Section 1： Supply Chain Management and Logistics
Supply-chain management is one of the hottest topics of discussion today amongst CEO's and other senior officers of businesses worldwide. Articles permeate the business press and many publications have designated it as the last frontier for creating strategic competitive advantage. Why all the interest？ The answer is that companies worldwide are now cognizant of the great potential for cost reduction and increased customer service from successful supply-chain management.
The payoff potential can result from reduction or elimination of inventories， being able to respond quickly to customized orders， reduction or elimination of steps in moving goods to market， enhanced customer service， upstream vendor relationships， and transportation improvements including carrier programs.
In this regard， logistics can help improve a company's sales by adding value in a variety of ways. Specifically， by providing a means for ensuring that goods are prepared for sale properly and delivered quickly. This could involve specialized packaging， labeling， kitting， constructing floor ready pallets， shipment consolidations， pooling， and merge-in-transit programs， anything that gets products downstream faster. Excellent customer service can differentiate a company in the marketplace and help that company win contracts.
Error free delivery accomplished on a consistent basis is a key differentiator. In dealings with our clients and 3PLs， TranSolutions Consulting finds that most of the time the ability to have almost real-time visibility to information is an operating advantage or a marketing advantage depending on whether you are the client or the 3PL. This is important because supply chains are being shortened and companies are depending on more frequent shipments from their partner-suppliers so that visibility to component whereabouts is extremely critical. All of the new logistics strategies should be removing significant cost from supply chains but as many companies have found， it is all in the execution.
For 1999， according to The Controller's Report ， total logistics costs rose 2.21% over the previous year when measured as percentage of sales and 3.6% when measured by cost per hundredweight. The cost elements measured were transportation， warehousing， order entry/customer service， administrative， and inventory carrying. The average company logistics costs were 7.34% of sales and/or $74.29 cost per hundredweight. Most professionals believe there is ample room for improvement by optimizing the supply chain and including the use of new inventory management tools like VMI， e-commerce， and by improved planning between partners and internal functional groups. Execution is key.
This first section of The Language of Logistics defines terms frequently used by logistics professionals， writers， and consultants and represents an umbrella approach to organizing these terms recognizing that the ultimate goal of logistics professionals is to integrate logistics processes to the overall supply-chain of a company. The sections following flow in an order related to what is usually given emphasis first but is not intended to rank areas of opportunity， as this will vary by company.
ABC： Activity Based Costing is a valuable tool for cost management， total quality management and business process reengineering. Originally， a method for product costing， it is now used for generating accurate cost information that relates to a variety of decisions. ABC isolates direct costs and overheads to specific products， customers， and services attributing activity costs only if the activities are performed on the products or services.
Baldrige Award： Refers to the Malcolm Baldrige National Quality Award instituted by the U.S. Congress and presented annually to up to six U.S. companies for their excellence in improving quality.
Benchmarking： An approach to improving performance through comparison of current operations against another operation or mode. Benchmarking can be applied to any part of the supply chain to evaluate current operations and set performance goals through the implementation of “best practices”。
Best Practices： Refers to companies whose operations set the industry standard for performance in one or more areas.
BPI： Business Process Improvement. Term used when logistics managers take a process improvement approach to improve the company's logistics process performance. A BPI model is constructed for approval with the objective being successful implementation. Usually， the next involves a benchmarking effort （case study） in order to apply what has been learned.
Capabilities： Broader than core competencies， capabilities encompasses processes such as order cycle time， customer service， as well as overall business behavior and culture. Refer to “core competencies，” “demand-oriented capabilities，” and “supply-oriented capabilities” in this publication.
Category Management： The management of individual product categories as strategic business units. Emphasizes profits and sales for entire product groups rather than individual brands.
C-commerce： “Collaborative commerce”。 This involves combining trading partners to reduce cost through the sharing of logistics resources.
CDL： “Consumer Direct Logistics”。 This consists of processing and fulfillment of consumer orders from a retail store or dedicated distribution center. Amazon.com and Peapod are two examples of companies perfecting this channel.
Channel： Business components of a company's supply chain such as manufacturing support， manufacturing， distribution， and retailing or direct sales. Product moves from one channel member， with value being added， to the next channel member until product reaches the customer. A channel may also be a geographic area or zone wherein volumes are shipped.
Collaborative Supply Network： A network that manages the convergence of execution networks and strategic planning. Core Competency： Attributes， processes， knowledge， abilities and skills that allow a firm to achieve competitive advantage. Often used to mean things a company does best. See “capabilities”。
CCM： Abbreviation for “Commerce Chain Management”。 CCM consists of systems， commerce networks， procurement， and in-house or 3PL logistics.
