A

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 0 to !0% by pro"ected dollar volume. The ne#t grouping, B, represents about 20% of the items and 20% of the
dollare volume. The C$class contains %0 to !0% of the items, and represents about 10 to &0% of the dollar volume.
ABC Costing: See Activity-Based Costing

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 ( $ are lo)est volume *+,s.-

ABC Model: .n 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 ob"ect that creates a demand for
the activity to be performed.

ABC System: .n cost management, a system that maintains financial and operating data on an organi/ation0s
resources, activities, drivers, ob"ects and measures. ABC 1odels are created and maintained )ithin this system.
ABI: See Automated Broker Interface
ABM: See Activity-Based Management.
ABP: See Activity-Based Planning.

Abnormal Demand: (emand in any period that is outside the limits established by management policy. This
demand may come from a ne) customer or from e#isting customers )hose o)n demand is increasing or
decreasing. Care must be ta2en in evaluating the nature of the demand3 .s it a volume change, is it a change in
product mi#, or is it related to the timing of the order4

Absorption Costing: .n cost management, an approach to inventory valuation in )hich variable costs and a
portion of fi#ed costs are assigned to each unit of production. The fi#ed costs are usually allocated to units of
output on the basis of direct labor hours, machine hours, or material costs.
Synonym: Allocation Costing.

Accelerated Commercial Release Operations Support System ACROSS!: A Canada Customs system to
speed the release of shipments by allo)ing electronic transmission of data to and from Canada Customs 25 hours a
day, ! days a )ee2.
Acceptable "uality #evel A"#!: .n 6uality management, )hen a continuing series of lots is considered, A78
represents a 6uality level that, for the purposes of sampling inspection, is the limit of a satisfactory process average.
Acceptable Sampling Plan: .n 6uality management, a specific plan that indicates the sampling si/es and the
associated acceptance or non$acceptance criteria to be used.
Also see: Acceptance Sampling.

Acceptance $umber: .n 6uality management, 1- A number used in acceptance sampling as a cut off at )hich the
lot )ill be accepted or re"ected. 9or e#ample, if # or more units are bad )ithin the sample, the lot )ill be re"ected.
2- The value of the test statistic that divides all possible values into acceptance and re"ection regions.
Also see: Acceptance Sampling.
Acceptance Sampling: %! The process of sampling a portion of goods for inspection rather than e#amining the
entire lot. The entire lot may be accepted or re"ected based on the sample even though the specific units in the lot
are better or )orse than the sample. There are t)o types3 attributes sampling and variables sampling. .n attributes
sampling, the presence or absence of a characteristic is noted in each of the units inspected. .n 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 2ind. &! A method of measuring random samples of lots or
batches of products against predetermined standards.
Accessibility: A carrier0s ability to provide service bet)een an origin and a destination.
Accessorial C'arges: A carrier0s charge for accessorial services such as loading, unloading, pic2up, and delivery,
or any other charge deemed appropriate.
Accountability: Being ans)erable for, but not necessarily personally charged )ith, doing specific )or2.
Accountability cannot be delegated, but it can be shared. 9or e#ample, managers and e#ecutives are accountable
for business performance even though they may not actually perform the )or2.
Accounts Payable A(P!: The value of goods and services ac6uired for )hich payment has not yet been made.

Accounts Receivable A(R!: The value of goods shipped or services rendered to a customer on )hom payment
has not been received. ,sually includes an allo)ance for bad debts.
Accreditation: Certification by a recogni/ed body of the facilities, capability, ob"ectivity, competence, and integrity
of an agency, service, operational group, or individual to provide the specific service or operation needed. 9or
e#ample, the ;egistrar Accreditation Board accredits those organi/ations that register companies to the .*< =000
*eries *tandards.
Accredited Standards Committee ASC!: A committee of A>*. chartered in 1=!= to develop uniform standards
for the electronic interchange of business documents. The committee develops and maintains ,* generic
standards '?12- for @lectronic (ata .nterchange.
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.
Synonym: Assembly Bin.

Accuracy: .n 6uality management, the degree of freedom from error or the degree of conformity to a standard.
Accuracy is different from precision. 9or e#ample, four$significant$digit numbers are less precise than si#$significant$
digit numbers: ho)ever, a properly computed four$significant$digit number might be more accurate than an
improperly computed si#$significant$digit number.

ACD: See Automated Call istribution.

Ac)no*ledgement: A communication by a supplier to advise a purchaser that a purchase order has been
received. .t usually implies acceptance of the order by the supplier.

Ac+uisition Cost: .n cost accounting, the cost re6uired to obtain one or more units of an item. .t is order 6uantity
times unit cost.

Action Message: An alert that an 1;A or (;A system generates to inform the controller of a situation re6uiring his
or her attention.
Active Stoc): Boods in active pic2 locations and ready for order filling.
Activity: Cor2 performed by people, e6uipment, technologies, or facilities. Activities are usually described by the
action$verb$ad"ective$noun grammar convention. Activities may occur in a lin2ed se6uence and activity$to$activity
assignments may e#ist.
1. .n activity$based cost accounting, a tas2 or activity, performed by or at a resource, re6uired in producing the
organi/ation0s 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. .n pro"ect management, an element of )or2 on a pro"ect. .t usually has an anticipated duration, anticipated
cost, and e#pected resource re6uirements. *ometimes ma"or activity is used for larger bodies of )or2.
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 intervie)s, group sessions,
6uestionnaires, observations, and revie)s of physical records of )or2.
Activity,Based Budgeting ABB!: An approach to budgeting )here a company uses an understanding of its
activities and driver relationships to 6uantitatively estimate )or2load and resource re6uirements as part of an
ongoing business plan. Budgets sho) the types, number of, and cost of resources that activities are e#pected to
consume based on forecasted )or2loads. The budget is part of an organi/ation0s 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 ob"ects, activities,
and resources. Cost ob"ects consume activities and activities consume resources. ;esource costs are assigned to
activities based on their use of those resources, and activity costs are reassigned to cost ob"ects 'outpputs- based
on the cost ob"ects proportional use of those activities. Activity$based costing incorporates causal relationships
bet)een cost ob"ects and activities and bet)een activities and resources.

Activity,Based Costing Model: .n 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$based cost accounting models that collectively defines data on
an organi/ation0s resources, activities, drivers, ob"ects, and measures.
Activity,Based Management ABM!: A discipline focusing on the management of activities )ithin business
processes as the route to continuously improve both the value received by customers and the profit earned in
providing that value. A1B uses activity$based cost information and performance measurements to influence
management action.
See Activity-Based Costing.

Activity,Based Planning ABP!: Activity$based planning 'ABA- is an ongoing process to determine activity and
resource re6uirements 'both financial and operational- based on the ongoing demand of products or services by
specific customer needs. ;esource re6uirements are compared to resources available and capacity issues are
identified and managed. Activity,based budgeting ABB! is based on the outputs of activity$based planning.
Activity Dictionary: A listing and description of activities that provides a commonDstandard definition of activities
across the organi/ation. An activity dictionary can include information about an activity andDor its relationships,
such as activity description, business process, function source, )hether value added, inputs, outputs, supplier,
customer, output measures, cost drivers, attributes, tas2s, and other information as desired to describe the activity.

Activity Driver: The best single 6uantitative measure of the fre6uency and intensity of the demands placed on an
activity by cost ob"ects or other activities. .t0s used to assign activity costs to cost ob"ects or to other activities.
Activity #evel: A description of types of activities dependent on the functional area. Aroduct$related activity levels
may include unit, batch, and product levels. Customer$related activity levels may include customer, mar2et,
channel, and pro"ect levels.
Activity Ratio: A financial ratio used to determine ho) an organi/ation0s resources perform relative to the revenue
the resources produce. Activity ratios include inventory turnover, receivables conversion period, fi#ed$asset
turnover, and return on assets.
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 "ob as it moves
through the production process.

Actual Demand: Actual demand is composed of customer orders 'and often allocations of items, ingredients, or
ra) materials to production or distribution-. Actual demand nets against or consumes the forecast, depending on
the rules chosen over a time hori/on. 9or e#ample, actual demand )ill totally replace forecast inside the sold$out
customer order bac2log hori/on 'often called the demand time fence-, but )ill net against the forecast outside this
hori/on based on the chosen forecast consumption rule.
Actual to -'eoretical Cycle -ime: The ratio of the measured time re6uired to produce a given output divided by
the sum of the time re6uired to produce a given output based on the rated efficiency of the machinery and labor
operations.

Administrative Monetary Penalty System AMPS !: A Canada Customs system of monetary penalties that )ill be
imposed against violations of Canada Customs regulations.
Ad .alorem Duty: A duty calculated as a percentage of the shipment value.
Also see: uty
Advance Material Re+uest: <rdering materials before the release of the formal product design. This early release
is re6uired because of long lead times.

Advanced Planning and Sc'eduling APS!: Techni6ues that deal )ith analysis and planning of logistics and
manufacturing over the short, intermediate, and long$term time periods. AA* describes any computer program that
uses advanced mathmatical algorithms or logic to perform optimi/ation or simulation on finite capacity scheduling,
sourcing, capital planning, resource planning, forecasting, demand management, and others. These techni6ues
simultaneously consider a range of constraints and business rules to provide real$time planning and scheduling,
decision support, available$to$promise, and capable$to$promise capabilities. AA* often generates and evaluates
multiple scenarios. 1anagement then selects one scenario to use as the official plan. The five main components of
an AA* system are demand planning, production planning, production scheduling, distribution planning, and
transportation planning.

Advanced S'ipment $otice AS$!: An @(. term referring to a transaction set 'A>*. E%- )here the supplier
sends out a notification to interested parties that a shipment is no) outbound in the supply chain. This notification is
list transmitted to a customer or consignor designating items shipped. The A*> may also include the e#pected time
of arrival.
Advanced S'ipping $otice AS$!: (etailed shipment information transmitted to a customer or consignee in
advance of delivery, designating the contents 'individual products and 6uantities of each- and nature of the
shipment. 1ay also include carrier and shipment specifics, including time of shipment and e#pected time of arrival.
Also see: Assumed !eceipt
Aerodynamic Drag: Cind resistance

After,Sale Service: *ervices provided to the customer after products have been delivered. This can include
repairs, maintenance, andDor telephone support.
Synonym: "ield Service

Agency -ariff: A rate bureau publication that contains rates for many carriers.
Agent: An enterprise authori/ed to transact business for, or in the name of, another enterprise.
Agglomeration: A net advantage a company gains by sharing a common location )ith other companies.
Aggregate /orecast: An estimate of sales, oftentimes phased, for a grouping of products or product families
produced by a facility or firm. *tated 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 organi/ation0s 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 bac2log for families of products. The production
plan is the result of the aggregate planning process. T)o approaches to aggregate planning e#ist $ production
planning and sales and operations planning.

Aggregate -ender Rate: A reduced rate offered to a shipper )ho tenders t)o or more class$related shipments at
one time and one place.
Agility: The ability to successfully manufacture and mar2et a broad range of lo)$cost, high$6uality products and
services )ith short lead times and varying volumes that provide enhanced value to customers through
customi/ation. Agility merges the four distinctive competencies of cost, 6uality, dependability, and fle#ibility.
Air Cargo: 9reight that is moved by air transportation.
Air Cargo Agent: An agent appointed by an airline to solicit and process international airfreight shipments.
Air Cargo Containers: Containers designed to conform to the inside of an aircraft. There are many shapes and
si/es of containers. Air cargo containers fall into three categories3 %! air cargo pallets &! lo)er dec2 containers 0!
bo# type containers.
Air Carrier: An enterprise that offers transportation service via air.
Airport and Air*ay -rust /und: A federal fund that collects passenger tic2et ta#es and disburses those funds for
airport facilities.
Air -a1i: An e#empt for$hire air carrier that )ill fly any)here on demand: air ta#is are restricted to a ma#imum
payload and passenger capacity per plane.
Air -ransport Association of America: A ,.*. airline industry association.
Air 2aybill A2B!: 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.
Alert: See Action Message.

Algorit'm: a clearly specified mathematical process for computation: a set of rules, )hich, if follo)ed, produce a
prescribed result.
All,Cargo Carrier: An air carrier that transports cargo only.
Allocation: %! 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 vie)ed as more relevant for management decision$ma2ing. &! Allocation of available
inventory to customer and production orders.

All 2ater: Term used )hen the transportation is completely by )ater.
American $ational Standards Institute A$SI!: A non$profit organi/ation chartered to develop, maintain, and
promulgate voluntary ,* national standards in a number of areas, especially )ith regards to setting @(. standards.
A>*. is the ,* representative to the .nternational *tandards <rgani/ation '.*<-.

American Society for "uality AS"!: 9ounded in 1=5%, a not$for$profit educational organi/ation consisting of
155,000 members )ho are interested in 6uality improvement.

American Society of -ransportation 3 #ogistics: A professional organi/ation in the field of logistics.
American -ruc)ing Associations: A motor carrier industry association composed of sub$conferences
representing various motor carrier industry sectors.
American 2ater*ay Operators: A domestic )ater carrier industry association representing barge operators on
inland )ater)ays.
Amtra): The >ational ;ailroad Aassenger Corporation, a federally created corporation that operates most of the
,nited *tates0 intercity passenger rail service.
A$SI: See American #ational Standards Institute
Anti,Dumping Duty: An additional import duty imposed in instances )here imported goods are priced at less than
the FnormalG price charged in the e#porterHs domestic mar2et and cause material in"ury to domestic industry in the
importing country
Any,"uantity A"! rate: A rate that applies to any si/e shipment tendered to a carrier: no discount rate is available
for large shipments.
API: American Aetroleum .nstitute: also Application Arogramming .nterface
AP4: AA,s automatically shut do)n the main locomotive engine idle )hile maintaining all vital main engine
systems at greatly reduced fuel consumption

A"#: See Acceptable $uality %evel.

A(R: See Accounts !eceivable.
Arrival $otice: A notice from the delivering carrier to the >otify Aarty indicating the shipment0s arrival date at a
specific location 'normally the destination-.
Artificial Intelligence: A field of research see2ing to understand and computeri/e the human thought process.
AS(RS: See Automated Storage&!etrieval System
AS": See American Society for $uality.
Assemble to Order: A production environment )here a good or service can be assembled after receipt of a
customer0s order. The 2ey components 'bul2, semifinished, intermediate, sub$assembly, fabricated, purchased,
pac2ing, and so on- used in the assembly or finishing process are planned and usually stoc2ed in anticipation of a
customer order. ;eceipt of an order initiates assembly of the customi/ed product. This strategy is useful )here 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 andDor parts that are put together and constitute a ma"or subdivision for the
final product. An assembly may be an end item or a component of a higher$level assembly.
Assignment: A distribution of costs using causal relationships. Because cost causal relationships are vie)ed as
more relevant for management decision ma2ing, assignment of costs is generally preferable to allocation
techni6ues.
Synonymous 'it( )racing. Contrast 'it( Allocation
Association of American Railroads: A railroad industry association that represents the larger ,.*. railroads.
A-A: Actual time of arrival, or also 2no)n as the American Truc2ing Associations.
A-D: Actual time of departure
A-/I: Automated Tariff 9iling .nformation *ystem
A-P: See Available to Promise
Attributes: A label used to provide additional classification or information about a resource, activity, or cost ob"ect.
,sed for focusing attention and may be sub"ective. @#amples are a characteristic, a score or grade of product or
activity, or groupings of these items, and performance measures.
Audit: .n reference to freight bills, the term audit is used to determine the accuracy of freight bills.
Auditability: A characteristic of modern information systems gauged by the ease )ith )hich data can be
substantiated by tracing it to source documents, and the e#tent to )hich auditors can rely on pre$verified and
monitored control processes.

Auditing: (etermining the correct transportation charges due the carrier: auditing involves chec2ing the freight bill
for errors, correct rate, and )eight.
Audit -rail: 1anual or computeri/ed tracing of the transactions affecting the contents or origin or a record.

AutoID: ;eferring to an automated identification system. This includes technology such as bar coding and radio
fre6uency tagging ';9.(-.
Automated Bro)er Interface ABI!: The ,.*. Customs program to automate the flo) of customs$related
information among customs bro2ers, importers, and carriers.
Automated Call Distribution: A feature of large call center or ICustomer .nteraction CenterI telephone s)itches
that routes calls by rules, such as ne#t$available employee, s2ill set, etc.

Automated 5uided .e'icle System A5.S!: A computer$controlled materials handling system consisting of small
vehicles 'carts- that move along a guide)ay.
Automated Storage(Retrieval System AS(RS!: A high$density rac2 inventory storage system )ith unmanned
vehicles automatically loading and unloading products toDfrom the rac2s.
Automatic -ire Inflation System: Automatic tire inflation systems monitor and continually ad"ust the level of
pressuri/ed air to tires, maintaining proper tire pressure even )hen the truc2 is moving.
Available to Promise A-P!: The uncommitted portion of a company0s inventory and planned production
maintained in the master schedule to support customer$order promising. The ATA 6uantity is the uncommitted
inventory balance in the first period and is normally calculated for each period in )hich an 1A* receipt is
scheduled. .n the first period, ATA includes on$hand inventory less customer orders that are due and overdue.
Three methods of calculation are used3 discrete ATA, cumulative ATA )ith loo2 ahead, and cumulative ATA )ithout
loo2 ahead.
Average: See Marine Cargo Insurance
Average Cost: Total cost, fi#ed plus variable, divided by total output.
A2B: See Air *aybill
B
B&B: See Business-to-Business.
B&C: See Business-to-Customer.
Bac) Order: Aroduct ordered but out of stoc2 and promised to ship )hen the product becomes available.

Bac)'aul: The process of a transportation vehicle returning from the original destination point to the point of origin.
The 1=E0 1otor Carrier Act deregulated interstate commercial truc2ing, thereby allo)ing carriers to contract for the
return trip. The bac2haul can be )ith a full, partial, or empty load. An empty bac2haul is called deadheading.
Also see: ead(ead

Bac)order:
1. The act of retaining a 6uantity to ship against an order )hen other order lines have already been shipped.
Bac2orders are usually caused by stoc2 shortages.
2. The 6uantity remaining to be shipped if an initial shipment's- has been processed. #ote: .n some cases,
bac2orders are not allo)ed. This results in a lost sale )hen sufficient 6uantities are not available to
completely ship an order or order line.
Bac)sourcing: Aulling a function bac2 in house as an outsourcing contract e#pires.

Balanced Scorecard: A structured measurement system based on a mi# of financial and non$financial measures
of business performance. A list of financial and operational measurements used to evaluate organi/ational or
supply chain performance. The dimensions of the balanced scorecard might include customer perspective,
business process perspective, financial perspective, and innovation and learning perspectives. .t formally connects
overall ob"ectives, strategies, and measurements. @ach dimension has goals and measurements.
Also see: Scorecard.

Balance of -rade: The surplus or deficit )hich results from comparing a country0s e#ports and imports of
merchandise only.
Bale: A large compressed, bound, and often )rapped 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, trac2ing of units by reading a series of printed bars for translation into a numeric or alphanumeric
identification code. A popular e#ample is the ,AC code used on retail pac2aging.
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 )hich can be
read by electronic readers called bar.
Barge: The cargo$carrying vehicle )hich may or may not have its o)n propulsion mechanism for the purpose of
transporting goods. Arimarily used by .nland )ater carriers, basic barges have open tops, but there are covered
barges for both dry and li6uid cargoes.
Barrier to 6ntry: 9actors that prevent companies from entering into a particular mar2et, such as high initial
investment in e6uipment.
Barter: The e#change of commodities or services for other commodities or services rather than the purchase of
commodities or services )ith money.
Base Currency: The currency )hose value is IoneI )henever a 6uote is made bet)een t)o currencies.
Basing,Point Pricing: A pricing system that includes a transportation cost from a particular city or to)n in a /one
or region even though the shipment does not originate at the basing point.
Batc' Pic)ing: A method of pic2ing orders in )hich order re6uirements are aggregated by product across orders
to reduce movement to and from product locations. The aggregated 6uantities of each product are then transported
to a common area )here the individual orders are constructed.
See +one Picking.

Benc'mar)ing: The process of comparing performance against the practices of other leading companies for the
purpose of improving performance. Companies also benchmar2 internally by trac2ing and comparing current
performance )ith past performance.

Benefit,Cost Ratio: An analytical tool used in public planning: a ratio of total measurable benefits divided by the
initial capital cost.
Also see: Cost Benefit Analysis.
Best in Class: An organi/ation, usually )ithin a specific industry, recogni/ed for e#cellence in a specific process
area.

Best Practice: A specific process or group of processes )hich have been recogni/ed 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 )ith respect to resources, activities, cost ob"ect, or processes.

Bilateral Contract: An agreement )here$in each party ma2es a promise to the other party.
Billing: A carrier terminal activity that determines the proper rate and total charges for a shipment and issues a
freight bill.
Bill of Activities: A listing of activities re6uired by a product, service, process output, or other cost ob"ect. Bill of
activity attributes could include volume andDor cost of each activity in the listing.
Bill of #ading BO#!: A transportation document that is the contract of carriage containing the terms and
conditions bet)een the shipper and carrier.

Bill of #ading $umber: The number assigned by the carrier to identify the bill of lading.
Bill of #ading7 -'roug': A bill of lading to cover goods from point of origin to final destination )hen interchange or
transfer from one carrier to another is necessary to complete the "ourney.
Bill of Material BOM!: A structured list of all the materials or parts and 6uantities needed to produce a particular
finished product, assembly, subassembly, or manufactured part, )hether purchased or not.

Bill of Material Accuracy: Conformity of a list of specified items to administrative specifications, )ith all 6uantities
correct.

Bill of Resources: A listing of resources re6uired by an activity. ;esource attributes could include cost and
volumes.
Bin Center: A drop off facility that is smaller than a public )arehouse
Binder: A strip of cardboard, thin )ood, burlap, or similar material placed bet)een layers of containers to hold a
stac2 together.
Blan)et Order: See Blanket Purc(ase ,rder.

Blan)et Purc'ase Order: A long$term commitment to a supplier for material against )hich short$term releases )ill
be generated to satisfy re6uirements. <ftentimes, blan2et orders cover only one item )ith predetermined delivery
dates.
Synonyms: Blanket ,rder- Standing ,rder.

Blan)et Rate: A rate that does not increase according to the distance a commodity is shipped.
Blan)et Release: The authori/ation to ship andDor produce against a blan2et agreement or contract.
Blan)et 2rap: A service pioneered by the moving companies to eliminate pac2aging material by )rapping product
in padded Iblan2etsI to protect it during transit, usually on Iair rideI vans.
Bleeding 6dge: An unproven process or technology so far ahead of its time that it may create a competitive
disadvantage.
Blo* -'roug': An 1;A process )hich uses a Iphantom bill of materialI and permits 1;A logic to drive
re6uirements straight through the phantom item to its components. The 1;A system usually retains its ability to net
against any occasional inventories of the item.
BO#: See Bill of %ading.
BOM: See Bill of Material.

Bonded: See Bond- In.
Bonded 2are'ouse: Carehouse approved by the Treasury (epartment and under bondDguarantee for
observance of revenue la)s. ,sed for storing goods until duty is paid or goods are released in some other proper
manner.
Boo)able #eg: See %eg.
Boo)ing: The act of re6uesting space and e6uipment aboard a vessel for cargo )hich is to be transported.
Boo)ing $umber: The number assigned to a certain space reservation by the carrier or the carrier0s agent.
Bottlenec): A constraint, obstacle, or planned control that limits throughput or the utili/ation of capacity.
Bo1car: An enclosed railcar used to transport freight

BPM: See Business Performance Measurement.

BPO: See Business Process ,utsourcing.

BPR: See Business Process !eengineering.

Bracing: To secure a shipment inside a carrier0s vehicle to prevent damage.
Brac)eted Recall: ;ecall from customers of suspect lot numbers, plus a specified number of lots produced before
and after the suspect ones.
Branding: The use of a name, term, symbol, or design, or a combination of these, to identify a product.

Brea),Bul): The separation of a consolidated bul2 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.
Brea) Bul) Cargo: Cargo that is shipped as a unit or pac2age 'for e#ample3 palleti/ed cargo, bo#ed cargo, large
machinery, truc2s- but is not containeri/ed.
Brea) Bul) .essel: A vessel designed to handle brea2 bul2 cargo.
Brea),6ven Point: The level of production or the volume of sales at )hich operations are neither profitable nor
unprofitable. The brea2$even point is the intersection of the total revenue and total cost curves.

