Supply Chain Management Glossary

A comprehensive list of SCM terms and definitions. Click on a topic to expand or collapse its terms.

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SCM Overview

Supply Chain Management (SCM): The entire process of producing and selling a product, from the raw materials to the final customer.
Economies of Scale: The cost advantages that a business obtains due to expansion, often leveraged in lateral supply chains by outsourcing to specialized providers.
Economies of Scope: Cost efficiencies gained by producing a wider variety of products or services together rather than separately.
Digital Transformation: The integration of digital technology into all areas of supply chain operations, enabling predictive analytics, automation, and end-to-end visibility.
Industrie 4.0: The European term for supply chain digital transformation, emphasizing automation, smart factories, and data-driven decision-making.
Stakeholder Value: The principle that supply chains must generate value for all participants—including customers, suppliers, employees, and investors—not just cost reduction.
Procurement: The process of acquiring goods, services, or work from an external source.
Logistics: The detailed planning and execution of moving goods, information, and resources from one point to another.
Inventory Management: The practice of controlling and overseeing the ordering, storage, and use of a company's raw materials, components, and finished products.
Distribution: The process of moving goods from the manufacturer or supplier to the end customer.
Customers: The end-users who purchase and consume the product, driving demand and providing feedback for the entire supply chain.
Suppliers: Organizations that provide the raw materials, components, and services needed to produce a product.
Manufacturers: Businesses that convert raw materials into finished goods or products.
Retailers: The businesses that sell products directly to the end customer.
Logistics Providers: Companies that specialize in transportation, warehousing, and other services to help move goods through the supply chain.
Supply Chain Phases: The key stages of a supply chain: Plan, Source, Make, Deliver, and Return.
Important Supply Chain Metrics: Key Performance Indicators (KPIs) like lead time, perfect order rate, and inventory turnover, used to measure performance.
Cycles of Supply Chain Processes: The sequence of activities, such as a customer's order cycle, that connects different stages of the supply chain.
Push/Pull Strategy: Two methods for product flow: 'Push' is based on forecasts, while 'Pull' is based on actual customer demand.
Origin of Supply Chain: The historical development of supply chain management from its roots in logistics and operations management.
E-Commerce Supply Chain: A specialized supply chain focused on managing the flow of goods for online sales and fulfillment, often including last-mile delivery.
JIT (Just-in-Time): An inventory strategy designed to receive goods from suppliers only as they are needed, minimizing inventory costs.
Lean SCM: A methodology that focuses on eliminating waste and increasing efficiency in all parts of the supply chain.
Green and Sustainable SCM: The integration of environmentally and socially responsible practices into the management of a supply chain.
Bull-Whip Effect: The phenomenon where small changes in customer demand at the retail level cause increasingly larger fluctuations in orders further up the supply chain.
Supply Chain Impellers: Factors that drive or accelerate change and motion within a supply chain, such as technology, consumer demand shifts, or regulations.
SCM Globalization: The expansion of supply chain activities across international borders, involving sourcing, manufacturing, and distribution in different countries.
Multi Modal Transportation: The use of two or more different modes of transportation (e.g., truck, rail, ship) to move goods from source to destination.
Role of IT in Supply Chain Management: The use of technology and software to manage, track, and optimize all supply chain operations, from planning to delivery.
Supply Chain Visibility: The ability to see and track goods, information, and funds as they move through the supply chain, often in real-time.
CRM: Customer Relationship Management software and processes used to manage a company's interactions with current and potential customers.
ERP: Enterprise Resource Planning; integrated software systems that a company uses to manage and integrate all of its key business functions.
WMS: A Warehouse Management System; a software application that helps manage and control daily operations in a warehouse, from receiving to shipping.
Order Management: The process of receiving, tracking, and fulfilling customer orders, from placement to delivery.
Risk Management: The process of identifying, assessing, and mitigating potential disruptions or threats to the supply chain.

Distribution and Fulfillment

Cross-Docking: A logistics practice where products are unloaded from an incoming vehicle and loaded directly into an outbound vehicle, with little or no storage in between.
Order Picking: The process of retrieving products from a warehouse to fulfill a customer's order. This can be done manually or with automated systems.
Last-Mile Delivery: The final leg of the delivery process, from a distribution center or hub to the final customer's doorstep. It is often the most expensive and time-consuming part.
Distribution: The process of storing, handling, and delivering finished goods from manufacturers or distribution centers to retailers, wholesalers, or end customers efficiently and cost-effectively.
Distribution Channels: The paths or routes through which goods and services flow from producers to end customers. They can include direct channels (manufacturer to customer) and indirect channels (wholesalers, distributors, retailers, etc.). Distribution channels determine how products reach the market efficiently.
Distribution Center: A specialized warehouse where products are stored, sorted, and shipped to retailers, wholesalers, or customers to ensure timely delivery.
Regional Distribution Center: A facility that serves a specific geographic area, storing and distributing products closer to customers to reduce delivery time and costs.
Distribution Strategy: A plan for how a product gets from the manufacturer to the final customer, covering things like choosing online stores, physical shops, or direct selling, and managing the transport and storage of goods.
Centralized vs. Decentralized Distribution: Centralized distribution uses one main hub for all operations, offering better control and lower costs but slower delivery. Decentralized uses multiple smaller locations closer to customers, providing faster delivery and more flexibility at a higher cost.
Multi-Channel Distribution: A business strategy that uses multiple channels, such as physical stores, websites, and social media, to sell products or services and reach a wider customer base.
Distribution Network Design: The strategic planning and management of a company's distribution channels and facilities to ensure efficient movement of goods from suppliers to customers. This includes decisions on the number, location, and type of warehouses, as well as transportation and inventory control.
Centralized Distribution: A strategy where inventory is stored and managed from a single location.
Decentralized Distribution: A strategy where inventory is spread across multiple locations closer to customers.
Direct-to-Consumer (D2C): A model where manufacturers sell directly to customers without intermediaries.
Multi-Channel Distribution: Using multiple sales channels like retail, online, and distributors simultaneously.
Omni-Channel Fulfillment: An integrated approach where all channels are connected to provide a seamless customer experience.
Distribution Network Design: Planning the layout and structure of warehouses, hubs, and transport routes.
Hub-and-Spoke Model: A system where a central hub supplies smaller regional facilities (spokes).
Regional Distribution Center: A facility positioned regionally to store and distribute products quickly to customers.
Cross-Docking: Moving products directly from inbound to outbound transport with little or no storage.
Wholesalers: Intermediaries who buy in bulk from manufacturers and sell to retailers.
Retailers: Businesses that sell products directly to end consumers.
Distributors: Organizations that distribute products on behalf of manufacturers to retailers or customers.
E-commerce Platforms: Online marketplaces where products are sold and fulfilled digitally.
Third-Party Logistics (3PL): External companies that provide logistics and fulfillment services.
In-House Fulfillment: Companies manage storage, picking, packing, and shipping themselves.
Dropshipping: Retailers sell products without holding inventory; suppliers ship directly to customers.
4PL (Lead Logistics Provider): A higher-level logistics partner managing multiple 3PLs and supply chain functions.
Micro-Fulfillment Centers: Small, tech-enabled warehouses located close to urban areas for faster delivery.
Order Processing: The steps from receiving an order to preparing it for shipment.
Order Tracking: Providing visibility of order status to customers and businesses.
Returns Management: Handling customer returns and reverse logistics efficiently.
Safety Stock: Extra inventory kept as a buffer against demand or supply uncertainty.
Replenishment Strategies: Methods to restock inventory when it runs low.
Just-in-Time (JIT) Distribution: Delivering inventory exactly when needed, minimizing storage costs.
Inventory Positioning: Deciding where to hold stock in the supply chain for efficiency.
Picking & Packing: Warehouse processes of selecting and preparing products for shipment.
Storage Systems: Methods like FIFO, LIFO, and FEFO to organize warehouse inventory.
Warehouse Automation: Use of robotics and technology to speed up warehouse operations.
Cold Chain Distribution: Temperature-controlled supply chain for perishable goods.
Last-Mile Delivery: The final step of delivery from a hub to the customer s doorstep.
Freight Forwarding: Coordinating the movement of goods across international borders.
Carrier Management: Selecting and managing transport service providers.
Transportation Modes: Different ways of moving goods road, rail, air, and sea.
Warehouse Management System (WMS): Software to manage warehouse operations and inventory.
Transportation Management System (TMS): Software to plan, track, and optimize transport operations.
Real-Time Tracking: Monitoring goods location and status at any moment.
AI in Fulfillment: Using AI to optimize picking, demand forecasting, and delivery.
Supply Chain KPIs: Metrics like order cycle time, fill rate, and on-time delivery to measure performance.
Cost Optimization: Strategies to reduce logistics and fulfillment costs.
Service Level Agreements (SLAs): Contracts defining service standards between companies and logistics providers.
Sustainability in Distribution: Practices that reduce environmental impact, like green packaging and efficient transport.
Micro-Fulfillment Centers: Small automated warehouses close to cities for faster delivery.
Dark Stores: Retail outlets converted to online-only fulfillment hubs.
Order Processing: Steps from receiving an order to preparing it for shipment.
Order Tracking: Monitoring and sharing order status with customers.
Returns Management: Handling product returns and reverse logistics efficiently.
Reverse Logistics: Moving goods back from customers to sellers for returns or recycling.
Safety Stock: Extra inventory kept as a buffer against uncertainty.
Cycle Stock: Inventory required to meet normal demand during a cycle.
Replenishment Strategies: Methods to restock inventory when it runs low.
Just-in-Time (JIT) Distribution: Delivering goods exactly when needed, reducing storage.
Vendor-Managed Inventory (VMI): Suppliers manage inventory levels at the retailer's location.
Inventory Positioning: Deciding where to place stock in the network for efficiency.
Picking & Packing: Warehouse processes of selecting and preparing goods for shipping.
Kitting: Combining individual items into ready-to-ship sets.
Storage Systems: Inventory organization methods like FIFO, LIFO, FEFO.
Warehouse Automation: Robotics and tech to streamline warehouse operations.
Cold Chain Distribution: Temperature-controlled supply chain for perishable goods.
Consolidation: Combining multiple smaller shipments into one larger load.
Pooling: Sharing transport or warehousing among companies to reduce costs.
Last-Mile Delivery: The final step of delivery to the customer s door.
Middle-Mile Logistics: Transport from warehouses to local hubs or stores.
Freight Forwarding: Organizing international shipping across modes and borders.
Carrier Management: Selecting and managing transport providers.
Transportation Modes: Ways to move goods: road, rail, air, sea.
Intermodal Transport: Using more than one mode of transport in a single journey.
Warehouse Management System (WMS): Software managing warehouse operations and inventory.
Transportation Management System (TMS): Software to plan and optimize transport operations.
Yard Management System (YMS): Software controlling trucks and trailers at distribution yards.
Real-Time Tracking: Monitoring goods location and status continuously.
Electronic Data Interchange (EDI): Digital exchange of business documents between partners.
Blockchain in Logistics: A secure ledger for transparent supply chain transactions.
AI in Fulfillment: Using AI for picking, demand forecasting, and routing.
Robotics in Warehousing: Robots assist in picking, sorting, and moving goods.
Drones in Delivery: Unmanned aerial vehicles used for last-mile delivery.
Autonomous Vehicles: Self-driving trucks and vans for transport.
Supply Chain KPIs: Metrics like order cycle time and delivery reliability.
On-Time Delivery: A KPI measuring if orders are delivered as scheduled.
Fill Rate: Percentage of customer demand met without backorders.
Perfect Order Rate: Orders delivered complete, on time, and without errors.
Cost Optimization: Strategies to lower logistics and fulfillment costs.
Service Level Agreements (SLAs): Contracts defining service expectations with providers.
Sustainability in Distribution: Reducing logistics environmental impact via green practices.
Green Packaging: Eco-friendly materials for shipping and packaging goods.
Carbon-Neutral Shipping: Offsetting emissions from transportation activities.
Distribution ERP: An integrated system that manages inventory, order processing, warehousing, and logistics to streamline distribution operations.
Distributed Order Management (DOM): A system that intelligently routes and fulfills customer orders across multiple channels, warehouses, and suppliers to ensure the most efficient and cost-effective delivery.
Entities: The participants in a supply chain, which may include suppliers, producers, customers, service providers, or even departments within a single organization.
Flows: The four types of flows in a supply chain: product, information, funds, and reverse flows.
Reverse Supply Chain: The backward flow of products for return, recycling, remanufacturing, or disposal, handled through reverse logistics.
Funds Flow: The upstream movement of money in a supply chain as customers pay producers and producers pay suppliers.
Cash-to-Cash Cycle Time: The time it takes for invested cash to be converted back into cash through sales receipts, measuring the efficiency of financial flows.
Channel Master: A strong company, such as a manufacturer, designer, or powerful retailer, that organizes and drives value creation in the supply chain.
Vertical Integration: The practice of bringing multiple supply chain activities inside one organization for greater control, e.g., Henry Ford’s ownership of mines, mills, and ships.
Lateral (Horizontal) Integration: An approach where companies specialize in core competencies and outsource non-core functions to other organizations.
Keiretsu: A Japanese cooperative relationship among companies that remain legally independent but collaborate closely, often supported by shared ownership and financial ties.
Supply Chain Maturity: The level of integration and coordination with supply partners relative to competitors, often described in five stages from dysfunction to orchestration.
Multiple Dysfunction: The first stage of supply chain maturity, characterized by ad hoc processes, poor forecasting, and lack of coordination.
Semifunctional Enterprise: The second stage of supply chain maturity where functions are defined and efficiency is pursued, but cross-functional collaboration is limited.
Integrated Enterprise: A stage of supply chain maturity where companywide processes are integrated through ERP systems and cross-functional collaboration.
Extended Enterprise: A maturity stage where firms collaborate with suppliers or customers on planning, forecasting, and replenishment across organizational boundaries.
Orchestrated Supply Chain: The most advanced maturity stage, emphasizing digital transformation, resilience, automation, and predictive analytics.
Value Creation: The process of enhancing overall supply chain performance to generate net value, not just cutting costs.
Stakeholders: People with a vested interest in a company, including employees, managers, customers, suppliers, investors, and others.
Process View of Supply Chain: Viewing the supply chain as a set of linked processes rather than just a sequence of companies, highlighting the cross-functional nature of supply chain activities.