CPFR： Abbreviation for “Means Collaborative Planning Forecasting and Replenishment”。 Purpose is to create efficient flow of information amongst supply chain partners （I.e. vendors， customers）。
CR： “Collaborative Replenishment”。 When large retailers share all their needs on a 52-week， individual store basis with their suppliers.
CRP： “Continuous Replenishment Planning/Program”。 This is an innovative logistics method that integrates the logistics operations of the supplier and the customer into one coordinated logistics effort. Inventories are tracked electronically and a replenishment planning/ordering system often linked to POS manages a “pull” type method of inventory management rather then a “push” type.
CSC： “Continuous Supply Chain”。 This is an innovative logistics product involving the integration of a company's logistics operations with suppliers into a coordinated “pull” effort. The most important characteristics of this undertaking are execution and dependability with repeated success leading to competitive advantage.
CSR： “Customer Service Representative”。 Individuals who take customers orders and requests for information via telephone， fax， or through Internet web sites. They are responsible for accurately entering order information and for making sure their part of this process operates satisfactorily for the customer.
De-engineering： The process of simplifying previously redesigned business processes that have become ineffective and/or too complicated.
Demand-Oriented Capabilities： Customer-oriented logistics approach emphasizing demands of the external customer. Capabilities encompass time-advantages， responsiveness to target markets， and customer service.
Direct Product Profitability Analysis： DPP is an approach to analyzing profit for a bundle of products. It involves determining the marginal cost for each product and determining which ones are profitable and which ones are marginal （requiring too much overhead costs）。
ECR： Efficient consumer response； involves examining supply chain and trade practices to identify opportunities for changes in practices or technology to make the supply chain more competitive. Term originates in the grocery industry where it refers to a strategy in which distributors and suppliers work cooperatively to bring better value to customers by jointly focusing on efficiency in the total grocery supply chain. Accurate information and high-quality product flows are aided by a paperless system between the manufacturing line and point of sale. Objective is to reduce inventories and cost in the supply chain by matching the flow of product to consumer demand. The most advanced ECR strategy across the total supply chain.
Efulfillment Center （eFC） ： A warehouse with more than a traditional WMS. The e-warehouse receives goods， operates as a crossdock， and orders are picked， value-added processing performed； orders packed， and merge-in-transit utilized. Other key attributes include a “returns” program and a quality assurance program. All of this should be supported by dynamic customer service.
Efulfillment： The process that supports a website order from click to customer.
E-Procurement： There are three ways to build this solution： （1） use of suppliers Websites whereby purchaser connects directly with individual supplier sites， （2） use of procurement software and the inclusion of existing s well as new vendors， and （3） vertical trading network that operates between purchaser and suppliers.
Flow Modeling： This is a tool to assist logistics managers in the management of cycle time at the various levels of the company across all components in the supply chain. This tool identifies both the time and cost associated with a process. Components include cumulative lead-time analysis， cumulative value analysis， schedules， and a structure built that reflects the relationships of the components.
Gain Sharing： During the life of an outsourced agreement， a third party provider shares in the savings generated through continuous improvement.
Gantt Chart： A project tracking tool used to identify all activities that need to be in progress during a period （weekly， monthly） in order to assure successful completion of a project.
GPO： Abbreviation for Group Purchasing Organization. Hospital groups purchase through GPOs to maximize pricing levels and distribution services.
Green Logistics： A system designed for produce （fruits and vegetables） wherein the produce arrives store-ready at a distribution center packed in re-usable trays； eliminating use of corrugated packaging and quality is improved with less damage. Trays are bar coded.
Integrated： A methodology employed to more efficiently manage inventory mechanisms. Usually involves the inventory pulls from manufacturing sites and warehouses， on an integrated basis through distribution to the customer.
Integrators： Logistics service providers that will manage most or all aspects of the supply chain.
Integrated logistics： Involves viewing the entire process or movement as a system， as opposed to many disparate and individual activities.
Insourcing： Refers to programs that bring logistics suppliers into the customer location， including manager level supplier professionals and the supplier's computer systems. Insourcing
Just In Time （JIT）： A distribution and materials handling system， which keeps inventory levels to， a minimum by ordering and delivering supplies only as needed.
Kanban： A method of re-ordering items， which require instantaneous replacement. A Kanban card has a standardized quantity； when the card is used， the item is shipped immediately in the quantity specified on the card.
Kitting： Simplifying receipt of inbound materials prior to delivery and organizing them [sometimes hundreds of parts] into user packages for the manufacturing process. See Warehousing Section.
