SUPPLYCHAINMANAGEMENTTERMSandGLOSSARYUpdated: February 2010AA3Method:TheA3system isameansof describinga businessprocess ina compactform.It was originallycreatedby the Toyota Motor Corporation and was named for the paper size on which it was printed:A3(11"x17").Toyotaused the A3 methodology to help develop its famed Toyota Production System (TPS).Abandonment:1)Thedecisionofa carriertogiveup ortodiscontinue serviceoveraroute.Railroadsmust seekIcCpermissiontoabandon routes.2)Asinthephrase"call abandonment".Thisreferstopeoplewho,beingplacedon hold in an incoming call, elect to hang up ("abandon")the call. Call centers monitor closely the"abandonmentrate" as a measure of their inefficiency.ABB:SeeActivity Based BudgetingABC:SeeActivityBasedCostingABcClassification:Amethodof classifying inventoryitems relativetotheirimpactontotal control.ABCtypicallyuses movement and cost data to calculate the value of stock usage over the prior period, and uses the result as anelement in ranking items under an 8o/2o Pareto rule for cycle counting purposes.The group is divided into classescalledA,B,andC(andsometimesD)withTheAgrouprepresentsthehighestvaluewith10to20%bynumberofitems.TheB, C and D(if used)groups are each lower values but typicallyhigher populations.Items withhigherusage value are (the 20%) are counted more frequently.Specific bars to be used in setting ABc levels will vary byorganization as theywill impact the financial control applied to inventory and thelevel of effort spent counting.Alsosee:CycleCountingABcCosting:SeeActivityBasedCostingABcFrequencyof Access:Locationmethod where the determination ofaproduct's location within the warehouse,or distribution center, is based on 1) product's ABC Classification and 2) the number of times or rate of which theproduct is accessed.ABc InventoryControl:A method of inventory control which divides items into categories based on value ofusage, something likea Pareto division where the items which constitute the highest dollar value are tracked morecloselythan thosewithlowervaluemovement.Inthismethod anitem withhighvolumesofmovement,butlowcost, such as a small cheap fastener, would likely be counted less frequently than a slower mover which has a veryhigh cost. Items are typically divided by a company defined set of values into "A", "B"and "c" groups, andsometimes even a"D" group. The count frequencies are then applied to the groups. For example"A" class items maybe counted weekly,"B" monthly, "c" quarterly, etc. as a part of a cycle counting program.ABc Model:In cost management, a representation of resource costs during a time period that are consumedthrough activities and traced to products,services, and customers or to any other object that creates a demand forthe activity to be performed.Definitions compiled by:KateVitasekwww.scvisions.comCSCMP does not take responsibility for these definitions nor endorses theseasofficialdefinitionsexceptasnotedPage1of212
Also see: Cycle Counting ABC Frequency of Access: Location method where the determination of a product’s location within the warehouse, or distribution center, is based on 1) product’s ABC Classification and 2) the number of times or rate of which the product is accessed. ABC Model: In cost management, a representation of resource costs during a time period that are consumed through activities and traced to products, services, and customers or to any other object that creates a demand for the activity to be performed. Abandonment: 1) The decision of a carrier to give up or to discontinue service over a route. Railroads must seek ICC permission to abandon routes. 2) As in the phrase "call abandonment". This refers to people who, being placed on hold in an incoming call, elect to hang up ("abandon") the call. Call centers monitor closely the "abandonment rate" as a measure of their inefficiency. ABC Classification: A method of classifying inventory items relative to their impact on total control. ABC typically uses movement and cost data to calculate the value of stock usage over the prior period, and uses the result as an element in ranking items under an 80/20 Pareto rule for cycle counting purposes. The group is divided into classes called A, B, and C (and sometimes D) with The A group represents the highest value with 10 to 20% by number of items. The B, C and D (if used) groups are each lower values but typically higher populations. Items with higher usage value are (the 20%) are counted more frequently. Specific bars to be used in setting ABC levels will vary by organization as they will impact the financial control applied to inventory and the level of effort spent counting. ABC: See Activity Based Costing ABB: See Activity Based Budgeting ABC Inventory Control: A method of inventory control which divides items into categories based on value of usage, something like a Pareto division where the items which constitute the highest dollar value are tracked more closely than those with lower value movement. In this method an item with high volumes of movement, but low cost, such as a small cheap fastener, would likely be counted less frequently than a slower mover which has a very high cost. Items are typically divided by a company defined set of values into “A”, “B” and “C” groups, and sometimes even a “D” group. The count frequencies are then applied to the groups. For example “A” class items may be counted weekly, “B” monthly, “C” quarterly, etc. as a part of a cycle counting program. ABC Costing: See Activity Based Costing A Updated: February 2010 TERMS and GLOSSARY SUPPLY CHAIN MANAGEMENT A3 Method: The A3 system is a means of describing a business process in a compact form. It was originally created by the Toyota Motor Corporation and was named for the paper size on which it was printed: A3 (11” x 17”). Toyota used the A3 methodology to help develop its famed Toyota Production System (TPS). Definitions compiled by: Kate Vitasek www.scvisions.com CSCMP does not take responsibility for these definitions nor endorses these as official definitions except as noted. Page 1 of 212
