Glossary of Supply Chain Management

GLOSSARY OF SUPPLY CHAIN MANAGEMENT with Links for detailed explanations, examples and case studies

www.scmzone.8m.com

Disclaimer: The information provided here has been collected from various sources and the responsibility of checking and verifying the authenticity and correctness of the same lies with the user. Some of the links may not be available due to technical reasons or whatsoever. The publisher is not liable with respect to any subject matter of the terms of use or terms and conditions related thereto under any theory of liability.

Glossary of Supply Chain Management - www.scmzone.8m.com

GLOSSARY OF SUPPLY CHAIN MANAGEMENT This glossary has been compiled from various sources including the internet for the purpose of familiarizing a person with the commonly used terms and concepts in the field of Supply Chain Management (SCM). However, the definitions provided are not exhaustive as such and may only be used for general understanding. Links have been provided for detailed explanations, examples, case studies, etc. wherever available for reference purpose. It is advisable to consult standard reference material for detailed study of the concepts and fundamentals of SCM.

0-9 3PL A firm that provides outsourced or "third party" logistics services to companies for part or sometimes all of their supply chain management function. Typically specialize in customised integrated warehousing and transportation services.

4PL A 4PL is an integrator that assembles the resources, capabilities, and technology of its own organization and other organizations to design, build and run comprehensive supply chain solutions.

A ABC Analysis - Activity Based Costing Activity-based costing (ABC) is an accounting method that allows businesses to gather data about their operating costs. Costs are assigned to specific activities—such as planning, engineering, or manufacturing—and then the activities are associated with different products or services. In this way, the ABC method enables a business to decide which products, services, and resources are increasing their profitability, and which are contributing to losses.

Link: http://www.answers.com/Activity%20Based%20Costing ABC Analysis (Inventory) It is a form of Pareto analysis in which the items are grouped into three categories (A, B, and C) in order of their estimated importance.

Case Studies/Examples: http://costkiller.net/centre-couts/cost-cutting-analysis.htm http://papers.ssrn.com/sol3/papers.cfm?abstract_id=962270 http://www.accountingcoach.com/online-accounting-course/35Xpg01.html Acceptance Number The maximum allowable number of defective pieces in a sample of specified size Link: http://www.answers.com/topic/acceptance-number Accessory Planning A business strategy that plans for the use of "remnant materials" (the residual or scrap materials left over after a product or process is complete) to provide added value to existing products or processes

2

Glossary of Supply Chain Management - www.scmzone.8m.com

Link: http://www.surveymethods.com/glossary/Accessory_Planning.aspx ASN - Advanced Shipment Notification A notification by a shipper providing instructions to all parties responsible for the movement of freight from origin to destination. An ASN refers to the information used in creating a Waybill and Bill of Lading. An Advanced Shipment Notice is an EDI formatted electronic notification of pending deliveries; an electronic packing list. Its use is today mandated by many companies.

Link: http://en.wikipedia.org/wiki/Advanced_Shipping_Notice

B B2B - Business to Business A marketing strategy which involves the transaction of goods or services between businesses (as opposed to relations between businesses and other groups, for example consumers or public administration).

Link: http://www.answers.com/topic/business-to-business B2C - Business to Consumer Describes activities of commercial organizations serving the end consumer with products and/or services Link: http://www.answers.com/topic/b2c Balanced Scorecard A performance metric used in strategic management to identify and improve various internal functions and their resulting external outcomes. The balanced scorecard attempts to measure and provide feedback to organizations in order to assist in implementing strategies and objectives.

Link: http://www.answers.com/Balanced%20Scorecard Batch Processing A manufacturing process used to produce or process any product in batches, as opposed to a continuous production process, or a one-off production Link: http://en.wikipedia.org/wiki/Batch_production Benchmarking Benchmarking is a process of comparing an organization's or company's performance to that of other organizations or companies using objective and subjective criteria Link: http://www.answers.com/Benchmarking Best Practice Best Practice is a management idea which asserts that there is a technique, method, process, activity, incentive or reward that is more effective at delivering a particular outcome than any other technique, method, process, etc Link: http://en.wikipedia.org/wiki/Best_practice

3

Glossary of Supply Chain Management - www.scmzone.8m.com

BOM - Bill of Materials Describes a product in terms of its assemblies, sub-assemblies, and basic parts. Basically consisting of a list of parts, a BOM is an essential part of the design and manufacture of any product Link: http://en.wikipedia.org/wiki/Build_to_Order BPR - Business Process Reengineering Business Process Reengineering is a management approach aiming at improvements by means of elevating efficiency and effectiveness of the processes that exist within and across organizations.

