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108 Cards in this Set

  • Front
  • Back

Scor Model

Plan, Source, Make, Deliver, Return
Profit margin is ?
The difference between sales and costs of goods sold

Decoupling

Creating independence between supply and use of material. Commonly denotes providing inventory between operations so that fluctuations in the production rate of the supplying operation do not constrain production or use rates of the next operation.
Gross margin
The difference between total revenue and the costs of goods sold. (Synonym: Gross profit margin).
Optimization
Achieving the best possible solution to a problem in terms of a specified objective function.
Cycle stock
One of the two main conceptual components of any item inventory, the cycle stock is the most active component; the cycle stock depletes gradually as customer orders are received and is replenished cyclically when supplier orders are received. The other conceptual component of the item inventory is the safety stock, which is a cushion of protection against uncertainty in the demand or in the replenishment lead time. (Synonym: Cycle inventory).
Stockout costs
The costs associated with a stockout. Those costs may include lost sales, backorder costs, expediting, and additional manufacturing and purchasing costs.
Interplant demand
One plant's need for a part or product that is produced by another plant or division within the same organization. Although it is not a customer order, it is usually handled by the master production scheduling system in a similar manner.
Demand shaping
The practice of using the 4 Ps (product, pricing, placement, promotion) and other market variables to influence the demand of a product or service so that the demand better matches the available supply.
Buffer
1) A quantity of materials awaiting further processing. It can refer to raw materials, semifinished stores or hold points, or a work backlog that is purposely maintained behind a work center. 2) In the theory of constraints, these can be time or material and support throughput and/or due date performance. They can be maintained at the constraint, convergent points (with a constraint part), divergent points, and shipping points.
Standard costs
The target costs of an operation, process, or product including direct material, direct labor, and overhead charges.
Demand forecasting
Forecasting the demand for a particular good, component, or service.
Return on investment (ROI)
A relative measure of financial performance that provides a means for comparing various investments by calculating the profits returned during a specified time period. In the theory of constraints, ROI is calculated as throughput minus operating expense divided by investment.
Pull system
1) In production, the production of items only as demanded for use or to replace those taken for use. 2) In material control, the withdrawal of inventory as demanded by the using operations. Material is not issued until a signal comes from the user. 3) In distribution, a system for replenishing field warehouse inventories where replenishment decisions are made at the field warehouse itself, not at the central warehouse or plant.
Vendor
Any seller of an item in the marketplace. See: Supplier.
Service industry
1) In its narrowest sense, an organization that provides an intangible product (e.g., medical or legal advice). 2) In its broadest sense, all organizations except farming, mining, and manufacturing. This definition of service industry includes retail trade; wholesale trade; transportation and utilities; finance, insurance, and real estate; construction; professional, personal, and social services; and local, state, and federal governments.
Market driven
Responding to customers' needs.
Process chart
A chart that represents the sequence of work or the nature of events in process. It serves as a basis for examining and possibly improving the way the work is carried out. (Synonym: Operations process chart).
Obsolescence
1) The condition of being out of date. A loss of value occasioned by new developments that place the older property at a competitive disadvantage. A factor in depreciation. 2) A decrease in the value of an asset brought about by the development of new and more economical methods, processes, or machinery. 3) The loss of usefulness or worth of a product or facility as a result of the appearance of better or more economical products, methods, or facilities.
Tactical buying
The purchasing process focused on transactions and nonstrategic material buying. It is closely aligned with the “ordering” portion of executing the purchasing transaction process. The characteristics for tactical buying include stable, limited fluctuations, defined standard specifications, noncritical to production, no delivery issues, and high reliability concerning quality-standard material with very little concern for rejects. See: Strategic sourcing.
Cost of goods sold
An accounting classification useful for determining the amount of direct materials, direct labor, and allocated overhead associated with the products sold during a given period of time.
Inventory optimization software
A computer application having the capability of finding optimal inventory strategies and policies related to customer service and return on investment over several echelons of a supply chain.
Balanced scorecard
A list of financial and operational measurements used to evaluate organizational or supply chain performance. The dimensions of this tool might include customer perspective, business process perspective, financial perspective, and innovation and learning perspectives. It formally connects overall objectives, strategies, and measurements. Each dimension has goals and measurements.
Competitive analysis
An analysis of a competitor that includes its strategies, capabilities, prices and costs.
Purchasing
The term used in industry and management to denote the function of and the responsibility for procuring materials, supplies, and services.