Bro)er: There are & definitions for the term Ibro2erI3
%! an enterprise that o)ns and leases e6uipment
&! an enterprise that arranges the buying J selling of transportation of, goods, or services
0! a ship agent )ho acts for the ship o)ner or charterer in arranging charters.
Buc)eted System: An 1;A, (;A, or other time$phased system in )hich all time$phased data are accumulated
into time periods, or buc2ets. .f the period of accumulation is one )ee2, then the system is said to have )ee2ly
buc2ets.
Buffer: %! A 6uantity of materials a)aiting further processing. .t can refer to ra) materials, semi$finished stores, or
hold points, or a )or2 bac2log that is purposely maintained behind a )or2 center. &! .n the theory of constraints,
buffers can be time or material, and support throughput andDor due date performance. Buffers can be maintained at
the constraint, convergent points ')ith a constraint part-, divergent points, and shipping points.
Buffer Management: .n the theory of constraints, a process in )hich all e#pediting in a shop is driven by )hat is
scheduled to be in the buffers 'constraint, shipping, and assembly buffers-. By e#pediting this material into the
buffers, the system helps avoid idleness at the constraint and missed customer due dates. .n addition, the causes
of items missing from the buffer are identified, and the fre6uency of occurrence is used to prioriti/e improvement
activities.
Buffer Stoc): A 6uantity of goods or articles 2ept in storage to safeguard against unforeseen shortages or
demands.
Build to Inventory: A IpushI system of production and inventory management. Aroduct is manufactured or
ac6uired 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.
Build to Stoc): See Build to Inventory.
Bul) Area: A storage area for large items )hich at a minimum are most efficiently handled by the palletload.
Bul) Cargo: ,npac2ed dry cargo such as grain, iron ore or coal. Any commodity shipped in this )ay is said to be
in bul2.

Bull*'ip 6ffect: An e#treme change in the supply position upstream in a supply chain generated by a small
change in demand do)nstream in the supply chain. .nventory can 6uic2ly move from being bac2ordered to being in
e#cess. This is caused by the serial nature of communicating orders up the chain )ith the inherent transportation
delays of moving product do)n the chain. The bull)hip effect can be eliminated by synchroni/ing the supply chain.
Bundle: A group of products that are shipped together as an unassembled unit.
Bundling: An occurrence )here t)o or more products are combined into one transaction for a single price.
Burn Rate: The rate of consumption of cash in a business. ,sed to determine cash re6uirements on an on$going
basis. A burn rate of K0,000 )ould mean the company spends K0,000 a month above any incoming cash flo) to
sustain its business. @ntrepreneurial companies )ill calculate their burn rate in order to understand ho) much time
they have before they need to raise more money, or sho) a positive cash flo).

Business Application: Any computer program, set of programs, or pac2age of programs created to solve a
particular business problem or function.
Business Continuity Plan BCP!: A contingency plan for sustained operations during periods of high ris2, such as
labor unrest or natural disaster. C*C1A provides suggestions for helping companies do continuity planning in their
Securing t(e Supply C(ain research. A copy of this research is available on C*C1A0s )eb site at
www.cscmp.org.

Business #ogistics: The process of planning, implementing, and controlling the efficient, effective flo) 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 re6uirements.
Business Plan:
1. A statement of long$range strategy and revenue, cost, and profit ob"ectives usually accompanied by
budgets, a pro"ected balance sheet, and a cash flo) '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 synchroni/ed tactical functional plans through the production planning process 'or the sales
and operations planning process-. Although fre6uently stated in different terms 'dollars versus units-, these
tactical plans should agree )ith each other and )ith the business plan.
2. A document consisting of the business details 'organi/ation, strategy, and financing tactics- prepared by an
entrepreneur to plan for a ne) business.
Business Performance Measurement BPM!: A techni6ue that uses a system of goals and metrics to monitor
performance. Analysis of these measurements can help businesses periodically set business goals, then provide
feedbac2 to managers on progress to)ards those goals. A specific measure can be compared to itself over time,
compared )ith a present target, or evaluated along )ith other measures.

Business Process Outsourcing BPO!: The practice of outsourcing non$core internal functions to third parties.
9unctions typically outsourced include logistics, accounts payable, accounts receivable, payroll, and human
resources. <ther areas can include .T development or complete management of the .T functions of the enterprise.

Business Process Reengineering BPR!: The fundamental rethin2ing and radical redesign of business
processes to achieve dramatic organi/ational improvements.

Business,to,Business B&B!: As opposed to business$to$consumer 'B2C-. 1any companies are no) focusing
on this strategy, and their )eb sites are aimed at businesses 'thin2 )holesale- and only other businesses can
access or buy products on the site. .nternet analysts predict this )ill be the biggest sector on the )eb.

Business,to,Consumer B&C!: The hundreds of e$commerce )eb sites that sell goods directly to consumers are
considered B2C. This distinction is important )hen comparing )eb sites that are B2B as the entire business model,
strategy, e#ecution, and fulfillment is different.
Business 4nit: A division or segment of an organi/ation generally treated as a separate profit$and$loss center.

Buyer: An enterprise that arranges for the ac6uisition of goods or services and agrees to payment terms for such
goods or services.
Buyer Be'avior: The )ay individuals or organi/ations behave in a purchasing situation. The customer$oriented
concept finds out the )ants, needs, and desires of customers and adapts resources of the organi/ation to deliver
need$satisfying goods and services.
C
C 3 /: See Cost and "reig(t
Cab 61tenders: Also called gap seals, )hich help to close the gap bet)een the tractor and the trailer
Cabotage: A federal la) that re6uires coastal and inter$coastal traffic to be carried in ,.*.$built and registered
ships.
CA6: See Computer-Aided .ngineering.
CAD: See Cas( Against ocuments.
CAD68: See Customs Automated ata ./c(ange System
CA/: See Currency Ad0ustment "actor
Cage:
%! A secure enclosed area for storing highly valuable items
&! A pallet$si/ed platform )ith sides that can be secured to the tines of a for2lift and in )hich a person may ride to
inventory items stored )ell above the )arehouse floor.
Caged: ;eferring to the practice of placing high$value or sensitive products in a fenced off area )ithin a
)arehouse.
Calendar Days: The conversion of )or2ing days to calendar days is based on the number of regularly scheduled
)or2days per )ee2 in your manufacturing calendar.
Calculation: To convert from )or2ing days to calendar days3 if )or2 )ee2 L 5 days, multiply by 1.!: L days,
multiply by 1.5: L % days, multiply by 1.1!

Call Center: A facility housing personnel )ho respond to customer phone 6ueries. These personnel may provide
customer service or technical support. Call center services may be in house or outsourced. Synonym: Customer
Interaction Center.
Can,Order Point: An ordering system used )hen multiple items are ordered from one vendor. The can$order
point is a point higher than the original order point. Chen any one of the items triggers an order by reaching the
must$order point, all items belo) their can$order point are also ordered. The can$order point is set by considering is
set by considering the additional holding cost that )ould be incurred if the item )ere ordered early.
Capacity Management: The concept that capacity should be understood, defined, and measured for each level in
the organi/ation to include mar2et segments, products, processes, activities, and resources. .n each of these
applications, capacity is defined in a hierarchy of idle, non$productive, and productive vie)s.
Capacity Planning: Assuring that needed resources 'e.g., manufacturing capacity, distribution center capacity,
transportation vehicles, etc.- )ill be available at the right time and place to meet logistics and supply chain needs.
Capacity: The physical facilities, personnel, and processes available to meet the product or service needs of
customers. Capacity generally refers to the ma#imum output or producing ability of a machine, a person, a process,
a factory, a product, or a service.
Also see: Capacity Management
CAP68: A term used to describe the monetary re6uirements 'CAAital @?penditure- of an initial investment in ne)
machines or e6uipment.
Capital: The resources, or money, available for investing in assets that produce output.
CAPS-A$: Computer$Aided Alanned *to)age and >et)or2ing system.
CARA-: Cargo Agents ;eservation Air Caybill .ssuance and Trac2ing.
Cargo: 1erchandise carried by a means of transportation.
Carmac) Amendment: An .nterstate Commerce Act amendment that delineates the liability of common carriers
and the bill of lading provisions.
Carnet: A Customs document permitting the holder to carry or send special categories of goods temporarily into
certain foreign countries )ithout paying duties or posting bonds.
Carousel: A rotating system of layers of bins andDor dra)ers that can store many small items using relatively little
floor space.
Carriage: See )ransportation.
Carrier: A firm that transports goods or people via land, sea, or air.
Carrier Assets: .tems that a carrier o)ns 'technically or outright- to facilitate the services they provide.
Carrier Certificate and Release Order: ,sed to advise customs of the shipment0s details. By means of this
document, the carrier certifies that the firm or individual named in the certificate is the o)ner or consignee of the
cargo.
Carrier #iability: A common carrier is liable for all shipment loss, damage, and delay )ith the e#ception of that
caused by act of Bod, act of a public enemy, act of a public authority, act of the shipper, and the goods0 inherent
nature.
Cartel: A group of companies that agree to cooperate rather than compete, in producing a product or service.
Thus limiting or regulating competition.
Cartage: There are t)o definitions for this term3
%! charge for pic2$up and delivery of goods
&! movement of goods locally 'short distances-.
Carton /lo* Rac): A storage rac2 consisting of multiple lines of gravity flo) conveyors.
Cas' Against Documents CAD!: A method of payment for goods in )hich documents transferring title are given
to the buyer upon payment of cash to an intermediary acting for the seller.
Cas' Conversion Cycle: %! .n retailing, the length of time bet)een the sale of products and the cash payments for
a company0s resources. &! .n manufacturing, the length of time from the purchase of ra) materials to the collection
of accounts receivable from customers for the sale of products or services.
Also see: Cas(-to-Cas( Cycle )ime.

Cas' In Advance CIA!: A method of payment for goods )hereby the buyer pays the seller in advance of shipment
of goods.
Cas',to,Cas' Cycle -ime: The time it ta2es for cash to flo) bac2 into a company after it has been spent for ra)
materials.
Synonym: Cash Conversion Cycle.
Calculation: Total .nventory (ays of *upply M (ays of *ales <utstanding $ Average Aayment Aeriod for 1aterial in
(ays.
Cas' *it' Order C2O!: A method of payment for goods )here cash is paid at the time of order, and the
transaction becomes binding on both buyer and seller.
Catalog C'annel: A call center or order processing facility that receives orders directly from the customer based
on defined catalog offerings, and ships directly to the customer.
Category Management: The management of product categories as strategic business units. This practice
empo)ers a category manager )ith full responsibility for the assortment decisions, inventory levels, shelf$space
allocation, promotions, and buying. Cith this authority and responsibility, the category manager is able to more
accurately "udge the consumer buying patterns, product sales, and mar2et trends of that category.
Cause,and,6ffect Diagram: .n 6uality management, a structured process used to organi/e ideas into logical
groupings. ,sed in brainstorming and problem$solving e#ercises. Also 2no)n as .shi2a)a or fish bone diagram.
CB-: See Computer-Based )raining
C6##: A manufacturing or service unit consisting of a number of )or2stations, and the materials transport
mechanisms and storage buffers that interconnect them.
Center,of,5ravity Approac': A supply chain planning methodology for locating distribution centers at
appro#imately the location representing the minimum transportation costs bet)een the plants, the distribution
centers, and the mar2ets.
Central Dispatc'ing: The organi/ation of the dispatching function into one central location. This structure often
involves the use of data collection devices for communication bet)een the centrali/ed dispatching function )hich
usually reports to the production control department and the shop manufacturing departments.
Centrali9ed Aut'ority: The restriction of authority to ma2e decisions to fe) managers.
Centrali9ed Inventory Control: .nventory decision$ma2ing 'for all *+,s- e#ercised from one office or department
for an entire company.
Certificate of Compliance: A supplier0s certification that the supplies or services in 6uestion meet specified
re6uirements.

Certificate of Insurance: A negotiable document indicating that insurance has been secured under an open policy
to cover loss or damage to a shipment )hile in transit.
Certificate of Origin: A document containing an affidavit to prove the origin of imported goods. ,sed for customs
and foreign e#change purposes.
Certificate of Public Convenience and $ecessity: The grant of operating authority that common carriers receive.
A carrier must prove that a public need e#ists and that the carrier is fit, )illing, and able to provide the needed
service. The certificate may specify the commodities the carrier may haul, and the routes it may use.
Certificated Carrier: A for$hire air carrier that is sub"ect to economic regulation and re6uires an operating
certification to provide service.
Certified Supplier: A status a)arded to a supplier )ho consistently meets predetermined 6uality, cost, delivery,
financial, and count ob"ectives. .ncoming inspection may not be re6uired.

C/S: See Container "reig(t Station.
C/S(C/S: See Container "reig(t Station to Container "reig(t Station.
CI: See Continuous Improvement.

CI/: See Cost- Insurance- "reig(t
C'ain of Customers: The se6uence of customers )ho, in turn, consume the output of each other, forming a
chain. 9or e#ample, individuals are customers of a department store )hich in turn is the customer of a producer
)ho is the customer of a material supplier.
C'ange Management: The business process that coordinates and monitors all changes to the business
processes and applications operated by the business, as )ell as to their internal e6uipment, resources, operating
systems, and procedures. The change management discipline is carried out in a )ay that minimi/es the ris2 of
problems that )ill affect the operating environment and service delivery to the users.
C'ange Order: A formal notification that a purchase order or shop order must be modified in some )ay. This
change can result from a revised 6uantity, date, or specification by the customer: an engineering change: a change
in inventory re6uirement data: etc.
C'angeover: Arocess of ma2ing necessary ad"ustments to change or s)itchover the type of products produced on
a manufacturing line. Changeovers usually lead to do)ntime and for the most part, companies try to minimi/e
changeover time to help reduce costs.
C'annel: %: A method )hereby a business dispenses its product, such as a retail or distribution channel, call
center, or a )eb$based electronic storefront. &: A push technology that allo)s users to subscribe to a )eb site to
bro)se offline, automatically display updated pages on their screen savers, and do)nload or receive notifications
)hen pages in the )eb site are modified. Channels are available only in bro)sers that support channel definitions
such as 1icrosoft .nternet @#plorer version 5.0.
C'annel Conflict: This occurs )hen various sales channels )ithin a company0s supply chain compete )ith each
other for the same business. An e#ample is )here a retail channel is in competition )ith a )eb$based channel set
up by the company.
C'annel Partners: 1embers of a supply chain 'i.e., suppliers, manufacturers, distributors, retailers, etc.- )ho )or2
in con"unction )ith one another to manufacture, distribute, and sell a specific product.
C'annels of Distribution: Any series of firms or individuals that participates in the flo) of goods and services from
the ra) material supplier and producer to the final user or consumer.
Also see: istribution C(annel.
C'argeable 2eig't: The shipment )eight used in determining freight charges. The chargeable )eight may be the
dimensional )eight or, for container shipments, the gross )eight of the shipment less the tare )eight of the
container.
C'arging Area: A )arehouse area )here a company maintains battery chargers and e#tra batteries to support a
fleet of electrically po)ered materials handling e6uipment. The company must maintain this area in accordance )ith
government safety regulations.
C'assis: A speciali/ed frame)or2 that carries a rail or marine container
C'oc): A )edge, usually made of hard rubber or steel, that is firmly placed under the )heel of a trailer, truc2, or
bo#car to stop it from rolling.
CI: See Continuous Improvement.
CIA: See Cas( In Advance
CI/: See Cost- Insurance- and "reig(t
City Driver: A motor carrier driver )ho drives a local route as opposed to a long$distance, intercity route.
Civil Aeronautics Board: A federal regulatory agency that implemented economic regulatory controls over air
carriers.
C#: Carload rail service re6uiring shipper to meet minimum )eight.
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 $$ motor carriers of
property: K million: railroads: K0 million: motor carriers of passengers: K& million.
Class II Carrier: A classification of regulated carriers based upon annual operating revenues $$ motor carriers of
property3 K1$K million: railroads3 K10$K0 million: motor carriers of passengers3 K& million.
Class III Carrier: A classification of regulated carriers based upon annual operating revenues $$ motor carriers of
property3 K1 million: railroads K10 million.
Class % Railroad: A line haul freight railroad of ,* o)nership )ith operating revenue in e#cess of K2!2.0 million.
There are seven '!- Class 1 ;ailroads in the ,nited *tates. T)o 1e#ican and t)o Canadian railroads )ould also
6ualify, if they )ere ,* companies.
Class Rates: A grouping of goods or commodities under one general heading. All the items in the group ma2e up a
class. The freight rates that apply to all items in the class are called Iclass rates.I
Classification: An alphabetical listing of commodities, the class or rating into )hich the commodity is placed, and
the minimum )eight necessary for the rate discount: used in the class rate structure.
Classification yard: A railroad terminal area )here 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 re6uirements
have been met.
Clearing'ouse: A conventional or limited$purpose entity generally restricted to providing speciali/ed services,
such as clearing funds or settling accounts.
C#M: Council of 8ogistics 1anagement, no) 2no)n as The Council of *upply Chain 1anagement Arofessionals.
Closed #oop MRP: A system build around material re6uirements planning that includes the additional planning
processes of production planning 'sales and operations planning-, master production scheduling, and capacity
re6uirements planning. <nce this planning phase is complete and the plans have been accepted as realistic and
attainable, the e#ecution processes come into play. These processes include the manufacturing control process of
input$output 'capacity- measurement, detailed scheduling and dispatching, as )ell as anticipated delay reports from
both the plant and suppliers, supplier scheduling, and so on. The term Iclosed loop implies not only that each of
these processes is included in the overall system, but also that feedbac2 is provided by the e#ecution processes so
that the planning can be 2ept valid at all times..
CMI: See Co-Managed Inventory
CO: Carbon mono#ide
CO&: Carbon dio#ide
Co,Destiny: The evolution of a supply chain from intra$organi/ational management to inter$organi/ational
management.
Co,Pac)er: A contract co$pac2er produces goods andDor services for other companies, usually under the other
company0s label or name. Co$pac2ers are more fre6uently seen in consumer pac2aged goods and foods.

Co,Managed Inventory CMI!: A form of continuous replenishment in )hich the manufacturer is responsible for
replenishment of standard merchandise, )hile the retailer manages the replenishment of promotional merchandise.
Coastal Carriers: Cater carriers that provide service along coasts serving ports on the Atlantic or Aacific <ceans
or on the Bulf of 1e#ico.
Code: A numeric, or alphanumeric representation of te#t for e#changing commonly$used information. 9or
e#ample3 commodity codes, carrier codes.
Codifying: The process of detailing a ne) standard.
CO/C: *ee Container on 9lat Car
CO5S: See Cost-of-1oods Sold.

Collaborative Planning7 /orecasting7 and Replenis'ment CP/R!:
1. A collaboration process )hereby supply chain trading partners can "ointly plan 2ey supply chain activities
from production and delivery of ra) materials, to production and delivery of final products to end
customers. Collaboration encompasses business planning, sales forecasting, and all operations re6uired to
replenish ra) materials and finished goods.
2. A process philosophy for facilitating collaborative communications. CA9; is considered a standard,
endorsed by the Noluntary .nter$.ndustry Commerce *tandards.
Collect /reig't: 9reight 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.
Collective Paper: All documents 'commercial invoices, bills of lading, etc.- submitted to a buyer for the purpose of
receiving payment for a shipment.
Combi Aircraft: An aircraft specially designed to carry uniti/ed cargo loads on the upper dec2 of the craft, for)ard
of the passenger area.
Combined #ead -ime: See Cumulative %ead )ime
Commercial Invoice: A document created by the seller. .t is an official document )hich 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 9one: The area surrounding a city or to)n to )hich rate carriers 6uote for the city or to)n also apply:
the .CC defines the area.
Committed Capability: The portion of the production capability that is currently in use, or is scheduled for use.
Committee of American Steams'ip #ines: An industry association representing subsidi/ed ,.*. flag steamship
firms.
Commodities: Any article e#changed in trade, most commonly used to refer to ra) materials and agricultural
products.
Commodities Clause: A clause that prohibits railroads from hauling commodities that they produced, mined,
o)ned, or had an interest in.


Commodity Buying: Brouping li2e parts or materials under one buyer0s control for the procurement of all
re6uirements to support production.

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 )ould include the plan to
manage the supplier base and solve problems.
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 9ederal Trade Commission for interstate traffic.
Antonym: Private Carrier.

Common Carrier Duties: Common carriers must serve, deliver, charge reasonable rates, and not discriminate.
Common Cost: A cost that a company cannot directly assign to particular segments of the business: a cost that the
company incurs for the business as a )hole.
Commuter: An e#empt for$hire air carrier that publishes a time schedule on specific routes: a special type of air
ta#i.
Company Culture: A system of values, beliefs, and behaviors inherent in a company. To optimi/e business
performance, top management must define and create the necessary culture.

Comparative Advantage: A principle based on the assumption that an area )ill speciali/e in producing goods for
)hich it has the greatest advantage or the least comparative disadvantage.
Competitive Advantage: Nalue created by a company for its customers that clearly distinguishes it from the
competition, provides its customers a reason to remain loyal.

Competitive Benc'mar)ing: Benchmar2ing a product or service against competitors.
Also see: Benc(marking.

Competitive Bid: A priceDservice offering by a supplier that must compete )ith offerings from other suppliers.

Complete and On,-ime Delivery CO-D!: 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 S'ip -ime: Average time from )hen a unit is declared shippable by manufacturing until
the unit actually ships to a customer.

Compliance: 1eaning that products, services, processes, andDor documents comply )ith re6uirements.

Component: 1aterial that )ill contribute to a finished product but is not the finished product itself. @#amples
include tires for an automobile, po)er supply for a personal computer, or a /ipper for a s2i par2a.
Computer,Aided 6ngineering CA6!: The use of computers to model design options to stimulate their
performance.
Computer,Based -raining: Training that is delivered via computer )or2station and includes all training and
testing materials.
Conference: A group of vessel operators "oined for the purpose of establishing freight rates.
Conference Carrier: An ocean carrier )ho is a member of an association 2no)n as a Iconference.I The purpose of
the conference is to standardi/e shipping practices, eliminate freight rate competition, and provide regularly
scheduled service bet)een specific ports.
Configuration: The arrangement of components as specified to produce an assembly.
Configure(Pac)age to Order: A process )here the trigger to begin to manufacture, final assembly, or pac2aging
of a product is an actual customer order or release rather than a mar2et forecast. .n order to be considered a
configure$to$order environment, less than 20% of the value added ta2es 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: Cith regards to @(., a formal notice 'by message or code- from a electronic mailbo# system or @(.
server indicating that a message sent to a trading partner has reached its intended mailbo# or has been retrieved by
the addressee.

Confirming Order: A purchase order issued to a supplier listing the goods or services and terms of an order
placed orally or other)ise before the usual purchase document.

Conformance: An affirmative indication or "udgment that a product or service has met the re6uirements of a
relevant specification, contract, or regulation.
Synonym: Compliance.

Conrail: The Consolidated ;ail Corporation established by the ;egional ;eorgani/ation Act of 1=!& to operate the
ban2rupt Aenn Central ;ailroad and other ban2rupt railroads in the >ortheast: the 5$; Act of 1=!% provided funding.
Consignee: The party to )hom goods are shipped and delivered. The receiver of a freight shipment.

Consignment: Also see: Consignment Inventory.
1. A shipment that is handled by a common carrier.
2. The process of a supplier placing goods at a customer location )ithout receiving payment until after the
goods are used or sold.

Consignment Inventory:
1. Boods or products that are paid for )hen they are sold by the reseller, not at the time they are shipped to
the reseller.
2. Boods or products )hich are o)ned by the vendor until they are sold to the consumer.
Consignor: The party )ho originates a shipment of goods 'shipper-. The sender of a freight shipment, usually the
seller.

Consolidation: Combining t)o or more shipments in order to reali/e lo)er transportation rates. .nbound
consolidation from vendors is called ma2e$bul2 consolidation: outbound consolidation to customers is called brea2$
bul2 consolidation.

Consolidation Point: The location )here consolidation ta2es place.
Consolidator: An enterprise that provides services to group shipments, orders, andDor goods to facilitate
movement.
Consolidator;s Bill of #ading: A bill of lading issued by a consolidator as a receipt for merchandise that )ill be
grouped )ith cargo obtained from other shippers. *ee also Oouse Air Caybill.
Consortium: A group of companies that )or2s together to "ointly produce a product, service, or pro"ect.
Constraint: A bottlenec2, obstacle, or planned control that limits throughput or the utili/ation of capacity.
Consul: A government official residing in a foreign country, charged )ith representing the interests of his or her
country and its nationals.
Consular Declaration: A formal statement made to the consul of a country describing merchandise to be shipped
to that consul0s country. Approval must be obtained prior to shipment.
Consular Documents: *pecial forms signed by the consul of a country to )hich cargo is destined.
Consular Invoice: A document, re6uired by some foreign countries, describing a shipment of goods and sho)ing
information such as the consignor, consignee, and value of the shipment. Certified by a consular official of the
foreign country, it is used by the country0s custom.
Consumer,Centric Database: (atabase )ith information about a retailer0s individual consumers used primarily for
mar2eting and promotion.
Consumption 6ntry: An official Customs form used for declaration of reported goods, also sho)ing the total duty
due on such transaction.
Container:
1. A bo#, typically 10 to 50 feet long, )hich is primarily used for ocean freight shipments. 9or travel to and
from ports, containers are loaded onto truc2 chassis or on railroad flatcars.
2. The pac2aging, such as a carton, case, bo#, buc2et, drum, bin, bottle, bundle, or bag, that an item is
pac2ed and shipped in.
Container C'assis: A vehicle built for the purpose of transporting a container so that, )hen a container and
chassis are assembled, the produced unit serves as a road trailer.
Container Depot: The storage area for empty containers.
Container /reig't Station C/S!: The location designated by carriers for receipt of cargo to be pac2ed into
containersDe6uipment by the carrier. At destination, C9* is the location designated by the carrier for unpac2ing of
cargo from e6uipmentDcontainers.
Container /reig't Station C'arge: The charge assessed for services performed at the loading or discharge
location.
Container /reig't Station to Container /reig't Station C/S(C/S!: A type of steamship$line service in )hich
cargo is transported bet)een container freight stations, )here containers may be stuffed, stripped, or consolidated.
,sually used for less$than$container load shipments.
Container I:D:: An identifier assigned to a container by a carrier.
See also: .2uipment I.
Containeri9ation: A shipment method in )hich commodities are placed in containers, and after initial loading, the
commodities, per se, are not rehandled in shipment until they are unloaded at the destination.
Container on /lat Car CO/C!: A container that is transported on a rail flatcar. .t can be shipped via tractorDtrailer
using a chassis as the )heel section.
Container -erminal: An area designated to be used for the sto)age of cargo in containers that may be accessed
by truc2, rail, or ocean transportation.
Container .essel: A vessel specifically designed for the carriage of containers.
Container <ard: The location designated by the carrier for receiving, assembling, holding, storing, and delivering
containers, and )here containers may be pic2ed up by shippers or redelivered by consignees.
Container <ard to Container <ard C<(C<!: A type of steamship$line service in )hich freight is transported from
origin container yard to destination container yard.
Contingency Planning: Areparing to deal )ith calamities 'e.g., floods- and noncalamitous situations 'e.g., stri2es-
before they occur.
Continuous /lo* Distribution C/D!: The streamlined pull of products in response to customer re6uirements
)hile minimi/ing the total costs of distribution.
Continuous,/lo*7 /i1ed,Pat' 6+uipment: 1aterials handling devices that include conveyors and drag lines.
Continuous Improvement CI!: A structured, measurement$driven process that continually revie)s and improves
performance.