Link: http://en.wikipedia.org/wiki/Business_process_reengineering BTO - Built to Order A production approach products are built after a confirmed order is received for it.

Link: http://en.wikipedia.org/wiki/Build_to_Order Case Study/Example link: This approach is considered good for highly customised or low-volume products, e.g. computer Servers, or for products where holding inventories is very expensive, e.g. aircraft.

BTS - Balance to Ship Refers to the quantity or order yet to be shipped or delivered BTS - Build to Stock A build-ahead production approach in which production plans are driven by historical demand information in combination with sales forecast information.

Case Studies/Examples: This sort of approach to logistics is considered good for a high volume products where the demand is either seasonal or easily predicted (or both) Bullwhip Effect Unexpected changes in demand patterns will continue to escalate further up the supply chain. Problems tend to escalate in supply chains where communication is minimal between supply nodes. A small wave in the middle of the ocean may end up as a tidal wave near the shore.

C Change Agent A person who leads a change project or business-wide initiative by defining, researching, planning, building business support and carefully selecting volunteers to be part of a change team. Change Agents must have the conviction to state the facts based on data, even if the consequences are associated with unpleasantness.

Link: http://www.isixsigma.com/dictionary/Change_Agent-393.htm Change Management Change management is a structured approach to change in individuals, teams, organizations and societies that enables the transition from a current state to a desired future state.

4

Glossary of Supply Chain Management - www.scmzone.8m.com

Consignment Inventory Consignment Inventory is inventory that is in the possession of the customer, but is still owned by the supplier.

Link: http://www.inventoryops.com/ConsignmentInventory.htm Case Studies/Examples: Consider a bicycle manufacturer that produces a wide range of bicycles ranging in price from a couple hundred dollars to several thousand dollars. He has customers (local independent bicycle shops) that stock his low-to-mid-priced models but are hesitant to stock the more expensive bikes because they do not have the confidence that their customers are willing to pay that much for a bike. And, if they do get a customer that wants a high-end bike, they could always special order it for them. The bicycle manufacturer believes that getting his high-end bikes in the shops where customers can see and touch them is critical in driving up sales for these models as well as helping to promote his brand which ultimately drives up sales for the lower cost models.

Cost Of Quality Cost of quality is the amount of money a business loses because its product or service was not done right in the first place. From fixing a warped piece on the assembly line to having to deal with a lawsuit because of a malfunctioning machine or a badly performed service, businesses lose money every day due to poor quality Link: http://www.asq.org/learn-about-quality/cost-of-quality/overview/overview.html CPFR - Collaborative, Planning, Forecasting and Replenishment Collaborative Planning, Forecasting, and Replenishment (CPFR) is a concept that aims to enhance supply chain integration by supporting and assisting joint practices. CPFR seeks cooperative management of inventory through joint visibility and replenishment of products throughout the supply chain. Information shared between suppliers and retailers aids in planning and satisfying customer demands through a supportive system of shared information. This allows for continuous updating of inventory and upcoming requirements, making the end-to-end supply chain process more efficient. Efficiency is created through the decrease expenditures for merchandizing, inventory, logistics, and transportation across all trading partners.

Case Studies/Examples: 1995 initiative co-led by Wal-Mart's Vice President of Supply Chain, Chief Information Officer, Vice President of Application Development, and the Cambridge, Massachusetts software and strategy firm, Benchmarking Partners.

CRM - Customer Relationship Management a broad term that covers concepts used by organizations to manage their relationships with customers, including collecting, storing and analyzing customer information.

More Detail: 1995 initiative co-led by Wal-Mart's Vice President of Supply Chain, Chief Information Officer, Vice President of Application Development, and the Cambridge, Massachusetts software and strategy firm, Benchmarking Partners.

CTO - Configure to Order Represents the ability for a user to define the component make-up (configuration) of a product at the very moment of ordering that product, and a vendor to subsequently build that configuration dynamically upon receipt of the order Links: http://www.en.wikipedia.org/wiki/Configure-to-order.