Warehousing and Storage

Safety Stock: A buffer of inventory kept to mitigate the risk of stockouts due to unexpected changes in supply or demand.
Stock Keeping Unit (SKU): A unique alphanumeric code assigned to a specific product to identify and track it within a warehouse or inventory system.
Warehouse Management System (WMS): Software designed to support and optimize warehouse and distribution center management, from receiving and putaway to order fulfillment and shipping.
Types of Warehouses: Warehouses can be categorized based on ownership, function, and storage needs, including public, private, bonded, distribution centers, and automated warehouses.
Warehouse: A warehouse is a facility for storing goods before distribution. Unlike normal shipment, it serves as an intermediate hub for ops.
Automated Warehouse: A highly mechanized facility using robotics and automated systems for storage and retrieval of goods.
Distribution Center: A warehouse focused on rapid order fulfillment and distribution to retailers or customers.
Bonded Warehouse: A secure storage for imported goods awaiting customs clearance, often duty-free until released.
Private Warehouse: A company-owned warehouse used exclusively for its own inventory and operations.
Public Warehouse: A facility open to multiple users on a rental basis, offering flexible storage and services.
Bonded Warehouse: A secure facility for storing imported goods that have not yet cleared customs, allowing duty-free storage until release.
Non-Bonded Warehouse: A warehouse where goods can be stored without customs restrictions, typically for domestic inventory and distribution.
Warehouse Design Factors: Warehouse design is governed by space utilization, material flow, storage systems, accessibility, safety, scalability, technology integration, and docking/handling efficiency.
Types of Warehouse Storage Systems: Common storage systems include pallet racks, shelving, bulk storage, automated storage and retrieval systems (AS/RS), and mezzanine floors.
Receiving: Accepting and inspecting incoming goods for quantity and quality.
Put-away: Moving received goods to their designated storage locations.
Picking: Selecting items from storage to fulfill customer orders.
Packing: Preparing selected items for shipment, including packaging and labeling.
Shipping: Dispatching goods to customers or other warehouses.
Inventory Management: Monitoring and controlling stock levels, including cycle counts and audits.
Returns Handling: Processing returned goods for restocking, disposal, or repair.
Kitting: Combining multiple items into a ready-to-ship set or kit.
Racks: Vertical or horizontal structures used to store pallets or large quantities of goods efficiently.
Bins: Small containers or compartments used to store individual items or smaller quantities for easy access.
Warehouse Staging Area: A dedicated space where goods are temporarily held between processes, such as after receiving and before put-away, or after picking and before shipping.
Inventory Management: The process of tracking and controlling stock levels, locations, and movements within a warehouse to optimize availability and minimize costs.
Pallet Racking: A storage system using racks to hold palletized goods, designed to maximize vertical space and improve accessibility in warehouses.
Warehouse Management System (WMS): Software used to manage warehouse operations, including inventory tracking, order processing, and optimizing storage and labor efficiency.
FIFO (First-In, First-Out): An inventory management method where goods received first are used or shipped first, often used for perishable items to prevent spoilage.
LIFO (Last-In, First-Out): An inventory management method where the most recently received goods are used or shipped first, typically for non-perishable items.
Order Fulfillment: The process of receiving, processing, picking, packing, and shipping customer orders from a warehouse to their destination.
Distribution Center: A specialized warehouse designed for rapid movement of goods, focusing on efficient order fulfillment and distribution to retailers or customers.
Cold Storage: A temperature-controlled warehouse used to store perishable goods, such as food or pharmaceuticals, to maintain quality and safety.
Automated Storage and Retrieval System (AS/RS): A robotic or automated system for storing and retrieving goods in a warehouse, improving efficiency and reducing manual labor.
Public Warehouse: A third-party facility that rents storage space to multiple businesses, offering flexible and cost-effective solutions for temporary or small-scale needs.
Bonded Warehouse: A secure facility where imported goods are stored before customs duties are paid, often located near ports or borders.
Inventory Turnover: A metric measuring how often inventory is sold and replaced over a period, indicating efficiency in stock management.
Micro-Fulfillment Center: A small-scale, often urban warehouse designed for rapid order processing and delivery, typically for e-commerce businesses.
Inventory ABC Analysis: A method for categorizing inventory items based on their value or importance. 'A' items are high-value and require tight control; 'B' items are of medium value; and 'C' items are low-value and managed with less rigorous control.
Inventory Metrics: A set of key performance indicators (KPIs) used to measure the efficiency of a warehouse's inventory management, such as inventory turnover, stock-to-sales ratio, and fill rate.
Cross-Docking: A logistics practice where goods from an incoming truck are unloaded, sorted, and immediately reloaded onto an outgoing truck without being stored in the warehouse.
Cycle Counting: A regular, planned process of counting a small subset of inventory on a continuous basis, as opposed to a single, large annual physical inventory count.
Docking and Yard Management: The process of managing the flow of trucks and trailers in and out of the warehouse's loading docks, including scheduling appointments and tracking their location in the yard.

Supply Chain Planning

Demand Management: The process of forecasting, influencing, and managing customer demand to align supply chain activities with market needs.
Forecasting: Estimating future customer demand using historical data, market research, and statistical methods.
Forecast Error: The difference between actual demand and forecasted demand, used to evaluate the reliability of forecasting methods.
Sales and Operations Planning (S&OP): A process that balances demand forecasts with supply capabilities, aligning plans across marketing, sales, and operations.
Operations Planning and Control: The broader process that includes S&OP, master scheduling, and other planning activities to align resources with demand.
Demand Forecasting: The process of predicting future customer demand for a product or service. Accurate forecasting is crucial for effective supply chain planning.
Rolling Average Demand: A simple forecasting method that calculates the average demand over a specific period and uses it to predict future demand.
Forecasting in Supply Chain: The practice of estimating future demand, supply, and trends to guide supply chain decisions.
Definition of Forecast: A prediction or estimate of future demand, supply, or trends in the supply chain.
Primary Characteristic of a Forecast: Forecasts are always uncertain and should be treated as estimates, not guarantees.
Forecasting Methods: Techniques such as qualitative, quantitative, time series, and causal methods used to predict demand.
Aggregate Forecasts: Forecasting total demand across products or regions rather than individual items.
Long Term Forecast: Projections covering years, used for capacity planning and strategic decisions.
Short Term Forecast: Forecasts for days, weeks, or months, used for inventory and operational planning.
Forecast Components: Key elements influencing forecasts, including demand, lead time, seasonality, and trends.
Demand: The quantity of a product or service required by customers at a given time.
Lead Time: The time taken between ordering and receiving goods.
Time Series Forecasting: A method that uses historical data to predict future demand patterns over time.
Moving Average Forecast: A time series method that averages a fixed number of past periods to predict future demand.
Exponential Smoothing: A forecasting method that applies decreasing weights to past observations, giving more importance to recent data.
Forecast Error: The difference between actual demand and the forecasted demand.
Holt's Model: An extension of exponential smoothing that accounts for trends in forecasting.
Winter's Model: An advanced exponential smoothing model that includes both trend and seasonality adjustments.
Seasonality in Forecast: Repeating demand patterns that occur at regular intervals, such as monthly or yearly.
Role of IT in Forecasting: Information systems and analytics tools enhance accuracy and speed in forecasting processes.
Risk Management in Forecasting: Identifying and mitigating uncertainties in demand and supply predictions to reduce business risk.
Product Life Cycle (PLC): The stages a product passes through—introduction, growth, maturity, and decline—which influence supply chain and marketing strategies.
Product Life Cycle Management (PLM): The process of managing a product’s entire lifecycle, from design and introduction to growth, maturity, and retirement.
Forecasting Methods: Techniques used to estimate demand, including qualitative methods (market research, expert judgment) and quantitative methods (time series, regression).
Collaborative Planning, Forecasting, and Replenishment (CPFR): A business practice that combines the intelligence of multiple partners to improve the accuracy of forecasts and the efficiency of replenishment.
Change Management: The structured approach to transitioning individuals, teams, and organizations to a desired future state, critical in orchestrated supply chains.
Control Tower: A centralized system in digital supply chains that provides real-time visibility and coordination across global operations.
Predictive Analytics: The use of statistical and machine learning techniques on supply chain data to forecast future outcomes, such as demand or maintenance needs.
Resilience: The ability of a supply chain to adapt and recover quickly from disruptions such as natural disasters, pandemics, or supply shortages.
Visibility: The capability to track products, information, and funds across the entire supply chain in real-time for better decision-making.
Demand Analysis: Market research or competitor analysis needed for strategic, tactical, and operational levels of planning. Tools include SWOT analysis, market research, and product assessments.
Environmental Scan: A process needed to validate current strategic and operational plans against external forces such as harsh economic climate, changing tastes, or competitor offerings.
Macro Environment: The environment external to a business, including technological, economic, natural, and regulatory forces that marketing efforts cannot control, as defined in the APICS Dictionary, 16th edition.
SWOT Analysis: Stands for Strengths, Weaknesses, Opportunities, and Threats; a strategic planning tool useful for long-term demand analysis.
Strengths: Internal positive points assessed in a SWOT analysis, typically derived from comprehensive data collected about the organization.
Weaknesses: Internal negative points assessed in a SWOT analysis, where input from external customers and suppliers ideally provides substantiated evidence.
Opportunities: External positive points assessed in a SWOT analysis, based on market trends and risk analyses, that can be acted upon to help achieve organizational goals.
Threats: External negative points or risks that can impact a company negatively if they are not handled appropriately, such as unforeseen external events.
Market Plan: A written document, a subset of the strategic business plan, that includes the current market position, opportunity and issue analysis (SWOT results), marketing objectives, action plans, budgets, and pro forma profit and loss statement and management controls.
Market Research: The systematic gathering, recording, and analysis of data about problems relating to the marketing of goods and services.
Pro Forma: Indicates that a financial statement, such as a profit and loss statement, is based on forecasted information rather than historical information.
Market Analysis: A type of market research involving the study of the size, location, nature, and characteristics of markets, useful for market segmentation.
Sales Analysis (or Research): The systematic study and comparison of sales (or consumption) data and market share.
Market Share: The actual portion of current market demand that a company or product achieves (APICS Dictionary, 16th edition).
Consumer Research: The discovery and analysis of consumer attitudes, reactions, and preferences, resulting in information useful for customer segmentation.
Demand Forecasting: A marketing and sales activity that predicts future demand.
Vendor-Managed Inventory (VMI): A type of collaborative arrangement where demand forecasts need to be shared with cross-functional and intercompany teams.
Collaborative Planning, Forecasting, and Replenishment (CPFR): A collaborative arrangement where forecasts need to be shared with cross-functional and intercompany teams to ensure everyone works from the same information.
SKU (Stock Keeping Unit): A proliferation of these (units of product that differ by feature, color, or packaging) increases inventory overhead, dilutes marketing efforts, and lowers manufacturing economies of scale.
Benchmarking: A tool used to get an idea of the competition’s strategy or to determine the relative maturity of competitors’ supply chains.
SCOR Model: A framework for supply chain management used to standardize measurements across different regions or markets, looking at an organization's flexibility, velocity, and predictability, among other things.
Product Portfolio: The mix of product classifications, families, products, and services that the organization offers, forming the core of its brand and value proposition.
Product Family: Groups of products with manufacturing similarities, which are part of the overall product portfolio.
Durable Goods: A broad product classification of physical goods that are expected to last for an extended time period.
Non-durable Goods: A broad product classification of physical goods that deteriorate quickly and may need to be consumed quickly.
Industrial Goods: One of the major classifications of physical goods, which includes subcategories such as raw materials, components, capital goods, and MRO materials.
Raw materials and components (Industrial): A subcategory of industrial goods where the typical strategic priorities are cost and services related to speed, dependability, and/or flexibility.
Capital goods: A subcategory of industrial goods (e.g., finished goods, industrial equipment) where the typical strategic priorities are quality, cost, flexibility (e.g., product features), and services.
Maintenance, repair, and operating (MRO) materials: A subcategory of industrial goods where the typical strategic priorities are cost, dependability (e.g., availability), and speed.
Consumer Goods: One of the major classifications of physical goods, which includes subcategories like convenience goods, shopping goods, and specialty goods.
Convenience goods: A subcategory of consumer goods (e.g., groceries) where the typical strategic priorities are cost and dependability.
Shopping goods: A subcategory of consumer goods (e.g., home furnishings) where the typical strategic priorities are quality (including perceived brand quality), dependability (including service warranty), and cost.
Specialty goods: A subcategory of consumer goods (e.g., art, high fashion) where the typical strategic priority is quality (including brand prestige).
Product Portfolio Complexity Management: Involves a review of the number of stock keeping units (SKUs) maintained by the organization to balance providing customer variety against the increasing costs and complexity in the supply chain.
Product Life Cycle: The concept that no product is immune to changes in customer demand over time, necessitating a review to determine how manufacturing, supply chain, and marketing strategies must change as the product shifts through its stages.
Introduction (Life Cycle Stage): The initial stage of a product's life cycle where product availability, product volume, and sales volume are typically low.
Growth (Life Cycle Stage): A stage of the product's life cycle where product availability, product volume, and sales volume are increasing.
Maturity (Life Cycle Stage): A stage of the product's life cycle where product availability, product volume, and sales volume have leveled off.
Decline (Life Cycle Stage): A stage of the product's life cycle where product availability, product volume, and sales volume are low or decreasing.
Saturation: The stage in the life cycle of a service when it enters maturity because all competitors are offering it, transforming it from an order winner into an order qualifier.
Order Qualifiers: Customer requirements that must be met for a product or service to even be considered by the customer, such as a service that has reached saturation.
Order Winners: Customer requirements that cause a customer to select a product or service over another, where a feature or service provides a differential competitive advantage.
New Product Introduction (NPI): The process of attempting to produce entirely new demand or to build upon previous demand by focusing on new product features to differentiate the product/service package from competitors.
Microeconomics: The analysis of the behavior of individual economic decision makers (individuals and firms), focusing on specifics like the price of a product, cost trends for a business, or employment levels in a given industry.
Law of Demand: A microeconomic law stating that as the price of a good or service increases, demand will decrease, assuming all other factors remain equal.
Scarcity: The economic condition meaning that goods and services are limited in availability, forcing businesses and consumers to make choices about which items they want more than others.
Opportunity Costs: The value of the other things that an entity is sacrificing to make the chosen good or service a priority.
Price Elasticity of Demand: The sensitivity of customers to changes in product price, which determines how much price changes impact demand.
Elastic Demand: A condition where demand is highly sensitive to price changes (coefficient greater than 1.0); if the price drops, the proportional increase in units sold provides a net increase in revenue.
Inelastic Demand: A condition where demand is less sensitive to price changes (coefficient less than 1.0); if the price drops, the loss of revenue from the lower price is greater than the gain from increased unit sales.
Marginal Analysis: A microeconomic decision-making tool that focuses only on the extra usefulness (marginal utility) and additional cost (marginal cost) of one more unit of a good or service.
Marginal Utility: The extra usefulness or benefit a consumer derives from consuming one more unit of a good or service.
Marginal Cost: The additional cost of producing one more unit of a good or service. In economics, the production of an item is economically justified as long as its marginal utility exceeds its marginal cost.
Fixed Costs: Business expenses that do not change based on production or output volumes (e.g., rent, insurance).
Variable Costs: Business expenses that fluctuate in direct proportion to the volume of output (e.g., direct materials, direct labor).
Total Costs: The sum of all fixed costs and all variable costs incurred by a business in a given period.
Breakeven Point: The point at which total revenue equals total costs; the stage at which a firm first begins to profit.
Services: A major product classification characterized by four unique traits: client interaction, simultaneity, intangibility, and perishability. Examples include transportation, warehousing, and banking.
Simultaneity (Services): A characteristic of services meaning the consumption of the service must occur at the same time the service is being provided.
Intangibility (Services): A characteristic of services meaning the output is not a physical object, making it harder to measure quality and necessitating the use of proxies (e.g., speed of delivery).
Perishability (Services): A characteristic of services meaning the service cannot be stored for later consumption or resale; if the capacity is not utilized, the lost revenue is gone forever.
Heterogeneity (Services): A characteristic of services meaning that every delivery of the service is unique, largely due to client interaction and variability in human effort or skill.
Demand Management: The function of recognizing all demands for goods and services to support the marketplace. It includes the activities of demand finding, influencing, and prioritizing.
Demand Finding: A primary activity of demand management that identifies and estimates customer wants and needs, often through marketing and market research.
Demand Shaping (or Influencing): A primary activity of demand management that uses marketing tools like price changes, promotions, and advertising to alter existing demand patterns.
Demand Prioritization: A primary activity of demand management that allocates scarce or limited supply to different customer segments or channels when total demand exceeds capacity.
Operations Planning (or Demand/Supply Integration): The function responsible for translating the marketing plan's demand picture into operational terms, linking the supply capability with the demand picture.
Sales and Operations Planning (S&OP): An integrated business management process through which the executive team continually achieves focus, alignment, and synchronization among all functions of the organization. It balances demand and supply.
Demand Pattern: The historical behavior of sales over time, which can be broken down into five components: trend, seasonality, cycle, random variation, and the influence of promotions.
Trend (Demand): The general direction of demand over the long term, which can be flat, upward, or downward. It is usually influenced by factors like population shifts or product life cycle stage.
Seasonality (Demand): A component of demand characterized by repeatable patterns tied to a specific calendar event or time of year (e.g., holidays, weather), which can occur within a single year.
Cycle (Demand): A component of demand characterized by swings in demand that do not repeat over the same time frame each year and are typically tied to the general economic climate (recessions or booms).
Random Variation: The unpredictable part of a data series that cannot be explained by other factors; akin to common cause variation in statistical process control.
Common Cause Variation: The multitude of small, random factors affecting demand that cannot be practically added to a forecasting model, which random variation is akin to.
Special Cause Variation: Causes of demand variation (like trends, seasonality, or promotions) that have an identifiable effect on demand and can often be removed from the data prior to forecasting.

