Activity-Based Cost Accounting (ABC)

A cost accounting system that accumulates costs based on activities performed and then uses cost drivers to allocate these costs to products or other bases, such as customers, markets, or projects. It is an attempt to allocate overhead costs on a more realistic basis than direct labor or machine hours. Source: http://www.apics.org/ (10th ed.)

Activity-Based Management (ABM)

The use of activity-based costing information about cost pools and drivers, activity analysis, and business processes to identify business strategies; improve product design, manufacturing, and distribution; and remove waste from operations. Source: http://www.apics.org/ (10th ed.)

Agreements

An agreement should clearly state what you are buying and its cost. Delivery terms and responsibility, Installation related issues, if applicable, an acceptance provision detailing how and when the buyer…

Business-to-Business Commerce (B2B)

Business being conducted over the Internet between businesses. The implication is that this connectivity will cause businesses to transform themselves via supply chain management to become virtual organizations, reducing costs, improving quality, reducing delivery lead time, and improving due-date performance.

Capacity Management

The function of establishing, measuring, monitoring, and adjusting limits or levels of capacity in order to execute all manufacturing schedules; i.e., the production plan, master production schedule, material requirements plan, and dispatch list. Capacity management is executed at four levels: resource requirements planning, rough-cut capacity planning, capacity requirements planning, and input/output control.

Capacity Planning

The process of determining the amount of capacity required to produce in the future. This process may be performed at an aggregate or product-line level (resource requirements planning), at the master-scheduling level (rough-cut capacity planning), and at the material requirements planning level (capacity requirements planning).

Capacity Requirements Planning

The function of establishing, measuring, and adjusting limits or evels of capacity. The term capacity requirements planning in this context refers to the process of determining in detail the amount…

Capacity Strategy

One of the strategic choices that a firm must make as part of its manufacturing strategy. There are three commonly recognized capacity strategies: lead, lag, and tracking. A lead capacity…

Capacity Utilization

A measure (usually expressed as a percentage) of how intensively a resource is being used to produce a good or service. Utilization compares actual time used to available time. Traditionally,…

Capacity – Information Flows

Capacity is the capability of a worker, machine, work center, plant, or organization to produce output per time period. Information aids us in addressing capacity availability, unused capacity and performance issues that impact a business’s revenue and productivity as well as its image and reputation Source: http://www.apics.org/ (10th ed.)

Capacity – Physical Flows

1) The capability of a system to perform its expected function. 2) The capability of a worker, machine, work center, plant, or organization to produce output per time period. Capacity…

Channel management

The management of firms or individuals that participate in the flow of goods and services from the raw material supplier and producer to the final user or customer. Source: http://www.apics.org/ (10th ed.)

Collaboration

Collaboration is defined as the process by which partners adopt a high level of purposeful cooperation to maintain a trading relationship over time. The relationship is bilateral; both parties have…

Commodity Strategy Development

The purchasing plan for a family of items. This would include the plan to manage the supplier base and solve problems. Source: http://www.apics.org/

Continuous Improvement

A never-ending effort to expose and eliminate root causes of problems; small step improvement as opposed to big step improvement. Source: http://www.apics.org/

Contract

An agreement between two or more competent persons or companies to perform or not to perform specific acts or services or to deliver merchandise. A contract may be oral or written. A purchase agreement when accepted by a supplier, becomes a contract. Acceptance may be in writing or by performance, unless the purchase order requires acceptance in writing. Source: http://www.apics.org/

Contract Management

Contract management is a strategic management discipline employed by both buyers and sellers whose objectives are to manage customer and supplier expectations and relationships, control risk and cost, and contribute…

Cost

See: Activity-based Cost Accounting, Activity-based Management, Cost System Design, Target Costing, Total Costs, Total Cost of Ownership

Cost Management

In terms of activity-based cost accounting, cost management involves control of activities to eliminate waste, improve cost drivers, and plan operations. This process should influence the organization’s strategy setting process. Factors such as product pricing, introduction of new products, and distribution of existing products are examples of strategic decisions that are affected by cost management.