5

Glossary of Supply Chain Management - www.scmzone.8m.com

Customer Desired Delivery Date Is the latest date desired by customer on which the order should be delivered.

Customer Desired Ship Date Is the latest date desired by customer on which the order should be shipped.

Customer Requested Delivery Date Is the latest date requested by customer on which the order can be delivered Customer Requested Ship Date Is the latest date requested by customer on which the order can be shipped Cycle Time Time required to produce and deliver a product or service. Thus, total cycle time is the sum of value-added processing time and total nonvalue-added time Links: http://www.answers.com/topic/cycle-time D Dashboard real time information is collated from various sources in the business displayed on the page Links: http://www.answers.com/topic/dashboard-business Demand Planning It deals with the processes connected with identification, analysis and forecasting of requirements Links: http://sap.ittoolbox.com/topics/t.asp?t=411&p=411&h1=411 DFMA - Design For Manufacturing and Assembly A methodology and tool set used to determine how to simpilify a current or future product design and/or manufacturing process to achieve cost savings. DFMA allows for improved supply chain cost management, product quality and manufacturing, and communication between Design, Manufacturing, Purchasing and Management.

Links: http://www.isixsigma.com/dictionary/Design_For_Manufacturing_and_Assembly_DFMA907.htm DOE - Design of Experiments Design of experiments includes the design of all information-gathering exercises where variation is present, whether under the full control of the experimenter or not.

Links: http://www.answers.com/topic/design-of-experiments Distribution Center Distribution centers store and sort goods using warehouse space so that full truckloads of merchandise can be sent to a single destination or to multiple destinations along a specific route.

6

Glossary of Supply Chain Management - www.scmzone.8m.com

DPM - Defects Per Million constitutes a standard of measure that correlates failures of expected norms in any process. One failure per every million normative outcomes constitutes 1 DPM. Links: http://www.answers.com/topic/defects-per-million-opportunities Due Date Due Date is the latest date an order has to be delivered or fullfilled to the customer E EDI - Electronic Data Interchange The electronic communication of business transactions, such as orders, confirmations and invoices, between organizations. Third parties provide EDI services that enable organizations with different equipment to connect. Although interactive access may be a part of it, EDI implies direct computer-to-computer transactions into vendors' databases and ordering systems.

ERP - Enterprise Resource Planning Refers to software packages that attempt to consolidate all the information flowing through the company from finance to human resources. ERP allows companies to standardize their data, streamline their analysis process, and manage long term business planning with greater ease.

Links: http://www.isixsigma.com/dictionary/ERP-547.htm F FIFO - First in First Out FIFO assumes that the first goods purchased are the first sold. As a consequence, the items that remain in the inventory at the end of the year are assumed to be those purchased last Finite Scheduling Finite capacity scheduling is so-called because it takes capacity into account from the very outset. The schedule is based on the capacity available Finished Goods A product sold as a completed item or repair part or any item subject to a customer order or sales forecast. All manufacturing operations, including final test, have been completed.

Flowchart A schematic representation of a sequence of operations, as in a manufacturing process or computer program. Also called flow diagram, flow sheet Links: http://www.answers.com/topic/flowchart Forecast Consumption The netting of actual demand from customer or interplant orders against the forecast for a given time period. Systems for producing items to stock often use the higher of the forecast quantity or actual demand quantity when creating suggested schedules Forecasting Estimating the likelihood of an event taking place in the future, based on available data from the past.

7

Glossary of Supply Chain Management - www.scmzone.8m.com

Fourth Party Logisitics A 4PL is an integrator that assembles the resources, capabilities, and technology of its own organization and other organizations to design, build and run comprehensive supply chain solutions.

Links: http://en.wikipedia.org/wiki/Third-party_logistics_provider More Details: A 4PL uses a 3PL to supply service to customers, owning only computer systems and intellectual capital.It can be argued that a 4PL is the same thing as a Non Asset-Based 3PL. Term coined by global consulting firm Accenture Case Study/Example http://www.logisticstoday.com/displayStory.asp?S=1&sNO=7028 FPY - First Pass Yield is simply the number of good units produced divided by the number of total units going into the process Functional Requirements Functional Requirements describe what the system, process, or product/service must do in order to fulfill the business requirement(s). Note that the business requirement often can be broken up into sub-business requirements and many functional requirements.