Procurement and Sourcing

Acquisitions: The process of gaining ownership or control over another organization or supplier, often used as a strategy to internalize sourcing capabilities or strengthen the supply base.
Annualized Contracts: Agreements negotiated for a one-year period that establish pricing, ensure continuity of supply, and provide suppliers with estimated future requirements.
Auctions: Online or in-person bidding events used to source goods or services, where suppliers compete to offer the lowest price or best terms for a buyer.
Reverse Auctions: A type of auction where multiple suppliers bid down the price of providing goods or services, with the lowest bid typically winning the contract.
B2B Marketplaces: Online platforms or exchanges that connect multiple buyers and suppliers, enabling transactions and facilitating sourcing transparency and efficiency.
Bilateral Contracts: Agreements in which both parties make mutual promises, forming a legally binding relationship for goods or services.
Blanket Purchase Orders: Long-term purchase commitments with a supplier under which specific deliveries or releases are made over time, reducing administrative costs and ensuring continuity.
Buyer-Supplier Relationships: The spectrum of interactions between purchasing organizations and their suppliers, ranging from transactional to strategic or ownership-based partnerships.
Buy on the Market: A transactional purchasing approach where organizations procure goods as needed from available vendors based primarily on price and immediate availability.
Mergers: The combining of two or more companies into a single entity, often used to integrate suppliers or create ownership-based sourcing relationships.
Ongoing Relationships: Supplier relationships that extend beyond single transactions and involve repeated interactions, often under medium-term contracts with preferred suppliers.
Strategic Alliances: Collaborative, long-term partnerships between organizations that share information, resources, and strategies to improve mutual supply chain performance.
Category Strategy: A sourcing approach that defines how groups of goods and services are managed to align purchasing with business goals and supplier segmentation.
COGS (Cost of Goods Sold): An accounting measure representing the total direct materials, direct labor, and overhead associated with producing goods sold during a specific period.
Collaboration: A cooperative approach between supply chain partners to share information, align objectives, and jointly improve product design, planning, and performance.
Collaborative Design: A product design method involving cross-functional teams and suppliers early in the process to optimize manufacturability, cost, and supply performance.
Compliance: Adherence to legal, ethical, environmental, and corporate social responsibility policies within sourcing, contracting, and supplier management.
Component Commonality: The use of identical parts across multiple products to simplify sourcing, reduce inventory, and improve flexibility.
Concurrent Engineering: A cross-functional product development process in which design, manufacturing, and sourcing activities are performed simultaneously to reduce time-to-market.
Consortia-Based Marketplaces: Online trading exchanges created by groups of buyers or suppliers that aggregate demand or supply for improved pricing and efficiency.
Contract Deployment: The process of implementing, communicating, and managing newly signed contracts to ensure internal adoption, supplier compliance, and performance tracking.
Contracting: The process of negotiating and formalizing agreements with suppliers that define performance, pricing, and responsibilities.
Cost-Based Contracts: Contracts where payment is tied to supplier costs and key inputs, often used when actual costs are difficult to predict.
Cost-Plus Contracts: Agreements where suppliers are reimbursed for allowable costs plus an additional profit or fixed fee.
Cost-Plus-Fixed-Fee Contracts: Contracts where the supplier is reimbursed for allowable costs and paid a fixed fee regardless of actual total cost.
Cost-Plus-Incentive-Fee Contracts: Contracts that reimburse allowable costs and provide performance-based incentives tied to cost savings or quality improvements.
Firm Fixed-Price Contracts: Agreements in which the supplier is paid a set price for goods or services regardless of actual costs incurred.
Fixed-Price-Incentive-Fee Contracts: Contracts where suppliers receive a fixed price but can earn additional profit by meeting or exceeding specific performance targets.
Incentive Arrangements: Contract structures that motivate suppliers through shared savings or bonuses based on cost, quality, or service performance.
Core Competencies: Unique organizational strengths or capabilities that provide competitive advantage and are typically not outsourced.
Costs: The total expenditures related to sourcing and production, including landed, process change, and ongoing ownership costs.
Currency Hedging: A financial risk management technique that protects against losses from foreign exchange rate fluctuations in international contracts.
Customer Desirability Matrix: A tool comparing how much a supplier values a buyer’s business versus how much the buyer needs that supplier, classifying customers as core, exploit, development, or nuisance.
Customization: The tailoring of products or services to meet specific customer needs, often at higher cost or longer lead times.
Design for Logistics (DFL): A design approach ensuring that products are easy to package, transport, and handle efficiently across the supply chain.
Design for Maintainability: A design method emphasizing ease of maintenance, repair, and serviceability throughout a product’s lifecycle.
Design for Manufacturability: An approach ensuring that product designs are optimized for efficient, cost-effective manufacturing processes.
Design for Quality: A design philosophy focusing on integrating quality assurance into the product design process to minimize defects and variability.
Design for the Environment (DFE): A sustainable design approach that minimizes environmental impact across a product’s life cycle through recyclable materials and energy efficiency.
E-Procurement: The use of digital platforms or software to automate and manage sourcing, bidding, ordering, and supplier management activities.
Expediting: The process of accelerating order fulfillment or production to meet urgent needs, often used to resolve delays but discouraged in normal operations.
Hedging: A financial strategy used to offset risks from price fluctuations in commodities, currencies, or interest rates within sourcing contracts.
Incentive Contracts: Agreements that share cost savings and overruns between buyer and seller to encourage performance improvements.
Insourcing: Using internal organizational resources to provide goods or services instead of outsourcing to external suppliers.
Landed Costs: The total cost of a purchased item, including purchase price, transportation, duties, taxes, and other delivery-related expenses.
Letter of Credit (L/C): A bank-issued financial document guaranteeing a buyer’s payment to a supplier in international trade upon fulfillment of contract terms.
Logistics Relationships: Supplier partnerships focused on efficient transportation, warehousing, and delivery of goods within the supply chain.
Make-or-Buy Analysis: A strategic assessment comparing the total costs, risks, and benefits of producing a good or service internally versus purchasing it from an external supplier.
Make-or-Buy Decisions: Decisions determining whether an organization should manufacture a product or perform a service internally, or outsource it to external suppliers.
Mass Customization: A production strategy combining the efficiency of mass production with the flexibility of individual customization to meet specific customer preferences.
Mergers: The consolidation of two or more organizations into a single entity to gain strategic advantages such as cost efficiency, scale, or expanded supply chain control.
Modular Design Strategy: An approach to product design where components or modules can be independently created and combined in multiple ways to enable flexibility and customization.
Modularization: The process of designing products or processes as independent modules to simplify manufacturing, maintenance, and customization.
Multicountry Strategy: An international strategy where supply chain and sourcing operations are adapted to individual countries’ market conditions rather than standardized globally.
Negotiation: The process of reaching agreement between buyer and supplier on terms, prices, or conditions of a purchase or partnership.
Principled Negotiation: A win-win negotiation method that focuses on mutual interests, objective criteria, and problem-solving rather than positional bargaining.
Net Costs: The total costs after accounting for all discounts, rebates, or savings associated with procurement or sourcing decisions.
Offshoring: The relocation of business processes or production to another country to reduce costs, gain access to resources, or enter new markets.
Ongoing Costs: Post-purchase costs incurred throughout a product’s lifecycle, including maintenance, support, and warranty-related expenses.
Operating Exposure: The risk arising from fluctuations in currency exchange rates that affect an organization’s revenues, costs, or cash flow in international operations.
Purchase Orders (POs): Formal documents issued by a buyer to a supplier authorizing the purchase of goods or services under specified terms and conditions.
Order Tracking: The process of monitoring and updating the status of open purchase orders from creation to receipt and payment.
Outsourcing: Contracting external suppliers to perform business processes or produce goods that were previously handled internally.
Participative Design/Engineering: A design approach involving cross-functional teams—including suppliers and customers—to ensure manufacturability, quality, and efficiency.
Payment: The transfer of money or equivalent value from buyer to supplier in exchange for goods or services provided.
Payment Methods: The mechanisms used to settle financial transactions with suppliers, such as wire transfer, credit, or letter of credit.
Payment Terms: The conditions under which a buyer must make payment to a supplier, including timing, discounts, and currency requirements.
Portals: Online access points used for procurement or collaboration, allowing buyers and suppliers to share information and conduct transactions.
Business Portals: Digital platforms that provide centralized access for businesses to manage procurement, supplier data, and contract information.
Consumer Portals: Online interfaces that enable end customers to interact directly with suppliers or service providers to place orders or access services.
Portfolio Analysis: A strategic sourcing tool that categorizes purchased items based on supply risk and strategic importance to determine sourcing strategies.
Postponement: A supply chain strategy that delays final product assembly or customization until customer demand is known to reduce inventory risk.
Post-Transaction Costs: Costs incurred after a purchase is completed, including maintenance, warranty, and disposal expenses.
Pre-Transaction Costs: Administrative costs incurred before purchase transactions, such as supplier evaluation, contract sourcing, and legal review.
Private Marketplaces: Online platforms operated by a single company or consortium where approved buyers and suppliers can transact directly.
Private Trade Exchanges: Digital trading environments limited to a specific group of organizations that conduct electronic sourcing and procurement activities.
Process Change Costs: Expenses related to modifying sourcing processes, supplier transitions, or operational procedures when implementing new strategies.
Procurement: The operational process of acquiring goods and services from suppliers, including ordering, tracking, and payment.
Product Design: The process of translating functional requirements into a manufacturable product that balances quality, cost, and logistics efficiency.
Product Differentiation: The development of unique product attributes that distinguish it from competitors to create market advantage.
Standardized Products: Goods designed with minimal variation to simplify production, sourcing, and inventory management.
Public Marketplaces: Open online exchanges where multiple buyers and sellers can participate in sourcing and bidding for goods or services.
Purchasing: The process within procurement that focuses on acquiring goods and services at optimal cost, quality, and delivery terms.
Quality: The degree to which a product or service meets specified requirements and satisfies customer expectations.
Receiving: The process of verifying, inspecting, and documenting the arrival of ordered goods before acceptance and payment.
Reverse Innovation: The process where innovations are first developed for emerging markets and later adapted for use in developed markets.
Risk Management: The identification, assessment, and mitigation of risks in sourcing, logistics, and supplier relationships to ensure continuity and compliance.
Segmentation: The classification of suppliers or products into categories based on strategic importance, spend, or performance.
Supplier Segmentation: The categorization of suppliers as transactional, preferred, strategic, or owned based on their value and relationship type.
Service Level Agreements (SLAs): Formal documents that define expected service standards, performance metrics, and penalties or incentives in supplier relationships.
Should-Cost Estimates: Analyses estimating the reasonable cost to produce a product or service, used to evaluate supplier quotations and negotiate pricing.
Simplification: A design or sourcing principle aimed at reducing complexity by standardizing parts, processes, or suppliers.
Sourcing: The strategic process of identifying, evaluating, and selecting suppliers that meet organizational requirements.
Standardization: The use of consistent specifications, processes, and materials to improve efficiency, quality, and compatibility across supply chains.
Subcontracting: The practice of contracting another organization to perform specific production or service activities that support the primary supplier.
Supplier Alignment: The process of ensuring supplier goals, capabilities, and performance are aligned with the buyer’s strategic objectives.
Supplier Partnerships: Long-term collaborative relationships between buyers and suppliers that focus on shared goals, continuous improvement, and mutual benefit.
Supplier Selection: The process of evaluating and choosing suppliers based on defined criteria such as cost, quality, reliability, and sustainability.
Supply Chain Capabilities: The combination of people, processes, and technologies that enable effective planning, sourcing, production, and delivery.
Supply Planning: The process of determining sourcing and production strategies to balance supply with demand across the network.
Sustainability: Practices ensuring that sourcing, production, and logistics minimize environmental impact and promote long-term social responsibility.
Total Cost of Ownership (TCO): The comprehensive measure of all direct and indirect costs of acquiring, operating, and disposing of a product or service.
Trading Exchanges: Digital platforms that enable buyers and suppliers to conduct transactions, auctions, or negotiations online.
Trading Partner Agreements: Formal contracts defining the business terms, communication protocols, and responsibilities between trading partners.
Traditional Design: A sequential product development process where each functional area works independently, often resulting in inefficiencies.
Triangle Talk: A negotiation framework emphasizing three elements: knowing your goals, understanding the other party’s goals, and proposing mutually beneficial solutions.
Universality: The design principle of creating products or standards that can be used globally without significant modification.
Value Added: Enhancements provided by a supplier or process that increase a product’s worth beyond its base cost.
Vertical Marketplaces: Online exchanges focused on specific industries or product categories, enabling specialized sourcing and collaboration.