Demand management
1) The function of recognizing all demands for goods and services to support the marketplace. It involves prioritizing demand when supply is lacking. Proper demand management facilitates the planning and use of resources for profitable business results. 2) In marketing, the process of planning, executing, controlling, and monitoring the design, pricing, promotion, and distribution of products and services to bring about transactions that meet organizational and individual needs. (Synonym: Marketing management). See: Demand planning.
Strategic sourcing
A comprehensive approach for locating and sourcing key material suppliers, which often includes the business process of analyzing total-spend-for-material spend categories. There is a focus on the development of long-term relationships with trading partners who can help the purchaser meet profitability and customer satisfaction goals. From an information technology applications perspective, strategic sourcing includes automation of request for quote (RFQ), request for proposal (RFP), electronic auctioning (e-auction or reverse auction), and contract management processes.
Horizontal marketplace
An online marketplace used by buyers and sellers from multiple industries. This marketplace lowers prices by lowering transaction costs.
Inventory turnover
The number of times that an inventory cycles, or "turns over," during the year. A frequent method to compute inventory turnover is to divide the average inventory level into the annual cost of sales. For example, an average inventory of $3 million divided into an annual cost of sales of $21 million means that inventory turned over seven times. (Synonyms: Inventory turns, turnover). See: Inventory velocity.
Push system
1) In production, the production of items at times required by a given schedule planned in advance. 2) In material control, the issuing of material according to a given schedule or issuing material to a job order at its start time. 3) In distribution, a system for replenishing field warehouse inventories where replenishment decision making is centralized, usually at the manufacturing site or central supply facility. See: Pull system.
Balance sheet
A financial statement showing the resources owned, the debts owed, and the owner's share of a company at a given point in time.
Profit
1) Gross profit─earnings from an ongoing business after direct costs of goods sold have been deducted from sales revenue for a given period. 2) Operating profit─earnings or income after all expenses (selling, administrative, depreciation) have been deducted from gross profit. 3) Net profit─earnings or income after adjusting for miscellaneous income and expenses (patent royalties, interest, capital gains) and tax from operating profit. (Synonym: Income).
Value-added
1) In accounting, the addition of direct labor, direct material, and allocated overhead assigned at an operation. It is the cost roll-up as a part goes through a manufacturing process to finished inventory. 2) In current manufacturing terms, the actual increase of utility from the viewpoint of the customer as a part is transformed from raw material to finished inventory. It is the contribution made by an operation or a plant to the final usefulness and value of a product, as seen by the customer. The objective is to eliminate all non-value-added activities in producing and providing a good or service.
Supply Chain Operations Reference-model (SCOR®)
A process reference model developed and endorsed by the Supply Chain Council as the cross-industry, standard diagnostic tool for supply chain management. This model describes the business activities associated with satisfying a customer’s demand, which include plan, source, make, deliver, return, and enable. Use of the model includes analyzing the current state of a company’s processes and goals, quantifying operational performance, and comparing company performance to benchmark data. The Council has developed a set of metrics for supply chain performance, and Supply Chain Council members have formed industry groups to collect best practices information that companies can use to evaluate their supply chain performance.
Market research
The systematic gathering, recording, and analyzing of data about problems relating to the marketing of goods and services. Such research may be undertaken by impartial agencies or by business firms or their agents. Marketing research includes several types: (1) market analysis (product potential is a type) is the study of the size, location, nature, and characteristics of markets, (2) sales analysis (or research) is the systematic study and comparison of sales (or consumption) data, (3) consumer research (motivation research is a type) is concerned with the discovery and analysis of consumer attitudes, reactions, and preferences. (Synonym: Market research).
Safety stock
1) In general, a quantity of stock planned to be in inventory to protect against fluctuations in demand or supply. 2) In the context of master production scheduling, the additional inventory and capacity planned as protection against forecast errors and short-term changes in the backlog. Overplanning can be used to create safety stock. (Synonyms: Buffer stock, reserve stock).
Supplier-input-process-output-customer (SIPOC) diagram
A high-level process map that shows substantial subprocess in an organization's process together with the structure of the process represented by the suppliers, inputs, outputs, and customers. A SIPOC diagram defines the critical aspects of a process without losing the overall perspective.
Customer relationship management (CRM)
A marketing philosophy based on putting the customer first. The collection and analysis of information designed for sales and marketing decision support (as contrasted to enterprise resources planning information) to understand and support existing and potential customer needs. It includes account management, catalog and order entry, payment processing, credits and adjustments, and other functions. (Synonym: Customer relations management).