KRA： Key Result Areas. Term used to describe the areas of a business enterprise that are key to process improvement.
KPI： Key Performance Indicators； also known as KPF or Key Performance Factor. Examples are manufacturing cost per unit， cost per unit for transportation， on time delivery， on time pickup， and billing errors.
Lifestyle Collection Point： A B2C customer order-delivery operation whereby all orders are delivered to a common site at the same time. An example would be grocery orders placed through a website by a large group of customers working in the same company or building in accordance with a window governing order time and a delivery window for 5PM same day in the parking lot.
Logistics： The integrated system of planning， managing， allocating， and controlling financial， physical and human resources committed to physical distribution， manufacturing support and purchasing operations. Logistics is the glue that binds the business functions and a company's suppliers into a unified supply chain.
Council of Logistics Management definition： “Logistics is that part of the supply chain process that plans， implements， and controls the efficient， effective flow and storage of goods， services， and related information from the point of origin to the point of consumption in order to meet customers' requirements.”
Logistics Management & Distribution Report definition： “Any discussion of supply chain management must include logistics-essentially the management of goods and materials in motion or at rest-as a critical component. For all of the advances in technology that are crucial to supply chain management， the central reality is that the chain is not complete until the physical goods move through the system.”
Logistics Provider： A third party company with technical and specialized knowledge that manages tactically and operationally elements of logistics services， such as transportation， freight management， carrier management， warehousing and distribution， as a single service offering or in combination as part of a comprehensive service package meeting the needs of the customer. Logistics providers are often referred to as 3PLS.
Management Reporting or Metrics： Carrier performance information captured periodically by systems and/or manual methods to measure quality.
Merge-in-Transit： A strategy used by certain manufacturers involving the shipment of products from different production points or warehouses to a consolidation point where the components are combined for final assembly. Personal computer， printer， and other related equipment manufacturers frequently use this strategy. Double handling and the buildup of pipeline inventory costs are eliminated. Customers also get faster delivery.
Multi-Vendor Consolidation： a method of reducing the cost of shipping LTL quantities by consolidating shipments from different vendors to make-up TL shipments. LTL can cost up to four times the cost of TL. Besides cost， other advantages are reduced inventory， reduced order cycle， reduced costs at the DC， reduced damage， and improved in-stock positions.
MRP： Materials requirement planning. Production operation planning system that provides scheduling， inventory management， and materials billing capabilities. MRPII refers to a more recent， expanded application that also considers issues such as purchasing and forecasting.
Open To Buy： Control on or budget for the purchase of certain items； as purchases are made， the dollars not spent are “the open to buy” when compared to the dollars allotted to the total buy of an item.
Optimization： The actions taken through use of certain skills and tools to make a company's 1） order entry to delivery cycle； 2） inbound raw materials routing； 3） outbound routing； 4） warehouse sites； and in general， make any aspect of a company's total logistics function more effective from a cost and customer service perspective eliminating waste.
POP： In retail， merchandising companies arrange for the manufacture and installation （usually through 3rd party installers） of “point-of-purchase” materials ranging from free standing displays， wall mounted displays， hanging displays， racks for collateral material， racks containing goods for placement in mass merchants and in dealer type stores.
Postponement： A strategy whereby a warehouse undertakes final assembly of a product adding certain features after orders customer orders are received. An example would be a women's clothing manufacturer that inventories close to a large market and when orders are received the warehouse sews in the appropriate label.
Purchased Transportation： Term used to describe service offering by third party logistics providers. Involves the program of buying freight capacity at volume levels for many shippers at substantial discounts. Includes the administration and coordination of all activities associated with a freight management system.
Quality： “Meeting the requirements.” To have quality， three things must happen. First， the customer must understand and accurately define the requirements. Second， the customer must clearly communicate the requirements to the supplier. Third， the supplier must meet the requirements. QOS： Measurements of “quality of service” as used in weekly， monthly reports.
QR： “Quick response”； strategy in which retailers and suppliers work cooperatively to respond to consumer needs by sharing information on point of sales （POS） activity to forecast demand for replenishable items and to monitor trends to detect new opportunities.
QVR： Stands for “quality， value， and responsiveness”； used in re-engineering efforts by a company to make itself the ideal business partner for its customers.
Re-engineering： The fundamental rethinking and redesign of a company's business processes to achieve dramatic improvements in critical measures of performance， such as cost， quality， service and speed.
Reverse Logistics： Returnables that are handled by transportation provider or shipper and are re-used （after refurbishment if necessary）， reclaimed/recycled， resold or disposed of by shipper or shipper's suppliers.
