100 Supply Chain Management Definitions

A comprehensive vocabulary review set covering 100 essential concepts, methods, and terminology in supply chain management.

Supply Chain

The entire network of entities, directly or indirectly interlinked and interdependent in serving the same consumer or customer.

Supply Chain Management (SCM)

The management of the flow of goods and services, which includes all processes that transform raw materials into final products.

Logistics

The detailed coordination of complex operations involving people, facilities, and supplies.

Distribution

The process of making a product or service available for the consumer or business user who needs it.

Procurement

The process of obtaining goods and services from external sources.

Inventory Management

The supervision of non-capitalized assets (inventory) and stock items.

Demand Forecasting

The process of making estimations about future customer demand using historical data and other information.

Just-In-Time (JIT)

An inventory management strategy that aligns raw-material orders from suppliers directly with production schedules.

Lead Time

The amount of time that elapses between when a process starts and when it is completed.

Supplier Relationship Management (SRM)

The discipline of strategically planning for, and managing, all interactions with third-party organizations that supply goods and/or services.

Supply Chain Visibility

The ability to track products as they move through the supply chain.

Third-Party Logistics (3PL)

The use of third-party businesses to outsource elements of a company’s distribution and fulfillment services.

Fourth-Party Logistics (4PL)

A model where a business outsources the management of its entire supply chain to another company.

Cross-Docking

A practice in logistics of unloading materials from an incoming truck and loading them directly onto outbound trucks.

Reverse Logistics

The process of moving goods from their final destination for the purpose of capturing value, or proper disposal.

Electronic Data Interchange (EDI)

The computer-to-computer exchange of business documents in a standard electronic format between business partners.

Material Requirements Planning (MRP)

A system for calculating the materials and components needed to manufacture a product.

Enterprise Resource Planning (ERP)

Business process management software that allows an organization to use a system of integrated applications to manage the business.

Order Fulfillment

The complete process from point of sales inquiry to delivery of a product to the customer.

Supply Chain Network Design

The process of building and modeling a supply chain to understand the costs and time required to bring products to market.

Bullwhip Effect

The phenomenon in supply chains where orders to the supplier tend to have larger variance than sales to the buyer.

Vendor-Managed Inventory (VMI) [Business Model]

A family of business models in which the buyer of a product provides certain information to a supplier of that product and the supplier takes full responsibility for maintaining an agreed inventory.

Consignment Inventory

Inventory that is in the possession of the customer, but remains the property of the supplier.

Freight Forwarder

An agent who acts on behalf of importers, exporters, or other companies to organize the safe, efficient, and cost-effective transportation of goods.

Cold Chain

A temperature-controlled supply chain.

Warehouse Management System (WMS)

Software and processes that allow organizations to control and administer warehouse operations.

Capacity Planning

The process of determining the production capacity needed by an organization to meet changing demands for its products.

Total Cost of Ownership (TCO)

The purchase price of an asset plus the costs of operation.

Kitting

The process in warehouse management where individual items are grouped or packaged together to create a single, ready-to-ship package.

Bill of Materials (BOM)

A comprehensive list of raw materials, components, and assemblies required to build a product.

Supply Chain Resilience

The ability of a supply chain to both resist disruptions and recover operational capability after disruptions occur.

Dropshipping

A retail fulfillment method where a store doesn’t keep the products it sells in stock. Instead, it purchases the item from a third party and has it shipped directly to the customer.

Freight Audit

The process of examining, adjusting, and verifying freight bills for accuracy.

Inbound Logistics

The process of receiving, storing, and distributing raw materials for use in production.

Outbound Logistics

The process related to the storage and movement of the final product and the related information flows from the end of the production line to the end user.

Sustainability in Supply Chain

The integration of sustainable environmental practices into supply chain management.

Advanced Planning and Scheduling (APS)

Systems that coordinate and synchronize supply chain operations, from demand planning through supply chain execution.

Global Supply Chain

The worldwide network of suppliers, manufacturers, warehouses, distribution centers, and retailers.

Kanban

A scheduling system for lean manufacturing and just-in-time manufacturing.

Radio-Frequency Identification (RFID)

A technology that uses electromagnetic fields to automatically identify and track tags attached to objects.

Supply Chain Optimization

The application of processes and tools to ensure the optimal operation of a manufacturing and distribution supply chain.

Batch Tracking

The process of tracking the production, usage, and location of batches of products throughout the supply chain.

Dual Sourcing

The practice of using two suppliers for a given component or product.

Economic Order Quantity (EOQ)

The optimal order quantity that minimizes the total holding costs and ordering costs.

Safety Stock

A quantity of stock that is maintained to mitigate the risk of stockouts.

Supply Chain Agility

The ability of a supply chain to rapidly respond to changes in demand, supply, and market conditions.

Vendor-Managed Inventory (VMI) [Inventory System]

An inventory management system where the supplier is responsible for maintaining the inventory levels of the buyer.