Virtual Trading Exchanges: Internet-based platforms that connect buyers and suppliers electronically to facilitate sourcing and transactions.
Warehouse Processes: The set of activities involved in receiving, storing, managing, and dispatching goods efficiently in a distribution environment.
Category Strategy: A sourcing approach that defines how different categories of goods and services will be managed, aligning procurement activities with organizational objectives and supplier segmentation.
Category Management: The process of grouping purchased goods and services into logical categories to manage sourcing and supplier relationships strategically.
Portfolio Analysis: A tool used to classify purchased items into categories—commodity, leverage, bottleneck, and core competency—based on their strategic importance and supply risk.
Strategic Importance: The significance of a product or service in achieving business objectives, influenced by cost, quality, delivery reliability, precision, and flexibility.
Complexity: A factor representing the difficulty of producing an item or service, often requiring collaboration or strategic partnerships for highly complex products.
Supply Uncertainty: The risk associated with the availability, price stability, and quality of goods or services from suppliers.
Supplier Segmentation: The classification of suppliers into groups such as transactional, preferred, strategic, or owned, based on their importance and interdependence with the buying organization.
Transactional Supplier: A supplier with whom the organization maintains a traditional, short-term, price-focused relationship without significant collaboration.
Preferred Supplier: A supplier that receives significant business volume, is expected to demonstrate continuous improvement, and has a moderate level of collaboration with the buyer.
Strategic Supplier: A supplier with whom the buyer forms long-term partnerships for high-risk or high-value items, often involving joint planning and shared objectives.
Ownership Supplier Relationship: A relationship where external suppliers become internal through mergers or acquisitions, converting the supply relationship into an internal process.
Make-or-Buy Analysis: A decision-making process comparing the total costs and strategic implications of producing an item in-house versus purchasing it from an external supplier.
Total Cost of Ownership (TCO): The sum of all costs associated with acquiring, operating, maintaining, and disposing of a product or service across its entire lifecycle.
Landed Cost: The total cost of a product including purchase price, transportation, warehousing, customs, and handling fees incurred until it reaches the buyer’s facility.
Process Change Costs: Costs incurred before actual transactions, such as evaluating suppliers, contract sourcing, supplier training, and system integration.
Ongoing Costs: Post-transaction costs including maintenance, quality assurance, repair, and sustainability-related expenses throughout a product’s lifecycle.
Should-Cost Estimate: An analytical estimate of what a product or service should cost to produce, based on cost drivers like materials, labor, and overhead, used for negotiation and benchmarking.
Customer Desirability Matrix: A tool used to assess how much a supplier values a customer’s business, categorizing customers as core, development, exploit, or nuisance.
Segmented Sourcing Strategy: A structured approach that treats suppliers differently based on their strategic importance, business value, and interdependence, optimizing relationships and risk.
Sourcing Requirements: The detailed criteria defining what an organization expects from suppliers, including cost, quality, delivery performance, capacity, collaboration, and sustainability.
Outsourcing: The strategic decision to contract out activities or processes that are not core competencies to external suppliers, allowing focus on core business areas.
Offshoring: A type of outsourcing in which goods or services are contracted from suppliers located in a different country to benefit from cost or skill advantages.
Nearshoring: Outsourcing business processes or production to a nearby country to reduce transportation, time zone, and cultural challenges while still leveraging cost savings.
Core Competency: A key area of expertise that provides a competitive advantage and should generally not be outsourced, as it defines the organization’s unique value.
Sourcing Process: A structured sequence of steps for identifying, evaluating, and engaging suppliers, including planning, market research, category strategy, and supplier segmentation.
Procurement Process: A subset of the sourcing process focused on operational activities like issuing purchase orders, negotiating contracts, and managing supplier performance.
Spend Analysis: The process of analyzing procurement expenditures to identify high-spend categories, reduce costs, and optimize supplier performance.
Supply Base Rationalization: The process of optimizing the number of suppliers to improve efficiency, strengthen key relationships, and reduce supply chain risk.
Supplier Relationship Management (SRM): A systematic approach to managing supplier interactions to maximize value, promote collaboration, and reduce risk.
Strategic Sourcing: A data-driven approach to sourcing that focuses on long-term value creation, total cost, and alignment with business strategy rather than just price.
Global Sourcing: The practice of sourcing goods and services from the most efficient suppliers across global markets to reduce costs and improve competitiveness.
Sourcing Risks: The potential disruptions in the supply chain arising from geopolitical instability, transport costs, cultural differences, or supplier failures.
Supply Plan: A strategic document outlining how sourcing, production, and logistics will align to meet demand, considering cost, capacity, and quality trade-offs.
Centralized Sourcing: A procurement model where sourcing decisions are managed centrally to achieve cost savings and consistency across the organization.
Autonomous Sourcing: A decentralized sourcing model allowing local teams to make purchasing decisions, increasing responsiveness and leveraging local supplier relationships.
Sourcing Requirements: The specifications defining what an organization expects from a supplier, including cost targets, quality levels, delivery timelines, and sustainability criteria.
Sourcing Competency: The skill set and knowledge required by sourcing professionals to manage supplier relationships, global sourcing risks, and contract negotiations effectively.
Supplier Certification: A process for validating that suppliers meet specific standards in quality, delivery, and compliance before and during engagement.
Sourcing Risk Portfolio: An assessment of potential risks associated with sourcing activities, including supplier dependence, geographic exposure, and market volatility.
Sustainability in Sourcing: The integration of environmental and social responsibility considerations into sourcing and procurement decisions to promote long-term value.
Contracting: The process of formalizing agreements with suppliers to define performance expectations, responsibilities, pricing, and risk allocation in sourcing relationships.
Smart Contract: A digital contract using blockchain technology to record and enforce terms in a secure, transparent, and tamper-proof manner.
Third-Party Logistics (3PL): Outsourced logistics providers that handle transportation, warehousing, or distribution functions on behalf of a company.
Fourth-Party Logistics (4PL): A logistics management model where an external provider designs, manages, and integrates the entire supply chain using multiple 3PLs.
Contract Risk Management: The identification, analysis, and mitigation of risks associated with supplier contracts, including compliance, quality, and delivery risks.
Compliance Management: Ensuring that suppliers adhere to contract terms, regulatory requirements, and ethical standards through audits and performance monitoring.
Supplier Certification Program: A structured process to validate that suppliers meet specific quality, delivery, and compliance standards before and during engagement.
Supplier Performance Evaluation: A systematic assessment of supplier performance based on criteria like cost, quality, delivery reliability, innovation, and responsiveness.
Supplier Scorecard: A reporting tool that measures supplier performance using predefined metrics and helps identify areas for improvement or partnership strengthening.
Supplier Development: Collaborative initiatives between buyer and supplier to improve performance, capabilities, and innovation aligned with long-term strategic goals.
Negotiation Strategy: The planned approach for reaching mutually beneficial agreements with suppliers, balancing price, quality, service, and relationship value.
Collaborative Negotiation: A win-win negotiation approach focused on mutual value creation, shared goals, and long-term partnership rather than one-time gains.
Contract Lifecycle Management (CLM): The process of managing a contract from initiation to renewal or termination, ensuring compliance, performance, and value realization.
Continuous Improvement: An ongoing effort to enhance processes, products, or supplier performance by using feedback, data, and structured methodologies like Lean or Six Sigma.
Right-Sizing the Supply Base: Optimizing the number of suppliers in each category to balance cost savings, risk reduction, and supplier relationship effectiveness.
Procurement Governance: The framework of policies, roles, and procedures that ensure transparency, compliance, and efficiency in sourcing decisions.
Strategic Alliances: Long-term partnerships formed between buyer and supplier organizations to achieve shared business objectives and innovation goals.
Supplier Audit: A formal evaluation of a supplier’s operations, systems, and controls to ensure compliance with contractual and regulatory requirements.
Ethical Sourcing: A procurement practice that ensures suppliers operate responsibly, respecting human rights, labor laws, and environmental standards.
Contract Enforcement Mechanism: Procedures and legal tools used to ensure suppliers meet obligations and resolve disputes effectively during the contract period.
Product Design Influence: The role of supply management in shaping design decisions to optimize cost, manufacturability, quality, and logistics early in product development.
Over-the-Wall Design: A traditional design approach where departments work in silos, passing completed designs to the next stage with minimal collaboration.
Collaborative Design: A design process where engineering, procurement, and suppliers work together to ensure the product is optimized for manufacturing, sourcing, and logistics.
Design for Logistics: An approach to product design that minimizes logistics costs by considering packaging, handling, transportation, and warehousing factors early in development.
Design for Manufacturability (DFM): The practice of designing products to simplify manufacturing processes, reduce costs, and improve quality and time to market.
Design for Sustainability (DFS): A method of designing products with minimal environmental impact, focusing on material selection, energy efficiency, recyclability, and waste reduction.
Standardization: The process of reducing product variety by using common components or designs, improving efficiency and reducing sourcing complexity.
Modularization: Designing products using interchangeable modules, allowing flexibility in production and easier customization without redesigning the entire product.
Simplification: Reducing unnecessary features, parts, or processes to streamline production, reduce costs, and improve reliability.
Customization: Tailoring products or services to meet specific customer needs while balancing efficiency and cost through flexible design and production processes.
Supplier Integration in Design: Including suppliers early in the product design process to leverage their expertise in materials, production methods, and innovation.
Concurrent Engineering: A design approach where multiple functions such as design, sourcing, and manufacturing work simultaneously rather than sequentially.
Early Supplier Involvement (ESI): Engaging suppliers early in new product development to ensure manufacturability, cost efficiency, and innovation alignment.
Value Engineering (VE): A systematic method to improve the value of a product by analyzing its functions and reducing cost without compromising performance or quality.
Life Cycle Costing (LCC): An approach to estimating the total cost of a product or service over its entire life span, from acquisition to disposal.
Sustainability Sourcing: Integrating environmental and social considerations into supplier selection and sourcing decisions to minimize negative impacts.
Green Procurement: Purchasing goods and services that cause minimal harm to the environment, focusing on energy efficiency, recyclability, and ethical production.
Circular Supply Chain: A sustainable model where materials are reused, remanufactured, or recycled to minimize waste and extend product life cycles.
Supplier Innovation: Leveraging suppliers’ technical knowledge and R&D capabilities to co-develop new or improved products and processes.
Innovation Sourcing: Proactively seeking suppliers who can contribute innovation, technology, or intellectual property to improve products and competitiveness.
Cost Modeling: A structured estimation of the cost structure of a product or process, identifying cost drivers and opportunities for savings.
E-Sourcing: The use of digital tools and internet-based platforms to identify, evaluate, and negotiate with suppliers efficiently.
E-Procurement: A digital system for automating the procurement process, including requisitioning, ordering, invoicing, and payment.
Reverse Auction: An online, competitive bidding process where suppliers submit successively lower bids to win contracts.
Spend Visibility: The ability to analyze and monitor procurement spending patterns across categories, suppliers, and regions for strategic insights.
Digital Procurement: The integration of automation, analytics, and digital technologies into procurement processes to enhance speed, transparency, and value.
Supplier Collaboration Platform: A shared digital environment where buyers and suppliers exchange information, track performance, and manage joint improvement projects.
Blockchain in Procurement: The use of distributed ledger technology to ensure transparency, traceability, and security in supplier transactions and contracts.
Artificial Intelligence in Sourcing: Applying AI and machine learning to predict supplier risks, optimize sourcing decisions, and automate procurement activities.
Predictive Sourcing: Using data analytics and AI to forecast demand, supplier performance, and market conditions for proactive sourcing strategies.
Supplier Risk Assessment: Evaluating supplier-related risks such as financial stability, geopolitical exposure, compliance, and operational reliability.
Resilient Sourcing Strategy: A sourcing approach designed to mitigate disruption risks through diversification, redundancy, and contingency planning.
Global Supply Network Optimization: Analyzing and designing the global supplier network to balance cost, risk, and service objectives efficiently.
Ethical Procurement: Ensuring purchasing practices comply with legal and moral standards regarding labor, environment, and fair trade.
Supplier Diversity: Encouraging the inclusion of suppliers from underrepresented or small business groups to enhance innovation and social impact.
Supplier Capacity Planning: Assessing and coordinating supplier production capacities to ensure alignment with forecasted demand and flexibility requirements.
Localization Strategy: Positioning suppliers closer to markets to reduce lead times, logistics costs, and supply risks while supporting local economies.
Supply Chain Transparency: The ability to trace materials, products, and supplier practices throughout the supply chain to ensure accountability and trust.
Future of Sourcing: The evolution of sourcing practices driven by digitalization, sustainability, AI, and data-driven decision-making.
Procurement Analytics: The use of data analytics and business intelligence tools to identify cost-saving opportunities, monitor supplier performance, and optimize sourcing.