SCE： Supply Chain Execution. Definition refers to integrating the supply chain. SCE is the software that picks up where an advance planning or enterprise system ends. The objective is to provide visible inventory.
SCR： Synchronized consumer response； an initiative of manufacturers and distributors of fast-moving consumer goods based on the consumer pull model （replenishment is pull driven back through the supply chain）。 SCR emphasizes flexible software solutions that enable companies to respond to their customers' requirements.
Seamless Corporation： Synonymous with extended enterprise or supply chain enterprise. Redefines organizational structure to include organizations with which it interacts. Corporation forms long term partnerships with suppliers， buyers， vendors， customers， and other external companies that constitute the supply chain. Managing the supply chain is the goal of the seamless corporation. Sequencing The action of providing production-ready materials for the assembly line so that the right part arrives in the correct order at the right time.
SFLM： Synchronous Flow Leadership Manufacturing. This is an on-going， continuous improvement process that has been developed to synchronize and manage material flow and to lead this transformation in a manufacturing environment to increase plant effectiveness. See Synchronous Manufacturing in this Section.
Single Customer Focus： Logistics provider's operation is geared to handle all of the needs of a particular customer with the goal of ensuring error-free service performance.
SOE： “Statement of Expectations”； first step used in formulating an implementation plan for a logistics initiative to be accomplished internally by a corporation or by a third party provider with the purpose of defining the expectations of the parties and corresponding accountabilities.
Sourcing： The skill of effectively identifying and procuring raw materials for productive manufacturing. This includes component parts and supplies. Streamlining this process and managing raw material inventories is part of effective sourcing. The process may include inspections and measurements against quality standards.
Statistical Process Control： （SPC）。 Engineering approaches to developing best methods to increase the efficiency of an operation， improve quality， and reduce costs.
Sub-Assembly： Involves pre-assembling of parts and components to keep low work-in-process inventories. Reduces number of assembly processes manufacturing or operations has to manage enabling a company to reduce or eliminate on-site activities. Allows a company to focus on main assembly functions. See Kitting in Warehousing Section.
Supply Chain： The components of business operations such as vendors， procurement， operations or manufacturing， warehousing and distribution， customers， and third party suppliers that service or manage segments of the supply chain that interact with the products from the raw material stage to delivery to the customer.
Supply Chain Management （SCM）： Encompasses all of the activities associated with moving goods from raw materials stage through to the end user. This includes systems management， sourcing and procurement， production scheduling， order processing， inventory management， transportation， warehousing， and customer service. Successful supply chain management， then， coordinates and integrates these activities for sustainable competitive advantage.
Supply Chain Network： The infrastructure required to support e-commerce with the Internet functioning as an enabler to the physical distribution of goods. Infrastructure will consist of suppliers， manufacturers， warehouses， transportation partners， and the software that ties it all together for the e-company for the purpose of providing flawless execution of orders.
Supply Channel： Members of the supply chain that hold， control， or effect inventory of raw materials， parts or goods.
Supply-Oriented Capabilities： Related to a firm's operational capabilities， supply-oriented capabilities emphasize the internal customers of a company such as production and marketing departments. Focused on distribution networks to gain competitive advantage， supply-oriented logistics capabilities include widespread product availability， selective distribution coverage， and low total distribution cost.
SWOT： Managerial analysis of a company's specific strengths， weaknesses， opportunities and threats.
Synchronous manufacturing： Advanced control system that aims to increase throughput while minimizing inventory investment by manufacturing the right components timely and in the right order. Combines JIT with flexible manufacturing， also known as “flex-flow”。
TCP： Abbreviation for “total cost of production” in manufacturing.
Unsalables： Product returns resulting from goods not sold by a customer （I.e. grocery store， retail chain， department store） or goods damaged enroute to and/or at the distribution center. Leading causes of unsalables are management indifference， out-of-code product， inefficient handling practices， seasonal product returns， and pallet overhang. When companies begin to deal with unsalables a team manager is usually appointed to recommend policies， review packaging requirements， consider a reclamation approach， and set up benchmarks to track progress in reducing unsalables to， for example， less than 1% of sales.
Value-chain： The strategy to build collaborative relationships and select trading partners from the outset of raw materials procurement to the delivery of the finished product to the ultimate customer. Involves linking the customer's customer and the supplier's supplier through electronic b2b.
Visioneering： The ability to look into the future and anticipate customer responses， business processes， knowledge capital of a company， and determine windows of opportunity.
VOC： Voice of the customer； term used by companies when describing an element of their customer service/quality initiatives. 3PLS： See Logistics Provider in this Section.