Continuous Process Improvement CPI!: A never$ending effort to e#pose and eliminate root causes of problems:
small$step improvement as opposed to big$step improvement.
Synonym: Continuous .mprovement.
Also see: +ai/en.

Continuous Replenis'ment: Continuous replenishment is the practice of partnering bet)een distribution channel
members that changes the traditional replenishment process from distributor$generated purchase orders based on
economic order 6uantities to the replenishment of products based on actual and forecasted product demand.

Continuous Replenis'ment Planning CRP!: A program that triggers the manufacturing and movement of
product through the supply chain )hen the identical product is purchased by an end user.

Contract: An agreement bet)een t)o 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 )ritten. A purchase order, )hen
accepted by a supplier, becomes a contract. Acceptance may be in )riting or by performance, unless the purchase
order re6uires acceptance in )riting.
Contract Administration: 1anaging all aspects of a contract to guarantee that the contractor fulfills his
obligations.
Contract Carrier: A for$hire carrier that does not serve the general public but serves shippers )ith )hom the carrier
has a continuing contract. The contract carrier must secure a permit to operate.
Contract of Affreig'tment: A contract bet)een a cargo shipper and carrier for the transport of multiple cargoes
over a period of time. Contracts are individually negotiated and usually include cargo description, 6uantities per
shipment and in total, load and discharge ports, freight rates and duration of the contract.
Contribution: The difference bet)een sales price and various costs. Contribution is used to cover fi#ed costs and
profits.
Contribution Margin: An amount e6ual to the difference bet)een sales revenue and variable costs.
Controlled Access: ;eferring to an area )ithin a )arehouse or yard that is fenced and gated. These areas are
typically used to store high$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 )arehouse area to another. ;oller conveyors
utili/e gravity, )hereas belt conveyors use motors.
Cooperative Associations: Broups of firms or individuals having common interests: agricultural cooperative
associations may haul up to 2 percent of their total interstate non$farm, nonmember goods tonnage in movements
incidental and necessary to their primary business.
Coordinated -ransportation: T)o or more carriers of different modes transporting a shipment.
CORBA: Common <b"ect ;e6uest Bro2er Architecture.
Core Competency: Bundles of s2ills or 2no)ledge sets that enable a firm to provide the greatest level of value to
its customers in a )ay that0s difficult for competitors to emulate and that provides for future gro)th. Core
competencies are embodied in the s2ills of the )or2ers and in the organi/ation. They are developed through
collective learning, communication, and commitment to )or2 across levels and functions in the organi/ation and
)ith the customers and suppliers. A core competency could be the capability of a firm to coordinate and harmoni/e
diverse production s2ills and multiple technologies.
)o illustrate: advanced casting processes for ma2ing steel re6uire the integration of machine design )ith
sophisticated sensors to trac2 temperature and speed, and the sensors re6uire mathematical modeling of heat
transfer. 9or rapid and effective development of such a process, materials scientists must )or2 closely )ith
machine designers, soft)are engineers, process specialists, and operating personnel. Core competencies are not
directly related to the product or mar2et.

Core Process: That uni6ue capability that is central to a company0s competitive strategy.

Cost Accounting: The branch of accounting that is concerned )ith recording and reporting business operating
costs. .t includes the reporting of costs by departments, activities, and products.

Cost and /reig't C 3 /!: The seller 6uotes a price that includes the cost of transportation to a specific point. The
buyer assumes responsibility for loss and damage and pays for the insurance of the shipment.
Cost Allocation: .n accounting, the assignment of costs that cannot be directly related to production activities via
more measurable means, e.g., assigning corporate e#penses to different products via direct labor costs or hours.

Cost Center: .n accounting, a sub$unit in an organi/ation that is responsible for costs.

Cost Driver: .n accounting, any situation or event that causes a change in the consumption of a resource, or
influences 6uality or cycle time. An activity may have multiple cost drivers. Cost drivers do not necessarily need to
be 6uantified: ho)ever, they strongly influence the selection and magnitude of resource drivers and activity drivers.

Cost Driver Analysis: .n cost accounting, the e#amination, 6uantification, and e#planation of the effects of cost
drivers. The results are often used for continuous improvement programs to reduce throughput times, improve
6uality, and reduce cost.

Cost 6lement: .n cost accounting, the lo)est level component of a resource activity, or cost ob"ect.

Cost7 Insurance7 /reig't: 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 )aste, influence cost drivers, and plan operations. The
resulting information can be very useful in setting and evaluating an organi/ation0s strategies.

Cost of Capital: The cost to borro) or invest capital.
Cost,of,5oods Sold CO5S!: The amount of direct materials, direct labor, and allocated overhead associated
)ith products sold during a given period of time, determined in accordance )ith Benerally Accepted Accounting
Arinciples 'BAAA-.

Cost of #ost Sales: The forgone profit companies associate )ith a stoc2out.
Cost -rade,Off: The interrelationship among system variables in )hich a change in one variable affects other
variables0 costs. A cost reduction in one variable may increase costs for other variables, and vice versa.
Cost .ariance: .n cost accounting the difference bet)een )hat has been budgeted for an activity and )hat it
actually costs.
CO-D: See Complete and ,n-)ime elivery.

Council of Supply C'ain Management Professionals CSCMP!: The C*C1A is a not$for$profit professional
business organi/ation consisting of individuals throughout the )orld )ho have interests andDor responsibilities in
logistics and supply chain management, and the related functions that ma2e up these professions. .ts purpose is to
enhance the development of the logistics and supply chain management professions by providing these individuals
)ith 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 t)o or more parties.
Countervailing Duties: An additional import duty imposed to offset Bovernment subsidies in the e#porting country,
)hen the subsidi/ed imports cause material in"ury to domestic industry in the importing country.
Country of Destination: The country that )ill be the ultimate or final destination for goods.
Country of Origin: The country )here the goods )ere manufactured.
Courier Service: A fast, door$to$door service for high$valued goods and documents: firms usually limit service to
shipments )eighing fifty pounds or less.
CP/R: See Collaborative Planning- "orecasting and !eplenis(ment.

CPI: See Continuous Process Improvement.
Crane: A materials handling device that lifts heavy items. There are t)o types3 bridge and stac2er.
Credit #evel: The amount of purchasing credit a customer has available. ,sually defined by the internal credit
department and reduced by any e#isting unpaid bills or open orders.
Credit -erms: The agreement bet)een t)o or more enterprises concerning the amount and timing of payment for
goods or services.
Critical Differentiators: This is )hat ma2es an idea, product, service, or business model uni6ue.
Critical Success /actor CS/!: Those activities andDor processes that must be completed andDor controlled to
enable a company to reach its goals.
Critical .alue Analysis: A modified ABC analysis in )hich a company assigns a sub"ective critical value to each
item in an inventory.
CRM: See Customer !elations(ip Management.
Crossdoc): Crossdoc2 operations in a )arehouse involve moving goods bet)een different truc2s to consolidate
loads )ithout intermediate storage.

Cross Doc)ing: A distribution system in )hich merchandise received at the )arehouse or distribution center is not
put a)ay, but instead is readied for shipment to retail stores. Cross doc2ing re6uires close synchroni/ation of all
inbound and outbound shipment movements. By eliminating the put$a)ay, storage, and selection operations, it can
significantly reduce distribution costs.
Cross Sell: The practice of attempting to sell additional products to a customer during a sales call. 9or e#ample,
)hen the C*; presents a camera case and accessories to a customer that is ordering a camera.

Cross S'ipment: 1aterial flo) activity )here materials are shipped to customers from a secondary shipping point
rather than from a preferred shipping point.

CRP: See Continuous !eplenis(ment Planning.

Critical Success /actor CS/!: Those activities andDor processes that must be completed andDor controlled to
enable a company to reach its goals.

CSCMP: See Council of Supply C(ain Management Professionals.

CS/: See Critical Success "actor.

CS5: Communications *upport Broup.
CSR: See Customer Service !epresentative.
Cubage: Cubic volume of space being used or available for shipping or storage.

Cube Out: The situation )hen a piece of e6uipment has reached its volumetric capacity before reaching the
permitted )eight limit.
Cube 4tili9ation: .n )arehousing, a measurement of the utili/ation of the total storage capacity of a vehicle or
)arehouse.
Cubic Capacity: The carrying capacity of a piece of e6uipment according to measurement in cubic feet.
Cubic Space: .n )arehousing, a measurement of space available, or re6uired, in transportation and )arehousing.

Cumulative #ead -ime: The total time re6uired to source components, build, and ship a product.

Cumulative Source(Ma)e Cycle -ime: The cumulative internal and e#ternal lead time to manufacture shippable
product, assuming that there is no inventory on hand, no materials or parts on order, and no prior forecasts e#isting
)ith suppliers. 'An element of Total *upply Chain ;esponse Time-
Calculation: The critical path along the follo)ing elements3 Total *ourcing 8ead Time, 1anufacturing <rder
;elease to *tart 1anufacturing, total 1anufacture Cycle Time '1a2e to <rder, @ngineer to <rder,
ConfigureDAac2age to <rder- or 1anufacture Cycle Time '1a2e to *toc2-, Complete 1anufacture to *hip Time.
#ote: (etermined separately for 1a2e$to$<rder, ConfigureDAac2age$to$<rder, @ngineer$to$<rder, and 1a2e$to$
*toc2 products.
Currency Ad=ustment /actor CA/!: A surcharge imposed by a carrier on ocean freight charges to offset foreign
currency fluctuations.
Customer: %! .n N1., the trading partner or reseller, i.e., Cal$1art, *afe)ay, or CN*. &! .n direct consumer, the
end customer or user.
Customer Ac+uisition or Retention: The rate at )hich ne) customers are ac6uired, or e#isting customers are
retained. A 2ey selling point to potential mar6uis partners.
Customer Driven: The end user, or customer, motivates )hat is produced or ho) it is delivered.
Customer /acing: Those personnel )hose "obs entail actual contact )ith the customer.
Customer Interaction Center: See Call Center
Customer Order: An order from a customer for a particular product or a number of products. .t is often referred to
as an actual demand to distinguish it from a forecasted demand.

Customer(Order /ulfillment Process: A series of customers0 interactions )ith an organi/ation through the order$
filling process, including productDservice design, production and delivery, and order stats reporting.
Customer Profitability: The practice of placing a value on the profit generated by business done )ith a particular
customer.
Customer Relations'ip Management CRM!: This refers to information systems that help sales and mar2eting
functions as opposed to the @;A '@nterprise ;esource Alanning-, )hich is for bac2$end integration.
Customer Segmentation: (ividing customers into groups based on specific criteria, such as products purchased,
customer geographic location, etc.
Customer Service: The series of activities involved in providing the full range of services to customers.
Customer Service Representative CSR!: An individual )ho provides customer support via telephone in a call$
center environment.
Customer,Supplier Partners'ip: A long$term relationship bet)een a buyer and a supplier characteri/ed by
team)or2 and mutual confidence. The supplier is considered an e#tension of the buyer0s organi/ation. The
partnership is based on several commitments. The buyer provides long$term contracts and uses fe)er suppliers.
The supplier implements 6uality assurance processes so that incoming inspection can be minimi/ed. The supplier
also helps the buyer reduce costs and improve product and process designs.
Customi9ation: Creating a product from e#isting components into an individual order.
Synonym: Build to ,rder.

Customs: The authorities designated to collect duties levied by a country on imports and e#ports.
Customs Automated Data 61c'ange System CAD68!: A Canada Customs system that allo)s for the electronic
transmission of import data for goods that have already been released. Additional information such as accounting
data and release notifications are also accessible.
Customs Bro)er: A firm that represents importersDe#porters in dealings )ith customs. >ormally 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 >ouse Bro)er: 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 .alue: The value of the imported goods on )hich duties )ill be assessed.
C2O: See Cas( 'it( ,rder.
C2-: The abbreviation for hundred)eight, )hich is the e6uivalent of 100 pounds.
See 3undred'eig(t.

C<(C<: See Container 4ard to Container 4ard.
Cycle Inventory: An inventory system )here counts are performed continuously, often eliminating the need for an
annual overall inventory. .t is usually set up so that A items are counted regularly 'i.e., every month-, B items are
counted semi$regularly 'every 6uarter or si# months-, and C .tems are counted perhaps only once a year.
Cycle -ime: The amount of time it ta2es to complete a business process.
Cycle -ime to Process Obsolete and 6nd,of,#ife Product Returns for Disposal: The total time to process
goods returned as obsolete and end of life to actual disposal. This cycle time includes the time a ;eturn Aroduct
Authori/ation ';AA- is created to the time the ;AA is approved, from Aroduct Available for Aic2up to Aroduct
;eceived and from Aroduct ;eceipt to Aroduct (isposalD;ecycle.
Cycle -ime to Repair or Refurbis' Returns for 4se: The total time to process goods returned for repair or
refurbishing. This cycle time includes the time a ;eturn Aroduct Authori/ation ';AA- is created to the time the ;AA
is approved, from Aroduct Available for Aic2up to Aroduct ;eceived, from Aroduct ;eceipt to Aroduct
;epairD;efurbish Begin, and from Aroduct ;epairD;efurbish Begin to Aroduct Available for ,se.
D
Dangerous 5oods: Articles or substances capable of posing a significant ris2 to health, safety, or property, and
that ordinarily re6uire special attention )hen transported.
See also 3a5ardous 1oods.
Das'board: A performance measurement tool used to capture a summary of the 2ey performance
indicatorsDmetrics of a company. 1etrics dashboardsDscorecards should be easy to read and usually have red,
yello), green indicators to flag )hen the company is not meeting its metrics targets. .deally, a
dashboardDscoreboard should be cross functional in nature and include both financial and non$financial measures.
.n addition, scorecards should be revie)ed regularly $ at least on a monthly basis, and )ee2ly in 2ey functions such
as manufacturing and distribution )here activities are critical to the success of a company. The
dashboardsDscorecards philosophy can also be applied to e#ternal supply chain partners li2e suppliers to ensure
that their ob"ectives and practices align.
Synonym: Scorecard.

Data Dictionary: 8ists the data elements for )hich standards e#ist. The Point @lectronic (ocument .nterchange
'P@(.- committee developed a data dictionary that is employed by many @(. users.
Data Interc'ange Standards Association DISA!: The secretariat )hich provides clerical and administrative
support to the A*C ?12 Committee.
Data Mining: The process of studying data to search for previously un2no)n relationships. This 2no)ledge is then
applied to achieving specific business goals.
Data 2are'ouse: A repository of data that has been specially prepared to support decision$ma2ing applications.
Synonym: ecision-Support ata.
Database: (ata stored in computer$readable form, usually inde#ed or sorted in a logical order by )hich users can
find a particular item of data they need.
Date Code: A label on products )ith the date of production. .n food industries, it0s often an integral part of the lot
number.

Days of Supply: 1easure of 6uantity of inventory on hand in relation to number of days for )hich usage )ill be
covered. 9or e#ample, if a component is consumed in manufacturing at the rate of 100 per day and there are 1,E
units available on hand, this represents 1.E days0 supply.

DC: See istribution Center

Dead'ead: The return of an empty transportation container to its point of origin.
See Back(auling.
Dead on Arrival DOA!: A term used to describe products )hich are not functional )hen delivered.
Synonym: efective.
Dead*eig't -ons D2-!: The cargo carrying capacity of a vesel, including fuel oil, stores and provisions.
Decentrali9ed Aut'ority: A situation in )hich a company management gives decision$ma2ing authority to
managers at many organi/ational levels.
Decision Support System DSS!: *oft)are that speeds access and simplifies data analysis, 6ueries, etc.

Declaration of Dangerous 5oods: To comply )ith the ,.*. regulations, e#porters are re6uired to provide special
notices to inland and ocean transport companies )hen goods are ha/ardous.
Declared .alue 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 carrier0s 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 e6uipment 'vehicles- and drivers to a single
customer for its e#clusive use on a contractual basis.

Defective goods inventory D5I!: Those items that have been returned, have been delivered damaged and have
a freight claim outstanding, or have been damaged in some )ay during )arehouse handling.
Delivery Appointment: The time agreed upon bet)een t)o enterprises for goods or transportation e6uipment to
arrive at a selected location.
Delivery,Duty,Paid: *upplierDmanufacturer arrangement in )hich suppliers are responsible for the transport of the
goods they0ve produced, )hich are being sent to a manufacturer. This responsibility includes tas2s such as
ensuring that products get through Customs.

Delivery Instructions: A document issued to a carrier to pic2 up goods at a location anddeliver them to another
location.
See also elivery ,rder
Delivery Order: A document issued by the customs bro2er to the ocean carrier as authority to release the cargo to
the appropriate party.
Delivery Performance to Commit Date: The percentage of orders that are fulfilled on o before the internal commit
date, used as a measure of internal scheduling systems effectiveness. (elivery measurements are based on the
date a complete order is shipped or the ship$to date of a complete order. A complete order has all items on the
order delivered in the 6uantities re6uested. An order must be complete to be considered fulfilled. 1ultiple$line
items on a single order )ith different planned delivery dates constitute multiple orders, and multiple$planned
delivery dates on a single line item also constitute multiple orders.
Calculation: QTotal number of orders delivered in full and on time to the scheduled commit dateRDQTotal number of
orders deliveredR

Delivery Performance to Re+uest Date: The percentage of orders that are fulfilled on or before the customer0s
re6uested date used as a measure of responsiveness to mar2et demand. (elivery measurements are based on the
date a complete order is shipped or the ship$to date of a complete order. A complete order must be complete to be
considered fulfilled. 1ultiple line items on a single order )ith different planned delivery dates constitute multiple
orders, and multiple planned delivery dates on a single line item also constitute multiple orders.
Calculation: QTotal number of orders delivered in full and on time to the customer0s re6uest dateRDQTotal number of
orders deliveredR

Delta $u Alp'a: A professional association of transportation and traffic practitioners.
Demand C'ain Management: The same as supply chain management, but )ith an emphasis on consumer pull
versus supplier push.
Demand Planning Systems: The systems that assist in the process of identifying, aggregating, and prioriti/ing all
sources of demand for the integrated supply chain of a product of service at the appropriate level, hori/on, and
interval.

Demand Pull: The triggering of material movement to a )or2 center only )hen that )or2 center is ready to begin
the ne#t "ob. .n effect, it eliminates the 6ueue from in from of a )or2 center, but it can cause a 6ueue at the end of a
previous )or2 center.
Demand Side Analysis: Techni6ues such as mar2et research, surveys, focus groups, and performanceDcost
modeling used to identify emerging technologies.
Demand Signal: A signal from a consumer, customer or using operation that triggers the issue of product or ra)
material.
Demand Supply Balancing: The process of identifying and measuring the gaps and imbalances bet)een demand
and resources in order to determine ho) to best resolve the variances through mar2eting, pricing, pac2aging,
)arehousing, outsource plans, or some other action that )ill optimi/e service, fle#ibility, costs, assets, 'or other
supply chain inconsistencies- in an iterative and collaborative environment.
Deming Circle: The concept of a continuously rotating )heel of plan$to$do$chec2$action 'A(CA- used to sho) the
need for interaction among mar2et research, design, production, and sales to improve 6uality.
Also see: Plan-o-C(eck-Action.
Demograp'ic Segmentation: .n mar2eting, dividing potential mar2ets by characteristics of potential customers,
such as age, se#, income, and education.
Demurrage: The carrier charges and fees applied )hen rail freight cars and ships are retained beyond a specified
loading or unloading time.
Also see: etention- ./press.
Denied Party #isting DP#!: A list of organi/ations that is unauthori/ed to submit a bid for an activity or to receive
a specific product. 9or e#ample, some countries have bans on certain products li2e )eapons or sensitive
technology.

Density: A physical characteristic measuring a commodity0s mass per unit volume or pounds per cubic foot: an
important factor in ratema2ing, since density affects the utili/ation of a carrier0s vehicle.
Density rate: A rate based upon the density and shipment )eight.
Deregulation: ;evisions or complete elimination of economic regulations controlling transportation. The 1otor
Carrier Act of 1=E0 and the *taggers Act of 1=E0 revised the economic controls over motor carriers and railroads,
and the Airline (eregulation Act of 1=!E eliminated economic controls over air carriers.
Derived demand: The demand for a product0s transportation is derived from the product0s demand at some
location.
Design for Manufacture(Assembly D/MA!: A product design methodology that provides a 6uantitative
evaluation of product designs.

Design of 61periments DO6!: A branch of applied statistics dealing )ith planning, conducting, analy/ing, and
interpreting controlled tests to evaluate the factors that control the value of a parameter or group of parameters.

Destination: The location designated as a receipt point for goodsDshipment.
Detention: The carrier charges and fees applied )hen rail freight cars and ships are retained beyond a specified
loading or unloading time. Also see: emurrage- ./press.

Devanning: The unloading of cargo from a container or other piece of e6uipment.
See Stripping.
D/MA: See esign for Manufacture&Assembly.

D/?: See uty "ree +one
Differential: A discount offered by a carrier that faces a service time disadvantage over a route.
Direct C'annel: This is )hen your o)n sales force sells to the customer. Sour company may ship to the
customer, or a third party may handle shipment, but in either case, your company o)ns the sales contract and
retains rights to the receivable from the customer. Sour end customer may be a retail outlet. The movement to the
customer may be direct from the factory, or the product may move through a distribution net)or2 o)ned by your
company. <rder information in this channel may be transmitted by electronic means.
Direct Cost: A cost that can be directly traced to a cost ob"ect since a direct or repeatable cause$and$effect
relationship e#ists. A direct cost uses a direct assignment or cost causal relationship to transfer costs. Also see:
Indirect Cost- )racing
Direct Product Profitability DPP!: Calculation of the net profit contribution attributable to a specific product or
product line.
Direct Production Material: 1aterial that is used in the manufacturingDcontent of a product. './ample: purc(ased
parts- solder- SM) glues- ad(esives- mec(anical parts- bill-of-materials parts- etc.6

Direct Retail #ocations: A retail location that purchases products directly from your organi/ation or responding
entity.
Direct Store Delivery DSD!: Arocess of shipping direct from a manufacturer0s plant or distribution center to the
customer0s retail store, thus bypassing the customer0s distribution center. Also called irect-to-Store elivery.
Direct,to,Store D-S! Delivery: *ame as (irect *tore (elivery.
DISA: See ata Interc(ange Standards Association
Disaster Recovery Planning: Contingency planning specifically related to recovering hard)are and soft)are 'e.g.,
data centers, application soft)are, operations, personnel, telecommunications- in information system outages.
Disc'arge Port: The name of the port )here the cargo is unloaded from the e#port vessel. This is the port reported
to the ,.*. Census on the *hipper0s @#port (eclaration, *chedule +, )hich is used by ,.*. companies )hen
e#porting. This can also be considered the first discharge port.
Discrete Manufacturing: (iscrete manufacturing processes create products by assembling unconnected distinct
parts as in the production of distinct items such as automobiles, appliances, or computers.

Disintermediation: Chen the traditional sales channels are disassembled and the middleman gets cut out of the
deal. *uch as )here the manufacturer ships direct to a retailer, bypassing the distributor.

Dispatc'ing: The carrier activities involved )ith controlling e6uipment: involves arranging for fuel, drivers, cre)s,
e6uipment, and terminal space.
Distributed Inventory: .nventory that is geographically dispersed. 9or e#ample, )here a company maintains
inventory in multiple distribution centers to provide a higher level of customer service.