SUPPLYCHAINMANAGEMENTTERMSandGLOSSARYUpdated: February 2010ABc System:In cost management, a system that maintains financial and operating data on an organization'sresources,activities, drivers, objects and measures.ABC models are created and maintained within this system.ABI:SeeAutomatedBrokerInterfaceABM:SeeActivityBasedManagementAbnormal Demand: Demand for a product which is either greater or lower than expected by a given percentagewhich is determined by the organization. When observed, it should be determined whether it may be a one-timespike, or if the effect is part of a trend which should be considered during future forecasts.ABP:SeeActivityBasedPlanningAbsorptionCosting:Acostaccountingapproachwhichcapturesoverheadand otherindirectcostsasseparatefromunit costs for a given period, and then applies (absorbs) those costs into unit costs at the period end based onvariousfactorssuchasmovementandCoGSelements.ACAT:SeeAcquisitionCategoriesAcceptableQualityLevel(AQL):Inqualityassessment,acceptablequalitylevel,alsoknownasassured qualitylevel, describes themaximumnumberofdefects acceptableduringtherandom sampling ofan inspection,AcceptableSamplingPlan:Aqualitymanagementprocedurewhichdefines thesamplesizesandacceptabledefectlevels for validating quality of products..AcceptanceNumber:SeeAcceptableQualityLevelAcceptanceSampling:A statisticalqualitycontrolmethodwhichtests samples of productsat defined pointsasopposed to testing each product.Accessibility:The ability of a carrier to provide service between an origin and a destination.Accessorial Charges: A carrier's charge for accessorial services such as loading, unloading, pickup, and delivery.Alsosee:UpchargesAccessorialFee:SeeAccessorialChargesAccessory: A choice or feature added to the good or service offered to the customer for customizing the endproduct. An accessory enhances the capabilities of the product but is not necessary for the basic function of theproduct.Inmanycompanies,anaccessorymeans thatthechoicedoes nothavetobespecified beforeshipment butcanbeaddedatalater date.In othercompanies,this choicemustbemadebeforeshipment.Delfinitions compiled by:Kate Vitasekwww.scvisions.comcSCMPdoesnottakeronsibilityforthefficialdefinitcept as notedoeonPage,2 of 212
Updated: February 2010 TERMS and GLOSSARY SUPPLY CHAIN MANAGEMENT ABI: See Automated Broker Interface Accessorial Fee: See Accessorial Charges Absorption Costing: A cost accounting approach which captures overhead and other indirect costs as separate from unit costs for a given period, and then applies (absorbs) those costs into unit costs at the period end based on various factors such as movement and COGS elements. ABP: See Activity Based Planning Abnormal Demand: Demand for a product which is either greater or lower than expected by a given percentage which is determined by the organization. When observed, it should be determined whether it may be a one-time spike, or if the effect is part of a trend which should be considered during future forecasts. ABM: See Activity Based Management ABC System: In cost management, a system that maintains financial and operating data on an organization's resources, activities, drivers, objects and measures. ABC models are created and maintained within this system. Accessorial Charges: A carrier's charge for accessorial services such as loading, unloading, pickup, and delivery. Accessory: A choice or feature added to the good or service offered to the customer for customizing the end product. An accessory enhances the capabilities of the product but is not necessary for the basic function of the product. In many companies, an accessory means that the choice does not have to be specified before shipment but can be added at a later date. In other companies, this choice must be made before shipment. Accessibility: The ability of a carrier to provide service between an origin and a destination. Acceptance Sampling: A statistical quality control method which tests samples of products at defined points as opposed to testing each product. Acceptance Number: See Acceptable Quality Level Acceptable Sampling Plan: A quality management procedure which defines the sample sizes and acceptable defect levels for validating quality of products. Acceptable Quality Level (AQL): In quality assessment, acceptable quality level, also known as assured quality level, describes the maximum number of defects acceptable during the random sampling of an inspection. ACAT: See Acquisition Categories Also see: Upcharges Definitions compiled by: Kate Vitasek www.scvisions.com CSCMP does not take responsibility for these definitions nor endorses these as official definitions except as noted. Page 2 of 212