Sales and Operations Planning

Sales and Operations Planning (S&OP): A process to develop tactical plans that integrate customer-focused marketing plans with the management of the supply chain, bringing together all business plans (sales, marketing, development, manufacturing, sourcing, and financial) into one integrated set of plans.
Operations Planning and Control: A process that aligns supply and demand by enabling long- and short-term planning for demand, supply, and finances.
Master Planning: A group of business processes that includes demand management (forecasting and order servicing), production and resource planning, and master scheduling.
Strategic Plan: A long-term plan, extending five to ten years or more, that focuses on marshalling resources and determining actions to support the organization's mission and goals.
Business Plan: A plan that states the organizational strategy in more specific terms and sets goals for achieving the strategy over the next one to three years, typically stated in dollars and grouped by product family.
Production Plan: A high-level view of future production requirements over a 12 to 18-month horizon, providing the rate of production at the product family level as an output of S&OP.
Master Production Schedule (MPS): The output of master scheduling, which is typically a weekly plan at the item level detailing what will be produced.
Resource Planning (RP): Capacity planning conducted at the business plan level to establish, measure, and adjust long-range capacity, often looking out 15 to 18 months or longer.
Demand Management: A function that includes forecasting and order servicing and acts as an intermediary between product development, marketing, sales, and operations to coordinate plans and priorities.
Product Family: A group of end items whose similarity in design and manufacturing allows them to be planned in aggregate and their sales performance monitored together.
Demand Plan: The result of forecasting and demand management activities, representing a consensus on anticipated demand that is used as a key input for S&OP.
Material Requirements Planning (MRP): A process that uses bill-of-material data, inventory data, and the Master Production Schedule (MPS) to calculate the requirements for materials.
Rough-Cut Capacity Planning (RCCP): A process used to validate whether a Master Production Schedule (MPS) is feasible from a capacity standpoint.
Production Activity Control (PAC): The function that receives outputs from the planning processes (like MRP) and is responsible for executing the plan on the shop floor, including scheduling.
Executive S&OP Meeting: A monthly meeting where top executives review plans to balance supply and demand, make decisions for product families, and ensure alignment with the business plan.
Level Production Method: A production planning method that maintains a stable production rate while allowing inventory levels to fluctuate to meet demand.
Chase Production Method: A production planning method that maintains a stable inventory level by varying production rates to match demand.
Make-to-Stock (MTS): A production environment where products are finished before receiving a customer order, with orders typically filled from existing inventory.
Make-to-Order (MTO): A production environment where a good or service is made after a customer's order is received, often involving a combination of standard and custom-designed items.
Assemble-to-Order (ATO): A production environment where a good or service is assembled after a customer's order is received from a stock of partially manufactured components or modules.
Time Fence: A policy restricting last-minute changes to a manufacturing production schedule by setting cutoff dates. The closer to the production date, the more difficult it is to make a change.
Engineer-to-Order (ETO): A production environment where products require unique engineering design and significant customization based on customer specifications, resulting in unique part numbers and bills of material for each order .
Package-to-Order: A production environment where a good or service can be packaged after the receipt of a customer order, often to accommodate different packaging quantities or languages.
Hybrid Strategy: A production planning strategy that combines elements of both the level production and chase production methods.
Backlog: All customer orders that have been received but not yet shipped; also known as open orders or the order board.
Distribution Requirements Planning (DRP): The process of determining inventory replenishment needs at various distribution centers in the supply chain.
Capacity Requirements Planning (CRP): The process of determining in detail the amount of labor and machine resources required to accomplish the tasks of production as specified by the Material Requirements Plan .
Financial Review Meeting: A meeting within the S&OP process where the demand plan and alternative supply plans are analyzed for their financial impact and feasibility against the organization's business plan.
Pre-S&OP Meeting: A preparatory meeting where data is reviewed to identify areas of consensus and to set the agenda for the executive S&OP meeting, focusing on items that require executive-level decisions.
Supply Planning: A phase in the S&OP process that uses the consensus demand plan to generate a production plan, identifying any capacity or material constraints that would prevent operations from satisfying the plan.
Product Review Meeting: An early meeting in the S&OP cycle that involves updating the status of new product developments, product changes, or other initiatives that could affect future supply or demand.
Reconciliation: The process in S&OP where the demand, supply, and financial plans are brought together and aligned to create one unified plan for the business.
Demand Management and Prioritization: The process of managing and prioritizing demand when supply is constrained or when actual demand differs from the plan, in order to optimize profit and customer service.
Demand Plan Dashboard: A visual tool that consolidates plans from various departments, highlighting disagreements, key performance metrics, assumptions, and risks to facilitate an agreement on a consensus demand plan.
Operations Handshake: An informal term for the supply planning process where operations professionals agree on a production plan that can best fulfill the demand plan while remaining profitable.
Marketing/Sales Handshake: An informal term for the process where marketing and sales agree on a unified request for product and coordinated demand-influencing activities, resulting in an updated demand plan.
Capacity Control: A component of Production Activity Control (PAC) that involves monitoring production output, comparing it with capacity plans, and taking corrective action as needed.
Demand Plan Commitments: The realistic strategies and tactics developed by product management, marketing, and sales to achieve the revenue objectives stated in the business plan.
Consensus Demand Plan: A single, agreed-upon demand plan created by reconciling inputs from sales, marketing, and product management, which serves as the input for supply planning and financial review.
Chase Demand Matching: Another term for the chase production method, where production is adjusted to match demand in each period.
Final Assembly Scheduling: A detailed production control activity that involves scheduling the final assembly of products based on the outputs of material requirements planning.
Master Scheduling (MS): A core priority planning process that translates the S&OP production plan into a detailed schedule for specific end items, known as the Master Production Schedule (MPS).
Silo Mentality: A mindset where functional departments operate independently and are reluctant to share information, creating barriers that the S&OP process is designed to break down.
Constrained Plan: A demand plan that has been reviewed by the supply team and adjusted based on constraints such as production capacity and material availability.
Demand Review Meeting: A meeting within the S&OP process where professionals from product management, marketing, and sales collaborate to agree on a single, consensus set of demand numbers.
Supply Review Meeting: A meeting within the S&OP process where the supply management team uses the consensus demand plan to generate a production plan and identify potential constraints or alternatives.
Replanning: A continuous activity within the monthly S&OP process where plans from the prior month are reviewed and adjusted based on new information, promoting consensus-building.
Demand Management and Prioritization Policy: A formal, documented policy that clearly defines who is authorized to manage and prioritize demand, especially when supply is constrained.
Purchasing: A function that is an output of the priority planning process, responsible for acquiring the materials calculated in the Material Requirements Plan (MRP).
Demand Sensing: A high-level, demand-side activity, along with demand creation, that contributes to the development of the demand plan.
ABC analysis: Classifying inventory into A (high value), B (moderate), C (low) groups so management attention is focused on the vital few.
ABC classification: Classifying inventory into A (high value), B (moderate), C (low) groups so management attention is focused on the vital few.
Abilities: The innate aptitudes a person brings to tasks (complements knowledge and skills).
Acquisition costs: Costs to buy or acquire inventory (purchase price and immediate transaction costs).
Activity network diagrams: Visual charts showing task sequences and dependencies for scheduling (eg., PERT/CPM).
Affinity diagrams: A grouping tool to cluster related ideas or issues for problem solving.
Aggregate inventory management: Managing inventory at a grouped/aggregate level to optimize financial impact and flow.
Anticipation inventory: Stock held to cover expected future events (seasonality, promotions).
Appraisal costs: Quality-related costs of inspection and testing to ensure products meet standards.
Assets: Company resources of value (cash, inventory, equipment) shown on the balance sheet.
ATP: The uncommitted portion of inventory and planned production available for promising to customers.
Available time: Time available on a resource for production (used to compute rated capacity).
Available-to-promise (ATP): Quantity a seller can promise to a new order from current and planned supply.
Average inventory: Typical inventory level over a period (commonly used for carrying-cost calculations).
Backorders: Customer orders not immediately filled from stock and scheduled for later fulfillment.
Balance sheet: Financial statement listing assets, liabilities, and equity at a point in time.
Basic seven tools of quality: Classic quality tools: affinity, cause-and-effect, check sheets, control charts, histograms, Pareto, scatter (used for improvement).
Benchmarking: Comparing practices/metrics to best-in-class or peers to find improvement opportunities.
Best-in-class benchmarking: Comparing against top performers to set stretch targets.
Bills of material (BOMs): Hierarchical list of components needed to make a product.
Bills of resources: Documents listing resources (work centers/time) required for production (capacity inputs).
Bottlenecks: Process steps that limit overall throughput because they’re the most constrained resource.
Bucketless systems: Planning systems that do not aggregate time into large buckets (for more granular planning).
Buffer inventory: Extra stock held to decouple stages or protect against variability.
Buffers: Extra stock held to decouple stages or protect against variability.
Calculated capacity: Capacity derived from available time and standard times (how much should be producible).
Capacity: The maximum output a resource or system can produce in a given time.
Demonstrated capacity: Actual observed production capability over time (what has been achieved).
Rated capacity: The theoretical or nameplate capacity based on available time and standards.
Capacity control: Execution-level activities that ensure production stays within capacity limits.
Capacity management: The practice of matching capacity to demand through planning and control.
Capacity planning: Long- and medium-term planning to provide required capacity (lead/lag strategies).
Capacity requirements: The calculated resource needs to meet the master schedule (CRP input).
Capacity smoothing: Strategies to reduce variability in loads (eg., level loading).
Capacity strategies: Lead: add capacity ahead of demand; Lag: add after demand rises.
Capacity variance costs: Costs from under- or over-capacity (idle time, overtime, lost sales).
Capital costs: Long-term investment costs for assets (machinery, buildings).
Carrying costs: Costs to hold inventory (capital, space, obsolescence, service).
Cash flows: Cash inflows/outflows over a period; statement shows cash from operations, investing, financing.
Cause-and-effect diagrams: Visual tool to trace root causes of a problem.
Centralized inventory control: Inventory decisions managed from a central point rather than locally.
Chain of custody: Ability to track product/material origin and movement through the supply chain.
Changeovers: Time to switch a machine/process from one product to another.
Check sheets: Simple forms to collect and tally data during inspections or audits.
Closed-loop MRP: MRP integrated with capacity checks and feedback to control production.
Coaching: People-development activities to improve skills, performance, and knowledge.
COGS: Direct costs of producing goods sold (materials, direct labor, factory overhead).
Commitment decision points: Points in the planning horizon where orders or promises become binding (eg., ATP commitments).
Configuration management: Controlling and documenting product or system changes.
Configuration management system: Controlling and documenting product or system changes.
Constraints: Limits that restrict system performance (capacity, materials, suppliers).
Continuous improvement: Ongoing incremental process improvements (tools: Kaizen events, blitzes).
Control charts: Statistical charts used to monitor process stability and variation (SPC).
Cost of poor quality: Costs from failures: rework, scrap, returns, warranty, lost customers.
Costs: All categories of cost relevant to operations and inventory.
Inventory costs: All costs related to inventory: acquisition, carrying, ordering, shortage, risk.
Cross-functional training: Training employees across functions to improve collaboration and flexibility.
Cross plots: Charts to show relationship between two variables.
Cross-training: Training employees to perform multiple roles to increase flexibility.
Cumulative lead time: Total lead time across multiple sequential operations or tiers.
Customer orders: Requests from customers to purchase goods; open orders are not yet fulfilled.
Cycle counting: Ongoing inventory audit method sampling items frequently instead of full physical counts.
Cycle stock: Portion of inventory expected to be used to satisfy normal demand between replenishments.
DBR: TOC scheduling method: drum = pace, buffer = protection, rope = release control.
DCs: Facilities that store and move goods for distribution.
DDMRP systems: Demand-Driven MRP: buffer-based ordering system that dynamically positions inventory to shorten lead times.
Decentralized inventory control: Inventory decisions made locally at each site.
Decoupling: Inserting buffers between processes so changes or delays upstream don't immediately affect downstream.
DMAIC: Six Sigma improvement methodology (Define, Measure, Analyze, Improve, Control).
Demand: Customer requirement for product/service (can be independent or dependent).
Dependent demand: Demand driven by production plans for higher-level items (components).
Independent demand: Demand from external customers or forecasts not directly tied to production of another item.
Interplant demand: Demand between company plants or sites.
Demand-driven material requirements planning systems: Systems (eg., DDMRP) that use demand signals to drive replenishment.
Demand pull: Replenishment triggered by actual downstream demand (not forecasts).
Demand time fence (DTF): Point in the master schedule horizon inside which demand is frozen and only firm orders count.
Demonstrated capacity: Actual historical capacity achieved.
Disposition: Final handling of items (eg., scrap, return to vendor, rework, obsolescence).
Distribution inventory: Stock held at distribution points to serve local demand.
Echelons: Stages in a supply chain (suppliers, plants, DCs, retailers) counted by level.
Economic order quantity (EOQ): The order size that minimizes total ordering plus carrying costs.
Efficiency: Output produced per unit input (how well resources are used).
Employee improvement: Programs to raise skills, productivity, and performance.
End-of-life management: Managing products as they retire: disposition, recycling, regulatory compliance.
Exception reports: Reports that flag items deviating from plan or thresholds.
EOQ: The order size that minimizes total ordering plus carrying costs.
FOQ: Ordering policies where orders are fixed size (EOQ calculates optimal size; FOQ is a set lot).
Feedback loops: Information flows that amplify or dampen reactions in planning (important to control bullwhip).
Financial metrics: Measures and reports (income statement, balance sheet, cash flows) used to track financial performance.
Financial reporting: Measures and reports (income statement, balance sheet, cash flows) used to track financial performance.
Financial statements: Balance sheet, income statement and statement of cash flows used to report financial position and performance.
Finished goods inventory: Inventory of completed products ready for sale.
Firm planned orders (FPOs): Planned orders that have been firmed by planners (less changeable).
Fishbone diagrams: Visual cause-and-effect diagram used to identify root causes.
Five Ss: Workplace organization method: Sort, Set in order, Shine, Standardize, Sustain.
Flowcharts: Visual maps of process steps for analysis.
Flow process charts: Visual maps of process steps for analysis.
Fluctuation inventory: Inventory held to absorb demand variability.
Forecasts: Predictions of future demand using statistical models.
Frozen zones: Periods where schedule is fixed and changes are disallowed or tightly controlled.
Funds flow statements: Another name for cash flow reporting showing movement of funds.
Hedge inventory: Extra stock held against anticipated risks (currency shifts, labor strikes).
Heijunka: Smoothing production mix and volume to reduce variation.
Histograms: Bar charts showing frequency distributions (quality tool).
Holding costs: Costs to keep inventory (capital, space, obsolescence, service).
House of Lean: Visual model representing lean principles and pillars.
Income statement: Financial statement summarizing revenues and expenses for a period (profit/loss).
Independent demand: Demand from external customers or forecasts not directly tied to production of another item.
In-transit inventory: Stock moving between locations (on the transport pipeline).
Inventory: All items held for sale or production: raw materials, WIP, finished goods.
Inventory accuracy: Measures and practices ensuring recorded inventory matches physical counts.
Inventory adjustment: Actions and accounting to reconcile inventory records with physical counts.
Inventory audits: Physical verification activities (cycle counting or full counts) to ensure accuracy.
Inventory buffers: Extra stock held to decouple stages or protect against variability.
Inventory control: Policies and systems to maintain desired stock levels and availability.
Inventory management: Policies and systems to maintain desired stock levels and availability.
Inventory ordering systems: Methods to trigger replenishment: FOQ, L4L, min-max, TPOP, etc.
Inventory planning: Rules and planning horizons that determine reorder points, lot sizes, safety stock.
Inventory policies: Rules that determine reorder points, lot sizes, safety stock and review intervals.
Inventory status data: Data that shows current on-hand, allocated, on-order and available quantities.
Inventory tracking: Systems and methods to monitor physical and recorded inventory movement.
Inventory valuation: Methods to assign monetary value to inventory (eg., FIFO, LIFO, weighted average).
Inventory visibility: Ability to see inventory levels across the network in real time.
Ishikawa diagrams: Another name for fishbone/cause-and-effect diagrams.
Item inventory management: Managing inventory at the SKU/part level.
Jidoka: Auto-stop on defect and separation of man and machine (lean quality principle).
JIT: Producing or delivering the right item, at the right time, in the right quantity to minimize inventory.
Joint replenishment: Coordinating orders for related items to exploit joint ordering economies.
Kaizen: Small, continuous improvement activities.
Kaizen blitzes: Focused rapid-improvement events.
Kaizen events: Focused rapid-improvement events.
Kanban: Visual signaling system to authorize production or movement in a pull system.
KPIs: Selected metrics that track performance vs. objectives.
Key performance indicators (KPIs): Selected metrics that track performance vs. objectives.
Lead time: Time between order initiation and completion (total processing plus waits).
Lean: Systematic method to eliminate waste and improve flow/value to customer.
Life cycle analysis: Evaluating environmental and cost impacts over a product’s life.
Lot-for-lot (L4L): Lot sizing policy where order quantity equals net requirement (no stockpiling).
Lot-size inventory: Inventory determined by lot-size rules and ordering policies.
Manufacturing lead time: Time to make a product from start to finish (operations + waits).
Master production schedule (MPS): Time-phased plan of finished goods production used to drive MRP and ATP.
Master scheduling: The process of creating and maintaining the master production schedule.
Measures: Numeric indicators used to evaluate process or business performance (KPIs).
Metrics: Specific numeric indicators for process and financial performance.
Minimum order quantities: Supplier- or process-imposed minimums for ordering.
Min-max systems: Inventory policy setting a minimum level (reorder point) and maximum level for replenishment.
Mistake-proof: Design features or devices that prevent errors or make them obvious.
Muda: Lean term for waste to be eliminated.
Mura: Lean term for unevenness to be eliminated.
Muri: Lean term for overburden to be eliminated.
Obsolescence: Inventory that has become unsellable or unusable due to age or design changes.
Offsetting: Scheduling technique shifting production earlier to meet combined demand timing.
Open orders: Orders that have been issued and are outstanding (not yet received).
Ordering costs: Costs to place and receive orders (administration, shipping, setup).
Order point systems: Replenish when on-hand falls below a threshold.
Order promising: Committing delivery dates and availability to customer orders.
Order quantities: Rules or methods that determine how much to order each time.
Order releases: The act of issuing planned orders into execution.
Parent items: Higher-level item in a BOM that requires child components.
Pareto's law: Principle that a small share of causes (≈20%) create most effects (≈80%); used to prioritize.
Pareto charts: Charts used to identify the most significant factors following Pareto's law.
Pegging: Tracing demand for a component back to the parent orders that caused it (MRP feature).
Performance measures: Metrics used to evaluate success against objectives (KPIs).
Periodic review systems: Inventory review at fixed intervals (vs. continuous review).
Periodic counting: Ongoing inventory audit method sampling items frequently instead of full physical counts.
Physical inventory: Actual count of items on hand.
Pipeline inventory: Stock in transit between locations.
Planned orders: MRP-generated proposals to produce or buy at specific times (not yet released).
Planned order releases: MRP proposals that will be issued as orders at designated times.
Planned order receipts: Expected receipts from planned orders as per MRP.
Planning horizons: Time spans used for planning with different detail and rules (short, medium, long).
Planning time fence: Schedule window which defines different flexibility rules for changes.
Poka-yoke: Design features that prevent errors or make them obvious (mistake-proofing).
Process benchmarking: Comparing process performance to best practices to find improvements.
Process maps: Visual representations of process steps used to analyze and improve flow.
Production lead time: Time required to produce an item (similar to manufacturing lead time).
Product traceability: Ability to track product components and history for safety/compliance.
Pull systems: Production driven by actual consumption (replenishment triggered by downstream demand).
Push systems: Production driven by forecasts/plans (MRP/DRP).
Quality: Degree to which a product or process meets requirements and customer expectations.
Total quality management (TQM): Organization-wide approach to embed quality in every process.
Six Sigma: Data-driven improvement methodology aiming near-zero defects.
Quality costs: Costs of ensuring and failing to ensure quality (inspections, rework, returns).
Quantitative forecasting methods: Statistical models used to forecast demand (time-series, causal).
Rated capacity: Theoretical capacity based on available time and standards.
Raw materials inventory: Stock of inputs used to make products.
Replenishment: Actions to restore inventory to desired levels; joint = coordinated for related items.
Resource planning: Planning and allocating people, machines, and materials required to meet production.
Resource requirements planning: Calculation of resource needs to support production plans.
Returns: Handling of returned goods, repairs, disposal or remanufacturing.
Risk costs: Costs associated with supply risks (stockouts, disruptions, reputation).
Routing: Sequence of operations and work centers for manufacturing a part.
Routing files: Records that store routing and operation sequences for production.
Safety lead time: Extra lead time held to guard against variability.
Safety stock: Extra inventory held to protect against demand or supply variability.
Scatterplots: Charts showing the relationship between two variables.
Scheduled receipts: Confirmed incoming orders expected at a known date.
Scheduling: Assigning jobs to resources and sequencing to meet dates.
Setup time: Time to prepare equipment or process for a production run (changeovers).
Shrinkage: Inventory loss from theft, damage or error.
SKUs: Unique identifiers for each item/version tracked in inventory.
Standard hours: Time standards for operations used in capacity and costing.
Standardized work: Documented best method to perform a task consistently.
Statement of cash flows: Shows cash movements and liquidity over a period.
Storage costs: Costs to store and handle inventory (space, utilities, handling).
Suppliers: External providers of goods or services and the process of choosing/managing them.
Supply chain cost: Sum of costs across Plan, Source, Make, Deliver, Return processes.
System nervousness: Excessive schedule churn caused by many changes (MRP sensitivity).
Takt time: Rate at which product must be completed to meet customer demand (available time ÷ demand).
Theory of constraints (TOC): Management approach focusing on identifying and managing the system constraint to improve throughput.
Three Vs: Key supply chain characteristics to manage: Variability, Velocity, and Visibility.
Throughput time: Total time for an order to pass through the process (similar to cycle/lead time).
Time fences: Planning windows with different flexibility rules (Demand Time Fence, Planning Time Fence).
TPOP: A time-phased order point system used for distribution planning.
TQM: Organization-wide approach to embed quality in every process.
Traceability: Ability to follow material/product history for safety and compliance.
Training: Building employee skills across tasks/areas for flexibility and improvement.
Utilization: Ratio of actual output to available capacity (how much resource is used).
Valuation: Methods for valuing stock on financial statements.
Value stream mapping: Visualizing end-to-end process to identify waste and improvement opportunities.
Value streams: Sequences of activities that deliver value to the customer.
Variability: The degree of fluctuation in demand, supply, or process times that complicates planning.
Velocity: Speed at which products or information move through the supply chain.
Visibility: Ability to view inventory and status across the network.
Waste: Non-value-adding activities to eliminate (lean concept).
WIP inventory: Partially completed goods in production.
Work-in-process: Partially completed goods in production.
Finished goods inventory: Inventory of completed products ready for sale.
Raw materials inventory: Stock of inputs used to make products.