These are often referred to as System Requirements Links: http://en.wikipedia.org/wiki/Business_analyst Case Studies/Examples: (1) System must provide the ability to associate notes to a project plan.

(2) System must allow the user to enter free text to the project plan notes, up to 255 characters in length.

I Incoming Goods Inspection A verification check if the product arrived in good condition at your warehouse before accepting them into your stock.

Links: http://www.isixsigma.com/dictionary/Incoming_Goods_Inspection-802.htm Inventory Buffers stock held in individual workstations against the possibility if production falls behind schedule.

Inventory Netting Netting of Demand for an item against on-hand inventory and scheduled receipts ISO 9000 Series of Standards Series of standards established in the 1980s by countries of Western Europe as a basis for judging the adequacy of the quality control systems of companies.

Links: http://www.isixsigma.com/dictionary/ISO_9000_Series_of_Standards-14.htm J JIT (Just In Time) A planning system for manufacturing processes that optimizes availability of material inventories at the manufacturing site to only what, when & how much is necessary.

Links: http://www.isixsigma.com/dictionary/Just_In_Time_JIT_Manufacturing-43.htm

8

Glossary of Supply Chain Management - www.scmzone.8m.com

K Kaizen Japanese term that means continuous improvement, taken from words 'Kai' means change and 'zen' means improvement or being better.

Links: http://www.isixsigma.com/dictionary/Kaizen-42.htm KPI - Key Performance Indicators Key Performance Indicator (KPI) indicates any key performance that gives the actual data of that particular outcome.

Links: http://www.isixsigma.com/dictionary/KPI-880.htm L Lead Time The amount of time, defined by the supplier, that is required to meet a customer request or demand.

Links: http://www.isixsigma.com/dictionary/Lead_Time-476.htm Lean Manufacturing 'Lean production is aimed at the elimination of waste in every area of production including customer relations, product design, supplier networks and factory management.

Its goal is to incorporate less human effort, less inventory, less time to develop products, and less space to become highly responsive to customer demand while producing top quality products in the most efficient and economical manner possible.

Links: http://www.isixsigma.com/dictionary/Lean_Manufacturing-116.htm Lean Six Sigma The first principle of Lean Six Sigma is: Delight your customers with speed and quality.

The second principle says: Improve process flow and speed. Lean Six Sigma emphasizes that speed is directly tied to excellence.

LIFO - Last in First Out Last In, First Out. A method of inventory rotation to ensure that the newest inventory (last in) is used first (first out).

Links: http://www.isixsigma.com/dictionary/LIFO-656.htm Logisitics comprised of courses and/or programs related to planning, management, and movement of people, materials, and goods by road, pipeline, air, rail and water and related professional and technical support services such as transportation infrastructure planning and management, logistics services, mobile equipment and facility maintenance M MPS - Master Production Scheduling The planning of production (usually End Item Production) to satisfy current and forecast orders.

MRP - Materials Replenishment Planning The Material Requirements Planning process is designed to take the Master Production Schedule replenishment quantities, "explode" through the bill of materials to create component requirements which are netted against on-hand and on-order, level by level.

It is a time-phased process whereby the planned orders are driven by actual requirements by date.

9

Glossary of Supply Chain Management - www.scmzone.8m.com

MRP II - Manufacturing Resource Planning To effectively plan all resources of a factory. Ideally, it addresses operational planning in units, financial planning in dollars, and has a simulation capability to answer "what-if" questions and extension of closed-loop MRP. MTBF - Mean Time Between Failure An average time between machinery breakdowns.

More Detail: If the MTBF decreases, root cause analysis must be carried out to bring the MTBF # to a high, meaning long times between failures.

O ODM - Original Design Manufacturer The term Original Design Manufacturer (ODM) is used to describe companies that design and manufacture a product that is then sold under other brand names and does not necessarily acknowledge the Original Design Manufacturer brand. Some OEMs (original manufacturers, not resellers) have taken on a larger role in the design of the product they are manufacturing and become ODMs. One Piece Flow Refers to the concept of moving one workpiece at a time between operations within a workcell.