Cost System Design

An intelligent cost system design is one that is simple while still providing managers with information they need to make decisions. As most manufacturing processes were labor intensive at the…

Currency Conversions

Issues with currency conversion add complexity to the global sourcing process. The absence of fixed exchange rates can be a problem. Fluctuations in exchange rates can have a significant impact…

Customer Relationship Management (CRM)

A marketing philosophy based on putting the customer first. It involves the collection and analysis of information designed for sales and marketing decision support to understand and support existing and potential customer needs. It includes account management, catalog and order entry, payment processing, credits and adjustments, and other functions.

Customer Value

The customer value approach focuses on how people choose among competing suppliers, customer attraction and retention, and market-share gains. Answering three customer value questions is important in order to determine…

Customer/Order Fulfillment Process

A series of customers’ interactions with an organization through the order filling process, including product/service design, production and delivery, and order status reporting. Source: http://www.apics.org/

Demand Management

The function of recognizing all demands for goods and services to support the market place. It involves prioritizing demand when supply is lacking. Proper demand management facilitates the planning and use of resources for profitable business results. Source: http://www.apics.org/ (10th ed.)

Distribution Channel

The distribution route, from raw materials through consumption, along which products travel.

Distribution Channel Design

The planned channels of inventory disbursement from one or more sources to field warehouses and ultimately to the customer. There are several levels in the distribution network structure. Source: APICS (8th edition)

Facility Location

Location decisions are a basic determinant of profitability in international logistics. Decisions on where to manufacture, to assemble, to store, to transship and to consolidate can make the difference between…

Forecast Error

The difference between actual demand and forecast demand, stated as an absolute value or as a percentage. E.g., average forecast error, forecast accuracy, mean absolute deviation, tracking signal. There are…

Forecast Sharing

A supply partnership between a buyer and supplier is based on mutual interdependency and respect and calls for information sharing between the involved parties. By sharing its demand forecast with…

Forecasting

The business function that attempts to predict sales and use of products so they can be purchased or manufactured in appropriate quantities in advance. Source: http://www.apics.org/ (10th ed.)

Forecasting Methods

Qualitative forecasting techniques An approach to forecasting that is based on intuitive or judgmental evaluation. It is used generally when data are scarce, not available, or no longer relevant. Common…

Globalization

See: Currency Conversion, Language

Inbound Logistics

Following the receipt of materials, parts or resale products from external suppliers, the subsequent storage, handling, and transportation requirements to facilitate either manufacturing or market distribution constitute inbound logistics. Source: Bowersox, D.J., Closs, D.J., & Cooper, B.M. (2002). Supply Chain Logistics Management. Burr Ridge, Boston: McGraw Hill. See: Interplant Transfer, Outbound Logistics

Industry Standards

An industrial standard is a uniform identification that is agreed on. Industrial standardization can be defined as the process of establishing agreement on uniform identifications for definite characteristics of quality, design, performance, quantity, service, etc. Source: Dobler, D.W., & Burt, D.N. (1996). Purchasing and Supply Management. (6th ed.). New York: McGraw Hill.

Information Sharing

A strategic partnering relationship between suppliers and buyers is characterized by a willingness to be open, and to share forecasted demand and cost data as well as the benefits resulting…

Information Technology

The technology of computers, telecommunications, and other devices that integrate data, equipment, personnel, and problem-solving methods in planning and controlling business activities. Information technology provides the means for collecting, storing,…

Insource vs Outsource

The act of deciding whether to produce an item internally or buy it from an outside supplier. Factors to consider in the decision include costs, capacity availability, proprietary and/or specialized knowledge, quality considerations, skill requirements, volume, and timing. Source: http://www.apics.org/ (10th ed.)

Interplant Transfer

The shipment of a part or product by one plant to another plant or division within the corporation. Source: http://www.apics.org/ (10th ed.)

Inventory

1) Those stocks or items used to support production (raw materials and work-in-process items), supporting activities (maintenance, repair, and operating supplies), and customer service (finished goods and spare parts). Demand…

Inventory Management Systems

Software applications that permit monitoring events across a supply chain. These systems track and trace inventory globally on a line-item level and notify the user of significant deviations from plans.…

Inventory Positioning

Inventory positioning refers to the selective location of various items in the product line in plant, regional, or field warehouses. Inventory positioning has a bearing on facility location decision, and therefore, must be considered in the logistics strategy. Source: Ballou, R.H. (1999). Business Logistics Management. (4th ed.). Upper Saddle River, New Jersey: Prentice Hall.

