D470 Competency 3: Total Cost of Ownership Management and Operations Flashcards

Vocabulary flashcards covering key inventory, operational management, and outsourcing terms from D470 Competency 3.

Safety Stock (Buffer Stock)

The level of stock required to avoid stockouts caused by uncertainties in supply and demand.

Bullwhip Effect (Forrester Effect)

The surge in demand resulting from small changes in demand being amplified as they move back through the supply chain.

Economic Order Quantity (EOQ)

The traditional method of calculating the appropriate quantity to reorder.

ABC Analysis Method

A method used to minimize excess inventory by categorizing items into 'A' lines (fast movers, ~20%), 'B' lines (medium movers, ~30%), 'C' lines (slow movers), and 'D' lines (obsolete/dead stock, with C+D representing ~50%).

Direct Systems

Distribution structure systems that have a centralized inventory from which customers are supplied directly.

Echelon Systems

Distribution structure systems involving the flow of products through a series of locations from the point of origin to the final destination.

Mixed Systems

Distribution structure systems combining direct and echelon systems, representing the most common distribution pattern.

Independent Demand

Demand occurring where the demand for one product is not governed by the demand for any other product.

Dependent Demand

Demand occurring where the demand for a product is directly related to or dependent on another product.

Push System

An inventory management system that anticipates future demand (build to stock).

Pull System

An inventory management system where demand is used to 'pull' the product through the system (build to order).

Inventory Optimization

A scientific approach to determine the ideal inventory levels across a complete supply chain, identifying the most effective inventory locations and stock levels.

Balanced Scorecard

A management framework that translates the strategic mission of a business operation into tangible objectives and measures across four perspectives: financial, customer, internal, and innovation & learning.

Integrated Supply Chain Approach

A process-oriented approach that enables cost and performance monitoring to be based on a horizontal view of a business rather than the traditional vertical, silo-based functional structure.

Activity-Based Costing (ABC)

An accounting approach that addresses problems with traditional systems by collecting costs for specific activities rather than general aggregates or broad levels.

Cost-to-Serve®

An approach similar to activity-based costing that is less resource-intensive, used in distribution and logistics to assess how costs are consumed throughout the supply chain.

Engineered Standards

Internally derived measures for logistics activities covering vehicle preparation and loading, running/driving time, and load selection and delivery time.

Dedicated Operation

An exclusive distribution or logistics operation dedicated to a single user.

Multi-user Operation

A shared-user distribution operation serving multiple clients.

Implants

Third-party logistics (3PL) staff who work directly on the client's premises.