Supply-chain management is one of the hottest topics of discussion today amongst CEO's and other senior officers of businesses worldwide. Articles permeate the business press and many publications have designated it as the last frontier for creating strategic competitive advantage. Why all the interest？ The answer is that companies worldwide are now cognizant of the great potential for cost reduction and increased customer service from successful supply-chain management.
The payoff potential can result from reduction or elimination of inventories， being able to respond quickly to customized orders， reduction or elimination of steps in moving goods to market， enhanced customer service， upstream vendor relationships， and transportation improvements including carrier programs.
In this regard， logistics can help improve a company's sales by adding value in a variety of ways. Specifically， by providing a means for ensuring that goods are prepared for sale properly and delivered quickly. This could involve specialized packaging， labeling， kitting， constructing floor ready pallets， shipment consolidations， pooling， and merge-in-transit programs， anything that gets products downstream faster. Excellent customer service can differentiate a company in the marketplace and help that company win contracts.
Error free delivery accomplished on a consistent basis is a key differentiator. In dealings with our clients and 3PLs， TranSolutions Consulting finds that most of the time the ability to have almost real-time visibility to information is an operating advantage or a marketing advantage depending on whether you are the client or the 3PL. This is important because supply chains are being shortened and companies are depending on more frequent shipments from their partner-suppliers so that visibility to component whereabouts is extremely critical. All of the new logistics strategies should be removing significant cost from supply chains but as many companies have found， it is all in the execution.
For 1999， according to The Controller's Report ， total logistics costs rose 2.21% over the previous year when measured as percentage of sales and 3.6% when measured by cost per hundredweight. The cost elements measured were transportation， warehousing， order entry/customer service， administrative， and inventory carrying. The average company logistics costs were 7.34% of sales and/or $74.29 cost per hundredweight. Most professionals believe there is ample room for improvement by optimizing the supply chain and including the use of new inventory management tools like VMI， e-commerce， and by improved planning between partners and internal functional groups. Execution is key.
This first section of The Language of Logistics defines terms frequently used by logistics professionals， writers， and consultants and represents an umbrella approach to organizing these terms recognizing that the ultimate goal of logistics professionals is to integrate logistics processes to the overall supply-chain of a company. The sections following flow in an order related to what is usually given emphasis first but is not intended to rank areas of opportunity， as this will vary by company.
ABC： Activity Based Costing is a valuable tool for cost management， total quality management and business process reengineering. Originally， a method for product costing， it is now used for generating accurate cost information that relates to a variety of decisions. ABC isolates direct costs and overheads to specific products， customers， and services attributing activity costs only if the activities are performed on the products or services.
Baldrige Award： Refers to the Malcolm Baldrige National Quality Award instituted by the U.S. Congress and presented annually to up to six U.S. companies for their excellence in improving quality.
Benchmarking： An approach to improving performance through comparison of current operations against another operation or mode. Benchmarking can be applied to any part of the supply chain to evaluate current operations and set performance goals through the implementation of “best practices”。
Best Practices： Refers to companies whose operations set the industry standard for performance in one or more areas.
BPI： Business Process Improvement. Term used when logistics managers take a process improvement approach to improve the company's logistics process performance. A BPI model is constructed for approval with the objective being successful implementation. Usually， the next involves a benchmarking effort （case study） in order to apply what has been learned.
Capabilities： Broader than core competencies， capabilities encompasses processes such as order cycle time， customer service， as well as overall business behavior and culture. Refer to “core competencies，” “demand-oriented capabilities，” and “supply-oriented capabilities” in this publication.
Category Management： The management of individual product categories as strategic business units. Emphasizes profits and sales for entire product groups rather than individual brands.
C-commerce： “Collaborative commerce”。 This involves combining trading partners to reduce cost through the sharing of logistics resources.
CDL： “Consumer Direct Logistics”。 This consists of processing and fulfillment of consumer orders from a retail store or dedicated distribution center. Amazon.com and Peapod are two examples of companies perfecting this channel.
Channel： Business components of a company's supply chain such as manufacturing support， manufacturing， distribution， and retailing or direct sales. Product moves from one channel member， with value being added， to the next channel member until product reaches the customer. A channel may also be a geographic area or zone wherein volumes are shipped.
Collaborative Supply Network： A network that manages the convergence of execution networks and strategic planning. Core Competency： Attributes， processes， knowledge， abilities and skills that allow a firm to achieve competitive advantage. Often used to mean things a company does best. See “capabilities”。
CCM： Abbreviation for “Commerce Chain Management”。 CCM consists of systems， commerce networks， procurement， and in-house or 3PL logistics.