SUPPLYCHAINMANAGEMENTTERMSandGLOSSARYUpdated:February2010Accountability: The act of making a group or individual responsible for certain activities or outcomes. For example,managers and executives areaccountable forbusiness performanceeven thoughthey may notactuallyperform thework.Accounts Payable (A/p):1) a financial term referring to the amount of transactions which have been accrued butnotpaidtoavendor.2)AnaccountingfunctionAccounts Receivable (A/R): On a company's balance sheet, accounts receivable is the amount that customersowe to that company.Sometimes called trade receivables, they are classified as current assets assuming that theyare due within one year.Accreditation: The process in which certification of competency, authority, or credibility is presented. An exampleof accreditationistheaccreditationoftestinglaboratoriesandcertificationspecialiststhatarepermittedtoissueofficialcertificatesofcompliancewithestablishedstandards.Accredited Standards Committee(AsC):A committee of the ANSI chartered in 1979to develop uniformstandards for the electronic interchange of business documents.The committee develops and maintains U.S.genericstandards (X12)for Electronic Data Interchange.Accumulationbin:An area where item to be used in assembly ofa product arestaged priorto work being doneAlsosee:StagingAccuracy: A value, usually expressed as a percentage, which expresses the level of precision incurred duringtransactions. An example would be seen when comparing actual inventory levels to what was expected frombookkeeping records.ACD:See Automated Call DistributionAcE:SeeAutomatedCommercialEnvironmentACH:See Automated ClearinghouseAcknowledgment:Typically this is a response,either electronic or as a physical document,which confirms thereceipt of an order from the supplier to the buyer.Acquisition Categories (AcAT): U.S. DoD ACAT 1 programs are Milestone Decision Authority Programs orprogramsdesignatedACAT1bytheMilestoneDecisionAuthority.AcquisitionCost:The net priceplus other costs needed to purchase the item and get it to the point of use.Theseother costs can include:the item's purchasing costs (closing,research,accounting,commissions,legal fees),transportation,preparationand installationcosts.Definitions compiled byKateVitasekwww.scvisions.comcSCMPdoesnottakeonsibilityforthefficialdefiniept as notedoet00Page 3 of 212
Updated: February 2010 TERMS and GLOSSARY SUPPLY CHAIN MANAGEMENT Accounts Receivable (A/R): On a company's balance sheet, accounts receivable is the amount that customers owe to that company. Sometimes called trade receivables, they are classified as current assets assuming that they are due within one year. Accounts Payable (A/P): 1) a financial term referring to the amount of transactions which have been accrued but not paid to a vendor. 2) An accounting function Accountability: The act of making a group or individual responsible for certain activities or outcomes. For example, managers and executives are accountable for business performance even though they may not actually perform the work. Acquisition Cost: The net price plus other costs needed to purchase the item and get it to the point of use. These other costs can include: the item's purchasing costs (closing, research, accounting, commissions, legal fees), transportation, preparation and installation costs. Acknowledgment: Typically this is a response, either electronic or as a physical document, which confirms the receipt of an order from the supplier to the buyer. ACH: See Automated Clearinghouse ACE: See Automated Commercial Environment ACD: See Automated Call Distribution Accuracy: A value, usually expressed as a percentage, which expresses the level of precision incurred during transactions. An example would be seen when comparing actual inventory levels to what was expected from bookkeeping records. Accumulation bin: An area where item to be used in assembly of a product are staged prior to work being done. Accreditation: The process in which certification of competency, authority, or credibility is presented. An example of accreditation is the accreditation of testing laboratories and certification specialists that are permitted to issue official certificates of compliance with established standards. Accredited Standards Committee (ASC): A committee of the ANSI chartered in 1979 to develop uniform standards for the electronic interchange of business documents. The committee develops and maintains U.S. generic standards (X12) for Electronic Data Interchange. Acquisition Categories (ACAT): U.S. DoD ACAT 1 programs are Milestone Decision Authority Programs or programs designated ACAT 1 by the Milestone Decision Authority. Also see: Staging Definitions compiled by: Kate Vitasek www.scvisions.com CSCMP does not take responsibility for these definitions nor endorses these as official definitions except as noted. Page 3 of 212