Distribution: <utbound logistics, from the end of the production line to the end user.
1. The activities associated )ith the movement of material, usually finished goods or service parts, from the
manufacturer to the customer. These activities encompass the functions of transportation, )arehousing,
inventory control, material handling, order administration, site and location analysis, industrial pac2aging,
data processing, and the communications net)or2 necessary for effective management. .t includes all
activities related to physical distribution, as )ell as the return of goods to the manufacturer. .n many cases,
this movement is made through one or more levels of field)arehouses.
Synonym: P(ysical istribution.
2. The systematic division of a )hole into discrete parts having distinctive characteristics.
Distribution Center DC!: The )arehouse facility )hich holds inventory from manufacturing pending distribution to
the appropriate stores.

Distribution C'annel: <ne or more companies or individuals )ho participate in the flo) of goods and services
from the manufacturer to the final user or consumer.

Distribution C'annel Management: The organi/ational and pipeline strategy for getting products to customers.
(irect channels involve company sales forces, facilities, andDor direct shipments to customers: indirect channels
involve the use of )holesalers, distributors, andDor other parties to supply the products to customers. 1any
companies use both strategies, depending on mar2ets and effectiveness.
Distribution Planning: The planning activities associated )ith transportation, )arehousing, inventory levels,
materials handling, order administration, site and location planning, industrial pac2aging, data processing, and
communications net)or2s to support distribution.

Distribution Re+uirements 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 e#tension of distribution re6uirements planning into the planning of
the 2ey resources contained in a distribution system3 )arehouse space, )or2force, money, truc2s, freight cars, etc.

Distribution 2are'ouse: A finished goods )arehouse from )hich a company assembles customer orders.
Distributor: A business that does not manufacture its o)n products, but purchases and resells these products.
*uch a business usually maintains a finished goods inventory.
Synonym: *(olesaler.
Diversion: The process of changing the destination andDor the consignee )hile the shipment is enroute.
DOA: See ead on Arrival.
Doc) Receipt: A document used to accept materials or e6uipment at an ocean pier or accepted location. Arovides
the ocean carrier )ith verification of receipt and the delivering carrier )ith proof of delivery.
Document: .n @(., a form, such as an invoice or purchase order, that trading partners have agreed to e#change
and that the @(. soft)are handles )ithin its compliance$chec2ing logic.

Documentation: The papers attached or pertaining to goods re6uiring transportation andDor transfer of o)nership.
DO6: See esign of ./periments.
Domestic -run) #ine Carrier: A classification for air carriers that operate bet)een ma"or population centers.
These carriers are no) classified as ma"or carriers.
Door to Door: The through$transport of goods from consignor to consignee.
Door to Port: The through transport service from consignor to port of importation.
Double Bottoms: A motor carrier operation that involves one tractor pulling t)o trailers.
Double,Pallet @ac): A mechani/ed device for transporting t)o standard pallets simultaneously.
Doubles: (ouble truc2s are t)o 2E$foot trailers that are pulled by one tractor. (oubles also are 2no)n as Idouble
bottoms.I

Do*nload: To merge temporary files containing a day0s or )ee20s )orth of information )ith the main data base in
order to update it.
Do*nstream: <ne or more companies or individuals )ho participate in the flo) of goods and services moving
from the manufacturer to the final user or consumer.
DP#: See enied Party %ist.
Dra*bac): See uty ra'back
Drayage: The service offered by a motor carrier for pic2$up and delivery of ocean containers or rail containers.
(rayage agents usually handle full$load containers for ocean and rail carriers.
Drayage /irms: 1otor carriers that provide local pic2up and delivery of trailers and containers 'on chassis-

Driving -ime Regulations: ,.*. (epartment of Transportation rules that limit the ma#imum time a driver may drive
in interstate commerce: the rules prescribe both daily and )ee2ly ma#imums.
Drop: A situation in )hich an e6uipment operator deposits a trailer or bo#car at a facility at )hich it is to be loaded
or unloaded.
Drop S'ip: To ta2e the title of the products but not actually handle, stoc2, or deliver it, e.g., to have one supplier
ship directly to another or to have a supplier ship directly to the buyer0s customer.

DRP: See istribution !e2uirements Planning.

DRP II: See istribution !esource Planning
Drum,Buffer,Rope DBR!: .n the theory of constraints, the generali/ed process used to manage resources to
ma#imi/e throughput. The drum is the rate or pace of production set by the system0s constraint. The buffers
establish the protection against uncertainty so that the system can ma#imi/e throughput. The rope is a
communication process from the constraint to the gating operation that chec2s or limits material released into the
system to support the constraint.
DSD: See irect Store elivery.

DSS: See ecision Support System.
D-S: See irect-to-Store elivery.
Dual Operation: A motor carrier that has both common and contract carrier operating authority.
Dual rate system: An international )ater carrier pricing system in )hich a shipper signing an e#clusive use
agreement )ith the conference pays a rate 10 to 1 percent lo)er than non$signing shippers do for an identical
shipment.
Dumping: Chen a product is sold belo) cost in a foreign mar2et andDor )hen a product is sold at a lo)er price in
the foreign mar2et than in a domestic mar2et, )ith the intention of driving out competition in the foreign mar2et.
Dunnage: The pac2ing material used to protect a product from damage during transport.
D4$S $umber: A coded, numerical representation assigned to a specific company ',*A-.
Duty: A ta# imposed by a government on merchandise imported from another country.
Duty Dra*bac): A refund of duty paid on imported merchandise )hen it is e#ported later, )hether in the same or a
different form.
Duty /ree ?one D/?!: An area )here goods or cargo can be stored )ithout paying import customs duties )hile
a)aiting manufacturing or future transport.
Dynamic Process Control DPC!: Continuous monitoring of process performance and ad"ustment of control
parameters to optimi/e process output.
6
AB(&B Rule: A term referring to the Aareto principle. This principle suggests that most effects come from relatively
fe) causes: that is, E0% of the effects 'or sales or costs- come from 20% of the possible causes 'or items-.
Also see: ABC Classification- Pareto
6AI: See .nterprise Application Integration.
6A$:4CC: @uropean Article >umberingD,niform Code Council. The @A>.,CC *ystem provides identification
standards to uni6uely identify trade items, logistics units, locations, assets, and service relations )orld)ide. The
identification standards define the construction of globally$uni6ue and unambiguous numbers.
9or additional reference, please see http://www.uc-
council.org/ean_ucc_systems/stnds_and_tech/bus_apps.html
6arly Supplier Involvement 6SI!: The process of involving suppliers early in the product design activity and
dra)ing on their e#pertise, insights, and 2no)ledge to generate better designs in less time and ones that are easier
to manufacture )ith high 6uality.
6arnings Before Interest and -a1es 6BI-!: A measure of a company0s earning po)er from ongoing operations,
e6ual to earnings 'revenues minus cost of sales, operating e#penses, and ta#es- before deduction of interest
payments and income ta#es. Also called operating profit.

6BI-: See .arnings Before Interest and )a/es.
6C: See .lectronic Commerce
6CO: See .ngineering C(ange ,rder

6CR: See .fficient Consumer !esponse
6,Commerce: See .lectronic Commerce.

6conomic Order "uantity 6O"!: An inventory model that determines ho) much to order by determining the
amount that )ill meet customer service levels )hile minimi/ing total ordering and holding costs.

6conomic .alue Added 6.A!: A measurement of shareholder value as a company0s operating profits after ta#,
less an appropriate charge for the capital used in creating the profits.
6conomy of Scale: A phenomenon )hereby larger volumes of production reduce unit cost by distributing fi#ed
costs over a larger 6uantity.

6CR: See .fficient Consumer !esponse.

6DI: See .lectronic ata Interc(ange.

6DI Interc'ange: Communication bet)een partners in the form of a structured set of messages and service
segments starting )ith an interchange control header and ending )ith an interchange control trailer. .n the conte#t
of ?.500 @(. messaging, the contents of the primary body of an @(. message.
6DIA: See .lectronic ata Interc(ange Association.

6DI/AC-: @lectronic (ata .nterchange for Administration, commerce, and Transport. The ,nited >ations0 @(.
standard.

6DI Standards: Criteria that define the data content and format re6uirements for specific business transactions
'e.g., purchase orders-. ,sing standard formats allo)s companies to e#change transactions )ith multiple trading
partners more easily.
Also see: American #ational Standards Institute.

6DI -ransmission: A functional group of one or more @(. transactions that are sent to the same location in the
same transmission, and are identified by a functional group header and trailer.

6fficient Consumer Response 6CR!: A demand$driven replenishment system designed to lin2 all parties in the
logistics channel to create a massive flo)$through distribution net)or2. ;eplenishment is based on consumer
demand and point$of$sale information.

6/-: See .lectronic "unds )ransfer.

6lectronic Commerce 6C!: Also )ritten as e$commerce. Conducting business electronically via traditional @(.
technologies, or online via the .nternet. .n the traditional sense of selling goods, it0s possible to do this electronically
because of certain soft)are programs that run the main functions of e$commerce support, such as product display,
ordering, shipment, billing, and inventory management. The definition of e$commerce includes business activity
that is business$to$business 'B2B- andDor business$to$consumer 'B2C-

6lectronic Data Interc'ange 6DI!: .ntercompany, computer$to$computer transmission of business information in
a standard format. 9or @(. purists, computer to computer means direct transmission from the originating
application program to the receiving or processing application program. An @(. transmission consists only of
business data, not any accompanying verbiage or free$form messages. Aurists might also contend that a standard
format is one that is approved by a national or international standards organi/ation, as opposed to formats
developed by industry groups or companies.

6lectronic Data Interc'ange Association: A national body that propagates and controls the use of @(. in a given
country. All @(.As are nonprofit organi/ations dedicated to encouraging @(. gro)th. The @(. in the ,nited *tates
)as formerly T(CC and administered the development of standards in transportation and other industries.

6lectronic /unds -ransfer 6/-!: A computeri/ed system that processes financial transactions and information
about these transactions or performs the e#change of value. *ending payment instructions across a computer
net)or2, or the company$to$company, company$to$ban2, or ban2$to ban2 electronic e#change of value.

6lectronic Mail 6,Mail!: The computer$to$computer e#change of messages. @$mail is usually unstructured 'free$
form- rather than in a structured format. ?.500 has become the standard for e$mail e#change.
6,Mail: See .lectronic Mail

6mbargo: A prohibition upon e#ports or imports, either )ith specific products or specific countries.
6mpirical: Aertaining to a statement or formula based on e#perience or observation rather than on deduction or
theory.
6nd Item: A product sold as a completed item or repair part: any item sub"ect to a customer order or sales
forecast.
Synonym: "inis(ed 1oods Inventory.

6nd,of,#ife Inventory: .nventory on hand that )ill satisfy future demand for products that are no longer in
production at your company.
6nd 4ser: The final buyer of the product )ho purchases the product for immediate use.
6ngineering C'ange: A revision to a dra)ing or design released by engineering to modify or correct a part. The
re6uest for the change can be from a customer or from production, 6uality control, another department, or a
supplier.
Synonym: .ngineering C(ange ,rder
6ngineering C'ange Order 6CO!: A documented and approved revision to a product or process specification.

6ngineer to Order: A process in )hich the manufacturing organi/ation must first prepare 'engineer- significant
product or process documentation before manufacture may begin.
6nroute: A term used for goods in transit or on the )ay to a destination.
6nterprise Application Integration 6AI!: A computer term for the tools and techni6ues used in lin2ing @;A and
other enterprise systems together. 8in2ing systems is 2ey for e$business. Bartner says Ifirms implementing
enterprise applications spend at least &0% on point$to$point interfaces.I

6nterprise Resource Planning 6RP! System: A class of soft)are for planning and managing enterprise$)ide
the resources needed to ta2e customer orders, ship them, account for them, and replenish all needed goods
according to customer orders and forecasts. <ften includes electronic commerce )ith suppliers. @#amples of @;A
systems are the application suites from *AA, <racle, Aeople*oft, and others.

6ntry /orm: The document that must be filed )ith Customs to obtain the release of imported goods and to allo)
collection of duties and statistics. Also called a Customs @ntry 9orm or @ntry.
6nveloping: an @(. management soft)are function that groups all documents of the same type, or functioal group,
and bound for the same destination into an electronic envelope. @nveloping is useful )here there are multiple
documents such as orders or invoices issued to a single trading partner that need to be sent as a pac2et.
6nvironmentally Sensitive 6ngineering: (esigning features in a product and its pac2aging that improve
recycling, etc. .t can include elimination of compounds that are ha/ardous to the environment.

6O": See .conomic ,rder $uantity.
6PC or ePC: @lectronic Aroduct Code. An electronically coded tag that is intended as an improvement to the ,AC
bar code system. The @AC is a =%$bit tag )hich contains a number called the global Trade .dentification >umber
'BT.>-. ,nli2e a ,AC number, )hich only provides information specific to a group of products, the BT.> gives
each product its o)n specific identifying number, giving greater accuracy in trac2ing.
6+uipment: The rolling stoc2 carriers use to facilitate the transportation services that they provide, including
containers, truc2s, chassis, vessels, and airplanes, among others.
6+uipment I:D:: An identifier assigned by the carrier to a piece of e6uipment.
See also Container I.
6+uipment Positioning: The process of placing e6uipment at a selected location.
6rgonomic3 The science of creating )or2spaces and products )hich are human friendly to use.

6RP: See .nterprise !esource Planning System.

6RS: See .valuated !eceipts Settlement.

6SI: See .arly Supplier Involvement.

6-A: )(e .stimated )ime of Arrival.
6-D: )(e .stimated )ime of eparture.
6t'ical Standards: A set of guidelines for proper conduct by business professionals.
6.A: See .conomic 7alue Added.
6valuated Receipts Settlement 6RS!: A process for authori/ing payment for goods based on actual receipts )ith
purchase order data )hen price has already been negotiated. The basic premise behind @;* 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.

61ception Rate: A deviation from the class rate: changes 'e#ceptions- made to the classification.
61clusive Patronage Agreements: A shipper agrees to use only a conference0s member liner firms in return for a
10 to 1 percent rate reduction.
61clusive 4se: Nehicles that a carrier assigns to a specific shipper for its e#clusive use.
61empt Carrier: A for$hire carrier that is free from economic regulation. Truc2s hauling certain commodities are
e#empt from .nterstate Commerce Commission economic regulation. By far, the largest portion of e#empt carriers
transports agricultural commodities or seafood.

61pediting:
1. 1oving shipments through regular channels at an accelerated rate.
2. To ta2e e#traordinary action because of an increase in relative priority. Synonym: Stock c(ase
61pert System: A computer program that mimics a human e#pert.
61port: To send goods and services to another country.
61port Compliance: Complying )ith rules for e#porting products, including pac2aging, labeling, and
documentation.
61port Bro)er: An enterprise that brings together buyer and seller for a fee, then eventually )ithdra)s from the
transaction.
61port Declaration: A document re6uired by the ,.*. Treasury department and completed by the e#porter to sho)
the value, )eight, consignee, destination, etc., pertinent to the e#port shipment. The document serves t)o
purposes3 to gather trade statistics and to provide a control document if the goods re6uire a valid e#port license.
61port #icense: A document secured from a government authori/ing an e#porter to e#port a specific 6uantity of a
controlled commodity to a certain country. An e#port license is often re6uired if a government has placed
embargoes or other restrictions upon e#ports.
61port Management Company: A private firm that serves as the e#port department for several manufacturers,
soliciting and transacting e#port business on behalf of its clients in return for a commission, salary, or a retainer plus
commission.
61port Sales Contract: The initial document in any international transaction: it details the specifics of the sales
agreement bet)een the buyer and seller.
61port -rading Company: A firm that buys domestic products for sale overseas. A trading company ta2es title to
the goods: an e#port$management company usually does not.
61porter Identification $umber 6I$!: A number re6uired for the e#porter on the *hipper0s @#port (eclaration. A
corporation may use their 9ederal @mployer .dentification >umber as issued by the .;*: individuals can use their
*ocial *ecurity >umbers.
61press:
1. Carrier payment to its customers )hen ships, rail cars, or trailers are unloaded or loaded in less than the
time allo)ed by contract and returned to the carrier for use. See emurrage- etention.
2. The use of priority pac2age delivery to achieve overnight or second$day delivery.
61tended 6nterprise: The notion that supply chain partners form a larger entity )hich )or2s together as though it
)ere a single unit.

61tensible Mar)up #anguage 8M#!: A computer term for a language that facilitates direct communication of
data among computers on the .nternet. ,nli2e the older hyperte#t mar2up language 'OT18- )hich provides data
tags that give instructions to a )eb bro)ser on ho) to display information, ?18 tags give instructions to a bro)ser
or to application soft)are )hich help to define specifics about the category of information.

61ternal /actory: A situation )here suppliers are vie)ed as an e#tension of the firm0s manufacturing capabilities
and capacities. The same practices and concerns that are commonly applied to the management of the firm0s
manufacturing system should also be applied to the management of the e#ternal factory.

61tranet: A computer term describing a private net)or2 'or a secured lin2 on the public .nternet- that lin2s
separate organi/ations and uses the same soft)are and protocols as the .nternet. ,sed for improving supply chain
management. 9or e#ample, e#tranets are used to provide access to a supply chain partner0s internal inventory data
)hich is not available to unrelated parties.
Antonym: Intranet.
61 2or)s: The price that the seller 6uotes applies only at the point of origin. The buyer ta2es possession of the
shipment at the point of origin and bears all costs and ris2s associated )ith transporting the goods to the
destination.
/
CP#: See "ourt( Party %ogistics
D,Point Annual Average: 1ethod fre6uently used in A1B studies to establish a representative average for a one$
year period. Calculation: 89:&;9&<; = ;&;9&<> = ?&;<&<@ = A&;<&<? = 9:&;9&<BC&@
D,S Program: A program for organi/ing )or2 areas. *ometimes referred to as elements, each of the five
components of the program begins )ith the letter I*.I They include sort, systemi/e, shine or s)eep, standardi/e,
and sustain. .n the ,+, the concept is converted to the $C program comprising five comparable components3 clear
out, configure, clean and chec2, conformity, and custom and practice.
D Sort - get rid of clutter: separate out )hat is needed for the operations.
D Systemi5e&Set in ,rder - organi/e the )or2 area: ma2e it easy to find )hat is needed.
T S(ine - clean the )or2 area: ma2e it shine.
D Standardi5e - establish schedules and methods of performing the cleaning and sorting.
D Sustain - implement mechanisms to sustain the gains through involvement of people, integration into the
performance measurement system, discipline, and recognition.
The $* program is fre6uently combines )ith precepts of the 8ean 1anufacturing .nitiative. @ven )hen used
separately, ho)ever, the $* 'or $C- program is said to yield e#cellent results. .mplementation of the program
involves introducing each of the five elements in order, )hich reportedly generates multiple benefits, including
product diversification, higher 6uality, lo)er costs, reliable deliveries, improved safety, and higher availability rate.
/A: See "unctional Ackno'ledgement
/AS: See "inal Assembly Sc(edule

/abricator: A manufacturer that turns the product of a ra) materials supplier into a larger variety of products. A
fabricator may turn steel rods into nuts, bolts, and t)ist drills, or may turn paper into bags and bo#es.

/acilities: The physical plant, distribution centers, service centers, and related e6uipment.
/ailure Modes 6ffects Analysis /M6A!: A pro$active method of predicting faults and failures so that preventive
action can be ta2en.

/5: See "inis(ed 1oods Inventory.

/5I: See "inis(ed 1oods Inventory.

/ield /inis'ed 5oods: .nventory )hich is 2ept at locations outside the four )alls of the manufacturing plant 'i.e.,
distribution center or )arehouse-.
/ield Service Parts: Aarts inventory 2ept at locations outside the four )alls of the manufacturing plant 'i.e.,
distribution center or )arehouse.
/ield Services: See After-Sale Service.
/I/O: See "irst In "irst ,ut.
/ill Rates by Order: Chether orders are received and released consistently, or released from a blan2et purchase
order, this metric measures the percentage of ship$from$stoc2 orders shipped )ithin 25 hours of order Irelease.I
1a2e$to$stoc2 schedules attempt to time the availability of finished goods to match forecasted customer orders or
releases. <rders that )ere not shipped )ithin 25 hours due to consolidation but )ere available for shipment )ithin
25 hours are reported separately. .n calculating elapsed time for order fill rates, the interval begins at ship release
and ends )hen material is consigned for shipment.
Calculation: 8#umber of orders filled from stock s(ipped 'it(in :> (ours or order releaseC&8)otal number of stock
ordersC
The same concept of fill rates can be applied to order lines and individual products to provide statistics on
percentage of lines shipped completely and percentage of products shipped completely.
/inal Assembly: The highest level assembled product, as it is shipped to customers. This terminology is typically
used )hen products consist of many possible features and options that may only be combined )hen an actual
order is received.
Also see: .nd Item- Assemble to ,rder
/inal Assembly Sc'edule /AS!: A schedule of end items to finish the product for specific customers0 orders in a
ma2e$to$order or assemble$to$order environment. .t0s also referred to as the finishing schedule because it may
involve operations other than "ust the final assembly: also, it may not involve assembly, but simply final mi#ing,
cutting, pac2aging, etc. The 9A* is prepared after receipt of a customer order as constrained by the availability of
material and capacity, and it schedules the operations re6uired to complete the product from the level )here it is
stoc2ed 'or master scheduled- to the end$item level..

/inis'ed 5oods Inventory /5 or /5I!: Aroducts completely manufactured, pac2aged, stored, and ready for
distribution.
Also see: .nd Item
/ire*all: A computer term for a method of protecting the files and programs on one net)or2 from users on another
net)or2. A fire)all bloc2s un)anted access to a protected net)or2 )hile giving the protected net)or2 access to
net)or2s outside of the fire)all. a company )ill typically install a fire)all to give users access to the .nternet )hile
protecting their internal information.
/irst In /irst Out /I/O!: .n inventory control and financial accounting, this refers to the practice of using stoc2
from inventory on the basis of )hat )as received first and is consumed first.
Antonym: %ast In "irst ,ut.
/irst Mover Advantage: 1ar2et innovator, putting the company in the leadership position.
/i1ed Costs: Costs )hich do not fluctuate )ith business volume in the short run. 9i#ed costs include items such
as depreciation on buildings and fi#tures.

/i1ed Order "uantity: A lot$si/ing techni6ue in 1;A or inventory management that )ill al)ays cause planned or
actual orders to be generated for a pre$determined fi#ed 6uantity, or multiples thereof, if net re6uirements for the
period e#ceed the fi#ed order 6uantity.
/i1ed Over'ead: Traditionally, all manufacturing costs, other than direct labor and direct materials, that continue
even if products are not produced. Although fi#ed overhead is necessary to produce the product, it cannot be
directly traced to the final product.
Also see: Indirect Cost
/latbed: A flatbed, also called a haul brite, is a type of trailer on a truc2 that consists of a floor and no enclosure.

/le1ibility: Ability to respond 6uic2ly and efficiently to changing customer and consumer demands.

/le1ible Speciali9ation: A strategy based on multi$use e6uipment, s2illed )or2ers, innovative senior management
to accommodate the continuous change that occurs in the mar2etplace.
/loat: The time re6uired for documents, payments, etc. to get from one trading partner to another.

/loor,Ready Merc'andise /RM!: Boods shipped by suppliers to retailers )ith all necessary tags, prices, security
devices, etc. already attached so goods can be cross doc2ed rapidly through retail (Cs, or received directly at
stores.

/OB: See "ree on Board.

/OB Destination: Title passes at destination, and seller has total responsibility until shipment is delivered.

/OB Origin: Title passes at origin, and buyer has total responsibility over the goods )hile in shipment.

/orecast: An estimate of future demand. A forecast can be constructed using 6uantitative methods, 6ualitative
methods, or a combination of methods, and can be based on e#trinsic 'e#ternal- or intrinsic 'internal- factors.
Narious forecasting techni6ues attempt to predict one or more of the four components of demand3 cyclical, random,
seasonal, and trend.
/orecasting: Aredictions of ho) much of a product )ill be purchased by customers. ;elies upon both 6uantitative
and 6ualitative methods. Also see: "orecast.

/oreign -rade ?one /-?!: An area or /one set aside at or near a port or airport under the control of the ,*
Customs *ervice, for holding goods duty$free pending Customs clearance.

/our P;s: A set of mar2eting tools to direct the business offering to the customer. The four A0s are product, price,
place, and promotion.
/our,2all Inventory: The stoc2 )hich is contained )ithin a single facility or building.

/ourt' Party #ogistics CP#!: (iffers from third party logistics in the follo)ing )ays3
1. 5A8 organi/ation is often a separate entity established as a "oint venture or long$term contract bet)een a
primary client and one or more partners:
2. 5A8 organi/ation acts as a single interface bet)een the client and multiple logistics service providers:
&. All aspects 'ideally- of the client0s supply chain are managed by the 5A8 organi/ation:
5. .t is possible for a ma"or third party logistics provider to form a 5A8 organi/ation )ithin its e#isting structure
'Strategic Supply C(ain AlignmentE Fo(n 1attorna6.
/ree Alongside S'ip: A term of sale indicating that the seller is liable for all changes and ris2s until the goods sold
are delivered to the port on a doc2 that )ill be used by the vessel. Title passes to the buyer )hen the seller has
secured a clean doc2 or ship0s receipt of goods.

