D471 Global Supply Chain Management / Glossary

ABC Analysis

A tool for classifying inventory based on degree of importance.

Additive Manufacturing

Also known as 3-D printing, it is a process that creates a solid object from a software design. The process deposits materials such as plastics and metals in thick layers one on top of the other, gradually building up one layer at a time until the object is produced.

Alliances

The most comprehensive of buyer-supplier relationships reflected by high interaction frequency and significant trust and commitment between supply chain partners.

Anticipation Inventory

Inventories carried in anticipation of events, such as seasonality or price increases.

Assemble-to-Order Strategy

An inventory strategy in which the product is partially completed and kept in a generic form, then finished when an order is received.

Assignable Variation

Variation that is caused by factors that can be clearly identified and managed.

Batch Process

A process used to produce small quantities of products in groups or batches based on customer orders or product specifications.

Benchmarking

A method for comparing and quantifying operational performance to establish internal targets based on best in class results.

Big Data Analytics

Applying math and statistics to large data sets referred to as Big Data.

Bill of Materials (BOM)

A list that shows all the raw materials, components, and subassemblies that go into a product. It also shows the quantities and relationships of items needed to make a final product.

Break-Even-Analysis

A tool used to compute the product quantity that needs to be sold for a company to cover their costs—called the "break-even point."

Bullwhip Effect

The phenomenon where fluctuation and distortion of information increases as it moves up the supply chain, from retailers, to manufacturers, to suppliers.

Business Process

A structured set of activities or steps with specified outcomes.

Business Strategy

A plan for the company that defines the company's long-term goals, how it plans to achieve these goals, and the way the company plans to differentiate itself from its competitors.

Carbon Footprint

An ecological footprint metric that measures the amount of carbon released into the atmosphere, which is correlated with adverse effects on climate stability.

Cash-to-Cash Cycle

The time it takes to convert an order into cash.

Causal Models

Forecasting models based on the assumption that the variable being forecast is related to other variables in the environment; a model is developed identifying these relationships, expressing them in mathematical terms, and using that information to forecast the future.

Cellular Layouts

Sometimes called Group Technology Cell (GT Cells), these are hybrid layout group items based on similar processing characteristics and workstations arranged to form a number of small assembly lines called work cells.

Channel of Disruption

The way products and services are passed from the manufacturer to the final consumer.

Collaborative Planning, Forecasting, and Replenishment (CPFR)

A collaborative process of developing joint forecasts and plans with supply chain partners, rather than doing them independently.

Common (Random) Variation

Variation that is inherent in the process itself.

Concurrent Engineering

All organizational functions simultaneously working together in product design.

Continuous Processes

Operations processes that produce a high volume of a standardized product on a continual basis. Examples include oil refineries, water treatment plants, and certain paint facilities.

Core Competency

The distinctive competency of a company it uses to compete in the marketplace.

Cross-Docking

An approach used to reconfigure bundles of products where larger shipments are broken down into small shipments for local delivery in an area.

Cycle Stock

Also called lot size inventories, this is inventory for immediate use and is computed based on expected demand over a certain time period.

Culture

Acceptable behaviors, beliefs, and norms characteristic of a particular global region.

Customer Relationship Management (CRM)

Software designed to focus on the interface between the firm and its customers.

Customer Segmentation

Identification of unique groups of customers with similar needs.

Customer Service

A process of enhancing the level of customer satisfaction by meeting or exceeding customer expectations.

Cycle Time

The maximum amount of time each station on the assembly line has to complete its assigned tasks. It is also called takt time.

Demand Management

The process of attempting to modify demand through efforts such as promotional campaigns and advertisements, sales incentives, and cost cutting.

Dependent Demand

Demand for component parts or subassemblies.

Design for Manufacture (DFM)

A series of guidelines for producing a product easily and profitably.

Distribution Strategy

A plan for how a company will get its products and services to customers.

E-Auctions

The use of Internet technology to conduct auctions as a means of selecting suppliers and determining aspects of the purchase contract.

Early Supplier Involvement (ESI)

The practice of including suppliers in new product development to tap into their expertise in product, process, and supply chain design.

Electronic Data Interchange (EDI)

The interorganizational, computer-to-computer communication of business transactions for orders, confirmations, invoices, and shipping notices.

Enterprise Resource Planning (ERP)

Large software programs used for planning and coordinating all resources throughout the entire enterprise.

Environmental Sustainability

The preservation of diverse biological systems that remain productive over time.

Experience Curve

A phenomenon where organizational costs are reduced due to experience and learning effects that result from processing a higher volume.

Facility Layout

The physical arrangement of all resources within a facility.

Facility Location

The physical location of all facilities, including warehouses, factories, and retail locations.

Factor Rating

A tool that can be used to make location decisions.

Fill Rate

The percent of products ordered that are actually delivered.

Fixed Position Layout

A layout arrangement used when a product cannot be moved during production, usually due to size.

Forecasting

The process of predicting future events.

Functional Products

Products that satisfy basic functions or needs.

