facilities
*New low-price buying stratgies
*Some hard-skills training, job enhancement.
*Enhanced marketing and forecasting
* No coordination of initiatives
Stage 3 Integrated Enterprise
*New focus on process
*Internal process integration
*Inranets, etc. across functions
*Design teams
*Enhanced warehousing, logistice, forecasting, etc.
Stage 4 Extended Enterpise
*Process integration across entity boundaries
*Eventual electronic information connects among multiple partners.
*ERP-to-ERP links
*SC vs SC Competition.
Low Strategic Importance
Low SC difficulty--Commodity materials.
High SC difficulty--Bottleneck materials
*Lows SC difficulty--*Leverageable materials
*High SC dificulty
*Direct/core compentency materials (do it yourself)
High Strategic Importance
Upside Supply Chain Adapatability
Amount of increases production an Org can achieve and sustain in 30 days. Answers "How Much"
Upside Supply Chain Flexibility
Number of days an Org requires to achieve an unplanned sustainable 20% increase in quantities delivered. Answers "How Long"
EOQ is the order size that gives you the lowst total cost for holding, ordering, and setup.
EOQ Depends On
*Demand is constant and known
*LT is constant and known
*Items ordered arrive all at once, not stages
*There are no qty discounts
*Variable cost are limited holding and setup costs
*No stockouts if you place orders on schedule.
Chase production
A production planning method that maintains a stable inventory level while varying production to meet demand. Companies may combine chase and level production schedule methods. Syn: chase strategy,
chase-demand strategy.
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. Acronym: CPFR.
Collaborative planning, forecasting, and replenishment (CPFR)
Component commonality
A form of design standardization where a single part is used to
replace a variety of similar parts.
A measurement (usually expressed as a percentage) of the actual
output compared to the standard output expected. It measures how well something is performing relative to existing standards.
Modular design strategy
The strategy of planning products so the components can be used in current and future products or that the components can be assembled or arranged to produce multiple configurations of a
product. Automobiles and personal computers are examples of
modular designs.
A measure (usually expressed as a percentage) of how intensively a resource is being used to produce a good or service. Utilization
compares actual time used to available time. Traditionally, utilization is the ratio of direct time charged (run time plus setup time) to the clock time available. Utilization is a percentage between 0% and
100% that is equal to 100% minus the percentage of time lost due to the unavailability of machines, tools, workers, and so forth. In the theory of constraints, activation of a resource that productively
contributes to reaching the goal. Over-contributes to reaching the goal. Over-activation of a resource does not productively utilize a resource.
PSA--Product and Service Agreement
A (PSA) Product and Service Agreement defines the business relationship between the customer and the manufacturer. It provides the guidelines for meeting, attaining and sharing benefits, and the overall plan for the product and services to be worked on in the partnership. It will detail what can and cannot be worked on.
C-TPAT (Customs-Trade Partnership Against Terrorism)
C-TPAT is a voluntary membership by business.
*A business must submit an on line application and agree to specific actions which include:

*An assessment by the company according to C-TPAT guidelines
*Submitting a supply chain questionnaire to the U.S. Customs
*Developing and implementing a process of enhanced security
Communicating the guidelines to all the trading partners in the supply chain
Six Sigma Stages (DMAIC)
Defining, Measuring, Analyzing, Improving and Controlling the process.
Four levels of communication in the collaboration process
1) transactional, 2) shared process and partnership, 3) linked competitive vision and strategic alliance, and 4) backward integration
Shipper and sell of the cargo
The exporter's customer, who buys the cargo and is resp for payment of import duties @ customs. (Usually handle by customs broker)
Domestic Carrier
Train, turcik, or air carrier that takes cargo to the outgoing port
Overseas carrier
Ship operator or air carrier that take the cargo from the domestic port to the foreign port
Freight Forwarder
Contractor respnsible for getting goods from dock to dock and who arranges transportation for the exporter's cargo
A non-vessel common carrier that arranges trasnport of cargo from port to importer and contracts for or purchases space on the ocean vessel for resale or its own use
Independent firm or affiliate of NVOCC that consolidates shipments to load into empty vehicles for return trip from imprter's dock to port
Customs House Broker
Licensed broker who has the expertise to move a shipment through customs expeditiously and to ensure complete, acccurate documentation
Company that consults with exporter or import market (EMC) or that buys cargo and resells to importer (ECT)
Shipping Association
Nonprofit assoc of smaller shippers banded together to negiotiate better rates from carriers.
Ship broker
Indepnendent contractor who brings together the exporter with a ship operator that has a vessel available with the right services at the right time
A Rep for a ship operator who is available to coord in-port acitivities for the shipper with cargo to export.
Ship Agent
Export packing company
Specialist in packaging cargo for export so as to combine lightese practical weight (for reduced duties) with maximum protection.
ATA Carnet
Containers can cross several boundaries duty free without customs inspection. Used for samples, pro equip, tradeshow, etc.
Commerical Invoice
Commerical invoice states the value of the commodities in the shipment, and constitutes the seller's and buyer's invoice for the transaction.
Certificate of Origin
Certificate of origin often accompanies a cargo exported into a country that has signed a treaty granting favorable imprt duty rates to the exporting country.
Bill of Lading (B/L)
All internation shipments are inititated by a bill of lading (B/L) that serves as the carrier's contract and receipt for goods the carrier will transport from one destination and shipper to another specified destination and recipient.
Air waybill or airway B/L
Air waybill is a standarized form used for all air shipments.
A dock receipt, issued by a ship agent, signifies that the steamship company has received the cargo from the domestic carrier.
Dock Receipt
Harmonized Tariff Schedule (HTS)
HCS is administered by the World Customs Organization (WCO) in Brussels. HTS assigns a six-digit HTS # to products exhanged in export-import trade.
Letter of Credit
The importer requests and obtains from the local bank a commerical LOC. The LOC document guarantees that the importer has good credit and the importer's bank will honor a draft issued byt the exporter to the importer. In sum, the usual method for export-import transaction is the LOC, issued by the importer's bank and honored by the seller's bank.
Private Carrier
A private carrier is a firm that owns or leases a fleet of vehicles to transport its own products
Common Carrier
Common carriers perform bult of shipping; subject to most regulations; reguired to service commerical shippers
Contract Carrier
Contract with specific clients, custom services
Exempt Carrier
Free from fed regs. Restrict to specific markets, mostly agriculture--special niches