Joint Venture

An agreement between two or more firms to risk equity capital to attempt a specific business objective. Source: http://www.apics.org/

Language

Differences in culture, language, dialects or terminology may result in miscommunication and cause problems. While both parties may think that they understand what the other party has said, a true…

Lead Times/Cycle Times

1) A span of time required to perform a process (or series of operations). 2) In a logistics context, the time between recognition of the need for an order and…

Lean Manufacturing

A philosophy of production that emphasizes the minimization of the amount of all the resources (including time) used in the various activities of the enterprise. It involves identifying and eliminating…

Legal Issues

Purchasing law has been primarily developed from laws regarding contracts. In order for a contract to be valid, four conditions must be present: 1) Parties with full contractual capacity should…

Logistics Information Systems

Converting data to information, portraying it in a manner useful for decision making, and interfacing the information with decision-assisting methods are considered to be at the heart of an information…

Logistics Management

Logistics management is the process of strategically managing the procurement, movement and storage of materials, parts and finished inventory (and the related information flows) through the organization and its marketing…

Maintenance

See: Preventative Maintenance, Total Product Maintenance (TPM)

Manufacturing

See: Lean Manufacturing, Manufacturing Layout Strategy, Reverse Logistics, Order Management, Scheduling

Manufacturing Layout Strategy

An element of manufacturing strategy. It is the analysis of physical capacity, geography, functional needs, corporate philosophy, and product-market/process focus to systematically respond to required facility changes driven by organizational, strategic, and environmental considerations. Source: http://www.apics.org/ (10th ed.)

Market Analysis

See: Business-to-Business, Channel Management, Customer Relationship Management (CRM), Customer Value, Promotions

Negotiation

Negotiation is a process of formal communication where two or more people come together to seek mutual agreement over an issue or issues. Negotiation is particularly appropriate when issues besides…

New Product Development

See: Lead Times/Cycle Times, Supplier Integration in New Product Development

Operating Policies and Procedures

Definitive statements of what should be done in the business, and a formal organization and indexing of a firm’s procedures. They are usually outlined in manuals which are printed and distributed to the appropriate functional areas. Source: APICS (8th ed.)

Order management

Order management involves the seamless integration of orders from multiple channels with inventory databases, data collection, order processing including credit card verification, fulfillment systems and returns across the entire fulfillment…

Outbound Logistics

The process related to the storage and movement of the final product and related information flows from the end of the production line to the end user. Sources: Christopher, M. (1998). Logistics and Supply Chain Management: Strategies for reducing cost and improving service, (2nd Ed.). New York: Prentice Hall. http://www.esri.com/industries/logistics/glossary.html#f-l

Packaging

Packaging has a significant impact on the cost and productivity of logistics. Inventory control depends upon the accuracy of manual or automatic identification systems keyed by product packaging. Order selection…

Performance Measurement

Supplier performance measurement and evaluation includes the methods and techniques used to collect information that can be used to measure, rate or rank supplier performance on a continuous basis. The…

Preventative Maintenance

The activities, including adjustments, replacements, and basic cleanliness, that forestall machine breakdowns. The purpose is to ensure that production quality is maintained and that delivery schedules are met. In addition, a machine that is well cared for will last longer and cause fewer problems. Source:http://www.apics.org/ (10th ed.)

Program Management

The coordinated management of a portfolio of projects to achieve a set of business objectives is called program management. Or, a program might refer to an ongoing set of activities internal to the organization, for example, a Total Quality Management program, workplace safety program, supplier development program, etc. Source: http://www.mapnp.org/library/prog_mng/prog_mng.htm

Project Management

Project management is the application of knowledge, skills, tools and techniques to a broad range of activities in order to meet the requirements of the particular project. A project is…

Promotions

One of the four P’s (product, price, place, and promotion) that constitute the set of tools used to direct the business offering to the customer. Promotion is the mechanism whereby…

Purchase Requirements

See: Specifications, Industry Standards, Statement of Work, Service Level Agreement

Quality

Conformance to requirements or fitness for use. Quality can be defined through five principal approaches: (1) Transcendent quality is an ideal, a condition of excellence. (2) Product-based quality is based…

Quality Programs

Some of quality programs that are currently used include: Total Quality Management (TQM): TQM is a management approach to long-term success through customer satisfaction. TQM is based on the participation…

Relationship Management

See: Agreements, Collaboration, Contract, Joint Venture, Strategic Alliance, Supplier-Customer Partnership

Reverse Logistics

A supply chain that is dedicated to the reverse flow of products and materials for returns, repair, remanufacture, and/or recycling. Source: http://www.apics.org/ (10th ed.)