SCM Metrics

Supply Chain Metrics: Quantitative measures used to track, evaluate, and improve the efficiency, effectiveness, and adaptability of supply chain processes.
Balanced Scorecard: A framework that measures organizational performance from multiple perspectives—customer, business process, financial, and learning/innovation—ensuring alignment with supply chain objectives.
Dashboard: A real-time management tool that presents key performance indicators in an easy-to-read format to monitor supply chain performance.
SCOR Model: The Supply Chain Operations Reference model, a standardized framework for evaluating and improving supply chain performance across plan, source, make, deliver, return, and enable processes.
Plan Process: Part of the SCOR model focused on balancing resources and requirements to create supply chain strategies.
Source Process: The SCOR process for obtaining goods and services to meet demand and quality expectations.
Make Process: The SCOR process for transforming materials into finished goods or services, including assembly, repair, and remanufacturing.
Deliver Process: The SCOR process covering order management, transportation, distribution, and invoicing.
Return Process: The SCOR process for handling product returns, repairs, recycling, or refurbishing.
Enable Process: The SCOR process supporting supply chain performance with compliance, IT, contracts, and resource management.
Perfect Order Fulfillment: A measure of an organization’s ability to deliver a flawless order—right product, quantity, condition, place, time, customer, and cost—on time and without errors.
Order Fulfillment Cycle Time: The average time taken from receiving a customer order to successful delivery and acceptance by the customer.
Upside Supply Chain Adaptability: The maximum increase in production that a supply chain can achieve and sustain within 30 days to meet unexpected demand.
Downside Supply Chain Adaptability: The maximum reduction in ordered quantities that can be sustained within 30 days without incurring penalties.
Overall Value at Risk (VaR): A measure combining the probability and financial impact of risk events across supply chain functions.
Total Supply Chain Management Cost (TSCMC): The sum of costs to plan, source, make, deliver, and return products, including mitigation and overhead costs.
Cost of Goods Sold (COGS): Direct material, labor, and overhead costs assigned to products sold in a given period.
Total Cost to Serve: The sum of all costs associated with delivering products or services to customers, including planning, sourcing, making, delivering, and returns.
Total Landed Cost: The total cost of acquiring a product, including purchase price, transportation, duties, taxes, and handling fees.
Cash-to-Cash Cycle Time: The time required for a company to convert investments in raw materials into cash flows from customer sales.
Return on Supply Chain Fixed Assets: The return generated on investments in supply chain-related property, plant, and equipment.
Return on Working Capital: A profitability measure evaluating after-tax operating income relative to net working capital in the supply chain.
Inventory Turnover: The number of times inventory is sold and replaced during a given period, reflecting supply chain efficiency.
Inventory Velocity: The speed at which inventory passes through an organization or supply chain, typically measured by turnover.
Forecast Accuracy: The degree to which demand forecasts align with actual demand, often measured using MAPE or MAD.
Forecast Bias: A systematic deviation of forecasted demand from actual demand, measured using tracking signals.
Production Schedule Performance: A measure of adherence to planned production schedules in manufacturing or operations.
Production Schedule Stability: The consistency of production schedules over time without frequent changes or disruptions.
Inventory Days of Supply: The number of days that current inventory will last based on average daily demand.
Days’ Sales Outstanding (DSO): The average number of days it takes to collect payment after a sale is made.
Days’ Payables Outstanding (DPO): The average number of days a company takes to pay its suppliers after receiving goods or services.
Supplier Performance Index: A composite metric that adjusts supplier pricing to include costs of quality issues, delays, and other failures.
Labor Productivity: The ratio of output produced relative to labor input within the supply chain.
Equipment Capacity Utilization: The degree to which equipment or facilities are used relative to their maximum potential capacity.
Warehouse Capacity Utilization: A measure of how effectively warehouse storage space is used compared to total available capacity.
Order Entry Accuracy: The percentage of customer orders entered correctly into the system without errors.
Picking and Shipping Accuracy: The correctness of picking and shipping operations in fulfilling customer orders.
Fill Rate: The percentage of customer demand met directly from available stock without backorders.
On-Time Delivery: The percentage of customer orders delivered by or before the promised date.
Supplier Lead Time: The average time taken by suppliers to deliver goods from order placement to receipt.
Dwell Time: The length of time inventory spends idle in the supply chain without value-added activities.
Obsolete Inventory: Inventory that has lost value due to expiry, product changes, or lack of demand.
Cost Variance: The difference between budgeted and actual costs for a supply chain activity.
Usage Variance: The difference between planned and actual consumption of resources in production.
Supplier Bankruptcy Risk (Altman Z-Score): A financial risk metric predicting the likelihood of supplier bankruptcy using weighted financial ratios.
Customer Creditworthiness: An evaluation of a customer’s ability to pay invoices reliably and on time.
Strategic Profit Model (ROA Breakdown): A financial model showing how supply chain decisions impact return on assets via profit margin and asset turnover.
Suboptimization: A condition where improving one function in the supply chain increases overall cost or reduces total performance.
Supplier Capacity Utilization: The percentage of a supplier’s total available production capacity currently in use.
Supplier Quality Costs: The added costs of supplier quality issues such as rework, delays, or rejected materials.
Nonconformance Cost: Expenses associated with failures to meet quality requirements, including scrap and rework.
Backorder Rate: The percentage of customer orders delayed due to stockouts.
Service Level: The probability that demand will be met without a stockout during a replenishment cycle.
Stockout Rate: The percentage of demand not fulfilled on time due to insufficient inventory.
Damage Frequency: The rate at which goods are damaged in the supply chain, often tracked by location or function.
Information Accuracy: The reliability and correctness of supply chain data such as demand, shipment, or inventory levels.
Information Availability: The accessibility and timeliness of supply chain data to relevant stakeholders.
Document Accuracy: The degree to which shipping, invoicing, and compliance documents are error-free.
Warranty Returns: The percentage or number of products returned under warranty due to quality issues.
Credit Claims: The number or value of claims raised due to order errors, damage, or service failures.
Freight Cost per Unit: The transportation cost allocated per unit shipped, often used for benchmarking efficiency.
Inbound Freight Cost: The transportation cost for goods shipped from suppliers to manufacturing or distribution centers.
Outbound Freight Cost: The transportation cost for goods shipped to customers or distribution points.
Inventory Carrying Cost: The total cost of holding inventory, including capital, storage, insurance, and obsolescence.
Administrative Costs: The overhead costs of managing and operating supply chain functions.
Return Cost: The cost associated with processing and managing product returns in the supply chain.
Service Failure Cost: The cost impact of failing to meet service-level commitments or delivery promises.
Bullwhip Effect: The amplification of demand variability as it moves upstream in the supply chain.
Supplier Sustainability Scorecard: A measurement tool used to track suppliers’ environmental and social responsibility performance.
Synchronized Planning: The alignment of planning activities across supply chain partners to improve responsiveness and efficiency.
Dynamic Fulfillment: A supply chain capability to flexibly adjust order fulfillment strategies to maximize speed and customer satisfaction.
Intelligent Supply: Leveraging analytics and emerging technologies to optimize sourcing and procurement processes.
Smart Operations: Digitally connected and agile operations designed to optimize productivity and responsiveness.
Connected Customer: A supply chain capability focused on creating seamless, personalized customer experiences.
Supplier On-Time Delivery: The percentage of supplier shipments arriving as scheduled without delays.
Supplier Lead Time Variability: The fluctuation in time suppliers take to fulfill orders, impacting supply chain reliability.
Order Cycle Time Variance: The variability in actual order fulfillment times compared to standard or expected times.

Logistics and Transportation

Incoterms: Internationally recognized rules by the ICC defining responsibilities of sellers and buyers for goods delivery.
Freight Forwarder: A service provider that arranges storage, consolidation, and shipping of merchandise on behalf of shippers.
Intermodal Transport: Using multiple transport modes for goods in one container without handling the goods when changing modes.
Role of Transportation in SCM: Ensures timely movement of goods across the supply chain, balancing cost, speed, and reliability.
Modes of Transport: Various transport options such as road, rail, air, sea, and pipeline, each with unique cost and speed tradeoffs.
Performance Characteristics of Transport Modes: Attributes like speed, cost, capacity, reliability, and accessibility used to evaluate transport options.
Transportation Tradeoffs: Balancing cost, speed, flexibility, and reliability when choosing transport methods.
Package Carriers: Companies that specialize in small, high-value shipments with fast delivery, such as courier services.
Transportation Infrastructure: Physical and organizational facilities like roads, ports, railways, and airports that enable goods movement.
Milk Run: A delivery method where one vehicle makes multiple stops to pick up or deliver goods, reducing costs.
Intermediate Transit Points: Temporary hubs like cross-docking centers used to consolidate, sort, or redirect shipments.
Tailored Transportation Network: Customizing transport routes and modes to fit product types, demand levels, and customer needs.
SCM Risks in Transportation: Disruptions like delays, accidents, fuel price fluctuations, and regulatory issues affecting logistics flow.
Reverse Logistics: The process of moving goods from customers back to sellers or manufacturers for returns, recycling, or disposal.
Last Mile Delivery: The final step of the delivery process where goods reach the end customer, often the most costly and complex stage.
Cross-Docking: A logistics practice where inbound shipments are directly transferred to outbound vehicles without long-term storage.
Cold Chain Logistics: Temperature-controlled supply chain required for perishable goods like food, pharma, and chemicals.
Transportation Management System (TMS): Software that helps companies plan, execute, and optimize transportation operations.