SUPPLYCHAINMANAGEMENTTERMSandGLOSSARYUpdated: February 2010AcSI:SeeAmericanCustomerSatisfactionIndexAction Message:A system message usually created during MRP calculations to call attention to a current orpotentialproblemandsuggestcorrectiveaction.Action Plan: A specific method or process to achieve the results called for by one or more objectives.An actionplanmaybeasimplerversionofaprojectplan.ActionReport:SeeActionMessageActivation: TOC recognizes that it is possible to produce without contributing to throughput. TOC defines productionthat contributes to throughput as utilization. Production that does not contribute to throughput is known asactivation. Activation is not desired because it not only fails to increase throughput,but it also increases inventoryand operating expense. This is consistent with the Just-In-Time (JIT) philosophy.Active Inventory: Materials held in a facility which are intended to be consumed in manufacturing / assembly, orsold in a specified period.Active Stock: Goods in active pick locations and ready for order filling.Activity: Work performed by people, equipment, technologies or facilities. Activities are usually described by the"action-verb-adjective-noun"grammarconvention.Activitiesmayoccurinalinkedsequenceandactivity-to-activityassignments may exist.ActivityAnalysis:Theprocess of identifying and cataloging activities for detailed understanding and documentationof their characteristics.An activityanalysis isaccomplished by means of interviews,group sessions,questionnaires,observations,andreviewsof physical recordsofworkActivity Based Budgeting (ABB): An approach to budgeting where a company uses an understanding of itsactivities and driver relationships to quantitatively estimate workload and resource requirements as part of anongoingbusinessplan.Budgetsshowthetypes,numberofandcostofresourcesthatactivitiesareexpectedtoconsumebasedonforecastedworkloads.Thebudget ispart of anorganization'sactivity-basedplanningprocess andcanbeusedinevaluatingitssuccess insettingandpursuingstrategicgoals.Activity Based Costing (ABc): A methodology that measures the cost and performance of cost objects, activitiesand resources.Costobjects consume activities and activitiesconsume resources.Resource costs are assignedtoactivities basedontheiruse of those resources,and activitycosts are reassigned tocost objects (outputs)based onthecost objectsproportional useof thoseactivities.Activity-basedcosting incorporates causal relationshipsbetweencostobjectsandactivitiesandbetweenactivitiesandresources.Definitions compiled byKateVitasekwww.scvisions.comCSCMPdoesnottakeresponsibilityforthetofficial definitcept as notededehinitionsnorPage 4 of 212
Updated: February 2010 TERMS and GLOSSARY SUPPLY CHAIN MANAGEMENT Action Message: A system message usually created during MRP calculations to call attention to a current or potential problem and suggest corrective action. Active Stock: Goods in active pick locations and ready for order filling. Active Inventory: Materials held in a facility which are intended to be consumed in manufacturing / assembly, or sold in a specified period. Activation: TOC recognizes that it is possible to produce without contributing to throughput. TOC defines production that contributes to throughput as utilization. Production that does not contribute to throughput is known as activation. Activation is not desired because it not only fails to increase throughput, but it also increases inventory and operating expense. This is consistent with the Just-In-Time (JIT) philosophy. Action Report: See Action Message Action Plan: A specific method or process to achieve the results called for by one or more objectives. An action plan may be a simpler version of a project plan. ACSI: See American Customer Satisfaction Index Activity: Work performed by people, equipment, technologies or facilities. Activities are usually described by the “action-verb-adjective-noun” grammar convention. Activities may occur in a linked sequence and activity-to-activity assignments may exist. Activity Based Costing (ABC): A methodology that measures the cost and performance of cost objects, activities and resources. Cost objects consume activities and activities consume resources. Resource costs are assigned to activities based on their use of those resources, and activity costs are reassigned to cost objects (outputs) based on the cost objects proportional use of those activities. Activity-based costing incorporates causal relationships between cost objects and activities and between activities and resources. Activity Based Budgeting (ABB): An approach to budgeting where a company uses an understanding of its activities and driver relationships to quantitatively estimate workload and resource requirements as part of an ongoing business plan. Budgets show the types, number of and cost of resources that activities are expected to consume based on forecasted workloads. The budget is part of an organization’s activity-based planning process and can be used in evaluating its success in setting and pursuing strategic goals. Activity Analysis: The process of identifying and cataloging activities for detailed understanding and documentation of their characteristics. An activity analysis is accomplished by means of interviews, group sessions, questionnaires, observations, and reviews of physical records of work. Definitions compiled by: Kate Vitasek www.scvisions.com CSCMP does not take responsibility for these definitions nor endorses these as official definitions except as noted. Page 4 of 212