/ree on Board /OB!: Contractual terms bet)een a buyer and a seller that define )here title transfer ta2es place.
/reig't Carriers: Companies that haul freight, also called Ifor$hireI carriers. 1ethods of transportation include
truc2ing, railroads, airlines, and sea borne shipping.

/reig't Consolidation: The grouping of shipments to obtain reduced costs or improved utili/ation of the
transportation function. Consolidation can occur by mar2et area grouping, grouping according to scheduled
deliveries, or using third party pooling services such as public )arehouses and freight for)arders.

/reig't /or*arder: An organi/ation )hich provides logistics services as an intermediary bet)een the shipper and
the carrier, typically on international shipments. 9reight for)arders provide the ability to respond 6uic2ly and
efficiently to changing customer and consumer demands and international shipping 'importDe#port- re6uirements.
/ront'aul: The first leg of the truc2 trip that involves hauling a load or several loads to targeted destinations.

/-?: See "oreign )rade +one.
/ulfillment: The act of fulfilling a customer order. 9ulfillment includes order management, pic2ing, pac2aging, and
shipping.

/unctional Ac)no*ledgement /A!: A specific @(. Transaction *et '==!- sent by the recipient of an @(.
message to confirm the receipt of data but )ith no indication as to the recipient application0s response to the
message. The 9A )ill confirm that the message contained the correct number of lines, etc., via control summaries,
but does not report on the validity of the data.

/unctional 5roup: Aart of the hierarchical structure of @(. transmissions, a functional group contains one or more
related transaction sets preceded by a functional group header and follo)ed by a functional group trailer.
/unctional Silo: A vie) of an organi/ation )here each department or functional group is operated independently
of other groups )ithin the organi/ation. @ach group is referred to as a I*ilo.I This is the opposite of an integrated
structure.
5
5ain S'aring: A method of incentive compensation )here supply chain partners share collectively in savings from
productivity improvements. The concept provides an incentive to both the buying and supplier organi/ations to
focus on continually reevaluating, reenergi/ing, and enhancing their business relationship. all aspects of value
delivery are scrutini/ed, including specification design, order processing, inbound transportation, inventory
management, obsolescence programs, material yield, forecasting and inventory planning, product performance, and
reverse logistics. The focus is on driving out limited value cost )hile protecting profit margins.
5-I$: Blobal Trac2ing .dentification >umber or Blobal Trade .tem >umber. BT.> is the globally$uni6ue @A>.,CC
*ystem identification number, or 2ey, used for trade items 'products and services-. .t0s used for uni6uely identifying
trade items 'products and services- sold, delivered, )arehoused, and billed throughout the retail and commercial
distribution channels. ,nli2e a ,AC number, )hich only provides information specific to a group of products, the
BT.> gives each product its o)n specific identifying number, giving greater accuracy in trac2ing. Also see: .PC.
5lobal Positioning System 5PS!: A system )hich uses satellites to precisely locate an ob"ect on earth. ,sed by
truc2ing companies to locate over$the$road e6uipment.
5lobal Strategy: A strategy that focuses on improving )orld)ide performance through the sales and mar2eting of
common goods and services )ith minimum product variation by country. .ts competitive advantage gro)s through
selecting the best locations for operations in other countries.
5lobali9ation: The process of ma2ing something )orld)ide in scope or application.
5PS: See 1lobal Positioning System
5ross Margin: The difference bet)een total revenue and the cost$of$goods sold.
Synonym: 1ross Profit Margin.
>
>andling Costs: The cost involved in moving, transferring, preparing, and other)ise handling inventory.
>a*t'orne 6ffect: 9rom a study conducted at the Oa)thorne Alant of Cestern @lectric Company from 1=2!$1=&2
)hich found that the act of sho)ing people that you are concerned usually results in better "ob performance.
*tudying and monitoring of activities are typically seen as being concerned and results in improved productivity.
>a9ardous Material: A substance or material )hich the (epartment of Transportation has determined to be
capable of posing a ris2 to health, safety, and property )hen stored or transported in commerce.
>ei=un)a: .n the "ust$in$time philosophy, an approach to level production throughout the supply chain to match the
planned rate of end product sales.
>ierarc'y of Cost Assignability: .n cost accounting, an approach to group activity costs at the level of an
organi/ation )here they are incurred, or can be directly related to. @#amples are the level )here individual units
are identified 'unit level-, )here batches of units are organi/ed or processed 'batch level-, )here a process is
operated or supported 'process level-, or )here costs cannot be ob"ectively assigned to lo)er level activities or
processes 'facility level-. This approach is used to better understand the nature of the costs, including the level in
the organi/ation at )hich they are incurred, the level to )hich they can be initially assigned 'attached-, and the
degree to )hich they are assignable to other activity andDor cost ob"ect levels, i.e., activity or cost ob"ect cost, or
sustaining costs.
>ome Page: The starting point for a )eb site. .t0s the page that0s retrieved and displayed by default )hen a user
visits a )eb site. The default home$page name for a server depends on the server0s configuration. <n many )eb
servers, it is inde#.html or default.htm. *ome )eb servers support multiple home pages.
>ori9ontal Play(>ori9ontal >ub: This is a term for a function that cuts across many industries and usually defines
a facility or organi/ation that is providing a common service.
>ostler: An individual employed to move truc2s and trailers )ithin a terminal or )arehouse yard area.
>R: See 3uman !esources.
>ub:
%! A large retailer or manufacturer having many trading partners.
&! A reference for a transportation net)or2 as a Ihub and spo2eI )hich is common in the airline and truc2ing
industry. 9or e#ample, a hub airport serves as the focal point for the origin and termination of long$distance flights
)here flights from outlying areas are fed into the hub airport for connecting flights.
0! A common connection point for devices in a net)or2.
C! A )eb IhubI is one of the initial names for )hat is no) 2no)n as a Iportal.I .t came from the creative idea of
producing a )eb site )hich )ould contain many different Iportal spotsI 'small bo#es that loo2ed li2e ads )ith lin2s
to different, yet related content-. This content, combined )ith .nternet technology, made the idea a milestone in the
development and appearance of )eb sites, primarily due to the ability to display a lot of useful content and store
one0s preferred information on a secured server. The )eb term IhubI )as replaced )ith portal.
D! An .nternet )eb site that provides a central repository for data or a central planning capability in an industry or
supply net)or2.
>uman Resources >R!: The function broadly responsible for personnel policies and practices )ithin an
organi/ation.
>undred*eig't C2-!: a pricing unit used in transportation 'e6ual to 100 pounds-.
I
Import: 1ovement of products from one country into another. The import of automobiles from Bermany into the
,* is an e#ample.
Import(61port #icense: <fficial authori/ation issued by a government allo)ing the shipping or delivery of a
product across national boundaries.
Inbound logistics: The management of materials from suppliers and vendors into production processes or storage
facilities.
I$CO-6RMS: .nternational terms of sale developed by the .nternational Chamber of Commerce to define sellers0
and buyers0 responsibilities.
Independent -rading 61c'ange I-6!: <ften used synonymously )ith B2B, e$mar2etplace, or Nirtual Commerce
>et)or2 'NC>-. .T@ is a more precise term, connoting many$to$many transactions, )hereas the others do not
specify the transactions.
Indirect Cost: A resource or activity cost that cannot be directly traced to a final cost ob"ect since no direct or
repeatable cause$and$effect relationship e#ists. An indirect cost uses an assignment or allocation to transfer cost.
Indirect(Distributor C'annel: Sour company sells and ships to the distributor. The distributor sells and ships to
the end user. This may occur in multiple stages. ,ltimately, your product may pass through the .ndirectD(istributor
Channel and arrive at a retail outlet. <rder information in this channel may be transmitted by electronic means.
These means may include @(., bro2ered systems, or lin2ed electronic systems.
Indirect Retail #ocations: A retail location that ultimately sells your product to consumers, but )ho purchases
your products from an intermediary, li2e a distributor or )holesaler.
Insourcing: The opposite of outsourcing, that is, a service performed in house.
Integrated #ogistics: A comprehensive, system$)ide vie) of the entire supply chain as a single process, from ra)
materials supply through finished goods distribution. All functions that ma2e up the supply chain are managed as a
single entity rather than managing individual functions separately.
Interc'ange: .n @(., the e#change of electronic information bet)een companies. Also, the group of transaction
sets transmitted from one sender to one receiver at one time. (elineated by interchange control segments.
Interleaving: The practice of assigning an employee multiple tas2s )hich are performed concurrently.
Intermediately Positioned 2are'ouse: A )arehouse located bet)een customers and manufacturing plants to
provide increased customer service and reduced distribution cost.
Intermodal -ransportation: Transporting freight by using t)o or more transportation modes, such as by truc2 and
rail or truc2 and oceangoing vessel.
Internal Customer: The recipient 'person or department- of another person0s or department0s output 'good,
service, or information- )ithin an organi/ation.
Also see: Customer.
Internal #abor and Over'ead: The portion of C<B* that is typically reported as labor and overhead, less any
costs already classified as Ioutsourced.I
International Standards Organi9ation ISO!: An organi/ation )ithin the ,nited >ations to )hich all national and
other standard$setting bodies 'should- defer. (evelops and monitors international standards, including <*.,
@(.9ACT, and ?.500.
Internet: A computer term )hich refers to an interconnected group of computer net)or2s from all parts of the
)orld, i.e., a net)or2 of net)or2s. Accessed via a modem and an online service provider, it contains many
information resources and acts as a giant electronic message routing system.
In,-ransit Inventory: 1aterial moving bet)een t)o or more locations, usually separated geographically: for
e#ample, finished goods being shipped from a plant to a distribution center. .n$transit inventory is an easily
overloo2ed component of total supply chain availability.
Inventory: ;a) materials, )or2 in process, finished goods, and supplies re6uired for creation of a company0s
goods and services. The number of units andDor value of the stoc2 of goods held by a company.
Inventory Accuracy: Chen the on$hand 6uantity is e6uivalent to the perpetual balance 'plus or minus the
designated count tolerances-.
Inventory Carrying Cost: <ne of the elements comprising a company0s total supply chain management costs.
These costs consist of the follo)ing3
1. Opportunity Cost: The opportunity cost of holding inventory. This should be based on your company0s o)n
cost of capital standards using the follo)ing formula.
Calculation: Cost of Capital / Average #et 7alue of Inventory
2. Shrinkage: The costs associated )ith brea2age, pilferage, and deterioration of inventories. ,sually pertains to
the loss of material through handling damage, theft, or neglect.
3. Insurance and Taxes: The cost of insuring inventories and ta#es associated )ith the holding of inventory.
4. Total Obsolescence or !a" #aterial$ %I&$ and 'inished (oods In)entory: .nventory reserves ta2en due to
obsolescence and scrap and includes products e#ceeding the shelf life, i.e., spoils and is no good for use in its
original purpose 'do not include reserves ta2en for 9ield *ervice Aarts-.
*. Channel Obsolescence: Aging allo)ances paid to channel partners, provisions for buy$bac2 agreements, etc.
.ncludes all material that becomes obsolete )hile in a distribution channel. ,sually, a distributor )ill demand a
refund on material that goes bad 'shelf life- or is no longer needed because of changing needs.
+. 'ield Ser)ice &arts Obsolescence: ;eserves ta2en due to obsolescence and scrap. field service parts are
those inventories 2ept at locations outside the four )alls of the manufacturing plant i.e., distribution center or
)arehouse.
Inventory Management: The process of ensuring the availability of products through inventory administration.
Inventory Planning Systems: The systems that help to strategically balance the inventory policy and customer
service levels throughout the supply chain. These systems usually calculate time$phased order 6uantities and
safety stoc2 using selected inventory strategies. *ome inventory planning systems conduct )hat$if analysis and
compare the current inventory policy )ith simulated inventory scenarios to improve the inventory ;<..
Inventory -urns: The cost of goods sold divided by the average level of inventory on hand. This ratio measures
ho) many times a company0s inventory has been sold during a period of time. <perationally, inventory turns are
measured as total throughput divided by average level of inventory for a given period. Oo) many times a year the
average inventory for a firm changes over or is sold.
Inventory -urnover: See Inventory )urns.
Inventory .elocity: The speed at )hich inventory moves through a defined cycle 'i.e., from receiving to shipping-.
ISO: See International Standards ,rgani5ation.
ISO EBBB: A series of 6uality assurance standards compiled by the Beneva, *)it/erland$based .nternational
*tandards <rgani/ation. .n the ,nited *tates, .*< is represented by the American >ational *tandards .nstitute
based in Cashington, (C.
ISO %CBBB Series Standards: A series of generic environmental management standards under development by
the .nternational <rgani/ation of *tandardi/ation )hich provide structure and systems for managing environmental
compliance )ith legislative and regulatory re6uirements and affect every aspect of a company0s environmental
operations.
I-6: See Independent )rading ./c(ange.
Item: Any uni6ue manufactured or purchased part, material, intermediate, sub$assembly, or product.
@
@ido)a: The concept of adding an element of human "udgment to automated e6uipment. .n doing this, the
e6uipment becomes capable of discriminating against unacceptable 6uality, and the automated process becomes
more reliable.
@I- II: See Fust In )ime II
@I-: See Fust in )ime
@oint Supplier Agreement @SA!: .ndicative of *tage & *ourcing Aractices, the P*A includes terms and
conditions, ob"ective, process flo)s, performance targets, fle#ibility, balancing, and incentives.
@SA: See Foint Supplier Agreement.
@ust In -ime @I-!: An inventory control system that controls material flo) into assembly and manufacturing plants
by coordinating demand and supply to the point )here desired materials arrive "ust in time for use. An inventory
reduction strategy that feeds production lines )ith products delivered "ust in time. (eveloped by the auto industry, it
refers to shipping goods in smaller, more fre6uent lots.
@ust in -ime II @I- II!: Nendor$managed operations ta2ing place )ithin a customer0s facility. P.T .. )as
populari/ed by the Bose Corporation. The supplier reps, called Iinplants,I place orders to their o)n companies,
relieving the customer0s buyers from this tas2. 1any also become involved at a deeper level such as participating in
ne) product development pro"ects and manufacturing planning 'concurrent planning-.
F
Fai9en: A Papanese term for improvement $ continuing improvement involving everyone $ managers and )or2ers.
.n manufacturing, 2ai/en relates to finding and eliminating )aste in machinery, labor, or production methods.
Also see: Continuous Process Improvement.
Fanban: Papanese )ord for visible record, loosely translated means card, billboard, or sign. Aopulari/ed by
Toyota Corporation, it uses standard containers or lot si/es to deliver needed parts to the assembly line "ust in time
for use.
Feiretsu: A form of cooperative relationship among companies in Papan )here the companies largely remain
legally and economically independent, even though they )or2 closely in various )ays, such as sole sourcing and
financial bac2ing. A member of a 2eiretsu generally o)ns a limited amount of stoc2 in other member companies. A
2eiretsu generally forms around a ban2 and a trading company but distribution 'supply chain- 2eiretsus e#ist, lin2ing
companies from ra) material suppliers to retailers.
.
Fey Performance Indicator FPI!: A measure )hich is of strategic importance to a company or department. 9or
e#ample, a supply chain fle#ibility metric is *upplier <n$Time (elivery Aerformance )hich indicates the percentage
of orders that fulfilled on or before the original re6uested date.
Also see: Scorecard.
Fitting: 8ight assembly of components or parts into defined units, +itting reduces the need to maintain an
inventory of pre$build, completed products, but increases the time and labor consumed at shipment.
Also see: Postponement
FPI: See Gey Performance Indicator.
#
#aid,Do*n cost: The sum of the product and transportation costs. The laid$do)n cost is useful in comparing the
total cost of a product shipped from different supply sources to a customer0s point of use.
#A$: See %ocal Area #et'ork.
#anded Cost: Cost of product plus relevant logistics costs, such as transportation, )arehousing, handling, etc.
Also called Total 8anded Cost of >et 8anded Costs.
#ast In /irst Out #I/O!: .n inventory control and financial accounting, this refers to the practice of using stoc2
from inventory on the basis of )hat )as received last is consumed first. This has limited use in stoc2 2eeping and
is primarily a cost$accounting method.
#C#: See %ess-)(an-Carload.
#ead #ogistics partner ##P!: An organi/ation that organi/es other third party logistics partners for outsourcing of
logistics functions.
Also see: "ourt( Party %ogistics.
#ead -ime: The total time that elapses bet)een an order0s placement and its receipt. .t includes the time re6uired
for order transmittal, order processing, order preparation, and transit.
#ess,-'an,Carload #C#!: *hipment that is less than a complete rail car load 'lot shipment-.
#ess,-'an,-ruc)load #-#! Carriers: Truc2ing companies that consolidate and transport smaller 'less than
truc2load- shipments of freight utili/ing a net)or2 of terminals and relay points.
#ess,-'an,-ruc)load #-#!: Truc2ing companies that consolidate and transport smaller 'less than truc2load-
shipments of freight by utili/ing a net)or2 of terminals and relay points.
#everage: Ta2ing something small and e#ploding it. 8everage can be financial or technological.
#ife Cycle Cost: .n cost account, a product0s life cycle is the period that starts )ith the initial product
conceptuali/ation and ends )ith the )ithdra)al of the product from the mar2etplace and final disposition. A product
life cycle is characteri/ed by certain defined stages, including research, development, introduction, maturity,
decline, and abandonment. 8ife cycle cost is the accumulated costs incurred by a product during these stages.
#I/O: See %ast In "irst ,ut.
#in)ed Distributed Systems: .ndependent computer systems o)ned by independent organi/ations lin2ed in a
manner to allo) direct updates to be made to one system by another. 9or e#ample, a customer0s computer system
is lin2ed to a supplier0s system and the customer can create orders or releases directly in the supplier0s system.
##P: See %ead %ogistics Partner.
#ocal Area $et*or) #A$!: A data communications net)or2 spanning a limited geographical area, usually a fe)
miles at most, providing communications bet)een computers and peripheral devices.
#oad -endering: The practice of providing a carrier )ith detailed information and negotiated pricing 'the tender-
prior to scheduling pic2up. This practice can help assure contract compliance and facilitate automated payments
'self billing-.
#ogistics C'annel: The net)or2 of supply chain participants engaged in storage, handling, transfer,
transportation, and communications functions that contribute to the efficient flo) of goods.
#ogistics Management as defined by t'e Council of Supply C'ain Management Professionals CSCMP!:
8ogistics management is that part of supply chain management that plans, implements, and controls the efficient,
effective for)ard and reverse flo) and storage of goods, services, and related information bet)een the point of
origin and the point of consumption in order to meet customers0 re6uirements. 8ogistics management activities
typically include inbound and outbound transportation management, fleet management, )arehousing, materials
handling, order fulfillment, logistics net)or2 design, inventory management, supplyDdemand planning and
management of third party logistics services providers. To varying degrees, the logistics function also includes
sourcing and procurement, production planning and scheduling, pac2aging and assembly, and customer service. .t
is involved in all levels of planning and e#ecution $ strategic, operational, and tactical. 8ogistics management is an
integrating function )hich coordinates and optimi/es all logistics activities )ith other functions, including mar2eting,
sales, manufacturing, finance, and information technology.
#ot Control: A set of procedures 'e.g., assigning uni6ue batch numbers and tracing each batch- used to maintain
lot integrity from ra) materials, from the supplier through manufacturing to consumers.
#-#: See %ess-)(an-)ruckload Carriers.
#umping: Chen a driver assists )ith loading and unloading the trailer contents.
M
Mac'ine Do*ntimes: Time during )hich a machine cannot be utili/ed. 1achine do)ntimes may occur during
brea2do)ns, maintenance, changeovers, etc.
Macro 6nvironment: The environment e#ternal to a business, including technological, economic, natural, and
regulatory forces that mar2eting efforts cannot control.
Maintenance7 Repair7 and Operating Supplies MRO!: .tems used in support of general operations and
maintenance, such as maintenance supplies, spare parts, and consumables used in the manufacturing process and
supporting operations.