Holding Costs

Sometimes called carrying cost—includes all the costs that vary with the amount of inventory held in stock. This includes storage facilities, handling, insurance, pilferage, breakage, obsolescence, depreciation, taxes, and the opportunity cost of capital.

Import Quotas

A quantitative restriction on the volume of imports. It is one of the most common forms of nontariff barriers.

Independent Demand

Demand for a finished product.

Information Technology (IT)

Technology that enables communication, storage, and processing of information within and between firms. IT is the backbone of supply chain management that enables managing processes.

Infrastructure

Availability and access to roads and transportation, equipment and communication networks, distribution systems, and skilled labor.

Innovative Products

Products that are purchased for reasons other than basic needs, such as innovation or status. These include high-fashion items or technology products, such as those seen in the computer industry.

Intermittent Processes

A process used to produce a large variety of products with different processing requirements in low volumes.

Inventory

Quantities of goods in stock.

Inventory Policy

Inventory decisions that answer the questions of when and how much to order.

Inventory Turnover

A measure of how quickly inventory moves. It is computed as: Inventory Turnover = Cost of Goods Sold / Average Inventory Value

Jidoka

An element of Lean that allows workers to "stop the line" when discovering production problems.

Kaizen

An element of quality that means continuous improvement.

Keiretsu

A close-knit network of suppliers that continuously learn, improve, and prosper along with their parent companies.

Key Performance Indicators (KPI)

Quantifiable measurements that reflect a company's critical success factors.

Lean

A management approach for creating value for the end customer through the most efficient utilization of resources possible.

Lean Six Sigma

A management philosophy that combines the benefits of both Lean and Six Sigma approaches, utilizing the tools from each.

Leverage

Leverage is the amount of bargaining power in negatiation.

Life Cycle Assessment (LCA)

An approach that considers environmental stewardship by analyzing the environmental aspects and potential impacts associated with a product, process, or service.

Line Processes

Processes designed to produce a large volume of a standardized product for mass production. They are also known as flow shops, flow lines, or assembly lines.

Logistics

The business function responsible for transporting and delivering products to the right place at the right time throughout the supply chain.

Make-to-Order

A strategy used to produce products to customer specifications after an order has been received.

Make-to-Stock

A strategy that produces finished products for immediate sale or delivery, in anticipation of demand. Companies using this strategy produce a standardized product in larger volumes.

Marketing

The business function responsible for linking the organization to its customers and is concerned with the "downstream" part of the supply chain.

Material Requirements Planning (MRP)

An inventory control system used to compute order quantities for dependent demand inventory items.

Negotiation

The process of gaining concessions from another party.

Offshoring

Another name for outsourcing to a different country

Omni-Channel

An approach to sales that seeks to provide the customer with a seamless shopping experience across multiple channels.

Operations Management (OM)

The business function responsible for producing a company's goods and services, in an efficient and cost effective way.

Operations Strategy

A strategy of a company that involves decisions about how it will produce goods and services.

Ordering Cost

Costs involved in placing an order and procuring the item.

Order Qualifiers

Characteristics that qualify the company to be a participant in a particular market.

Order Winners

Characteristics that win the company orders in the marketplace. A company should excel on their order winners.

Outsourcing

Hiring a third party to perform a set of tasks for a fee.

Pareto Principle

A rule that suggests that 80% of an outcome is generated by 20% of an activity.

Physical Distribution

Outbound Logistics

Pipeline Inventory

Also called transportation inventory, this is inventory that is in transit. It exists because the points of demand and supply are not the same.

Planning

The process of selecting actions in anticipation of the forecast.

Power Distance

The extent to which there is a strong separation of individuals based on rank.

Predictive Analysis

Uses a variety of techniques—such as statistics, modeling, and data mining—to analyze current and historical facts to make predictions about the future.

Product Design

The process of specifying the exact features and characteristics of a company's product.

Product Layout

A layout design that arranges resources in sequence to enable efficient production of the product.

Product Life Cycle (PLC)

A marketing concept that states that products and services evolve through a life cycle, and that the specific management concerns vary with each stage of the life cycle.

Process Capability

The evaluation of the production process as to its ability to meet or exceed the set product specifications.

Process Control Charts

A statistical quality control tool used to monitor the process to ensure products are being produced with characteristics that are within the set limits.

Process Design

The design of a production process that can create the exact product desired.

Process Layout

A layout design where similar processes are grouped together.

Product Postponement

A strategy where the product is kept in the most generic form as long as possible in the production and distribution process.

Product Traceability

The ability to easily trace a product from point of origin in the supply chain, through to the customer, and back down the supply chain in the case of returns.

Productivity

A measure of how well a company uses its resources. It is computed as a ratio of outputs to inputs.

Project Processes

A process used to make one-of-a-kind products exactly to customer specifications.

Purchase Order (PO)

A document that specifies the terms and conditions of the purchase agreement and initiates supplier action.

Purchasing

A term that defines the process of buying goods and services.