Logistics Management

The part of supply chain management that plans, implements, and controls the efficient flow and storage of goods, services, and related information.

Inventory Turnover

A ratio showing how many times a company’s inventory is sold and replaced over a period.

Backorder

An order for a product that is temporarily out of stock.

Pipeline Inventory

Inventory that is in transit between suppliers and customers.

Supply Chain Collaboration

Working together with supply chain partners to achieve common objectives.

Lead Logistics Provider (LLP)

A company that manages all or most of another company's logistics functions.

Customs Brokerage

The facilitation of the import and export of goods across borders.

Landed Cost

The total cost of a product once it has arrived at a buyer’s doorstep. It includes the purchase price, shipping, insurance, and other costs.

Demand Planning

The process of forecasting future customer demand to optimize supply chain processes.

Order Cycle Time

The time it takes from when a customer places an order until the order is received.

Cycle Counting

An inventory auditing procedure where a small subset of inventory is counted on any given day.

Slotting

The process of organizing products within a warehouse to maximize efficiency and space utilization.

Inventory Carrying Cost

The total cost of holding inventory, including storage, insurance, and taxes.

Backhaul

The return trip of a transportation vehicle from its original destination to its point of origin, especially when carrying goods for a second customer.

Incoterms

A series of predefined commercial terms published by the International Chamber of Commerce related to international commercial law.

Cross-Border Logistics

The process of managing and overseeing the movement of goods across international borders.

Consolidation

The process of combining multiple smaller shipments into a larger one to improve transportation efficiency.

Hazardous Materials (HazMat)

Substances that pose a risk to health, property, or the environment.

Carbon Footprint in Supply Chain

The total amount of carbon dioxide emissions produced by a company’s supply chain activities.

Multi-Modal Transport

The transportation of goods under a single contract, but performed with at least two different means of transport.

Sourcing Strategy

The approach a company uses to source its raw materials, components, and services.

Blockchain in Supply Chain

The use of blockchain technology to enhance transparency, traceability, and security in supply chains.

Decoupling Point

The point in the supply chain where inventory is held as a buffer between differing lead times.

Service Level Agreement (SLA)

A contract between a service provider and a customer that outlines the expected level of service.

Total Quality Management (TQM)

An approach to long-term success through customer satisfaction.

Freight Density

The weight of a shipment divided by its volume.

ABC Analysis

An inventory categorization method that divides items into three categories: A (most valuable), B (moderately valuable), and C (least valuable).

Order Processing

The workflow associated with the picking, packing, and delivery of the packed items to a shipping carrier.

Routing

The process of determining the optimal path to deliver goods and services.

Point of Sale (POS) Data

Information collected at the time and place of sale, such as product details, price, and quantity sold.

Packaging Optimization

The process of designing packaging to minimize costs while protecting the product and meeting sustainability goals.

Freight Brokerage

The process of matching a shipper's freight with a carrier to transport the goods.

Obsolescence

The process of a product becoming outdated or no longer useful.

Electronic Product Code (EPC)

A unique identifier for individual objects used in RFID technology.

Customs Compliance

Adhering to all rules and regulations set forth by the country’s customs authority.

Intermodal Transportation

The movement of cargo using multiple modes of transportation, such as rail, ship, and truck, without handling the cargo itself when changing modes.

Supplier Risk Management

The process of identifying, assessing, and mitigating risks related to supplier relationships.

Order Management System (OMS)

A system that automates and manages the order processing for a business.

Containerization

A system of intermodal freight transport using intermodal containers (also called shipping containers and ISO containers).

Supply Chain Analytics

The process of collecting and analyzing data related to supply chain operations to make informed decisions.

Logistics Service Provider (LSP)

A company that provides logistics services, such as transportation, warehousing, and distribution.

Perpetual Inventory System

An inventory management method that records the sale or purchase of inventory in real-time through the use of computerized systems.

E-commerce Logistics

The process of delivering products purchased online to customers.

Buffer Stock

Extra inventory kept to reduce the risk of stockouts.

Cost-to-Serve

The analysis and understanding of the costs associated with serving different customers, segments, or channels.

Supplier Scorecard

A tool used to assess and track a supplier's performance over time.

Returns Management

The process of managing returned goods, from receiving to final disposition.

Collaborative Planning, Forecasting, and Replenishment (CPFR)

A concept that aims to enhance supply chain integration by supporting and assisting joint practices.

Automated Storage and Retrieval System (AS/RS)

A type of warehouse technology that automates the process of storing and retrieving products.

Total Delivered Cost

The complete cost to produce and deliver a product to the customer.

Third-Party Procurement

The use of an outside entity to manage procurement functions on behalf of a company.

Supplier Segmentation

The process of classifying suppliers into categories based on their importance to the business.

Value Chain

The full range of activities that businesses go through to bring a product or service to their customers.