Links: http://www.isixsigma.com/dictionary/One_Piece_Flow-540.htm Optimization Adjusting the system or process inputs to produce the best possible average response with minimum variability.

Links: http://www.isixsigma.com/dictionary/Optimization-52.htm O2C - Order to Cash A process flow encapsulates a variety of smaller business processes from order entry to cash receipt.

Links: http://www.ebstrategy.com/selfservice/composite/order_to_cash.htm

10

Glossary of Supply Chain Management - www.scmzone.8m.com

P P2P - Procure to Pay Process contains all steps from purchasing goods from a supplier, to paying the supplier.

More Detail: Some basic steps include: Create or Maintain Suppliers, Prepare Purchase Order, Receive Goods from Supplier, Enable Payment Packing List A Packing List gives details of the contents of all the packages making up the consignments and is required by Custom’s authorities if the packing information is not shown on the invoice. The Packaging List is usually attached to the invoice PPM - Parts per Million Parts Per Million. Typically used in the context of defect Parts Per Million opportunities Links: http://www.isixsigma.com/dictionary/PPM-70.htm Process Baseline The average long-term performance of an output characteristic or a process (Y) when all the input variables (x) are running in an unconstrained fashion.

Links: http://www.isixsigma.com/dictionary/Process_Baseline-834.htm Process Capability Process capability refers to the ability of a process to produce a defect-free product or service in a controlled manner of production or service environment. Various indicators are used-some address overall performance, some address potential performance.

Links: http://www.isixsigma.com/dictionary/Process_Capability-299.htm Process Maturity An indication of how close a developing process is to being complete, and capable of continuous improvement through quantitative measure and feedback.

Links: http://www.isixsigma.com/dictionary/Process_Maturity-818.htm Process Owner The individual(s) responsible for process design and performance. The process owner is accountable for sustaining the gain and identifying future improvement opportunities on the process.

Links: http://www.isixsigma.com/dictionary/Process_Owner-436.htm Production Planning The process of creating an overall production plan for the factory, over a specified time horizon Production Scheduling The allocation of resources to the manufacture of the parts to be produced.

Project Scope Defined and specific project beginning and end points. The more specific the details (what's in-scope and what's out of scope), the less a project may experience "scope creep".

11

Glossary of Supply Chain Management - www.scmzone.8m.com

Links: http://www.isixsigma.com/dictionary/Project_Scope-55.htm Purchase Orders is a commercial document issued by a buyer to a seller, indicating the type, quantities and agreed prices for products or services that the seller will provide to the buyer.

Pull System A pull system is where processes are based on customer demand. The concept is that each process is manufacturing each component in line with another department to build a final part to the exact expectation of delivery from the customer.

Links: http://www.isixsigma.com/dictionary/Pull_System-541.htm Push Manufacturing "Push" manufacturing can be described as producing an entire line of products without pre-selling and taking orders for it.

Q QC - Quality Control The managerial process during which actual process performance is evaluated and actions are taken on unusual performance.It is a process to ensure whether a product meets predefined standards and requisite action taken if the standards are not met.

Links: http://www.isixsigma.com/dictionary/Quality_Control-33.htm Quality Assurance A planned and systematic set of activities to ensure that variances in processes are clearly identified, assessed and improving defined processes for fullfilling the requirements of customers and product or service makers.

Links: http://www.isixsigma.com/dictionary/Quality_Assurance-105.htm R Raw Materials A natural unprocessed material used in a manufacturing process RFP - Request for Proposal A document prepared by a potential user of products and/or services to solicit information from a provider regarding that provider's products, capabilities, prices, and services. An RFP is generally more focused than an RFI and the responder may be bound by any information in the response, including pricing.

RFI - Request for Information The document used in informal, uncompetitive solicitation of information, data, comments, or reactions from possible suppliers. This process usually precedes the issuance of a competitive procurement process. Responses to RFI’s are not the basis to select a service provider.

RFID – Radio Frequency Identification A method of identifying unique items using radio waves. Typically, a reader communicates with a tag, which holds digital information in a microchip. But there are chipless forms of RFID tags that use material to reflect back a portion of the radio waves beamed at them.

Links: http://www.rfidjournal.com/article/glossary/3

12

Glossary of Supply Chain Management - www.scmzone.8m.com

RFQ - Request for Quote Is a document that an organization submits to one or more potential suppliers eliciting quotations for a product or service..