CPFR： Abbreviation for “Means Collaborative Planning Forecasting and Replenishment”。 Purpose is to create efficient flow of information amongst supply chain partners （I.e. vendors， customers）。
CR： “Collaborative Replenishment”。 When large retailers share all their needs on a 52-week， individual store basis with their suppliers.
CRP： “Continuous Replenishment Planning/Program”。 This is an innovative logistics method that integrates the logistics operations of the supplier and the customer into one coordinated logistics effort. Inventories are tracked electronically and a replenishment planning/ordering system often linked to POS manages a “pull” type method of inventory management rather then a “push” type.
CSC： “Continuous Supply Chain”。 This is an innovative logistics product involving the integration of a company's logistics operations with suppliers into a coordinated “pull” effort. The most important characteristics of this undertaking are execution and dependability with repeated success leading to competitive advantage.
CSR： “Customer Service Representative”。 Individuals who take customers orders and requests for information via telephone， fax， or through Internet web sites. They are responsible for accurately entering order information and for making sure their part of this process operates satisfactorily for the customer.
De-engineering： The process of simplifying previously redesigned business processes that have become ineffective and/or too complicated.
Demand-Oriented Capabilities： Customer-oriented logistics approach emphasizing demands of the external customer. Capabilities encompass time-advantages， responsiveness to target markets， and customer service.
Direct Product Profitability Analysis： DPP is an approach to analyzing profit for a bundle of products. It involves determining the marginal cost for each product and determining which ones are profitable and which ones are marginal （requiring too much overhead costs）。
ECR： Efficient consumer response； involves examining supply chain and trade practices to identify opportunities for changes in practices or technology to make the supply chain more competitive. Term originates in the grocery industry where it refers to a strategy in which distributors and suppliers work cooperatively to bring better value to customers by jointly focusing on efficiency in the total grocery supply chain. Accurate information and high-quality product flows are aided by a paperless system between the manufacturing line and point of sale. Objective is to reduce inventories and cost in the supply chain by matching the flow of product to consumer demand. The most advanced ECR strategy across the total supply chain.
Efulfillment Center （eFC） ： A warehouse with more than a traditional WMS. The e-warehouse receives goods， operates as a crossdock， and orders are picked， value-added processing performed； orders packed， and merge-in-transit utilized. Other key attributes include a “returns” program and a quality assurance program. All of this should be supported by dynamic customer service.
Efulfillment： The process that supports a website order from click to customer.
E-Procurement： There are three ways to build this solution： （1） use of suppliers Websites whereby purchaser connects directly with individual supplier sites， （2） use of procurement software and the inclusion of existing s well as new vendors， and （3） vertical trading network that operates between purchaser and suppliers.
Flow Modeling： This is a tool to assist logistics managers in the management of cycle time at the various levels of the company across all components in the supply chain. This tool identifies both the time and cost associated with a process. Components include cumulative lead-time analysis， cumulative value analysis， schedules， and a structure built that reflects the relationships of the components.
Gain Sharing： During the life of an outsourced agreement， a third party provider shares in the savings generated through continuous improvement.
Gantt Chart： A project tracking tool used to identify all activities that need to be in progress during a period （weekly， monthly） in order to assure successful completion of a project.
GPO： Abbreviation for Group Purchasing Organization. Hospital groups purchase through GPOs to maximize pricing levels and distribution services.
Green Logistics： A system designed for produce （fruits and vegetables） wherein the produce arrives store-ready at a distribution center packed in re-usable trays； eliminating use of corrugated packaging and quality is improved with less damage. Trays are bar coded.
Integrated： A methodology employed to more efficiently manage inventory mechanisms. Usually involves the inventory pulls from manufacturing sites and warehouses， on an integrated basis through distribution to the customer.
Integrators： Logistics service providers that will manage most or all aspects of the supply chain.
Integrated logistics： Involves viewing the entire process or movement as a system， as opposed to many disparate and individual activities.
Insourcing： Refers to programs that bring logistics suppliers into the customer location， including manager level supplier professionals and the supplier's computer systems. Insourcing
Just In Time （JIT）： A distribution and materials handling system， which keeps inventory levels to， a minimum by ordering and delivering supplies only as needed.
Kanban： A method of re-ordering items， which require instantaneous replacement. A Kanban card has a standardized quantity； when the card is used， the item is shipped immediately in the quantity specified on the card.
Kitting： Simplifying receipt of inbound materials prior to delivery and organizing them [sometimes hundreds of parts] into user packages for the manufacturing process. See Warehousing Section.