SUPPLYCHAINMANAGEMENTTERMSandGLOSSARYUpdated: February 2010Activity-Based Management (ABM):A discipline focusing on the management of activities within businessprocesses as the routeto continuously improve both the value received by customers and the profit earned inproviding that value. ABM uses activity-based cost information and performance measurements to influencemanagement action.Seealso:Activity-Based CostingActivity Based Planning (ABP):Activity-based planning (ABP) is an ongoing process to determine activity andresource requirements (both financial and operational) based on the ongoing demand of products or services byspecific customer needs.Resource requirements are compared to resources available and capacity issues areidentified and managed.Activity-based budgeting (ABB) is based on the outputs of activity-based planning.ActivityDictionary:A listing and description of activities that provides a common/standard definition of activitiesacross the organization.An activity dictionary can include information about an activity and/or its relationships, suchas activitydescription,businessprocess,functionsource,whether value-added,inputs,outputs,supplier,customer,output measures, cost drivers, attributes, tasks, and other information as desired to describe the activity.Activity Driver: The best single quantitative measure of the frequency and intensity of the demands placed on anactivity by cost objects orotheractivities.It is used to assign activity costs to cost objects orto otheractivities.ActivityLevel:Adescription of types of activities dependent on thefunctional area.Product-related activity levelsmay include unit, batch, and product levels.Customer-related activity levels may include customer, market,channel, andproject levels.Activity Network Diagram: An arrow diagram used in planning and managing processes and projects.Actual Cost System: A managerial accounting system that records and measures all cost elements at their actualacquisitionvalue.Indirect costsarethenapplied as overhead using a costallocation technique.Actual Costs:Theactual labor,material, and allocated overhead costs incurred intheacquisition orproduction ofaproduct.Actual Demand: The known demand for a specific product based on customer orders and production orders whichare open.Oncean orderis shipped or production is completed, specific demand quantity will becomeusage.Actualdemand should be netted against any forecast for the same period, meaning that as orders are received the areconsidered to bepart of an earlierforecast and forecasts shouldbeconsidered as satisfied.ActualtoTargetGapAnalysis:SeeGapAnalysisActual to Theoretical Cycle Time:The ratio of the measured time required to produce a given output divided bythe sum of the time required to produce a given output based on the rated efficiency of the machinery and laboroperations.Delfinitions compiled by:Kate Vitasekwww.scvisions.comCSCMPdoesnottakeresponsibilityforthesedefilofficial definitioexcept as notedinitionsnorPage 5 of 212
Updated: February 2010 TERMS and GLOSSARY SUPPLY CHAIN MANAGEMENT Activity Level: A description of types of activities dependent on the functional area. Product-related activity levels may include unit, batch, and product levels. Customer-related activity levels may include customer, market, channel, and project levels. Activity Driver: The best single quantitative measure of the frequency and intensity of the demands placed on an activity by cost objects or other activities. It is used to assign activity costs to cost objects or to other activities. Activity Dictionary: A listing and description of activities that provides a common/standard definition of activities across the organization. An activity dictionary can include information about an activity and/or its relationships, such as activity description, business process, function source, whether value-added, inputs, outputs, supplier, customer, output measures, cost drivers, attributes, tasks, and other information as desired to describe the activity. Activity Based Planning (ABP): Activity-based planning (ABP) is an ongoing process to determine activity and resource requirements (both financial and operational) based on the ongoing demand of products or services by specific customer needs. Resource requirements are compared to resources available and capacity issues are identified and managed. Activity-based budgeting (ABB) is based on the outputs of activity-based planning. Activity-Based Management (ABM): A discipline focusing on the management of activities within business processes as the route to continuously improve both the value received by customers and the profit earned in providing that value. ABM uses activity-based cost information and performance measurements to influence management action. See also: Activity-Based Costing Actual Costs: The actual labor, material, and allocated overhead costs incurred in the acquisition or production of a product. Actual Cost System: A managerial accounting system that records and measures all cost elements at their actual acquisition value. Indirect costs are then applied as overhead using a cost allocation technique. Activity Network Diagram: An arrow diagram used in planning and managing processes and projects. Actual to Target Gap Analysis: See Gap Analysis Actual to Theoretical Cycle Time: The ratio of the measured time required to produce a given output divided by the sum of the time required to produce a given output based on the rated efficiency of the machinery and labor operations. Actual Demand: The known demand for a specific product based on customer orders and production orders which are open. Once an order is shipped or production is completed, specific demand quantity will become usage. Actual demand should be netted against any forecast for the same period, meaning that as orders are received the are considered to be part of an earlier forecast and forecasts should be considered as satisfied. Definitions compiled by: Kate Vitasek www.scvisions.com CSCMP does not take responsibility for these definitions nor endorses these as official definitions except as noted. Page 5 of 212