Root Cause Analysis Study of original reason for nonconformance with a process. When the root cause is removed or corrected, the nonconformance will be eliminated.

Links: http://www.isixsigma.com/dictionary/Root_Cause_Analysis-571.htm Routings A sequenced list of the operations needed to manufacture a part. A Routing should include the amount of Resource required at each Work Centre the part passes through.

Tooling should also be included in a part’s Routing. Routing information must be held on the planning system for every manufactured part and used for capacity planning and costing.

S Sales Order document used to approve, track, and process outbound customer shipments Scheduled Packed Date Is the latest scheduled date an order should be packed Scheduled Delivery Date Is the scheduled date an order should be delivered to Customer.

SCM - Supply Chain Management Managing the movement of goods from raw materials to the finished product delivered to customers. Supply Chain Management aims to reduce operating costs, lead times, and inventory and increase the speed of delivery, product availability, and customer satisfaction.

Links: http://www.isixsigma.com/dictionary/Supply_Chain_Management-549.htm Ship Date Ship Date is the latest date an order can depart the manufacturing facility.

Six Sigma Six Sigma is a rigorous and a systematic methodology that utilizes information (management by facts) and statistical analysis to measure and improve a company's operational performance, practices and systems by identifying and preventing 'defects' in manufacturing and service-related processes in order to anticipate and exceed expectations of all stakeholders to accomplish effectiveness Links: http://www.isixsigma.com/dictionary/Six_Sigma-85.htm SME - Subject Matter Expert A person who can perform a job or a selected group of tasks to standards. His experience and knowledge of the job designates him as a technical expert. He must know what is critical to the performance of the task and what is nice-to-know.

SRM - Supplier Realtionship Management Supplier Relationship Management is the management of the flow of information between suppliers and purchasing organizations and the integration of supplier information in the procurement process by the buyer.

13

Glossary of Supply Chain Management - www.scmzone.8m.com

SPC - Statistical Process Control A system by which one samples and inspects the output of a process to determine if one should adjust the process to bring the items or goods into an acceptable quality standard.

Supplier Collaboration Plan collaboration with suppliers around demand and capacity coordination, as well as short-term order execution, and shipment and inventory tracking.

Supplier Scorecard The Supplier Scorecard assesses suppliers based on major performance benchmarks in several key areas such as Manufacturing Critical-path Time (MCT), On-time Delivery, Quality Parts per Million, Cost of Poor Quality, Inventory Turns and Productivity Gains.

Supply Chain Execution The set of supply chain activities that focus on fulfillment rather than planning- raw material delivery, manufacturing operations and shipments to customers and internal and external distribution points. Execution functions receive requirements from the planning cycle and provide the actual data in plan vs. actual measurements.

Supply Chain Integration Methods of coordination and integration of processes within a traditional supply chain, including interesting practices regarding customers and suppliers, such as customers becoming co-producers.

Supply Chain Network A supply network made of inter-linked nodes, including customers, distributors, producers, and suppliers.

Supply Chain Optimization The coordination of linked resources across all or part of a supply chain in eliminating or reducing manufacturing and logistics bottlenecks and creating optimized schedules based on shared inventory and order information.

Synchronization Is a practice in timekeeping which requires the coordination of events to operate a system in unison.

Case Studies/Examples: The familiar conductor of an orchestra serves to keep the orchestra in time T Theory of constraints TOC Also called constraints management, it is a set of tools that examines the entire system for continuous improvement. The current reality tree, conflict resolution diagram, future reality tree, prerequisite tree and transition tree are the five tools used in its ongoing improvement process.

Links: http://www.isixsigma.com/dictionary/Theory_of_constraints_TOC-1105.htm Third Party Logisitics A firm that provides outsourced or "third party" logistics services to companies for part or sometimes all of their supply chain management function. Typically specialize in customised integrated warehousing and transportation services.

Links: http://en.wikipedia.org/wiki/Third-party_logistics_provider More Detail: Hertz, and Alfredsson (2003) describe four categories of 3PL providers:

14

Glossary of Supply Chain Management - www.scmzone.8m.com

Standard 3PL provider: this is the most basic form of a 3PL provider. They would perform activities such as, pick and pack, warehousing, and distribution (business) – the most basic functions of logistics. For a majority of these firms, the 3PL function is not their main activity.