Ma)e,or,Buy Decision: The act of deciding )hether to produce an item internally or buy it from an outside
supplier. 9actors to consider in the decision include costs, capacity availability, proprietary andDor speciali/ed
2no)ledge, 6uality considerations, s2ill re6uirements, volume, and timing.
Ma)e to Order Manufacture to Order!: A manufacturing process strategy )here the trigger to begin manufacture
of a product is an actual customer order or release rather than a mar2et forecast. 9or ma2e$to$order products,
more than 20% of the value added ta2es place after the receipt of the order or release, and all necessary design
and process documentation is available at the time of order receipt.
Ma)e to Stoc) Manufacture to Stoc)!: A manufacturing process strategy )here finished product is continually
held in plant or )arehouse inventory to fulfill e#pected incoming orders or releases based on a forecast.
Manifest: A document )hich describes individual orders contained )ithin a shipment.
Manufacture Cycle -ime: The average time bet)een commencement and completion of a manufacturing
process, as it applies to ma2e$to$stoc2 products.
Calculation: 8Average H of units in *IPC&8Average daily output in unitsC
Manufacturer;s Representative: <ne )ho sells goods for several firms but does not ta2e title to them.
Manufacturing Calendar: A calendar used in inventory and production planning functions that consecutively
numbers only the )or2ing days so that the component and )or2 order scheduling may be done based on the actual
number of )or2days available. Synonyms: M-ay Calendar- Planning Calendar- Production Calendar- S(op
Calendar
Manufacturing 61ecution Systems M6S!: Arograms and systems that participate in shop$floor control, including
programmed logic controllers and process control computers for direct and supervisory control of manufacturing
e6uipment: process information systems that gather historical performance information, then generate reports:
graphical displays: and alarms that inform operations personnel )hat is going on in the plant currently and a short
history into the past. 7uality control information is also gathered $ a laboratory information management system
may be part of this configuration to tie process conditions to the 6uality data that are generated. Thereby, cause$
and$effect relationships can be determined. The 6uality data at times affect the control parameters that are used to
meet product specifications, either dynamically or offline.
Manufacturing #ead -ime: The total time re6uired to manufacture an item, e#clusive of lo)er$level purchasing
lead time. 9or ma2e$to$order products, it0s the length of time bet)een the release of an order to the production
process and shipment to the final customer. 9or ma2e$to$stoc2 products, it0s the length of time bet)een the release
of an order to the production process and receipt into finished goods inventory. .ncluded are order preparation time,
6ueue time, set$up time, run time, move time, inspection time, and put$a)ay time.
Synonym: Manufacturing Cycle )ime.
Manufacturing Resource Planning MRP,II!: A method for the effective planning of all resources of a
manufacturing company. .deally, it addresses operational planning in units, financial planning in dollars, and has a
simulation capability to ans)er )hat$if 6uestions. .t consists of a variety of processes, each lin2ed together3
business planning, production planning 'sales and operations planning-, master production scheduling, material
re6uirements planning, capacity re6uirements planning, and the e#ecution support systems for capacity and
material. <utput from these systems is integrated )ith financial reports, such as business plan, purchase
commitment report, shipping budget, and inventory pro"ections in dollars. 1anufacturing resource planning is a
direct outgro)th and e#tension of closed$loop 1;A.
Marginal Cost: The cost to produce one additional unit of output. The change in total variable cost resulting from
a one$unit change in output.
Mar)et Demand: .n mar2eting, the total demand that )ould e#ist )ithin a defined customer group in a given
geographical area during a particular time period given a 2no)n mar2eting program.
Mar)et,Positioned 2are'ouse: Carehouse positioned to replenish customer inventory assortments and afford
ma#imum inbound transport consolidation economies from inventory origin points )ith relatively short$haul local
delivery.
Mar)et Segment: A group of potential customers sharing some measurable characteristics based on
demographics, psychographics, lifestyle, geography, benefits, etc.
Mar+uis Partners: +ey strategic relationships. This has emerged as perhaps the 2ey competitive advantage and
barrier to entry of e$mar2etplaces. Bet the big players in the fold first, offering e6uity if necessary.
Mass Customi9ation: The creation of a high$volume product )ith large variety so that a customer may specify his
or her e#act model out of a large volume of possible end items, )hile manufacturing cost is lo) because of the large
volume. An e#ample is a personal computer order in )hich the customer may specify processor speed, memory
si/e, hard dis2 si/e and speed, removable storage device characteristics, and many other options )hen ACs are
assembled on one line and at a lo) cost.
Material Ac+uisition Costs: <ne of the elements comprising a company0s total supply chain management costs.
These costs consist of the follo)ing3
1. #aterials ,Co--odity. #anage-ent and &lanning: All costs associated )ith the supplier sourcing, contract
negotiation and 6ualification, and the preparation, placement, and trac2ing of a purchase order $ including all costs
related to buyerDplanners.
2. Supplier /uality 0ngineering: The costs associated )ith the determination, developmentDcertification, and
monitoring of suppliers0 capabilities to fully satisfy the applicable 6uality and regulatory
re6uirements. 3. Inbound 'reight and 1uties: 9reight costs associated )ith
the movement of material from a vendor to the buyer, including all associated administrative tas2s. (uties are
those fees and ta#es levied by government for moving purchased material across international borders. Customs
bro2er fees should also be included in this category.
4. !ecei)ing and &ut 2"ay: all costs associated )ith ta2ing possession of material and storing it. >ote $
inventory$carrying costs are normally covered in a separate
)or2sheet. *. Inco-ing Inspection: All
costs associated )ith the inspection and testing of received materials to verify compliance )ith specifications.
Materials >andling: The physical handling of products and materials bet)een procurement and shipping.
Materials Management: .nbound logistics from suppliers through the production process. The movement and
management of materials and products from procurement through production.
Material Re+uirements Planning MRP!: A decision$ma2ing methodology used to determine the timing and
6uantities of materials to purchase.
Matri1 Organi9ational Structure: An organi/ation structure in )hich t)o 'or more- channels of command budget
responsibility, and performance measurement e#ist simultaneously. 9or e#ample, both product and functional
forms of organi/ation could be implemented simultaneously: in other )ords, the product and functional managers
have e6ual authority and employees report to both managers.
Ma1imum Order "uantity: An order 6uantity modifier applied after the lot si/e has been calculated that limits the
order 6uantity to a pre$established ma#imum.
m,Commerce: 1obile commerce applications involve using a mobile phone to carry out financial transactions.
This usually means ma2ing a payment for goods or transferring funds electronically. Transferring money bet)een
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 )orld, such as dual slot phones and
other smarter terminals, and more standardi/ed protocols )hich allo) greater interactivity and therefore, more
sophisticated service.
Mean: The arithmetic average of a group of values.
Synonym: Arit(metic Mean.
Median: The middle value in a set of measured values )hen the items are arranged in order of magnitude. .f there
is no single middle value, the median is the mean of the t)o middle values.
M6S: See Manufacturing ./ecution Systems.
Message: The @(.9ACT term for a transaction set. A message is the collection of data, organi/ed in segments,
e#changed by trading partners engaged in @(.. Typically, a message is an electronic version of a document
associated )ith a common business transaction, such as a purchase order or shipping notice. A message begins
)ith a message header segment, )hich identifies the start of the message 'e.g., the series of characters
representing one purchase order-. The message header segment also carries the message type code, )hich
identifies the business transaction type. @(.9ACT0s message header segment is called ,>O: in A>*. ?12 protocol,
the message header is called *T. A message ends )ith a message trailer segment, )hich signals the end of the
message 'e.g., the end of one purchase order-. @(.9ACT0s message trailer is labeled ,>T: the A>*. ?12
message trailer is referred to as *@.
Metrics: See Performance Measures.
Mode: See )ransportation Mode.
MRO: See Maintenance- !epair- and ,perating Supplies.
MRP: See Material !e2uirements Planning.
MRP,II: See Manufacturing !esource Planning.
MSDS: See Material Safety ata S(eet.
Multi,Currency: The ability to process orders using a variety of currencies for pricing and billing.
Multi,#anguage: Aertaining to the ability to process orders in many different country$specific languages using
voice and te#t.
Multi,S)illed: Aertaining to individuals )ho are certified to perform a variety of tas2s.
$
$ational Motor /reig't Classification $M/C!: A tariff, )hich contains descriptions and classifications of
commodities and rules for domestic movement by motor carriers in the ,*.
$et Assets: Total net assets are calculated as Total Assets $ Total 8iabilities: )here the total assets are made up
of fi#ed assets 'plant, machinery, and e6uipment- and current assets )hich is the total of stoc2, debtors, and cash
'also includes AD;, inventory, prepaid assets, deferred assets, intangibles, and good)ill-. The total liabilities are
made up in much the same )ay as long$term liabilities and current liabilities 'includes ADA, accrued e#penses,
deferred liabilities-.
$e* Product Introduction $PI!: The process used to develop products that are ne) to the sales portfolio of a
company.
$M/C: See #ational Motor "reig(t Classification
$onconformity: 9ailure to fulfill a specified re6uirement.
$O8: <#ides of >itrogen
$PI: See #e' Product Introduction.
O
Obsolete Inventory: .nventory for )hich there is no forecast demand e#pected. A condition of being out of date.
A loss of value occasioned by ne) developments that place the oldeer property at a competitive disadvantage.
O6M: See ,riginal .2uipment Manufacturer.
Offline: A computer term )hich describes )or2 done outside of the computer system or outside of a main process
)ithin the corporate system.
Offs'ore: ,tili/ing an outsourcing service provider located in a country other than )here the client is located.
On,Demand: Aertaining to )or2 performed )hen demand is present. Typically used to describe products )hich
are manufactured or assembled only )hen a customer order is placed.
One,Piece /lo*: 1oving parts through a process in batches of one.
One,2ay $et*or)s: The advantages generally lie )ith either the seller of buyer, but not )ith both. B2C )eb sites
are one$)ay net)or2s.
Online: A computer term )hich describes activities performed using computer systems.
Operational Performance Measurements:
1. .n traditional management, performance measurements related to machine )or2er, or department efficiency
or utili/ation. These performance measurements are usually poorly correlated )ith organi/ational
performance.
2. .n theory of contraints, performance measurements that lin2 causally to organi/ational performance
measurements. Throughput, inventory, and operating e#pense are e#amples. Also see: Performance
Measures.
Optimi9ation: The process of ma2ing something as good or as effective as possible )ith given resources and
constraints.
Order Cycle: The time and process involved from the placement of an order to the receipt of the order.
Order 6ntry and Sc'eduling: The process of receiving orders from the customer and entering them into a
company0s order processing system. <rders can be received through phone, fa#, or electronic media. Activities
may include ItechnicallyI e#amining orders to ensure an orderable configuration and provide accurate price,
chec2ing the customer0s credit and accepting payment 'optionally-, identifying and reserving inventory 'both on
hand and scheduled-, and committing and scheduling a delivery date.
Order Management: The planning, directing, monitoring, and controlling of the processes related to customer
orders, manufacturing orders, and purchase orders. ;egarding customer orders, order management includes order
promising, order entry, order pic2, pac2 and ship, billing, and reconciliation of the customer account. ;egarding
manufacturing orders, order management includes order release, routing, manufacture, monitoring, and receipt into
stores or finished goods inventories. ;egarding purchase orders, order management includes order placement,
monitoring, receiving, acceptance, and payment of supplier.
Order Management Costs: <ne of the elements comprising a company0s total supply chain management costs.
These costs consist of the follo)ing3
1. 3e" &roduct !elease &hase In and #aintenance: This includes costs associated )ith releasing ne)
products to the field, maintaining released products, assigning product .(, defining configurations and pac2aging,
publishing availability schedules, release letters and updates, and maintaining product databases.
2. Create Custo-er Order: This includes costs associated )ith creating and pricing configurations to order and
preparing customer order documents.
3. Order 0ntry and #aintenance: This includes costs associated )ith maintaining the customer database, credit
chec2, accepting ne) orders, and adding them to the order system, as )ell as later order modifications.
4.Contract4&rogra- and Channel #anage-ent: This includes costs related to contract negotiation, monitoring
progress, and reporting against the customer0s contract, including administration of performance or )arranty$related
issues.
*. Installation &lanning: This includes costs associated )ith installation engineering, scheduling and
modification, handling cancellations, and planning the installation.
+. Order 'ulill-ent: This includes costs associated )ith order processing, inventory allocation, ordering from
internal or e#ternal suppliers, shipment scheduling, order status reporting, and shipment initiation.
5. 1istribution: This includes costs associated )ith )arehouse space and management, finished goods receiving
and stoc2ing, processing shipments, pic2ing and consolidating, selecting carriers, and staging productsDsystems.
6. Transportation$ Outbound 'reight$ and 1uties: This includes costs associated )ith all company$paid freight
duties from point of manufacturer to end customer or channel.
7. Installation: This includes costs associated )ith verification of site preparation, installation, certification, and
authori/ation of billing.
18. Custo-er In)oicing42ccounting: This includes costs associated )ith invoicing, processing customer
payments, and verification of customer receipt.
Order Processing: Activities associated )ith filling customer orders.
Original 6+uipment Manufacturer O6M!: A manufacturer that buys and incorporates another supplier0s products
into its o)n products. Also, products supplied to the original e6uipment manufacturer or sold as part of an
assembly. 9or e#ample, an engine may be sold to an <@1 for use as that company0s po)er source for its
generator units.
OS3D: See ,ver- S(ort- and amaged.
Outbound #ogistics: 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. 9or e#ample, if the
average sales for a product )ere ten units per month, and one month the product had sales of 00 units, this sales
point might be considered an outlier.
Outpartnering: The process of involving the supplier in a close partnership )ith the firm and its operations
management system. <utpartnering is characteri/ed by close )or2ing relationships bet)een buyers and suppliers,
high levels of trust, mutual respect, and emphasis on "oint problem solving and cooperation. Cith outpartnering, the
supplier is not vie)ed as an alternative source of goods and services 'as observed under outsourcing-, but rather
as a source of 2no)ledge, e#pertise, and complementary core competencies. <utpartnering is typically found
during the early stages of product life cycle )hen dealing )ith products that are vie)ed as critical to the strategic
survival of the firm.
Also see: Customer-Supplier Partners(ip.
Outsource: To utili/e a third party provider to perform services previously performed in house. @#amples include
manufacturing of products and call centerDcustomer support.
Outsourced Cost,of,5oods Sold: <perations performed on ra) material outside of the responding entity0s
organi/ation that )ould typically be considered internal to the entity0s manufacturing cycle. <utsourced cost$of$
goods sold captures the value of all outsourced activities that roll up as cost$of$goods sold. *ome e#amples of
commonly outsourced areas are assembly, test, metal finishing or painting, and speciali/ed assembly process.
Over7 S'ort7 and damaged OS3D!: This is typically a report issued at the )arehouse )hen goods are damaged.
,sed to file a claim )ith a carrier.
O*ner(Operator: A truc2 driver )ho o)ns and operates hisDher tractorDtrailer.
P
P&P: See Pat( to Profitability.
Pallet: The platform )hich cartons are stac2ed on and then used for shipment or movement as a group. Aallets
may be made of )ood or composite materials.
Parcel S'ipment: Aarcels include small pac2ages li2e those typically handled by providers such as ,A* and
9ed@#.
Pareto: A means of sorting data. 9or e#ample, the number of 6uality faults by fre6uency of occurrence. An
analysis that compares cumulative percentages of the ran2 ordering of costs, cost drivers, profits, or other attributes
to determine )hether a minority of elements have a disproportionate impact. Another e#ample3 identifying that
20% of a set of independent variables is responsible for E0% of the effect. Also see: I<&:< !ule.
Part Standardi9ation: A program for planned elimination of superficial, accidental, and deliberate differences
bet)een similar parts in the interest of reducing part and supplier proliferation. A typical goal of part standardi/ation
is to reduce costs by reducing the number of parts that the company needs to manage.
Pass*ord: A private code re6uired to gain access to a computer, an application program, or service.
Pat' to Profitability P&P!: The step$by$step model to generate earnings.
Pay on 4se: Aay on use is a process )here payment is initiated by product consumption, i.e., consignment stoc2
based on )ithdra)al of product from inventory, This process is popular )ith many @uropean companies.
Payroll: Total of all fully$burdened labor costs, including )ages, fringe, benefits, overtime, bonus, and profit
sharing.
PBI-: *ee Arofit Before .nterest and Ta#.
PDCA: See Plan-o-C(eck-Action.
Peer to Peer P&P!: A computer$net)or2ing environment )hich allo)s individual computers to share resources
and data )ithout passing through an intermediate net)or2 server.
Perfect Order: The definition of a perfect order is one )hich meets all of the follo)ing criteria3
T (elivered complete, )ith all items on the order in the 6uantity re6uested
T (elivered on time to customer0s re6uest date, using the customer0s definition of on$time delivery
T (elivered )ith complete and accurate documentation supporting the order including pac2ing slips, bills of lading
and invoices
T (elivered in perfect condition )ith the correct configuration, customer ready, )ithout damage, and faultlessly
installed 'as applicable-
Performance and 6vent Management Systems: The systems that report on the 2ey measurements in the supply
chain $ inventory days of supply, delivery performance, order cycle times, capacity use, etc. ,sing this information
to identify causal relationships to suggest actions in line )ith the business goals.
Performance Measures: .ndicators of the )or2 performed and the results achieved in an activity, process, or
organi/ational unit. Aerformance measures should be both non$financial and financial. Aerformance measures
enable periodic comparison and benchmar2ing. Also see: Performance Measurement Program.
Performance Measurement Program: A performance measurement program goes beyond "ust having
performance metrics in place. Typical characteristics of a good performance measurement program include the
follo)ing3
T 1etrics that are aligned to strategy, and lin2ed to the shop floor or line$level )or2ers.
T A process and culture that drives performance and accountability to deliver performance against 2ey
performance indicators.
T An incentive plan that is tied to performance goals, ob"ectives, and metrics.
T ToolsDtechnology in place to support easy data collection and use.
Perpetual Inventory: An inventory record 2eeping system )here each transaction in and out is recorded and a
ne) balance is computed.
P'ysical Distribution: See istribution.
Pic)ing: The operations involved in pulling products from storage areas to complete a customer order.
Pic) to #ig't: A laser identifies the bin for the ne#t item in the rac2: )hen the pic2er completes the pic2, the bar
code is scanned and the system then points the laser at the ne#t bin.
Piggybac): Terminology used to describe a truc2 trailer being transported on a railroad flatcar.
Plan,Do,C'ec),Action PDCA!: .n 6uality management, a four$step process for 6uality improvement. .n the first
step 'plan-, a plan to affect improvement is developed. .n the second step 'do-, the plan is carried out, preferably
on a small scale. .n the third step 'chec2-, the effects of the plan are observed. .n the last step 'action-, the results
are studied to determine )hat )as learned and )hat can be predicted. The plan$do$chec2$act cycle is sometimes
referred to as the *he)hart cycle 'Calter A. *he)hart discussed the concept in his boo2 *tatistical 1ethod from the
Nie)point of 7uality Control- and as the (eming circle 'C. @d)ards (eming introduced the concept in Papan: the
Papanese subse6uently called it the (eming circle-.
Synonym: S(e'(art Cycle.
Also see: eming Circle.
Planned Date: The date an operation such as a receipt, shipment, or delivery of an order is planned to occur.
Plant /inis'ed 5oods: 9inished goods inventory held at the end manufacturing location.
PM: Aarticulate matter
PO: See Purc(ase ,rder.
POD: See Proof of elivery.
Po)a <o)e mista)e proof!: The application of simple techni6ues that prevent process 6uality failure. A
mechanism that either prevents a mista2e from being made or ma2es the mista2e obvious at a glance.
Pooling: A shipping term for the practice of combining shipment from multiple shippers into a truc2load in order to
reduce shipping charges.
Portal: A )eb site that serves as a starting point to other destinations or activities on the .nternet. .nitially thought
of as a home base$type of )eb page, portals attempt to provide all .nternet needs in one location. Aortals commonly
provide services such as e$mail, online chat forums, shopping, searching, content, and ne)s feeds.
Postponement: The delay of final activities 'i.e., assembly, production, pac2aging, etc.- until the latest possible
time. A strategy used to eliminate e#cess inventory in the form of finished goods )hich may be pac2aged in a
variety of configurations.
Pre,61pediting: The function of follo)ing up on open orders before the scheduled delivery date to ensure the
timely delivery of materials in the specified 6uantity.
Prepaid: A freight term )hich indicates that charges are to be paid by the shipper. Arepaid shipping charges may
be added to the customer invoice, or the cost may be bundled into the pricing for the product.
Present .alue: Today0s value of future cash flo)s, discounted at an appropriate rate.
Price 6rosion: Chat causes old$line e#ecutives to brea2 out in a cold s)eat4 >o 6uestion about it: traditional
business models are threatened by the mar2et efficiencies of B2B. Chen prices begin to plummet, the margin
structures of older industries are also threatened.
Primary Manufacturing Strategy: Sour company0s dominant manufacturing strategy. The primary manufacturing
strategy generally accounts for E0$plus % of a company0s product volume. According to a study by Aittiglio ;abin
Todd J 1cBrath 'A;T1-, appro#imately !&% of all companies use a ma2e$to$stoc2 strategy.
Private #abel: Aroducts that are designed, produced, controlled by, and )hich carry the name of the store or a
name o)ned by the store: also 2no)n as a store brand or dealer brand. An e#ample )ould be Cal$1art0s I*am0s
ChoiceI products.
Private -ruc)ing /leets: Arivate fleets serve the needs of their o)ners, and do not ordinarily offer commercial
truc2ing services to other customers. Arivate fleets typically perform distribution or service functions.
Private 2are'ouse: A company$o)ned )arehouse.
Proactive: The strategy of understanding issues before they become apparent and presenting the solution as a
benefit to the customer, etc.
Process: A series of time$based activities lin2ed to complete a specific output.
Process Benc'mar)ing: Benchmar2ing a process 'such as the pic2, pac2, and ship process- against
organi/ations 2no) to be the best in class in this process. Arocess benchmar2ing is usually conducted on firms
outside of the organi/ation0s industry.
Also see: Benc(marking- Best in Class- Competitive Benc(marking.
Process Improvement: A design or activity )hich improves 6uality or reduces costs, often through the elimination
of )aste on non$value$added tas2s.
Process Manufacturing: Aroduction that adds value by mi#ing, separating, forming, andDor performing chemical
reactions. .t may be done in a batch, continuous, or mi#ed batchDcontinuous mode.
Process <ield: The resulting output from a process. An e#ample )ould be a 6uantity of finished product output
from manufacturing processes.
Procurement: The business functions of procurement planning, purchasing, inventory control, traffic, receiving,
incoming inspection, and salvage operations.
Synonym: Purc(asing
Product C'aracteristics: All of the elements that define a product0s character, such as si/e, shape, )eight, etc.
Product /amily: A group of products )ith similar characteristics often used in production planning 'or sales and
operations planning-.
Production Capacity: 1easure of ho) much production volume may be e#perienced over a set period of time.
Production #ine: A series of pieces of e6uipment dedicated to the manufacture of a specific number of products
or families.
Production Planning and Sc'eduling: The systems that enable creation of detailed, optimi/ed plans and
schedules, ta2ing into account the resource, material, and dependency constraints to meet the deadlines.
Production,Related Material: Aroduction$related material is an item classified as a material purchase and
included in cost$of$goods sold as a ra) material purchase.
Profitability Analysis: The analysis of profit derived from cost ob"ects )ith the vie) to improve or optimi/e
profitability. 1ultiple vie)s may be analy/ed, such as mar2et segment, customer, distribution channel, product
families, products, technologies, platforms, regions, manufacturing capacity, etc.
Profitable to Promise: This is effectively a promise to deliver a certain order on agreed upon terms, including
price and delivery. Arofitable to Aromise 'ATA- is the logical evolution of Available to Aromise 'AtA- and Capable to
Aromise 'CTA-. Chile the first t)o are necessary for profitability, they aren0t sufficient. 9or enterprises to survive in
a competitive environment, profit optimi/ation is a vital technology.
Profit Before Interest and -a1 PBI-!: The financial profit generated prior to the deduction of ta#es and interest
due on loans. Also called operating profit.
Promotion: The act of selling a product at a reduced price, or a buy oneDget one free offer, for the purpose of
increasing sales.
Pro $umber: Any progressive or seriali/ed number applied for identification of freight bills, bills of lading, etc.
Proof of Delivery POD!: .nformation supplied by the carrier containing the name of the person )ho signed for the
shipment, the time and date of delivery and other shipment delivery$related information. A<( is also sometimes
used to refer to the process of printing materials "ust prior to shipment 'Print on emand-.
Protocol: Communication standards that determine message content and format, enabling uniformity of
transmissions.
Public 2are'ouse: The )arehouse space that is rented or leased by an independent business providing a variety
of services for a fee or on a contract basis.
Pull Signal: A signal from a using operation that triggers the issue of ra) material.
Pull or Pull,-'roug' Distribution: *upply chain action initiated by the customer. Traditionally, the supply chain
)as pushed: manufacturers produced goods and pushed them through the supply chain and the customer had no
control. .n a pull environment, a customer0s purchase sends replenishment information bac2 through the supply
chain from retailer to distributor to manufacturer so goods are pulled through the supply chain.
Purc'ase Order PO!: The purchaser0s authori/ation used to formali/e a purchase transaction )ith a supplier.
The physical form or electronic transaction a buyer uses )hen placing an order for merchandise.
Pus' Distribution: The process of building product and pushing it into the distribution channel )ithout receiving
any information regarding re6uirements.
Also see: Pull or Pull-)(roug( istribution.
Pus' -ec'nology: Ceb casting 'push technology- is the prearranged updating of ne)s, )eather, or other
selected information on a computer user0s des2top interface through periodic and generally unobtrusive
transmission over the Corld Cide Ceb 'including the use of the )eb protocol on intranet-. Ceb casting uses so$
called push technology in )hich the )eb server ostensibly pushes information to the user rather than )aiting until
the user specifically re6uests it.
Put A*ay: ;emoving the material from the doc2 '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 )here the material has been place.
"
"/D: See $uality "unction eployment.
"R: See $uick !esponse.
"uality: Conformance to re6uirements or fitness for use. 7uality can be defined through five principal approaches3
%! Transcendent 6uality is an ideal, a condition of e#cellence.
&! Aroduct$based 6uality is based on a product attribute.
0! ,ser$based 6uality is fitness for use.
C! 1anufacturing$based 6uality is conformance to re6uirements.
D! Nalue$based 6uality is the degree of e#cellence to an acceptable price.
Also, 6uality has t)o ma"or components3
a! 6uality of conformance $ 6uality is defined by the absence of defects.