Independent demand
The demand for an item that is unrelated to the demand for other items. Demand for finished goods, parts required for destructive testing, and service parts requirements are examples of independent demand. See: Dependent demand.
Strategic planning
The process of developing a strategic plan.
Value stream mapping
A lean production tool to visually understand the flow of materials from supplier to customer that includes the current process and flow as well as the value-added and non-value-added time of all the process steps. Used to lead to reduction of waste, decrease flow time, and make the process flow more efficient and effective.
Enterprise resources planning (ERP)
Framework for organizing, defining, and standardizing the business processes necessary to effectively plan and control an organization so the organization can use its internal knowledge to seek external advantage.
Warehouse management system (WMS)
A computer application system designed to manage and optimize workflows and the storage of goods within a warehouse. These systems often interface with automated data capture and enterprise resources planning systems.

Market demand

In marketing, the total demand that would exist within a defined customer group in a given geographical area during a particular time period given a known marketing program.
Inventory management
The branch of business management concerned with planning and controlling inventories.
Key performance indicator (KPI)
Financial and nonfinancial measures that are used to define and assess progress toward specific organizational goals and are typically tied to an organization's strategy and business stakeholders. They should not be contradictory to other departmental or strategic business unit performance measures.
Inventory visibility
The extent to which inventory information is shared within a firm and with supply chain partners.
Third-party logistics (3PL)
A buyer and supplier team with a third party that provides product delivery services. This third party may provide added supply chain expertise.
Cash-to-cash cycle time
An indicator of how efficiently a company manages its assets to improve cash flow. (Inventory days + accounts receivable days - accounts payable days).
Triple bottom line (TBL)
An approach that measures the economic, social, and environmental impact of an organization's activities with the intent of bringing value for both its shareholders and society.
Supply chain
The global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash.
Value stream
The processes of creating, producing, and delivering a good or service to the market. For a good, the value stream encompasses the raw material supplier, the manufacture and assembly of the good, and the distribution network. For a service, the value stream consists of suppliers, support personnel and technology, the service “producer,” and the distribution channel. The value stream may be controlled by a single business or a network of several businesses.
Inventory valuation
The value of the inventory at either its cost or its market value. Because inventory value can change with time, some recognition is taken of the age distribution of inventory. Therefore, the cost value of inventory is usually computed on a FIFO basis, LIFO basis, or a standard cost basis to establish the cost of goods sold.
Inventory velocity
The speed with which inventory passes through an organization or supply chain at a given point in time as measured by inventory turnover. See: Inventory turnover.
Blanket purchase order
A long-term commitment to a supplier for material against which short-term releases will be generated to satisfy requirements. Often these cover only one item with predetermined delivery dates.
Sales and operations planning (S&OP)
A process to develop tactical plans that provide management the ability to strategically direct its business to achieve competitive advantage on a continuous basis by integrating customer-focused marketing plans for new and existing products with the management of the supply chain. The process brings together all the plans for the business (sales, marketing, development, manufacturing, sourcing, and financial) into one integrated set of plans. It is performed at least once a month and is reviewed by management at an aggregate (product family) level. The process must reconcile all supply, demand, and new-product plans at both the detail and aggregate levels and tie to the business plan. It is the definite statement of the company's plans for the near to intermediate term, covering a horizon sufficient to plan for resources and to support the annual business planning process. Executed properly, the sales and operation planning process links the strategic plans for the business with its execution and reviews performance measurements for continuous improvement. See: Tactical planning.
Cycle
1) The interval of time during which a system or process, such as seasonal demand or a manufacturing operation, periodically returns to similar initial conditions. 2) The interval of time during which an event or set of events is completed.
Cross-selling
Occurs when customers buy additional products or services after the initial purchase.
Single-source supplier
A company that is selected to have 100 percent of the business for a part although alternate suppliers are available. See: Sole-source supplier.
In-transit inventory
Material moving between two or more locations, usually separated geographically; for example, finished goods being shipped from a plant to a distribution center.
Dependent demand
Demand that is directly related to or derived from the bill of material structure for other items or end products. Such demands are therefore calculated and need not and should not be forecast. A given inventory item may have both dependent and independent demand at any given time. For example, a part may simultaneously be the component of an assembly and sold as a service part. See: Independent demand.
Trend
General upward or downward movement of a variable over time (e.g., demand, process attribute).
Sourcing
The process of identifying a company that provides a needed good or service.