KRA： Key Result Areas. Term used to describe the areas of a business enterprise that are key to process improvement.
KPI： Key Performance Indicators； also known as KPF or Key Performance Factor. Examples are manufacturing cost per unit， cost per unit for transportation， on time delivery， on time pickup， and billing errors.
Lifestyle Collection Point： A B2C customer order-delivery operation whereby all orders are delivered to a common site at the same time. An example would be grocery orders placed through a website by a large group of customers working in the same company or building in accordance with a window governing order time and a delivery window for 5PM same day in the parking lot.
Logistics： The integrated system of planning， managing， allocating， and controlling financial， physical and human resources committed to physical distribution， manufacturing support and purchasing operations. Logistics is the glue that binds the business functions and a company's suppliers into a unified supply chain.
Council of Logistics Management definition： “Logistics is that part of the supply chain process that plans， implements， and controls the efficient， effective flow and storage of goods， services， and related information from the point of origin to the point of consumption in order to meet customers' requirements.”
Logistics Management & Distribution Report definition： “Any discussion of supply chain management must include logistics-essentially the management of goods and materials in motion or at rest-as a critical component. For all of the advances in technology that are crucial to supply chain management， the central reality is that the chain is not complete until the physical goods move through the system.”
Logistics Provider： A third party company with technical and specialized knowledge that manages tactically and operationally elements of logistics services， such as transportation， freight management， carrier management， warehousing and distribution， as a single service offering or in combination as part of a comprehensive service package meeting the needs of the customer. Logistics providers are often referred to as 3PLS.
Management Reporting or Metrics： Carrier performance information captured periodically by systems and/or manual methods to measure quality.
Merge-in-Transit： A strategy used by certain manufacturers involving the shipment of products from different production points or warehouses to a consolidation point where the components are combined for final assembly. Personal computer， printer， and other related equipment manufacturers frequently use this strategy. Double handling and the buildup of pipeline inventory costs are eliminated. Customers also get faster delivery.
Multi-Vendor Consolidation： a method of reducing the cost of shipping LTL quantities by consolidating shipments from different vendors to make-up TL shipments. LTL can cost up to four times the cost of TL. Besides cost， other advantages are reduced inventory， reduced order cycle， reduced costs at the DC， reduced damage， and improved in-stock positions.
MRP： Materials requirement planning. Production operation planning system that provides scheduling， inventory management， and materials billing capabilities. MRPII refers to a more recent， expanded application that also considers issues such as purchasing and forecasting.
Open To Buy： Control on or budget for the purchase of certain items； as purchases are made， the dollars not spent are “the open to buy” when compared to the dollars allotted to the total buy of an item.
Optimization： The actions taken through use of certain skills and tools to make a company's 1） order entry to delivery cycle； 2） inbound raw materials routing； 3） outbound routing； 4） warehouse sites； and in general， make any aspect of a company's total logistics function more effective from a cost and customer service perspective eliminating waste.
POP： In retail， merchandising companies arrange for the manufacture and installation （usually through 3rd party installers） of “point-of-purchase” materials ranging from free standing displays， wall mounted displays， hanging displays， racks for collateral material， racks containing goods for placement in mass merchants and in dealer type stores.
Postponement： A strategy whereby a warehouse undertakes final assembly of a product adding certain features after orders customer orders are received. An example would be a women's clothing manufacturer that inventories close to a large market and when orders are received the warehouse sews in the appropriate label.
Purchased Transportation： Term used to describe service offering by third party logistics providers. Involves the program of buying freight capacity at volume levels for many shippers at substantial discounts. Includes the administration and coordination of all activities associated with a freight management system.
Quality： “Meeting the requirements.” To have quality， three things must happen. First， the customer must understand and accurately define the requirements. Second， the customer must clearly communicate the requirements to the supplier. Third， the supplier must meet the requirements. QOS： Measurements of “quality of service” as used in weekly， monthly reports.
QR： “Quick response”； strategy in which retailers and suppliers work cooperatively to respond to consumer needs by sharing information on point of sales （POS） activity to forecast demand for replenishable items and to monitor trends to detect new opportunities.
QVR： Stands for “quality， value， and responsiveness”； used in re-engineering efforts by a company to make itself the ideal business partner for its customers.
Re-engineering： The fundamental rethinking and redesign of a company's business processes to achieve dramatic improvements in critical measures of performance， such as cost， quality， service and speed.
Reverse Logistics： Returnables that are handled by transportation provider or shipper and are re-used （after refurbishment if necessary）， reclaimed/recycled， resold or disposed of by shipper or shipper's suppliers.