b! 6uality of design $ 6uality is measured by the degree of customer satisfaction )ith a product0s characteristics
and features.
"uality Circle: .n 6uality management, a small group of people )ho normally )or2 as a unit and meet fre6uently to
uncover and solve problems concerning the 6uality of items produced, process capability, or process control.
Also see: Small 1roup Improvement Activity.
"uality /unction Deployment "/D!: A structured method for translating user re6uirements into detailed design
specifications using a continual stream of I)hat$ho)I matrices. 79( lin2s the needs of the customer 'end user-
)ith design, development, engineering, manufacturing, and service functions. .t helps organi/ations see2 out both
spo2en and unspo2en needs, translate these into actions and designs, and focus various business functions to)ard
achieving this common goal.
"uarantine: The setting aside of items from availability for use or sale until all re6uired 6uality tests have been
performed and conformance certified.
"uic) Response "R!: A strategy )idely adopted by general merchandise and soft lines retailers and
manufacturers to reduce retail out of stoc2s, forced mar2do)ns, and operating e#penses. These goals are
accomplished through shipping accuracy and reduced response time. 7; is a partnership strategy in )hich
suppliers and retailers )or2 together to respond more rapidly to the consumer by sharing point$of$sale scan data,
enabling both to forecast replenishment needs.
R
Radio /re+uency R/!: A form of )ireless communications that lets users relay information via electromagnetic
energy )aves from a terminal to a base station )hich is lin2ed, in turn, to a host computer. The terminal can be
placed at a fi#ed station, mounted on a for2lift truc2, or carried in a )or2er0s hand. The base station contains a
transmitter and receiver for communication )ith the terminal. ;9 systems use either narro)$band or spread$
spectrum transmissions. >arro)$band data transmissions move along a single limited radio fre6uency, )hile
spread$spectrum transmissions move across several different fre6uencies. Chen combines )ith a bar code system
of identifying inventory items, a radio fre6uency system can relay data instantly, thus updating inventory records in
so$called real time.
Radio /re+uency Identification R/ID!: The use of radio fre6uency technology such as ;9.( tags and tag
readers to identify ob"ects. <b"ects may include virtually anything physical, such as e6uipment, pallets of stoc2, or
even individual units of product.
Ramp Rate: A statement )hich 6uantifies ho) 6uic2ly you gro) or e#pand an operation gro)th tra"ectory. Can
refer to sales, profits, or margins.
Rationing: The allocation of product among customers, or components among manufactured goods during periods
of short supply. Chen price is used to allocate product, it0s allocated to those )illing to pay the most.
Ra* Materials RM!: Crude or processed material that can be converted by manufacturing, processing, or a
combination thereof into a ne) and useful product.
Real -ime: The processing of data in a business application as it happens, as contrasted )ith 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 )ith the purchase order '6uantity and damage-, the identification and delivery to destination, and the
preparation of receiving reports.
Receiving Doc): (istribution center location )here the actual physical receipt of the purchased material from the
carrier occurs.
Reengineering:
1. A fundamental rethin2ing and radical redesign of business processes to achieve dramatic improvements in
performance.
2. A term used to describe the process of ma2ing 'usually- significant and ma"or revisions or modifications to
business processes.
&. Also called Business Arocess ;eengineering.
Refrigerated Carriers: Truc2load carriers designed to 2eep 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 re6uired to support activities li2e material movement and line
changeovers.
Replenis'ment: The process of moving or resupplying inventory from a reserve 'or upstream- storage location or
facility to a primary 'or do)nstream- storage or pic2ing location, or to another mode of storage in )hich pic2ing is
performed.
Re+uest for Information R/I!: A document used to solicit information about vendors, products, and services prior
to a formal ;97D;9A process.
Re+uest for Proposal R/P!: A document )hich provides information concerning needs and re6uirements for a
manufacturer. This document is created in order to solicit proposals from potential suppliers. 9or e#ample, a
computer manufacturer may use an ;9A to solicit proposals from suppliers of third party logistics services.
Re+uest for "uote R/"!: A document used to solicit vendor responses )hen a product has been selected and
price 6uotations are needed from several vendors.
Resellers: <rgani/ations intermediate in manufacturing and distribution process such as )holesalers and retailers.
Resource Driver: .n cost accounting, the best single 6uantitative measure of the fre6uency and intensity of
demands placed on a resource by other resources, activities, or cost ob"ects. .t0s used to assign resource costs to
activities and cost ob"ects, or to other resources.
Resources: @conomic elements applied or used in the performance of activities or to directly support cost ob"ects.
They include people, materials, supplies, e6uipment, technologies, and facilities.
Also see: !esource river- Capacity.
Retailer: A business that ta2es title to products and resells them to final consumers. @#amples include Cal$1art,
Best Buy, and *afe)ay, but also include the many smaller independent stores.
Return Disposal Costs: The costs associated )ith disposing or recycling products that have been returned due to
customer re"ects, end of life, or obsolescence.
Return 5oods >andling: Arocesses involved )ith returning goods from the customer to the manufacturer.
Aroducts may be returned because of performance problems or simply because the customer doesn0t li2e the
product.
Return Material Aut'ori9ation or Return Merc'andise Aut'ori9ation RMA!: A number usually produced to
recogni/e and give authority for a faulty 'perhaps- good to be returned to a distribution center or manufacturer. A
form generally re6uired )ith a )arrantyDreturn )hich helps the company identify the original product and the reason
for the return. The ;1A number often acts as an order form for the )or2 re6uired in repair situations, or as a
reference for credit approval.
Return on Assets ROA!: 9inancial measure calculated by dividing profit by assets.
Return on Sales: 9inancial measure calculated by dividing profit by sales.
Return Order Management Costs: The costs associated )ith managing ;eturn 1aterial Authori/ation ';1A-.
.ncludes all applicable elements of the 8evel 2 component order management cost of total supply chain
management cost.
Return Product Aut'ori9ation RPA!: Also called ;eturn 1aterial or Boods Authori/ation ';1A or ;BA-. A form
generally re6uired )ith a )arrantyDreturn )hich helps the company identify the original product and the reason for
the return. The ;AA number often acts as an order form for the )or2 re6uired in repair situations or as a reference
for credit approval.
Return to .endor R-.!: 1aterial that has been re"ected by the customer or the buyer0s inspection department
and is a)aiting shipment bac2 to the supplier for repair or replacement.
Returns Inventory Costs: The costs associated )ith managing inventory returned for any of the follo)ing
reasons3 repair, refurbish, e#cess, obsolescence, end of life, ecological conformance, and demonstration. .ncludes
all applicable elements of the 8evel 2 component .nventory Carrying Cost of Total *upply Chain 1anagement Cost.
Returns Material Ac+uisition7 /inance7 Planning7 and I- Costs: The costs associated )ith ac6uiring the
defective products and materials for repair or refurbishing items, plus any finance, planning, and information
technology costs to support return activity. .ncludes all applicable elements of the 8evel 2 components material
ac6uisition cost 'ac6uiring 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, e#cess, obsolete, and end$of$life
products, including diagnosing problems and replacing products. .ncludes the costs of logistics support, materials,
centrali/ed functions, troubleshooting service re6uests, on$site diagnosis and repair, e#ternal repair, and
miscellaneous. These costs are bro2en into ;eturns <rder 1anagement, ;eturns .nventory Carrying, ;eturns
1aterial Ac6uisition, 9inance, Alanning, .T, (isposal, and Carranty Costs.
Returns to Scale: A defining characteristic of B2B. Bigger is better. .t0s )hat creates the I)inner ta2es allI 6uality
of most B2B hubs. .t also places a premium on being first to mar2et and first to achieve critical mass.
Reverse 6ngineering: A process )hereby competitors0 products are disassembled and analy/ed for evidence of
the use of better processes, components, and techni6ues.
Reverse #ogistics: A speciali/ed segment of logistics focusing on the movement and management of products
and resources after the sale and after delivery to the customer. .ncludes product returns for repair andDor credit.
R/: See !adio "re2uency.
R/ID: ;adio 9re6uency .dentification.
Also see: !adio "re2uency.
R/P: See !e2uest for Proposal.
R/": See !e2uest for $uote.
R5A: ;eturn Boods Authori/ation.
Also See: !eturn Material Aut(ori5ation.
RM: See !a' Materials.
RMA: ;eturn 1aterial Authori/ation.
Also See: !eturn Product Aut(ori5ation.
ROA: See !eturn on Assets.
Roof /airings: An integrated air deflector mounted on the top of the cab.
Root Cause Analysis: Analytical methods to determine the core problem's- of an organi/ation, process, products,
mar2et, etc.
Route -ruc)s Delivery: Truc2s that travel fi#ed routes.
Routing or Routing 5uide:
1. Arocess of determining ho) shipment )ill move bet)een origin and destination. ;outing information
includes designation of carrier's- involved, actual route of carrier, and estimate time en route.
2. ;ight of shipper to determine carriers, routes, and points for transfer shipments.
&. .n manufacturing, this is the document )hich defines a process of steps used to manufacture andDor
assemble a product.
Routing Accuracy: Chen specified activities conform to administrative specifications, and specified resource
consumptions 'both man and machine- are detailed according to administrative specifications and are )ithin 10% of
actual re6uirements.
R-.: See !eturn to 7endor.
Rules: (ocumented definitions of ho) )or2 is to be performed.
S
S3OP: See Sales and ,perations Planning.
SA6: *ociety of Automotive @ngineers
Safety Stoc): The inventory a company holds above normal needs as a buffer against delays in receipt of supply
or changes in customer demand.
Salable 5oods: A part of assembly authori/ed for sale to final customers through the mar2eting function.
Sales and Operations Planning S3OP!: A strategic planning process that reconciles conflicting business
ob"ectives and plans future supply chain actions. *J<A usually involves various business functions, such as sales,
operations, and finance to agree on a single planDforecast that can be used to drive the entire business.
Sales Mi1: The proportion of individual product$type sales volumes that ma2e up the total sales volume.
Sales Plan: A time$phased statement of e#pected customer orders anticipated to be received 'incoming sales, not
outgoing shipment- for each ma"or product family or item. .t represents sales and mar2eting management0s
commitment to ta2e all reasonable steps necessary to achieve this level of actual customer orders. The sales plan
is a necessary input to the production planning process 'or sales and operations planning process-. .t is e#pressed
in units identical to those used for the production plan 'as )ell as in sales dollars-.
Also see: Sales and ,perations Planning.
Sales Planning: The process of determining the overall sales plan to best support customer needs and operations
capabilities, )hile meeting general business ob"ectives of profitability, productivity, competitive customer lead times,
and so on, as e#pressed in the overall business plan.
Also see: Sales and ,perations Planning.
Sa*toot' Diagram: A 6uantity$versus$time graphic representation of the order pointDorder 6uantity inventory
system sho)ing inventory being received, used up, and reordered.
Scalability:
%! Oo) 6uic2ly and efficiently a company can ramp up to meet demand.
&! Oo) )ell a solution to a problem )ill )or2 )hen the si/e of the problem increases. The economies of scale
don0t really 2ic2 in until your reach the critical mass, then revenues start to increase e#ponentially.
Scan: A computer term referring to the action of scanning bar codes or ;9 tags.
Scanlon Plan: A system of group incentives on a company)ide or plant)ide basis that sets up one measure that
reflects the results of all efforts. The *canlon plan originated in the 1=&0s by Poe *canlon and 1.T. The universal
standard is the ratio of labor costs to sales value added by production. .f there0s an increase in production sales
value )ith no change in labor costs, productivity has increased )hile unit cost has decreased.
SC6: See Supply C(ain ./ecution
SC6M: See Supply C(ain .vent Management
Scenario Planning: A form of planning in )hich li2ely sets of relevant circumstances are identified in advance, and
used to assess the impact of alternative actions.
SCM: See Supply C(ain Management
SCOR: *upply Chain <perations ;eference 1odel. This is the model developed by the *upply$Chain Council
'*CC-, and is build around si# ma"or processes3 plan, source, ma2e, deliver, return, and enable. The aim of the
*C<; is to provide a standardi/ed method of measuring supply chain performance, and to use a common set of
metrics to benchmar2 against other organi/ations.
Scorecard: A performance measurement tool used to capture a summary of the 2ey performance indicators
'+A.s-Dmetrics of a company. 1etrics dashboardsDscorecards should be easy to read and usually have red, yello),
green indicators to flag )hen the company is not meeting its metrics targets. .deally, a dashboardDscorecard should
be cross functional in nature and include both financial and non$financial measures. .n addition, scorecards should
be revie)ed regularly $ at least on a monthly basis and )ee2ly in 2ey functions, such as manufacturing and
distribution )here activities are critical to the success of a company. The dashboardDscorecards philosophy can
also be applied to e#ternal supply chain partners li2e suppliers to ensure that their ob"ectives and practices align.
Synonym: as(board
Seasonality: A repetitive pattern of demand from year to year 'or other repeating time interval-, )ith some periods
considerably higher than others. *easonality e#plains the fluctuation in demand for various recreational products
)hich are used during different seasons.
Secure 6lectronic -ransaction S6-!: .n e$commerce, a system of guaranteeing the security of financial
transactions conducted over the .nternet.
Self Billing: A transportation industry strategy )hich prescribes that a carrier )ill accept payment based on the
tender document provided by the shipper.
Self Correcting: A computer term for an online process that validates data and )on0t allo) the data to enter the
system unless all errors are corrected.
Selling7 5eneral7 and Administrative S53A! 61penses: .ncludes mar2eting, communication, customer service,
sales, salaries and commissions, occupancy e#penses, unallocated overhead, etc. @#cludes interest on debt,
domestic or foreign income ta#es, depreciation and amorti/ation, e#traordinary items, e6uity gains or losses, gain or
loss from discontinued operations and e#traordinary items.
Serial $umber: A uni6ue number assigned for identification to a single piece that )ill never be repeated for similar
pieces. *erial numbers are usually applied by the manufacturer but can be applied at other points by the distributor
or )holesaler. *erial numbers can be used to support traceability and )arranty programs.
Service #evel: A measure 'usually e#pressed as a percentage- of satisfying demand through inventory or by the
current production schedule in time to satisfy the customer0s re6uested delivery dates and 6uantities.
Service Parts Revenue: The sum of the value of sales made to e#ternal customers and the transfer price
valuation of sales )ithin the company of repair or replacement parts and supplies, net of all discounts, coupons,
allo)ances, and rebates.
S6-: See Secure .lectronic )ransaction.
S53A: See Selling- 1eneral- and Administrative ./penses.
S'ared Services: Consolidation of a company0s bac2$office processes to form a spinout '0r a separate Ishared
servicesI unit to be run li2e a separate business-, providing services to the parent company and sometimes, to
e#ternal customers. *hared services typically lo)er overall cost due to the consolidation, and may improve support
as a result of focus.
S'are'older .alue: Combination of profitability 'revenue and costs- and invested capital ')or2ing capital and fi#ed
capital-.
S'elf #ife: The amount of time an item may be held in inventory before it becomes unusable. *helf life is a
consideration for food and drugs )hich deteriorate over time, and for high$tech products )hich become obsolete
6uic2ly.
S'e*'art Cycle: See Plan-o-C(eck-Action.
S'ingo;s Seven 2astes: *higeo *hingo, a pioneer in the Papanese "ust$in$time philosophy, identified seven
barriers to improving manufacturing. They are the )aste of overproduction, )aste of )aiting, )aste of
transportation, )aste of stoc2s, )aste of motion, )aste of ma2ing defects, and )aste of the processing itself.
S'ipper: The party that tenders goods for transportation.
S'ipper,Carriers: *hipper$carriers 'also called private carriers- are companies )ith goods to be shipped that o)n
or manage their o)n vehicle fleets. 1any large retailers, particularly groceries and Ibig bo#I stores, are shipper$
carriers.
S'ipping: The function that performs the tas2s for the outgoing shipment of parts, components, and products. .t
includes pac2aging, mar2ing, )eighing, and loading for shipment.
S'ipping #ane: A predetermined, mapped route on the ocean that commercial vessels tend to follo) bet)een
ports. This helps ships avoid ha/ardous areas. .n general transportation, the logical route bet)een the point of
shipment and the point of delivery used to analy/e the volume of shipment bet)een t)o points.
S'ipping Manifest: A document that lists the pieces in a shipment. A manifest usually covers an entire load
regardless of )hether the load is to be delivered to a single destination or many destinations. 1anifests usually list
the items, piece count, total )eight, and the destination name and address for each destination in the load.
S'op Calendar: See Manufacturing Calendar
S'op /loor Production Control Systems: The systems that assign priority to each shop order, maintaining )or2$
in$process 6uantity information, providing actual output data for capacity control purposes, and providing 6uantity by
location by shop order for )or2$in$process inventory and accounting purposes.
S'ort S'ipment: Aiece of freight missing from shipment as stipulated by documents on hand.
S'rin)age: ;eductions of actual 6uantities of items in stoc2, in process, or in transit. The loss may be caused by
scrap, theft, deterioration, evaporation, etc.
Sigma: A Bree2 letter commonly used to designate the standard deviation of a population.
Si1,Sigma "uality: A term generally used to indicate that a process is )ell controlled, ..e., tolerance limits are M$%
sigma '&.5 defects per million events- from the centerline in a control chart. The term is usually associated )ith
1otorola )hich named one of its 2ey operations initiatives *i#$*igma 7uality.
SF4: See Stock-Geeping Jnit
S)ills Matri1: A visible means of displaying people0s s2ill levels in various tas2s. ,sed in a team environment to
identify the s2ills re6uired by the team and )hich team members possess those s2ills.
Slotting: Carehouse slotting is defined as the placement of products )ithin a )arehouse facility. .ts ob"ective is to
increase pic2ing efficiency and reduce )arehouse handling costs through optimi/ing product location and balancing
the )or2load.
Small 5roup Improvement Activity: An organi/ational techni6ue for involving employees in continuous
improvement activities.
Also see: $uality Circle.
SMAR-: *ee *pecific, 1easurable, Achievable, ;ealistic, Time Based.
*pecific, 1easurable, Achievable, ;ealistic, Time Based '*1A;T-3 A shorthand description of a )ay of setting
goals and targets for individuals and teams.
SOP: Standard ,perating Procedure.
SO2: See Statement of *ork
Spam: A computer industry term referring to the act of sending identical and irrelevant postings to many different
ne)sgroups or mailing lists. ,sually this posting is something that has nothing to do )ith the particular topic of a
ne)sgroup or of no real interest to the person on the mailing list.
SPC: See Statistical Process Control.
Split Delivery: A method by )hich a larger 6uantity is ordered on a purchase order to secure a lo)er price, but
delivery is divided into smaller 6uantities and is spread out over several dates to control inventory investment, save
storage space, etc.
Spot Demand: (emand )ith a short lead time that0s difficult to estimate. ,sually supply for this demand is
provided at a premium price. An e#ample of spot demand )ould be )hen there0s a spi2ed demand for building
materials as a result of a hurricane.
Staging: Aulling material for an order from inventory before the material is re6uired. This action is often ta2en to
identify shortages, but it can lead to increased problems in availability and inventory accuracy. Also see:
Accumulation Bin
Sta)e'olders: Aeople )ith a vested interest in a company, including manager, employees, stoc2holders,
customers, suppliers, and others.
Standard Components: Components 'parts- of a product for )hich there is an abundance of suppliers. >ot
difficult to produce. An e#ample )ould be a po)er 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. 9or management control purposes, the standards are compared to
actual costs, and variances are computed.
Standing Order: See Blanket Purc(ase ,rder.
Statement of 2or) SO2!: %! A description of products to be supplied under a contract. A good practice is for
companies to have *<Cs in place )ith their trading partners $ especially for all top suppliers. &! .n pro"ection
management, the first pro"ect planning document that should be prepared. .t describes the purpose, history,
deliverables, and measurable success indicators for a pro"ect. .t captures the support re6uired from the customer
and identifies contingency plans for events that could thro) the pro"ect off course. Because the pro"ect must be
sold to management, staff, and revie) groups, the statement of )or2 should be a persuasive document.
Statistical Process Control SPC!: A visual means of measuring and plotting process and product variation.
;esults are used to ad"ust variables and maintain product 6uality.
Stic)ering: Alacing customer$specific stic2ers on bo#es of product. An e#ample )ould be )here Cal$1art has a
re6uest for their o)n product codes to be applied to retail bo#es prior to shipment.
Stoc),Feeping 4nit SF4!: A category of unit )ith a uni6ue combination of form, fit, and function 'i.e., uni6ue
components held in stoc2-.
)o illustrate: .f t)o items are indistinguishable to the customer, or if any distinguishing characteristics visible to the
customer are not important to the customer so that the customer believes the t)o items to be the same, these t)o
items are part of the same *+,.
As a furt(er illustration3 consider a computer company that allo)s customers to configure a complete computer from
a selection of standard components. 9or e#ample, they can choose from three 2eyboards, three monitors, and
three CA,s. Customers may also individually buy 2eyboards, monitors, and CA,s. .f the stoc2 )ere held at the
configuration component level, the company )ould have nine *+,s. .f the company stoc2s at the component level,
the company )ould have &% *+,s. '= component *+,s M &T&T& configured product *+,s.- .f, as part of a
promotional campaign, the company also specially pac2aged the products, the company )ould have a total of !2
*+,s.
Straig't -ruc): *traight truc2s do not have a separate tractor and trailer. The driving compartment, engine and
trailer are one unit.
Strategic Alliance: Business relationship in )hich t)o or more independent organi/ations cooperate and )illingly
modify their business ob"ectives and practices to help achieve long$term goals and ob"ectives.
Sub,Optimi9ation: (ecisions or activities in part made at the e#pense of the )hole. An e#ample of sub$
optimi/ation is )here a manufacturing unit schedules production to benefit its cost structure )ithout regard to
customer re6uirements or the effect on other business units.
Subcontracting: *ending production )or2 outside to another manufacturer. This can involve speciali/ed
operations such as plating metals or complete functional operations.
Also see: ,utsource.
Sub'auler: A subhauler drives a tractor under contract for a company. ,sually a subhauler is an o)nerDoperator or
a small company.
Sun) Cost:
%! The unrecovered balance of an investment. .t0s 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.
&! A past cost that has no relevance )ith 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 bet)een alternatives.
Supplier:
%! A provider of goods or services. Also see: 7endor.
&! A seller )ith )hom the buyer does business, as opposed to vendor, )hich is a generic term referring to all
sellers in the mar2etplace.
Supplier Certification: Certification procedures verifying that a supplier operates, maintains, improves, and
documents effective procedures that relate to the customer0s re6uirements. *uch re6uirements can include cost,
6uality, delivery, fle#ibility, maintenance, safety, and .*< 6uality and environmental standards.
Supplier,O*ned Inventory: A variant of Nendor$1anaged .nventory and Consignment .nventory. .n this case the
supplier not only manages the inventory, but also o)ns the stoc2 close to or at the customer location until the point
of consumption or usage by the customer.
Supply C'ain:
%! *tarting )ith unprocessed ra) materials and ending )ith the final customer using the finished goods, the
supply chain lin2s many companies together.
&! The material and informational interchanges in the logistical process, stretching from ac6uisition of ra)
materials to delivery of finished products to the end user. All vendors, service providers, and customers are lin2s in
the supply chain.
Supply C'ain Design: The determination of ho) to structure a supply chain. (esign decisions include the
selection of partners, the location and capacity of )arehouse and production facilities, the products, the modes of
transportation, and supporting information systems.
Supply C'ain 61ecution SC6!: The ability to move the product out of the )arehouse door. This is a critical
capacity and one that only bric2$and$mortar firms bring to the B2B table. (ot coms have the technology, but that0s
only part of the e6uation. The need for *C@ is )hat is driving the dot coms to offer e6uity partnerships to the
)holesale distributors.
Supply C'ain 6vent Management SC6M!: *C@1 is an application that supports control processes for managing
events )ithin and bet)een companies. .t consists of integrated soft)are functionality that supports five business
processes3 monitor, notify, simulate, control, and measure supply chain activities.
Supply C'ain Integration SCI!: 8i2ely to become a 2ey competitive advantage of selected e$mar2etplaces.
*imilar concept to the bac2$end integration, but )ith greater emphasis on the moving of goods and services.
Supply C'ain Inventory .isibility: *oft)are applications that permit monitoring events across a supply chain.
These systems trac2 and trace inventory globally on a line$item level, and notify the user of significant deviations
from the plans. Companies are provided )ith realistic estimates of )hen the material )ill arrive.
Supply C'ain Management SCM! , as defined by t'e Council of Supply C'ain Management Professionals
CSCMP!: *upply chain management encompasses the planning and management of all activities involved in
sourcing and procurement, conversion, and all logistics management activites. .mportantly, it also includes
coordination and collaboration )ith channel partners, )hich can be suppliers, intermediaries, third party service
providers, and customers. .n essence, supply chain management integrates supply and demand management
)ithin and across companies. *upply chain management is an integrating function )ith primary responsibility for
lin2ing ma"or business functions and business processes )ithin and across companies into a cohesive, high$
performing business model. .t includes all of the logistics managment activities noted above, as )ell as
manufacturing operations, and it drives coordination of processes and activities )ith and across mar2eting, sales,
product design, finance, and information technology.
Supply C'ain $et*or) Design Systems: The systems employed in optimi/ing the relationships among the
various elements of the supply chain manufacturing plants, distribution centers, points of sale, as )ell as ra)
materials, relationships among product families, and other factors to synchroni/e supply chains at a strategic level.
Supply C'ain,Related /inance and Planning Cost 6lement: <ne of the elements comprising a company0s total
supply chain management costs. These costs consist of the follo)ing3
1. Supply9Chain 'inance Costs: Costs associated )ith paying invoices, auditing physical counts, performing
inventory accounting, and collecting accounts receivable. (oes ><T include customer invoicingDaccounting costs
'*ee <rder 1anagement Costs-.
2. 1e-and4Supply &lanning Costs: Costs associated )ith forecasting developing finished goods, intermediate,
subassembly or end$item inventory plans, and coordinating demandDsupply.
Supply C'ain,Related I- Costs: .nformation technology '.T- costs 'in ,* dollars- associated )ith ma"or supply
chain management processes as described belo). These costs should include3
D evelopment costs 'costs incurred in process reengineering, planning, soft)are development, installation,
implementation, and training associated )ith ne) andDor upgraded architecture, infrastructure, and systems to
support the described supply chain management processes-,
D ./ecution costs 'operating costs to support supply chain process users, including computer and net)or2
operations, @(. and telecommunications services, and amorti/ationDdepreciation of hard)are-
D Maintenance costs 'costs incurred in problem resolution, troubleshooting, repair, and routine maintenance
associated )ith installed hard)are and soft)are for described supply chain management processes. .ncludes costs
associated )ith database administration systems configuration control, release planning, and management-.
These costs are associated )ith the follo)ing processes3
&:23
1. &roduct 1ata #anage-ent 9 Aroduct phase$inDphase$out and release: post$introduction support and