SCM Systems

Enterprise Resource Planning (ERP): A modular suite of integrated business applications built around a central database to support planning, manufacturing, purchasing, finance, sales, logistics, and other functions across the enterprise.
ERP Transactional Modules: Modules where users interact with the ERP system for tasks such as order placement, inventory movement, billing, and purchasing. They align tactical decisions with strategic goals.
Advanced Planning and Scheduling (APS): Computer systems that use mathematical algorithms to optimize and simulate logistics and manufacturing across strategic, tactical, and operational levels of the supply chain.
APS Demand Management: A module within APS that forecasts demand using order history, customer data, seasonality, and marketing events.
APS Resource Management: Coordinates the capacities and constraints of resources across the supply chain using inputs such as demand forecasts, costs, and product characteristics.
Available-to-Promise (ATP): The uncommitted portion of a company’s inventory and planned production maintained in the master schedule, used to provide reliable delivery dates.
Capable-to-Promise (CTP): A process of committing customer orders based on available capacity and inventory, across one or more manufacturing/distribution sites.
Profitable-to-Promise (PTP): A decision-support tool that evaluates the profitability of fulfilling a customer order, factoring in costs, resources, and margins.
Supply Chain Event Management (SCEM): Software that monitors, simulates, and controls supply chain events, triggering alerts or actions for exceptions and enabling real-time visibility.
Warehouse Management System (WMS): A computer application designed to manage warehouse workflows, inventory, picking, replenishment, and put-away operations.
WMS Cross-Docking: A function within WMS that allows truck-to-truck transfers without long-term storage, reducing handling time and cost.
Transportation Management System (TMS): Software for planning, optimizing, executing, and tracking transportation operations, including routing, carrier selection, load planning, and freight rating.
TMS Shipment Planning: Optimizes routes, carriers, and capacity for transportation at strategic, tactical, and operational levels.
Global Track and Trace: A TMS-enabled capability that uses GPS and cellular networks to provide real-time visibility into shipment location, delivery status, and fleet performance.
Collaborative Transportation Management (CTM): The use of web-enabled TMS tools for shippers and carriers to collaborate on planning, consolidate shipments, and reduce costs.
Information System Architecture: A model of how the organization structures information across functions, communication needs, data modeling, and control systems.
Database Management System (DBMS): Software that organizes, stores, and retrieves data in structured databases, allowing multiple applications to access consistent data views.
Software as a Service (SaaS): A software delivery model where applications are hosted by a third party and accessed via the internet, reducing installation and upgrade costs.
Cloud Computing: An emerging IT model where computing resources, databases, and software are delivered over the internet, enabling scalability and integration across supply chain partners.
Engineering Change Control (ECC): A system ensuring that product design changes follow an authorization procedure, often integrated with ERP to manage product updates.
Best-of-Breed Systems: Specialized software applications purchased separately from ERP vendors, often providing cutting-edge or industry-specific functionality.
ERP Vendor Modules: Modules provided by ERP vendors that integrate seamlessly into the ERP framework, offering simplified data ownership and lower integration cost.
Configuration: Adjusting software parameters to match organizational processes without altering source code, enabling cost-effective customization.
Customization: Reprogramming or extending system code to meet business requirements not covered by standard configuration, usually discouraged due to cost and complexity.
Software as a Service (SaaS): A subscription-based model where supply chain software is hosted by a vendor and accessed via the internet, enabling fast deployment and automatic upgrades.
Cloud Computing: A system where supply chain applications and data are stored in remote data centers, accessed online, allowing scalable and flexible resource sharing.
Platform as a Service (PaaS): A cloud-based model providing a platform for users to build, test, and deploy supply chain applications without managing infrastructure.
Infrastructure as a Service (IaaS): Cloud services that provide computing infrastructure such as servers and storage, enabling supply chain systems to scale resources on demand.
Supply Chain Visibility Portals: Web-based interfaces that provide real-time access to supply chain data such as inventory, shipments, and warehouse status.
Advanced Shipment Notification (ASN): A WMS/TMS system message that informs partners of pending deliveries, improving receiving and planning accuracy.
Cross-Docking Systems: Warehouse systems that enable goods to move directly from inbound trucks to outbound trucks without long-term storage.
Load Matching and Optimization: TMS functionality that consolidates loads, matches shipments with carrier capacity, and minimizes empty miles.
Freight Rating System: TMS capability that automatically applies carrier tariffs, service levels, and cost ratings to optimize shipment decisions.
Manifesting System: A TMS function that generates required shipment documentation such as bills of lading, labels, and export forms.
Global Settlement System: A TMS financial module that audits freight bills, processes payments, and minimizes errors in global transportation billing.
Collaborative Planning, Forecasting, and Replenishment (CPFR): A system-enabled process where supply chain partners share forecasts and replenishment plans to align supply with demand.
Vendor-Managed Inventory (VMI) Systems: Systems that allow suppliers to monitor customer inventory levels and automatically replenish stock when needed.
Distributor Integration (DI): System-based integration between manufacturers and distributors to improve visibility and reduce stockouts.
Automatic Identification Technologies: Technologies like barcodes and RFID integrated into WMS/TMS to reduce data errors and increase information velocity.
Customer Relationship Management (CRM): A system that manages customer interactions, sales, and service data, often integrated with ERP to align demand forecasts with customer insights.
Supplier Relationship Management (SRM): Systems that manage supplier performance, procurement, contracts, and collaboration to improve supply chain efficiency and reliability.
Master Data Management (MDM): Systems ensuring consistent, accurate, and timely master data (e.g., customer, supplier, product, and location) across all supply chain applications.
Data Cleansing and Normalization: Processes supported by SCM systems to remove errors, standardize formats, and ensure accuracy of supply chain data.
Application Programming Interfaces (APIs): Standardized software interfaces enabling different SCM systems to communicate and share data efficiently.
Sales and Operations Planning (S&OP) Systems: Systems that synchronize supply and demand by integrating sales forecasts, production planning, and financial goals.
Engineering Change Management (ECM): System tools that control product design modifications and ensure that changes are approved, documented, and integrated into ERP/WMS/TMS.
Collaborative Commerce Platforms: Web-enabled platforms that connect multiple supply chain partners to jointly plan, execute, and optimize business processes.
Global Trade Management (GTM) Systems: Systems that manage international trade processes, including compliance, customs documentation, tariffs, and regulatory reporting.
Exception Management Systems: SCM event-driven systems that flag deviations from planned operations and trigger alerts or corrective actions across supply chain functions.
Information System Architecture: A structured model of how information is gathered, stored, shared, and used across an organization and its extended supply chain, aligned with overall organizational strategy.
Information Strategy: The translation of an organization’s strategic goals into guiding principles and priorities for information systems, treating IT as a strategic investment.
Information Content Definition: The process of deciding what data need to be collected, how they will be maintained, stored, accessed, and retired across the extended supply chain.
Information Policies and Controls: Agreed-upon rules for designing, operating, and auditing information systems to ensure data integrity, security, and compliance across supply chain partners.
Middleware: Software that interconnects otherwise incompatible applications and databases to enable integration of supply chain processes.
Electronic Data Interchange (EDI): The electronic exchange of standardized business documents such as purchase orders and invoices between trading partners without manual intervention.
Value-Added Network (VAN): A private network often used to support EDI, providing additional services such as security, validation, and auditing beyond common carriers.
Process-Oriented Middleware: Middleware that manages business process flows between supply chain partners, enabling process simplification and cross-enterprise integration.
Service-Oriented Architecture (SOA): A software design approach where applications are built from loosely coupled, reusable services to allow flexible sharing among supply chain partners.
Microservices: A cloud-native programming style where an application is built as independent services that communicate with each other, enabling scalability and resilience.
Publish/Subscribe Messaging: A communication model where publishers create message categories and subscribers receive them in real-time, facilitating visibility and event-driven supply chains.
E-Business: Conducting business processes on electronic networks, typically the internet, to improve performance and collaboration across the extended supply chain.
E-Commerce: The use of computer and telecommunication technologies to conduct business transactions electronically, including B2B, B2C, and hybrid models.
Business-to-Business (B2B): Electronic commerce between businesses, often involving exchanges, procurement, and collaboration technologies.
Business-to-Consumer (B2C): Electronic commerce between businesses and final consumers, such as online retail sales, apps, and digital marketing.
Business-to-Business-to-Consumer (B2B2C): A collaborative e-commerce model where multiple businesses jointly provide enhanced value to the end consumer.
Quick-Response Program (QRP): A supply chain method linking retail sales data directly to production and replenishment schedules using POS data and EDI.
Continuous Replenishment (CR): An inventory strategy where suppliers receive frequent POS or shipment data and commit to replenishing sales continuously without stockouts.
Consignment Inventory: An arrangement where a supplier places goods at a customer’s location but retains ownership until the goods are used or sold.
Collaborative Planning, Forecasting, and Replenishment (CPFR): A structured process where supply chain partners jointly plan, forecast, and manage replenishment to synchronize supply with demand.
Front End: The user interface in a client-server or web-based system, concerned with user experience, minimizing errors, and supporting multiple use cases.
Middle End: The software layer connecting front-end interfaces with back-end databases, enabling different applications to interoperate securely and efficiently.
Back End: The server and database portion of an information system, focused on fast, secure, and accurate data access and management.
Legacy System: An outdated computer application that is expensive to replace and poorly integrates with other systems, but continues to be used in operations.
Web Services: Open-standard frameworks that allow data to be exchanged between different applications over the internet without regard to platform or language.
Internet-Enabled Supply Chain: A supply chain where all partners share data through the internet, enabling visibility, global reach, responsiveness, and integration.
Sell-Side E-Commerce: Applications that allow sellers to present products online and automate sales, order entry, customer interaction, and settlement processes.
Buy-Side E-Commerce: Applications that automate procurement processes such as requisition, sourcing, negotiation, contracting, and payment.
Content Management: Applications that manage the lifecycle of digital information, enabling dynamic publishing and updates of content such as catalogs, ads, and contracts.
B2B Collaboration: The use of exchanges and portals that allow multiple trading partners to connect and collaborate, replacing hundreds of separate links with a hub-and-spoke model.
Point-of-Sale (POS) System: Systems that capture sales data and relieve inventory at the time and place of sale, enabling real-time demand-driven replenishment.
Automatic Identification System (AIS): Technologies such as barcodes and RFID that automatically identify items and capture data for faster, more accurate transaction processing.
Warehouse Automation Systems: Physical devices integrated with WMS that direct employees in picking, put-away, and movement of goods using voice, lights, or heads-up displays.
Bar Codes: Machine-readable codes used to identify products, SKUs, or locations, widely used in POS, warehousing, and transportation.
2D Bar Codes: Enhanced bar codes such as QR codes that store information both horizontally and vertically, enabling more data storage and mobile scanning.
Radio Frequency Identification (RFID): Electronic tags with antennas that communicate with readers to automatically capture product data, track movement, and improve visibility.
Electronic Product Code (EPC): A standardized code used with RFID to uniquely identify products, supporting warranty, tracking, and anti-counterfeiting programs.
Smart Cards: Cards with embedded microchips used for access control, time logging, or identification in supply chain environments.
Decision Support System (DSS): Computer systems that support managerial decision-making by using analytical models, simulations, and data-driven insights.
Data Mining: The process of analyzing large datasets to uncover hidden patterns, correlations, and insights that can improve supply chain decisions.
Supply Chain Visibility: The ability of supply chain partners to access and share real-time demand, production, and inventory information across the network.
Information Sharing: The exchange of data between supply chain partners, typically through e-business, to improve transparency, coordination, and decision-making.
Aggregation: The pooling of data into categories to smooth variation and highlight trends, enabling more effective forecasting and analysis.
Data Validation: The process of testing models and datasets against actual results to ensure accuracy and reliability in supply chain analysis.
Big Data: The collection, storage, and processing of massive volumes of structured and unstructured data for generating actionable insights.
Demand Sensing: Using near real-time data to detect short-term changes in customer demand and adjust supply chain plans accordingly.
Demand Shaping: Altering demand through promotions, pricing, or campaigns, based on demand sensing insights, to align with supply capabilities.
Data Accuracy: Ensuring that supply chain data is correct, consistent, and timely, which is critical for effective planning and execution.
Data Cleansing: The process of detecting and correcting errors in data, such as misspellings or missing values, to improve system reliability.
Data Normalization: A database process that minimizes redundancy and prevents structural anomalies, ensuring consistency across systems.
Master Data Life Cycle: The stages through which master data passes, from planning and creation to usage, maintenance, archival, and destruction.
Effectivity Date: A date in engineering data that indicates when a bill of material or product structure is valid, helping plan transitions to new versions.
Audit Trail: A secure record of changes made to data, showing who made modifications, when, and what was altered, used for control and compliance.
Data Residency: Legal requirements mandating that certain data must be stored within specific geographic or national boundaries.
General Data Protection Regulation (GDPR): The European Union’s data privacy regulation that grants individuals rights over their personal data and requires explicit consent for processing.
California Consumer Privacy Act (CCPA): A U.S. law giving California residents rights over personal data, including the right to know, delete, and opt out of data sales.
NIST Cybersecurity Framework: A U.S. framework providing best practices for identifying, protecting, detecting, responding to, and recovering from cyber risks.
MITRE ATT&CK Framework: A knowledge base that categorizes adversary tactics and techniques in cyberattacks, supporting defense and risk management.
Cyber Insurance: A form of coverage that protects businesses from losses related to cyberattacks, data breaches, and digital trade disruptions.
Trade Disruption Insurance: Insurance coverage for losses caused by disruptions in supply chain information systems, political risks, or expropriation of assets.