SCE： Supply Chain Execution. Definition refers to integrating the supply chain. SCE is the software that picks up where an advance planning or enterprise system ends. The objective is to provide visible inventory.
SCR： Synchronized consumer response； an initiative of manufacturers and distributors of fast-moving consumer goods based on the consumer pull model （replenishment is pull driven back through the supply chain）。 SCR emphasizes flexible software solutions that enable companies to respond to their customers' requirements.
Seamless Corporation： Synonymous with extended enterprise or supply chain enterprise. Redefines organizational structure to include organizations with which it interacts. Corporation forms long term partnerships with suppliers， buyers， vendors， customers， and other external companies that constitute the supply chain. Managing the supply chain is the goal of the seamless corporation. Sequencing The action of providing production-ready materials for the assembly line so that the right part arrives in the correct order at the right time.
SFLM： Synchronous Flow Leadership Manufacturing. This is an on-going， continuous improvement process that has been developed to synchronize and manage material flow and to lead this transformation in a manufacturing environment to increase plant effectiveness. See Synchronous Manufacturing in this Section.
Single Customer Focus： Logistics provider's operation is geared to handle all of the needs of a particular customer with the goal of ensuring error-free service performance.
SOE： “Statement of Expectations”； first step used in formulating an implementation plan for a logistics initiative to be accomplished internally by a corporation or by a third party provider with the purpose of defining the expectations of the parties and corresponding accountabilities.
Sourcing： The skill of effectively identifying and procuring raw materials for productive manufacturing. This includes component parts and supplies. Streamlining this process and managing raw material inventories is part of effective sourcing. The process may include inspections and measurements against quality standards.
Statistical Process Control： （SPC）。 Engineering approaches to developing best methods to increase the efficiency of an operation， improve quality， and reduce costs.
Sub-Assembly： Involves pre-assembling of parts and components to keep low work-in-process inventories. Reduces number of assembly processes manufacturing or operations has to manage enabling a company to reduce or eliminate on-site activities. Allows a company to focus on main assembly functions. See Kitting in Warehousing Section.
Supply Chain： The components of business operations such as vendors， procurement， operations or manufacturing， warehousing and distribution， customers， and third party suppliers that service or manage segments of the supply chain that interact with the products from the raw material stage to delivery to the customer.
Supply Chain Management （SCM）： Encompasses all of the activities associated with moving goods from raw materials stage through to the end user. This includes systems management， sourcing and procurement， production scheduling， order processing， inventory management， transportation， warehousing， and customer service. Successful supply chain management， then， coordinates and integrates these activities for sustainable competitive advantage.
Supply Chain Network： The infrastructure required to support e-commerce with the Internet functioning as an enabler to the physical distribution of goods. Infrastructure will consist of suppliers， manufacturers， warehouses， transportation partners， and the software that ties it all together for the e-company for the purpose of providing flawless execution of orders.
Supply Channel： Members of the supply chain that hold， control， or effect inventory of raw materials， parts or goods.
Supply-Oriented Capabilities： Related to a firm's operational capabilities， supply-oriented capabilities emphasize the internal customers of a company such as production and marketing departments. Focused on distribution networks to gain competitive advantage， supply-oriented logistics capabilities include widespread product availability， selective distribution coverage， and low total distribution cost.
SWOT： Managerial analysis of a company's specific strengths， weaknesses， opportunities and threats.
Synchronous manufacturing： Advanced control system that aims to increase throughput while minimizing inventory investment by manufacturing the right components timely and in the right order. Combines JIT with flexible manufacturing， also known as “flex-flow”。
TCP： Abbreviation for “total cost of production” in manufacturing.
Unsalables： Product returns resulting from goods not sold by a customer （I.e. grocery store， retail chain， department store） or goods damaged enroute to and/or at the distribution center. Leading causes of unsalables are management indifference， out-of-code product， inefficient handling practices， seasonal product returns， and pallet overhang. When companies begin to deal with unsalables a team manager is usually appointed to recommend policies， review packaging requirements， consider a reclamation approach， and set up benchmarks to track progress in reducing unsalables to， for example， less than 1% of sales.
Value-chain： The strategy to build collaborative relationships and select trading partners from the outset of raw materials procurement to the delivery of the finished product to the ultimate customer. Involves linking the customer's customer and the supplier's supplier through electronic b2b.
Visioneering： The ability to look into the future and anticipate customer responses， business processes， knowledge capital of a company， and determine windows of opportunity.
VOC： Voice of the customer； term used by companies when describing an element of their customer service/quality initiatives. 3PLS： See Logistics Provider in this Section.