e#pansion: testing and evaluation: end$of$life inventory management. .tem master definition and control.
2. 'orecasting and 1e-and4Supply #anage and 'inished (oods 9 9orecasting: end$item inventory planning,
(;A, production master scheduling for all products, all channels.
SO;!C0
1. Sourcing4#aterial 2c<uisition 9 1aterial re6uisitions, purchasing, supplier 6uality engineering, inbound freight
management, receiving, incoming inspection, component engineering, tooling ac6uisition, accounts payable.
2. Co-ponent and Supplier #anage-ent 9 Aart number cross references, supplier catalogs, approved vendor
lists.
3. In)entory #anage-ent 9 Aerpetual and physical inventory controls and tools.
#2=0
1. #anuacturing &lanning 9 1;A, production scheduling, trac2ing, manufacturing engineering, manufacturing
documentation management, inventoryDobsolescence trac2ing.
2. In)entory #anage-ent 9 Aerpetual and physical inventory controls and tools.
3. #anuacturing 0xecution 9 1@* detailed and finite interval scheduling, process controls, and machine
scheduling. 10:I>0!
1. Order #anage-ent 9 <rder entryDmaintenance, 6uotes, customer database, productDprice database, accounts
receivable, credits and collections, invoicing.
2. 1istribution and Transportation #anage-ent 9 (;A, shipping, freight management, traffic management.
3. In)entory #anage-ent 9 Aerpetual and physical inventory controls and tools.
4. %arehouse #anage-ent 9 9inished goods, receiving and stoc2ing, pic2Dpac2.
*. Channel #anage-ent 9 Aromotions, pricing and discounting, customer satisfaction surveys.
+. 'ield Ser)ice4Support 9 9ield service, customer and field support, technical service, serviceDcall management,
returns, )arranty trac2ing.
0?T0!32: 0:0CT!O3IC I3T0!'2C0S
&lan4Source4#ake41eli)er 9 .nterfaces, gate)ays, and data repositories created and maintained to e#change
supply chain$related information )ith the outside )orld. @$commerce initiatives. .ncludes development and
implementation costs.
#ote: Accurate assignment of .T$related cost is challenging. .t can be done using activity$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 .T activities should be
included.
Supply C'ain Strategic Planning: The process of analy/ing, evaluating, and defining supply chain strategies,
including net)or2 design, manufacturing and transportation strategy, and inventory policy.
Supply Planning: The process of identifying, prioriti/ing, and aggregating, as a )hole )ith constituent parts, all
sources of supply that are re6uired and add value in the supply chain of a product or service at the appropriate
level, hori/on, and interval.
Supply 2are'ouse: A )arehouse that stores ra) materials. Boods from different suppliers are pic2ed, sorted,
staged, or se6uenced at the )arehouse to assemble plant orders.
Support Costs: Costs of activities not directly associated )ith producing or delivering products or services.
@#amples are the costs of information systems, process engineering, and purchasing.
Also see: Indirect Cost.
Surrogate GitemH Driver: .n ABC costing, a substitute for the ideal cost driver, but closely correlated to the ideal
driver, )here QitemR is ;esource, Activity, or Cost <b"ect. A surrogate driver is used to significantly reduce the cost
of measurement )hile not significantly reducing accuracy. 9or e#ample, the number of production runs is not
descriptive of the material$disbursing activity, but the number of production runs may be used as an activity driver if
material disbursements correlate )ell )ith the number of production runs.
Sustaining Activity: An activity that benefits an organi/ational unit as a )hole, but not any specific cost ob"ect.
S2O-: See S*,) Analysis.
S2O- Analysis: An analysis of the strengths, )ea2nesses, opportunities, and threats of and to an organi/ation.
*C<T analysis is useful in developing strategy.
Sync'roni9ation: The concept that all supply chain functions are integrated and interact in real time: )hen
changes are made to one area, the effect is automatically reflected throughout the supply chain.
-
&C(I(0JD: ;eferring to operations that are conducted 25 hours a day, ! days a )ee2, &% days per year, )ith no
brea2s for holidays, etc.
&C(I: ;eferring to operations that are conducted 25 hours a day, ! days a )ee2.
0D #oading: &( loading is a method of space optimi/ing designed to help 6uic2ly and easily plan the best compact
arrangement of any &( rectangular ob"ect set 'bo#es- )ithin one or more larger rectangular enclosures
'containers-. .t0s based on three$dimensional, most$dense pac2ing algorithms.
0P#: See )(ird Party %ogistics
-actical Planning: The process of developing a set of tactical plants 'e.g., production plan, sales plan, mar2eting
plan, and so on-. T)o approaches to tactical planning e#ist for lin2ing tactical plans to strategic plans $ production
planning and sales and operations planning.
Also see: Sales and ,perations Planning.
-act -ime: See )akt )ime
-aguc'i Met'od: A concept of offline 6uality control methods conducted at the product and process design states
in the product development cycle. This concept, e#pressed by Benichi Taguchi, encompasses three phases of
product design, parameter design, and tolerance design. The goal is to reduce 6uality loss by reducing the
variability of a product0s characteristics during the parameter phase of product development.
-a)t -ime: *ets the pace of production to match the rate of customer demand and becomes the heartbeat of any
lean production system. .t0s computed as the available production time divided by the rate of customer demand.
9or e#ample, assume demand is 10,000 units per month, or 00 units per day, and planned available capacity is
520 minutes per day. The ta2t time L 520 minutes per dayD00 units per day L 0.E5 minutes per unit. This ta2t time
means that a unit should be planned to e#it the production system on average every 0.E5 minutes.
-are 2eig't: The )eight of a substance obtained by deducting the )eight of the empty container from the gross
)eight of the full container.
-arget Costing: A target cost is calculated by subtracting the desired profit margin from an estimated or mar2et$
based price to arrive at a desired production, engineering, or mar2eting cost. This may not be the initial production
cost, but one e#pected 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 productDservice to meet that
cost.
-ariff: A ta# 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.
-as)s: The brea2do)n of the )or2 in an activity into smaller elements.
-;s 3 C;s: See )erms and Conditions.
-ender: The document )hich describes a business transaction to be performed.
-erms and Conditions -;s 3 C;s!: All the provisions and agreements of a contract.
-'eory of Constraints -OC!: A production management theory )hich dictates that volume is controlled by a
series of constraints related to )or2 center capacity, component availability, finance, etc. Total throughput cannot
e#ceed the capacity of the smallest constraint, and any inventory buffers or e#cess capacity at non$related )or2
center is )aste.
-'ird Party #ogistics: <utsourcing all or much of a company0s logistics operations to a speciali/ed company.
-'ird Party #ogistics Provider 0P#!: A firm )hich provides multiple logistics services for use by customers.
Areferably, these services are integrated or bundled together, by the provider. These firms facilitate the movement
of parts and materials from suppliers to manufacturers, and finished products from manufacturers, and finished
products from manufacturers to distributors and retailers. Among the services they provide are transportation,
)arehousing, cross doc2ing, inventory management, pac2aging, and freight for)arding.
-'ird Party 2are'ousing: The outsourcing of the )arehousing function by the seller of the goods.
-'roug'put: A measure of )arehousing output volume ')eight, number of units-. Also, the total amount of units
received, plus the total amount of units shipped divided by t)o.
-#: See )ruckload Carriers
-MS: See )ransportation Management System
-OC: See )(eory of Constraints
-O/C: See )railer on a "lat Car- Piggyback
-otal Annual Sales: Total Annual *ales are Total Aroduct ;evenue plus post$delivery revenues 'e.g.,
maintenance and repair or e6uipment, system integration- royalties, sales of other services, spare parts revenue,
and rentalDlease revenues.
-otal Average Inventory: Average normal use stoc2, plus average lead stoc2, plus safety stoc2.
-otal Cost Analysis: A decision$ma2ing approach that considers minimi/ation of total costs and recogni/es the
inter$relationship among system variables, such as transportation, )arehousing, inventory, and customer service.
-otal Cost Curve:
%! .n cost$volume$profit 'brea2$even- analysis, the total cost curve is composed of total fi#ed and variable costs per
unit multiplied by the number of units provided. Brea2$even 6uantity occurs )here the total cost curve and total
sales revenue curve intersect.
&! .n inventory theory, the total cost curve for an inventory item is the sum of the costs of ac6uiring and carrying the
item.
-otal Cost of O*ners'ip -CO!: Total cost of a computer asset throughout its life cycle, from ac6uisition to
disposal. TC< is the combined hard and soft costs of o)ning net)or2ed information assets. IOardI 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$front or charged annually. These costs are
considered Ihard costsI because they are tangible and easily accounted for.
-otal Cumulative Manufacture Cycle -ime: Average time bet)een commencement of upstream processing and
completion of final pac2aging for shipment operations as )ell as release of approval for shipment. (oes not include
C.A storage time.
Calculation: 8Average H of units in *IPC&8Average daily output in unitsC - *IP days of supply
-otal Ma)e Cycle -ime: The average processing time bet)een commencement of upstream processing and
completion of all manufacturing process steps up to, but not including, pac2aging and labeling operations 'i.e., from
start of manufacturing to final formulated product ready for primary pac2aging.- (oes not include hold or test and
release times.
Calculation: 8Average H of units in active manufacturingC&8Average daily output in units.C
-otal Product Revenue: The total value of sales made to e#ternal customers plus the transfer price valuation of
intra$company shipments, net of all discounts, coupons, allo)ances, and rebates. .ncludes only the intra$company
revenue for product transferring out of an entity, installation services if these services are sold bundled )ith end
products, and recogni/ed leases to customers initiated during the same period as revenue shipments, )ith revenue
credited at the average selling price.
#ote: Total Aroduct ;evenue e#cludes post$delivery revenues 'maintenance and repair of e6uipment, system
integrations-, royalties, sales of other services, spare parts revenue, and rentalDlease revenues.
-otal Productive Maintenance -PM!: Team$based maintenance process designed to ma#imi/e machine
availability and performance and product 6uality.
-otal Supply C'ain Management Cost five elements!: Total cost to manage order processing, ac6uire
materials, manage inventory, and manage supply chain finance, planning, and .T costs as represented as a percent
of revenue. Accurate assignment of .T$related cost is challenging. .t 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, )hether
incurred in the entity completing the survey or in a supporting organi/ation on behalf of the entity. ;easonable
estimates founded in data )ere 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: Q<rder 1anagement Costs M 1aterial Ac6uisition Costs M .nventory Carrying Costs M *upply$Chain
;elated 9inance and Alanning Costs M Total *upply Chain$;elated .T CostsRDQTotal Aroduct ;evenueR
KPlease see individual component categories for component detail and calculations.6
-otal Supply C'ain Response -ime: The time it ta2es to rebalance the entire supply chain after determining a
change in mar2et demand. Also, a measure of a supply chain0s ability to change rapidly in response to mar2etplace
changes.
Calculation: Q9orecast Cycle TimeR M Q;e$Alan Cycle TimeR M Q.ntra$1anufacturing ;e$Alan Cycle TimeR M
QCumulative *ourceD1a2e Cycle TimeR M Q<rder 9ulfillment 8ead TimeR
-otal -est Release Cycle -ime: The average total test and release time for all tests, documentation revie)s, and
batch approval processes performed from start of manufacturing to release of final pac2aged product for shipment.
Calculation: QAverage number of units in test and releaseRDQAverage daily output in unitsR
-ouc' #abor: The labor that adds value to the product $ assemblers, )elders, pac2agers, etc. This does not
include indirect resources li2e material handlers )ho move and stage product, and mechanical and electrical
technicians )ho maintain e6uipment.
-racing: The practice of relating resources, activities, and cost ob"ects using the drivers underlying their cost
causal relationships. The purpose of tracing is to observe and understand ho) costs are arising in the normal
course of business operations.
Synonym: Assignment.
-ractor: The tractor is the driver compartment and engine of the truc2. .t has t)o or three a#les.
-raceability: %! The attribute allo)ing the ongoing location of a shipment to be determined. &! The registering and
trac2ing of parts, processes, and materials used in production, by lot or serial number.
-rac)ing and -racing: 1onitoring and recording shipment movements from origin to destination.
-rading Partner: Companies that do business )ith each other via @(. 'e.g., send and receive business
documents such as purchase orders-.
-rading Partner Agreement: The )ritten contract that spells out agreed upon terms bet)een @(. trading
partners.
-raffic: A department or function charged )ith the responsibility of arranging the most economic classification and
method of shipment for both incoming and outgoing materials and products.
-raffic Management: The management and controlling of transportation modes, carriers, and services.
-railer: The part of the truc2 that carries the goods.
-railer Drops: Chen a driver drops off a full truc2 at a )arehouse and pic2s up an empty one.
-railer on a /lat Car -O/C!: A speciali/ed form of containeri/ation in )hich motor and rail transport coordinate.
Synonym: Piggyback.
-ransaction: A single completed transmission, e.g., transmission of an invoice over an @(. net)or2. Analogous to
usage of the term in data processing in )hich a transaction can be an in6uiry or a range of updates and trading
transactions. The definition is important for @(. service operators )ho must interpret invoices and other
documents.
-ransaction Set: Commonly used business transactions 'e.g., purchase order, invoice, etc.- organi/ed 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.
-ransaction Set ID: A three digit numerical representation that identifies a transaction set.
-ransactional Ac)no*ledgement: *pecific transaction sets, such as the Aurchase <rder Ac2no)ledgement
'E-, that both ac2no)ledges receipt of an order and provides special status information, such as reschedules,
price changes, bac2 order situation, etc.
-ransit -ime: The total time that elapses bet)een a shipment0s pic2up and delivery.
-ransparency: The ability to gain access to information )ithout regard to the system0s landscape or architecture.
An e#ample )ould be )here an online customer could access a vendor0s )eb 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.
Also see: 7isibility.
-ransportation Management System: A computer system designed to provide optimi/ed transportation
management in various modes along )ith associated activities, including managing shipping units, labor planning
and building, shipment scheduling through inbound, outbound, intra$company shipments, documentation
management 'especially )hen international shipping is involved-, and third party logistics management.
-ransportation Mode: The method of transportation3 land, sea, or air shipment.
-ransportation Planning: The process of defining an integrated supply chain transportation plan and maintaining
the information )hich characteri/es total supply chain transportation re6uirements, and the management of
transporters, both inter$ and intra$ company.
-ransportation Planning Systems: The systems used in optimi/ing assignments from plants to distribution
centers, and from distribution centers to stores. The systems combine moves to ensure the most economical
means are employed.
-rend: Beneral up)ard or do)n)ard movement of a variable over time such as demand for a product. Trends are
used in forecasting to help anticipate changes in consumption over time.
-rend /orecasting Models: 1ethods for forecasting sales data )hen a definite up)ard or do)n)ard pattern
e#ists. 1odels include double e#ponential smoothing, regression, and triple smoothing.
-ruc) Stop 6lectrification -S6!: Arovides po)er outlets at truc2 par2ing spaces in )hich truc2 drivers can simply
plug in, and turn off their engines, rather than idle their truc2 engine.
-ruc)load Carriers -#!: Truc2ing companies )hich move full truc2loads of freight directly from the point of origin
to destination.
-ruc)load #ot: A truc2 shipment that 6ualifies for a lo)er freight rate because it meets a minimum )eight andDor
volume.
-urnover:
%! Typically refers to inventory turnover
&! .n the ,nited +ingdom and certain other countries, turnover refers to annual sales volume.
Also see: Inventory )urns.
4
4CC: See Jniform Code Council.
Also see: .A#.JCC.
4$(SPSC: See Jnited #ations Standard Product and Service Code.
4nbundled Payment(Remittance: The process )here payment is delivered separately from its associated detail.
4niform Code Council 4CC!: A ,* association that administrates ,C*, C.>*, and N.C* and provides ,C*
identification codes and ,AC codes. Also, a model set of legal rules governing commercial transmissions, such as
sales, contracts, ban2 deposits and collections, commercial paper, and letters or credit. .ndividual states give legal
po)er to the ,CC by adopting its articles of la).
4niform Product Code 4PC!: A standard product numbering and bar coding system used by the retail industry.
,AC codes are administered by the ,niform Code Council. They identify the manufacturer as )ell as the item, and
are included on virtually all retail pac2aging.
Also see: Jniform Code Council.
4niform Resource #ocator 4R#!: A string that supplies the .nternet address of a )eb site or resource on the
Corld Cide Ceb, along )ith the protocol by )hich the site or resource is accessed. The most common ,;8 type is
http3DD, )hich gives the .nternet address of a )eb page. *ome other ,;8 types are gopher3D, )hich gives the
.nternet address of a Bopher directory, and ftp3DD, )hich gives the net)or2 location of an 9TA resource.
4nit Cost: The cost associated )ith a single unit of product. The total cost of producing a product or service
divided by the total number of units. The cost associated )ith a single unit of measure underlying a resource,
activity, product, or service. .t0s calculated by dividing the total cost by the measured volume. ,nit cost
measurement must be used )ith caution as it may not al)ays be practical or relevant in all aspects of cost
management.
4nit of Measure 4OM!: The unit in )hich the 6uantity of an item is managed, e.g., pounds, each, bo# of 12,
pac2age of 20, or case of 155. Narious ,<1s may e#ist for a single item. 9or e#ample, a product may be
purchased in cases, stoc2ed in bo#es, and issued in single units.
4nited $ations Standard Product and Service Code 4$(SPSC!: (eveloped "ointly bet)een the ,nited >ations
and (un J Bradstreet '(JB-. .t has a five$level coding structure 'segment, family, class, commodity, business
function- for nearly =,000 products.
4niti9ation: .n )arehousing, the consolidation of several units into larger units into larger units for fe)er handlings.
4nplanned Order: <rders )hich are received that do not fit into the volumes prescribed by the plans developed
from forecasts.
4OM: See Jnit of Measure.
4PC: See Jniform Product Code.
4psell: The practice of attempting to sell a higher$value product to the customer.
4pside Production /le1ibility: The number of days re6uired 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
,pside 9le#ibility3 Arincipal Constraint. ,pside fle#ibility can affect three possible areas3 direct labor availability,
internal manufacturing capacity, and 2ey components or material availability.
4pstream: Arincipal direction of movement for customer orders )hich originate at point of demand or use, as )ell
as other flo)s, such as return product movements, payments for purchases, etc. <pposite of do)nstream.
4R#: See Jniform !esource %ocator.
.
.alue Added: .ncreased or improved value, )orth, functionality, or usefulness.
.alue,Added $et*or) .A$!: A company that acts as a clearinghouse for electronic transactions bet)een trading
partners. A third party supplier that receives @(. transmissions from sending trading partners and holds them in a
mailbo# until retrieved by the receiving partners.
.alue,Added Productivity Per 6mployee: 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$time e6uivalent employee in all functions, including sales and mar2eting,
distribution, manufacturing, engineering, customer service, finance, general and administrative, and other. Total
employment should include contract and temporary employees on a full$time e6uivalent '9T@- basis.
Calculation: )otal Product !evenue-./ternal irect Material&8").sC
.alue Adding($on,.alue Adding: Assessing the relative value of activities according to ho) they contribute to
customer value or to meeting an organi/ation0s needs. The degree of contribution reflects the influence of an
activity0s cost driver's-.
.alue Analysis: A method to determine ho) features of a product or service relate to cost, functionality, appeal
and utility to a customer 'i.e., engineering value analysis-.
Also see: )arget Costing.
.alue Based Return .PB!: A measure of the creation of value. .t0s the difference bet)een economic profit and
capital charge.
.alue C'ain: A series of activities, )hen combined, define a business process: the series of activities from
manufacturers to the retail stores that define the industry supply chain.
.alue C'ain Analysis: A method of identifying all the elements in the lin2age of activities a firm relies on the
secure the necessary materials and services starting from their point of origin to manufacture, and to distribution of
their products and services to an end user.
.alue Proposition: Chat the hub offers to members. To be truly effective, the value proposition has to be t)o$
sided $ a benefit to both buyers and sellers.
.A$: See 7alue-Added #et'ork.
.ariable Cost: A cost that fluctuates )ith the volume or activity level of business.
.BR: See 7alue-Based !eturn.
.elocity: ;ate of product movement through a )arehouse.
.endor: The manufacturer or distributor of an item or product line. Also see: Supplier.
.endor Code: a uni6ue identifier, usually a number and sometimes the company0s (,>* number, assigned by a
customer for the vendor it buys from.
./ample: a grocery store chain buys <reo coo2ies from >abisco. 9or accounting purposes, the grocery store
chain identifies >abisco as Nendor U!%0=1. <ne company can have multiple vendor codes. ./ample: Celch0s
9oods sells many different products $ fro/en grape "uice concentrate, chilled grape "uice, bottled grape "uice, and
grape "elly. Because each of these items is a different type of product 'fro/en food, chilled food, beverages, dry
food-, they may also have a different buyer at the grocery store chain, re6uiring a different vendor code for each
product line.
.endor,Managed Inventory .MI!: The practice of retailers ma2ing suppliers responsible for determining order
si/e and timing, usually based on receipt of retail A<* and inventory data. .ts goal is to increase retail inventory
turns and reduce stoc2 outs.
.endor,O*ned Inventory .OI!: See Consignment Inventory.
.ertical >ub(.ertical Portal: *erving one specific industry. Nertical portal )eb sites are ones that cater to
customers )ithin a particular industry. *imilar to the term Ivertical industry,I these )eb sites are industry specific,
and, li2e a portal, they ma2e use of .nternet technology by using the same 2ind of personali/ation technology. .n
addition to industry$specific vertical portals that cater to consumers, another definition of a vertical portal is one that
caters solely to other businesses.
.ertical Integration: The degree to )hich a firm has decided to directly produce multiple value$adding stages,
from ra) material to the sale of the product to the ultimate consumer. The more steps in the se6uence, the greater
the vertical integration. A manufacturer that decides to begin producing parts, components, and materials that it
normally purchases is said to be bac2)ard integrated. 8i2e)ise, a manufacturer that decides to ta2e over
distribution and perhaps sale to the ultimate consumer is said to be for)ard integrated.
.iral Mar)eting: The concept of embedding advertising into )eb portals and pop ups, and as e$mail attachments
to spread the )ord about products or services that the target audience may not other)ise have been interested in.
.irtual Corporation: The logical e#tension of outpartnering. Cith the virtual corporation, the capabilities and
systems of the firm are managed )ith those of the suppliers, resulting in a ne) type of corporation )here the
boundaries bet)een the suppliers0 systems and those of the firm seem to disappear. The virtual corporation is
dynamic in that the relationships and structures formed change according to the changing needs of the customer.
.irtual /actory: A changed transformation process most fre6uently found under the virtual corporation. .t0s a
transformation process that involves merging the capabilities and capacities of the firm )ith those of its suppliers.
Typically, the components provided by the suppliers are hose that are not related to a core competency of the firm,
)hile the components managed by the firm are related to core competencies. <ne advantage found in the virtual
factory is that it can be restructured 6uic2ly in response to changing customer demands and needs.
.isibility: The ability to access or vie) pertinent data or information as it relates to logistics and the supply chain,
regardless of the point in the chain )here the data e#ists.
.ision: The shared perception of the organi/ation0s future $ )hat the organi/ation )ill achieve and a supporting
philosophy. This shared vision must be supported by strategic ob"ectives, strategies, and action plans to move in in
the desired direction.
Synonym: 7ision Statement.
.MI: See 7endor-Managed Inventory
.OI: See 7endor-,'ned Inventory
.oice Activated: *ystems )hich guide users such as )arehouse personnel via voice commands.
2
2all,to,2all Inventory: An inventory management techni6ue in )hich material enters a plant and is processed
through the plant into finished goods )ithout ever having entered a formal stoc2 area.
2A$: Cide Area >et)or2.
2are'ouse: *torage place for products. Arincipal )arehouse activities include receipt of product, storage,
shipment, and order pic2ing.
2are'ouse Management System 2MS!: The systems used in effectively managing )arehouse business
processes and direct )arehouse activities, including receiving, puta)ay, pic2ing, shipping, and inventory cycle
counts. Also includes support of radio fre6uency communications, allo)ing real$time data transfer bet)een the
system and )arehouse personnel. they also ma#imi/e space and minimi/e material handling by automating
puta)ay processes.
2arranty Costs: .ncludes materials, labor, and problem diagnosis for products returned for repair or
refurbishment.
2aste:
%! .n "ust in time, any activity that does not add value to the good or service in the eyes of the consumer.
&! A by$product of a process or tas2 )ith uni6ue characteristics re6uiring special management control. Caste
production can usually be planned and controlled. *crap is typically not planned and may result from the same
production run as )aste.
2ave Pic)ing: A method of selecting and se6uencing pic2ing lists to minimi/e the )aiting time of the delivered
material. *hipping orders may be pic2ed in )aves combined by a common product, common carrier, or destination,
and manufacturing orders in )aves related to )or2 centers.
2aybill: (ocument containing description of goods that are part of common carrier freight shipment. *ho)s origin,
destination, consigneeDconsignor, and amount charged. Copies travel )ith goods and are retained by
originatingDdelivering agents. ,sed by carrier for internal record and control, especially during transit. >ot a
transportation contract.
2eb: A computer term used to describe the global .nternet. Synonym: *orld *ide *eb
2eb Bro*ser: A client application that fetches and displays )eb pages and other Corld Cide Ceb resources to
the user.
2eb Services: A computer term for information processing services that are delivered by third parties using
.nternet Aortals. *tandardi/ed technology communications protocols: net)or2 services a collections of
communication formats or endpoints capable of e#changing messages.
2eb Site: A location on the .nternet.
2eig't Confirmation: The practice of confirming or validating receipts or shipments based on the )eight.
2eig't,Point Plan: A supplier selection and rating approach that uses the input gathered in the categorical plan
approach and assigns )eights to each evaluation category. A )eighted sum for each supplier is obtained and a
comparison made. The )eights used should sum to 100% for all categories.
Also see: Categorical Plan.
2'at <ou See Is 2'at <ou 5et 2<SI2<5!: An editing interface in )hich a file created is displayed as it )ill
appear to an end user.
2'olesaler: See istributor.
2ide,Area $et*or) 2A$!: A public or private data communications system for lin2ing computers distributed over
a large geographic area.
2IP: See *ork in Process.
2MS: See *are(ouse Management System
2or) in Process 2IP!: Aarts and subassemblies in the process of becoming completed finished goods. Cor2 in
process generally includes all of the material, labor, and overhead charged against a production order )hich has
not been absorbed bac2 into inventory through receipt of completed products.
2orld 2ide 2eb 222!: A Imulti$media hyper$lin2ed database that spans the globeI providing information on
des2top and handheld computers and other devices such as )eb compliant phones and televisions. ,nli2e earlier
.nternet services, the I)ebI provides more than "ust te#t combining te#t, pictures, sounds, and even animation in a
graphical user interface for ease of navigation.
222: See *orld *ide *eb.
8<?
8%&: The A>*. standard for inter$industry electronic interchange of business transactions.
8M#: See ./tensible Markup %anguage
<ield: The ratio of usable output from a process to its input.
?one Pic)ing: A method of subdividing a pic2ing list by arrears )ithin a storeroom for more efficient and rapid
order pic2ing. A /one$pic2ed 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 )or2 center.