Collaborative planning, forecasting, and replenishment (CPFR)
1) A collaboration process whereby supply chain trading partners can jointly plan key supply chain activities from production and delivery of raw materials to production and delivery of final products to end customers. It encompasses business planning, sales forecasting, and all operations required to replenish raw materials and finished goods. 2) A process philosophy for facilitating collaborative communications. It is considered a standard, endorsed by the Voluntary Interindustry Commerce Standards.
Ordering cost
Used in calculating order quantities, the costs that increase as the number of orders placed increases. It includes costs related to the clerical work of preparing, releasing, monitoring, and receiving orders, the physical handling of goods, inspections, and setup costs, as applicable.
Risk pooling
A method often associated with the management of inventory risk. Manufacturers and retailers that experience high variability in demand for their products can pool together common inventory components associated with a broad family of products to buffer the overall burden of having to deploy inventory for each discrete product.
Customer service
1) The ability of a company to address the needs, inquires, and requests from customers. 2) A measure of the delivery of a product to the customer at the time the customer specified.
Logistics
1) In an industrial context, the art and science of obtaining, producing, and distributing material and product in the proper place and in proper quantities. 2) In a military sense (where it has greater usage), its meaning can also include the movement of personnel.
Seasonality
A repetitive pattern of demand from year to year (or other repeating time interval) with some periods considerably higher than others. (Synonym: Seasonal variation).
Return on assets (ROA)
Net income for the previous 12 months divided by total assets.
Stockkeeping unit (SKU)
1) An inventory item. For example, a shirt in six colors and five sizes would represent 30 different SKUs. 2) In a distribution system, an item at a particular geographic location. For example, one product stocked at the plant and at six different distribution centers would represent seven SKUs.
Spend management
Managing the outflow of funds in order to buy goods and services. The term is intended to encompass such processes as outsourcing, procurement, e-procurement, and supply chain management.
Partnership
1) A form of business ownership that is not organized as a separate legal entity (i.e., unincorporated business), but entailing ownership by two or more persons. 2) In a supply chain, a relationship based on trust, shared risk, and rewards aimed toward achieving a competitive advantage.
Supply chain management (SCM)
The design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally.
Value chain
The functions within a company that add value to the goods or services that the organization sells to customers and for which it receives payment.
Sole-source supplier
The only supplier capable of meeting (usually technical) requirements for an item. See: Single-source supplier.
Target costing
The process of designing a product to meet a specific cost objective. Target costing involves setting the planned selling price, subtracting the desired profit as well as marketing and distribution costs, thus leaving the required manufacturing or target cost.
Cycle time
1) In industrial engineering, the time between completion of two discrete units of production. For example, the cycle time of motors assembled at a rate of 120 per hour would be 30 seconds. 2) In materials management, it refers to the length of time from when material enters a production facility until it exits. (Synonym: Throughput time).
Anticipation inventories
Additional inventories above basic pipeline stock to cover projected trends of increasing sales, planned sales promotion programs, seasonal fluctuations, plant shutdowns, and vacations.
Supply chain visibility
The ability of supply chain partners to access demand and production information from trading partners.
Cash flow
The net flow of dollars into or out of the proposed project. The algebraic sum, in any time period, of all cash receipts, expenses, and investments. Also called cash proceeds or cash generated.
Procurement
The business functions of procurement planning, purchasing, inventory control, traffic, receiving, incoming inspection, and salvage operations.
Tactical planning
The process of developing a set of tactical plans (e.g., production plan, sales plan, marketing plan). Two approaches to tactical planning exist for linking tactical plans to strategic plans—production planning and sales and operations planning. See: Strategic planning.
Supplier relationship management (SRM)
A comprehensive approach to managing an enterprise’s interactions with the organizations that supply the goods and services the enterprise uses. The goal of SRM is to streamline and make more effective the processes between an enterprise and its suppliers. SRM is often associated with automating procure-to-pay business processes, evaluating supplier performance, and exchanging information with suppliers. An e-procurement system often comes under the umbrella of a supplier relationship management family of applications.
Supplier
1) Provider of goods or services. See: Vendor. 2) Seller with whom the buyer does business, as opposed to vendor, which is a generic term referring to all sellers in the marketplace.
Sustainability
Activities that provide present benefit without compromising the needs of future generations.
Forecasting
The business function that attempts to predict sales and use of products so they can be purchased or manufactured in appropriate quantities in advance.
Outsourcing
The process of having suppliers provide goods and services that were previously provided internally. Outsourcing involves substitution─the replacement of internal capacity and production by that of the supplier. See: Subcontracting.