Supply Chain Planning

Demand Management: The process of forecasting, influencing, and managing customer demand to align supply chain activities with market needs.
Forecasting: Estimating future customer demand using historical data, market research, and statistical methods.
Forecast Error: The difference between actual demand and forecasted demand, used to evaluate the reliability of forecasting methods.
Sales and Operations Planning (S&OP): A process that balances demand forecasts with supply capabilities, aligning plans across marketing, sales, and operations.
Operations Planning and Control: The broader process that includes S&OP, master scheduling, and other planning activities to align resources with demand.
Demand Forecasting: The process of predicting future customer demand for a product or service. Accurate forecasting is crucial for effective supply chain planning.
Sales and Operations Planning (S&OP): A process that aligns an organization's sales, marketing, production, and finance teams to ensure that supply meets demand.
Rolling Average Demand: A simple forecasting method that calculates the average demand over a specific period and uses it to predict future demand.
Forecasting in Supply Chain: The practice of estimating future demand, supply, and trends to guide supply chain decisions.
Definition of Forecast: A prediction or estimate of future demand, supply, or trends in the supply chain.
Primary Characteristic of a Forecast: Forecasts are always uncertain and should be treated as estimates, not guarantees.
Forecasting Methods: Techniques such as qualitative, quantitative, time series, and causal methods used to predict demand.
Aggregate Forecasts: Forecasting total demand across products or regions rather than individual items.
Long Term Forecast: Projections covering years, used for capacity planning and strategic decisions.
Short Term Forecast: Forecasts for days, weeks, or months, used for inventory and operational planning.
Forecast Components: Key elements influencing forecasts, including demand, lead time, seasonality, and trends.
Demand: The quantity of a product or service required by customers at a given time.
Lead Time: The time taken between ordering and receiving goods.
Time Series Forecasting: A method that uses historical data to predict future demand patterns over time.
Moving Average Forecast: A time series method that averages a fixed number of past periods to predict future demand.
Exponential Smoothing: A forecasting method that applies decreasing weights to past observations, giving more importance to recent data.
Forecast Error: The difference between actual demand and the forecasted demand.
Holt's Model: An extension of exponential smoothing that accounts for trends in forecasting.
Winter's Model: An advanced exponential smoothing model that includes both trend and seasonality adjustments.
Seasonality in Forecast: Repeating demand patterns that occur at regular intervals, such as monthly or yearly.
Role of IT in Forecasting: Information systems and analytics tools enhance accuracy and speed in forecasting processes.
Risk Management in Forecasting: Identifying and mitigating uncertainties in demand and supply predictions to reduce business risk.
Product Life Cycle (PLC): The stages a product passes through—introduction, growth, maturity, and decline—which influence supply chain and marketing strategies.
Product Life Cycle Management (PLM): The process of managing a product’s entire lifecycle, from design and introduction to growth, maturity, and retirement.
Forecast Error: The measurable difference between actual demand and forecasted demand, used to assess forecast reliability.
Forecasting Methods: Techniques used to estimate demand, including qualitative methods (market research, expert judgment) and quantitative methods (time series, regression).
Collaborative Planning, Forecasting, and Replenishment (CPFR): A business practice that combines the intelligence of multiple partners to improve the accuracy of forecasts and the efficiency of replenishment.
Change Management: The structured approach to transitioning individuals, teams, and organizations to a desired future state, critical in orchestrated supply chains.
Control Tower: A centralized system in digital supply chains that provides real-time visibility and coordination across global operations.
Predictive Analytics: The use of statistical and machine learning techniques on supply chain data to forecast future outcomes, such as demand or maintenance needs.
Resilience: The ability of a supply chain to adapt and recover quickly from disruptions such as natural disasters, pandemics, or supply shortages.
Visibility: The capability to track products, information, and funds across the entire supply chain in real-time for better decision-making.
Demand Analysis: Market research or competitor analysis needed for strategic, tactical, and operational levels of planning. Tools include SWOT analysis, market research, and product assessments.
Environmental Scan: A process needed to validate current strategic and operational plans against external forces such as harsh economic climate, changing tastes, or competitor offerings.
Macro Environment: The environment external to a business, including technological, economic, natural, and regulatory forces that marketing efforts cannot control, as defined in the APICS Dictionary, 16th edition.
SWOT Analysis: Stands for Strengths, Weaknesses, Opportunities, and Threats; a strategic planning tool useful for long-term demand analysis.
Strengths: Internal positive points assessed in a SWOT analysis, typically derived from comprehensive data collected about the organization.
Weaknesses: Internal negative points assessed in a SWOT analysis, where input from external customers and suppliers ideally provides substantiated evidence.
Opportunities: External positive points assessed in a SWOT analysis, based on market trends and risk analyses, that can be acted upon to help achieve organizational goals.
Threats: External negative points or risks that can impact a company negatively if they are not handled appropriately, such as unforeseen external events.
Market Plan: A written document, a subset of the strategic business plan, that includes the current market position, opportunity and issue analysis (SWOT results), marketing objectives, action plans, budgets, and pro forma profit and loss statement and management controls.
Market Research: The systematic gathering, recording, and analysis of data about problems relating to the marketing of goods and services.
Pro Forma: Indicates that a financial statement, such as a profit and loss statement, is based on forecasted information rather than historical information.
Market Analysis: A type of market research involving the study of the size, location, nature, and characteristics of markets, useful for market segmentation.
Sales Analysis (or Research): The systematic study and comparison of sales (or consumption) data and market share.
Market Share: The actual portion of current market demand that a company or product achieves (APICS Dictionary, 16th edition).
Consumer Research: The discovery and analysis of consumer attitudes, reactions, and preferences, resulting in information useful for customer segmentation.
Demand Forecasting: A marketing and sales activity that predicts future demand.
Vendor-Managed Inventory (VMI): A type of collaborative arrangement where demand forecasts need to be shared with cross-functional and intercompany teams.
Collaborative Planning, Forecasting, and Replenishment (CPFR): A collaborative arrangement where forecasts need to be shared with cross-functional and intercompany teams to ensure everyone works from the same information.
SKU (Stock Keeping Unit): A proliferation of these (units of product that differ by feature, color, or packaging) increases inventory overhead, dilutes marketing efforts, and lowers manufacturing economies of scale.
Benchmarking: A tool used to get an idea of the competition’s strategy or to determine the relative maturity of competitors’ supply chains.
SCOR Model: A framework for supply chain management used to standardize measurements across different regions or markets, looking at an organization's flexibility, velocity, and predictability, among other things.
Product Portfolio: The mix of product classifications, families, products, and services that the organization offers, forming the core of its brand and value proposition.
Product Family: Groups of products with manufacturing similarities, which are part of the overall product portfolio.
Durable Goods: A broad product classification of physical goods that are expected to last for an extended time period.
Non-durable Goods: A broad product classification of physical goods that deteriorate quickly and may need to be consumed quickly.
Industrial Goods: One of the major classifications of physical goods, which includes subcategories such as raw materials, components, capital goods, and MRO materials.
Raw materials and components (Industrial): A subcategory of industrial goods where the typical strategic priorities are cost and services related to speed, dependability, and/or flexibility.
Capital goods: A subcategory of industrial goods (e.g., finished goods, industrial equipment) where the typical strategic priorities are quality, cost, flexibility (e.g., product features), and services.
Maintenance, repair, and operating (MRO) materials: A subcategory of industrial goods where the typical strategic priorities are cost, dependability (e.g., availability), and speed.
Consumer Goods: One of the major classifications of physical goods, which includes subcategories like convenience goods, shopping goods, and specialty goods.
Convenience goods: A subcategory of consumer goods (e.g., groceries) where the typical strategic priorities are cost and dependability.
Shopping goods: A subcategory of consumer goods (e.g., home furnishings) where the typical strategic priorities are quality (including perceived brand quality), dependability (including service warranty), and cost.
Specialty goods: A subcategory of consumer goods (e.g., art, high fashion) where the typical strategic priority is quality (including brand prestige).
Product Portfolio Complexity Management: Involves a review of the number of stock keeping units (SKUs) maintained by the organization to balance providing customer variety against the increasing costs and complexity in the supply chain.
Product Life Cycle: The concept that no product is immune to changes in customer demand over time, necessitating a review to determine how manufacturing, supply chain, and marketing strategies must change as the product shifts through its stages.
Introduction (Life Cycle Stage): The initial stage of a product's life cycle where product availability, product volume, and sales volume are typically low.
Growth (Life Cycle Stage): A stage of the product's life cycle where product availability, product volume, and sales volume are increasing.
Maturity (Life Cycle Stage): A stage of the product's life cycle where product availability, product volume, and sales volume have leveled off.
Decline (Life Cycle Stage): A stage of the product's life cycle where product availability, product volume, and sales volume are low or decreasing.
Saturation: The stage in the life cycle of a service when it enters maturity because all competitors are offering it, transforming it from an order winner into an order qualifier.
Order Qualifiers: Customer requirements that must be met for a product or service to even be considered by the customer, such as a service that has reached saturation.
Order Winners: Customer requirements that cause a customer to select a product or service over another, where a feature or service provides a differential competitive advantage.
New Product Introduction (NPI): The process of attempting to produce entirely new demand or to build upon previous demand by focusing on new product features to differentiate the product/service package from competitors.
Microeconomics: The analysis of the behavior of individual economic decision makers (individuals and firms), focusing on specifics like the price of a product, cost trends for a business, or employment levels in a given industry.
Law of Demand: A microeconomic law stating that as the price of a good or service increases, demand will decrease, assuming all other factors remain equal.
Scarcity: The economic condition meaning that goods and services are limited in availability, forcing businesses and consumers to make choices about which items they want more than others.
Opportunity Costs: The value of the other things that an entity is sacrificing to make the chosen good or service a priority.
Price Elasticity of Demand: The sensitivity of customers to changes in product price, which determines how much price changes impact demand.
Elastic Demand: A condition where demand is highly sensitive to price changes (coefficient greater than 1.0); if the price drops, the proportional increase in units sold provides a net increase in revenue.
Inelastic Demand: A condition where demand is less sensitive to price changes (coefficient less than 1.0); if the price drops, the loss of revenue from the lower price is greater than the gain from increased unit sales.
Marginal Analysis: A microeconomic decision-making tool that focuses only on the extra usefulness (marginal utility) and additional cost (marginal cost) of one more unit of a good or service.
Marginal Utility: The extra usefulness or benefit a consumer derives from consuming one more unit of a good or service.
Marginal Cost: The additional cost of producing one more unit of a good or service. In economics, the production of an item is economically justified as long as its marginal utility exceeds its marginal cost.
Fixed Costs: Business expenses that do not change based on production or output volumes (e.g., rent, insurance).
Variable Costs: Business expenses that fluctuate in direct proportion to the volume of output (e.g., direct materials, direct labor).
Total Costs: The sum of all fixed costs and all variable costs incurred by a business in a given period.
Breakeven Point: The point at which total revenue equals total costs; the stage at which a firm first begins to profit.
Services: A major product classification characterized by four unique traits: client interaction, simultaneity, intangibility, and perishability. Examples include transportation, warehousing, and banking.
Simultaneity (Services): A characteristic of services meaning the consumption of the service must occur at the same time the service is being provided.
Intangibility (Services): A characteristic of services meaning the output is not a physical object, making it harder to measure quality and necessitating the use of proxies (e.g., speed of delivery).
Perishability (Services): A characteristic of services meaning the service cannot be stored for later consumption or resale; if the capacity is not utilized, the lost revenue is gone forever.
Heterogeneity (Services): A characteristic of services meaning that every delivery of the service is unique, largely due to client interaction and variability in human effort or skill.
Demand Management: The function of recognizing all demands for goods and services to support the marketplace. It includes the activities of demand finding, influencing, and prioritizing.
Demand Finding: A primary activity of demand management that identifies and estimates customer wants and needs, often through marketing and market research.
Demand Shaping (or Influencing): A primary activity of demand management that uses marketing tools like price changes, promotions, and advertising to alter existing demand patterns.
Demand Prioritization: A primary activity of demand management that allocates scarce or limited supply to different customer segments or channels when total demand exceeds capacity.
Operations Planning (or Demand/Supply Integration): The function responsible for translating the marketing plan's demand picture into operational terms, linking the supply capability with the demand picture.
Sales and Operations Planning (S&OP): An integrated business management process through which the executive team continually achieves focus, alignment, and synchronization among all functions of the organization. It balances demand and supply.
Demand Pattern: The historical behavior of sales over time, which can be broken down into five components: trend, seasonality, cycle, random variation, and the influence of promotions.
Trend (Demand): The general direction of demand over the long term, which can be flat, upward, or downward. It is usually influenced by factors like population shifts or product life cycle stage.
Seasonality (Demand): A component of demand characterized by repeatable patterns tied to a specific calendar event or time of year (e.g., holidays, weather), which can occur within a single year.
Cycle (Demand): A component of demand characterized by swings in demand that do not repeat over the same time frame each year and are typically tied to the general economic climate (recessions or booms).
Random Variation: The unpredictable part of a data series that cannot be explained by other factors; akin to common cause variation in statistical process control.
Common Cause Variation: The multitude of small, random factors affecting demand that cannot be practically added to a forecasting model, which random variation is akin to.
Special Cause Variation: Causes of demand variation (like trends, seasonality, or promotions) that have an identifiable effect on demand and can often be removed from the data prior to forecasting.

Manufacturing

Lean Manufacturing: A method to minimize waste and maximize productivity in the manufacturing process.
Just-in-Time (JIT): A strategy to produce or receive goods only when needed, reducing inventory and waste.
Total Quality Management (TQM): An approach focused on continuous improvement and customer satisfaction across all operations.
Kaizen: A Japanese term meaning 'continuous improvement' involving all employees to enhance efficiency and quality.
Kanban: A visual scheduling system from Japan that signals demand and helps manage workflow in production.
Poka-Yoke: A Japanese concept of 'mistake-proofing' designed to prevent errors in manufacturing processes.
5S Methodology: A Japanese workplace organization system: Sort, Set in order, Shine, Standardize, and Sustain.
Muda: One of the 3Ms in Lean; refers to waste or non-value-added activities such as overproduction, waiting, and defects.
Mura: One of the 3Ms in Lean; refers to unevenness or inconsistency in operations that creates inefficiencies.
Muri: One of the 3Ms in Lean; refers to overburdening people, machines, or processes beyond their natural capacity.
Six Sigma: A data-driven methodology to reduce defects and improve process quality and consistency.
Theory of Constraints (TOC): A management philosophy focusing on identifying and improving the bottleneck that limits overall system performance.
Agile Manufacturing: A flexible approach that emphasizes quick response to customer needs and market changes while controlling costs.
Mass Customization: The ability to produce customized products at scale with efficiency similar to mass production.
Computer-Integrated Manufacturing (CIM): The use of computer systems to control the entire production process for efficiency and automation.
Additive Manufacturing: Also known as 3D printing, it builds products layer by layer, allowing rapid prototyping and customized production.
Flexible Manufacturing System (FMS): A system that uses automated machines and tools to quickly adapt to changes in product type and volume.
Continuous Flow Manufacturing: A production approach where items move seamlessly through the process without interruptions or delays.
Cellular Manufacturing: Organizing workstations into cells to improve workflow, reduce movement, and enhance efficiency.
Design for Manufacturability (DFM): The practice of designing products to simplify manufacturing and reduce costs.
Total Productive Maintenance (TPM): A proactive maintenance approach aimed at increasing equipment reliability and reducing downtime.

Specialized Supply Chains

Humanitarian Supply Chain: A supply chain designed for disaster relief and humanitarian aid, which must be agile, resilient, and responsive under uncertain conditions.
Agility: The ability of a supply chain to respond quickly to unpredictable changes in demand or supply, critical for humanitarian and volatile environments.
Hospital Supply Chain: A specialized supply chain focused on balancing cost efficiency with safe and effective patient care.
Unique Device Identifier (UDI): A system mandated in healthcare to uniquely identify medical devices, improving tracking, billing, and safety.
Risk Pooling: A strategy where critical supplies are centralized to spread risk and reduce the likelihood of shortages in healthcare or crisis supply chains.
Retail Supply Chain: A supply chain model that supports both physical retail stores and online channels, often challenged by e-commerce competition.
Cross-Docking (Retail Context): A distribution strategy where goods are moved directly through warehouses without storage, effective for retail replenishment but less suitable for e-commerce.
Multichannel Retailing: A retail strategy that integrates online and physical store sales, requiring flexible and responsive supply chains.
Amazon Supply Chain: A benchmark e-commerce supply chain characterized by extensive distribution centers, inbound freight control, and fast fulfillment.
Inbound Freight: The transportation of goods from suppliers to company facilities; Amazon manages most inbound freight itself to reduce costs.