Service developer: this type of 3PL provider will offer their customers advanced valueadded services such as: tracking and tracing, cross-docking, specific packaging, or providing a unique security system. A solid IT foundation and a focus on economies of scale and scope will enable this type of 3PL provider to perform these types of tasks.

The customer adapter: this type of 3PL provider comes in at the request of the customer and essentially takes over complete control of the company’s logistics activities. The 3PL provider improves the logistics dramatically, but do not develop a new service. The customer base for this type of 3PL provider is typically quite small.

The customer developer: this is the highest level that a 3PL provider can attain with respect to its processes and activities. This occurs when the 3PL provider integrates itself with the customer and takes over their entire logistics function. These providers will have few customers, but will perform extensive and detailed tasks for them.

TQM - Total Quality Management A conceptual and a philosophical context which requires management and human resources commitment to adopt a perpetual improvement philosophy, through succinct management of all processes, practices and systems throughout the organization to achieve effectiveness in the organizational performance and fulfilling or exceeding the community expectations.

Links: http://www.isixsigma.com/dictionary/Total_Quality_Management-15.htm Transit Time A time period for cargo to move between two points (ie, from shipper to consignee) Trading Partner A supply chain vendor or customer that does business with a given organization and normally has linked communications.

U UNSPSC - United Nations Standard Products and Services Code The United Nations Standard Products and Services Code is a hierarchical convention that is used to classify all products and services. It is the most efficient, accurate and flexible classification system available today for achieving company-wide visibility of spend analysis, enabling procurement to deliver on cost-effectiveness demands and allowing full exploitation of electronic commerce capabilities. The UNSPSC was jointly developed by the United Nations Development Program(UNDP) and Dun & Bradstreet Corporation (D&B) in 1998.

V Value Added Manufacturing To be a value added action the action must meet all three of the following criteria: 1) The customer is willing to pay for this activity.

2) It must be done right the first time.

3) The action must somehow change the product or service in some manner.

Links: http://www.isixsigma.com/dictionary/Value-Added-134.htm

15

Glossary of Supply Chain Management - www.scmzone.8m.com

Value Chain The sequential set of primary and support activities that an enterprise performs to turn inputs into value-added outputs for its external customers.

Case Studies/Examples: An IT value chain is that subset of enterprise activities that pertain to IT operations, both to add value directly for external customers and to add indirect value by supporting other enterprise operations.

Value Stream Mapping Value stream mapping is a paper and pencil tool that helps you to see and understand the flow of material and information as a product or service makes its way through the value stream.A value stream map (AKA end-to-end system map) takes into account not only the activity of the product, but the management and information systems that support the basic process. This is especially helpful when working to reduce cycle time, because you gain insight into the decision making flow in addition to the process flow. It is actually a Lean tool.The basic idea is to first map your process, then above it map the information flow that enables the process to occur.

Links: http://www.isixsigma.com/dictionary/Value_Stream_Mapping-413.htm VMI - Vendor Managed Inventory An inventory planning and fulfillment technique in which a supplier is responsible for monitoring and restocking customer inventory at the appropriate time to maintain predefined levels. The vendor is given access to current customer inventory, forecast and sales order information and initiates replenishment as required.

Case Studies/Examples: Vendor Managed Inventory was first applied to the grocery industry, between companies like Procter & Gamble (supplier) and Wal-Mart (distributor). But increasingly, Vendor Managed Inventory is providing the benefits of smoother demand, increased sales, lower inventories and reduced costs to other industries.

Vendor capacity planning Process of assessing and allocating the capacity earmarked by the vendors.

W Work in progress Products in various stages of completion throughout the plant.

Work assignment The process of allocating work to work centres.

Y Yield Yield is the percentage of a process that is free of defects.

Links: http://www.isixsigma.com/dictionary/Yield-362.htm Z Zero Defects A practice that aims to reduce defects as a way to directly increase profits. The concept of zero defects lead to the development of Six Sigma in the 1980s.

Links: http://www.isixsigma.com/dictionary/Zero_Defects-550.htm ****************

16

Glossary of Supply Chain Management - www.scmzone.8m.com

SCMZone Network - www.scmzone.8m.com

17