Demand
A need for a particular product or component. The demand could come from any number of sources (e.g., a customer order or forecast, an interplant requirement, a branch warehouse request for a service part of the manufacturing of another product). At the finished goods level, demand data are usually different from sales data because demand does not necessarily result in sales (i.e., if there is no stock, there will be no sale). There are generally up to four components of demand: cyclical component, random component, seasonal component, and trend component.
Multisourcing
Procurement of a good or service from more than one independent supplier. (Synonym: Multiple sourcing. Antonym: Single sourcing).
Pipeline inventory
Inventory in the transportation network and the distribution system, including the flow through intermediate stocking points. The flow time through the pipeline has a major effect on the amount of inventory required in the pipeline. Time factors involve order transmission, order processing, scheduling, shipping, transportation, receiving, stocking, review time, and so forth. (Synonym: Pipeline stock).
Reverse logistics
A complete supply chain dedicated to the reverse flow of products and materials for the purpose of returns, repair, remanufacture, and/or recycling.
Total cost of ownership (TCO)
In supply chain management, the total cost of ownership of the supply delivery system is the sum of all the costs associated with every activity of the supply stream. The main insight that TCO offers to the supply chain manager is the understanding that the acquisition cost is often a very small portion of the total cost of ownership.
Profit margin
1) The difference between the sales and cost of goods sold for an organization, sometimes expressed as a percentage of sales. 2) In traditional accounting, the product profit margin is the product selling price minus the direct material, direct labor, and allocated overhead for the product, sometimes expressed as a percentage of selling price.
Planning horizon
The amount of time a plan extends into the future. For a master schedule, this is normally set to cover a minimum of cumulative lead time plus time for lot sizing low-level components and for capacity changes of primary work centers or of key suppliers. For longer term plans the planning horizon must be long enough to permit any needed additions to capacity. See: Cumulative lead time.
Forecast error
The difference between actual demand and forecast demand, stated as an absolute value or as a percentage.
Extrinsic forecasting method
A forecast method on a correlating leading indicator, such as estimating furniture sales based on housing starts. They tend to be more useful for large aggregations, such as total company sales, than for individual product sales.
Changeover
1) The work required to change a specific machine, resource, work center, or line from making the last good piece of item A to making the first good piece of item B. 2) The refitting of equipment to neutralize the effects of the last lot produced (e.g., teardown of the just-completed production, preparation of the equipment for production of the next scheduled item).
Cost of quality
The cost associated with providing poor quality products or services. There are four categories of costs: (1) internal failure costs (costs associated with defects found before the customer receives the product or service); (2) external failure costs (costs associated with defects found after the customer receives the product or service); (3) appraisal costs (costs incurred to determine the degree of conformance to quality requirements); and (4) prevention costs (costs incurred to keep failure and appraisal costs to a minimum).
Demand planning
The process of combining statistical forecasting techniques and judgment to construct demand estimates for products or services (both high and low volume; lumpy and continuous) across the supply chain from the suppliers' raw materials to the consumer's needs. Items can be aggregated by product family, geographical location, product life cycle, and so forth, to determine an estimate of consumer demand for finished products, service parts, and services. Numerous forecasting models are tested and combined with judgment from marketing, sales, distributors, warehousing, service parts, and other functions. Actual sales are compared with forecasts provided by various models and judgments to determine the best integration of techniques and judgment to minimize forecast error.
Distributor
A business that does not manufacture its own products, but purchases and resells these products. Such a business usually maintains a finished goods inventory.
Fluctuation inventory
Inventory that is carried as a cushion to protect against forecast error.
Income statement
A financial statement showing the net income for a business over a given period of time.
Intrinsic forecast method
A forecast method based on internal factors, such as an average of past sales.
Keiretsu
A form of cooperative relationship among companies in Japan where the companies largely remain legally and economically independent, even though they work closely in various ways such financial backing. A member of this generally owns a limited amount of stock in other member companies. It generally forms around a bank and a trading company, but "distribution" (supply chain) alliances have been formed of companies ranging from raw material suppliers to retailers.
Life cycle analysis
A quantitative forecasting technique based on applying past patterns of demand data covering introduction, growth, maturity, saturation, and decline of similar products to a new product family.
Metrics
A system for collecting, measuring, and comparing a measure to a standard for a specific criterion for an operation, item, good, service, business, etc. A performance measurement system consists of a criterion, a standard, and a measure.
Reverse supply chain

The planning and controlling of the processes of moving goods from the point of consumption back to the point of origin for repair, reclamation, recycling, or disposal.