Scheduling

Scheduling involves taking decisions regarding the allocation of available capacity or resources (equipment, labor and space) to jobs, activities, tasks or customers over time. Scheduling thus results in a time-phased…

Service Level Agreement

Service-level agreements (SLAs) are contracts between service providers and customers that define the services provided, the metrics associated with these services, acceptable and unacceptable service levels, liabilities on the part…

Six Sigma

See: Quality Programs

Sourcing Strategy

A successful sourcing strategy requires a thorough understanding of a company’s business strategy, the resources required to deliver that strategy, the market forces and the unique risks within the company…

Specifications

Specifications are the most detailed method of describing requirements. Various types of design specifications are the detailed descriptions of the materials, parts, and components to be used in making a…

Standard/Compatibility

1) An established norm against which measurements are compared. (APICS 10th ed.) 2) The Internet has transformed supply chain management into something closer to an exact science. However for information…

Statement of Work (S.O.W)

The most critical ingredient of a successful procurement of services is the development and documentation of the requirements – the statement of work. The S.O.W. identifies what the contractor is…

Statistic Quality Control

See: Quality Programs

Strategic Alliance

A relationship formed by two or more organizations that share (proprietary), participate in joint investments, and develop linked and common processes to increase the performance of both companies. Many organizations form strategic alliances to increase the performance of their common supply chain. Source: http://www.apics.org/

Supplier Development Training

Education and training is the most common approach to supplier development and improvement. A purchaser may provide training in statistical process control, quality improvement techniques, just-in-time delivery or any other…

Supplier Integration in New Product Development

Supplier integration into new product/process/service development suggests that suppliers are providing information and directly participating in decision making for purchases used in the new product/process/service. This integration can occur during…

Supplier Intelligence

Supplier Intelligence is the purposeful, coordinated and ethical monitoring of strategic suppliers, within a specific marketplace.

Supplier Performance Evaluation

The main objective of the supplier evaluation process is to reduce purchase risk and maximize the overall value of the purchaser. It typically involves evaluating, at a minimum, supplier quality,…

Supplier-Customer Partnership

A long-term relationship between a buyer and a supplier characterized by teamwork and mutual confidence. The supplier is considered an extension of the buyer’s organization. The partnership is based on…

Supply Chain Design

Supply chain design involves the determination of how to structure a supply chain. Design decisions include the selection of partners, the location and capacity of warehouse and production facilities, the products, the modes of transportation, and supporting information systems. Source: http://www.apics.org/ (10th ed.)

Supply Chain Inventory Visibility

Software applications that permit monitoring events across a supply chain. These systems track and trace inventory globally on a line-item level and notify the user of significant deviations from plans. Companies are provided with realistic estimates of when material will arrive. Source: http://www.apics.org/ (10th ed.) See: Inventory Management Systems

Target Costing

It is the process of designing a product to meet a specific cost objective. Target costing involves setting the planned selling price, subtracting the desired profit as well as marketing and distribution costs, thus leaving the required manufacturing or target cost. Source for above definitions: http://www.apics.org/ (10th ed.)

Total Cost of Ownership (TCO)

In supply chain management, the total cost of ownership of the supply delivery system is the sum of all the costs associated with every activity of the supply stream. The…

Total Costs

The sum of the variable, fixed and semivariable costs (costs that cannot be classified as variable or fixed ) comprises total costs. As the volume of production increases, total costs…

Total Productive Maintenance (TPM)

Preventive maintenance plus continuing efforts to adapt, modify, and refine equipment to increase flexibility, reduce material handling, and promote continuous flows. It is operator-oriented maintenance with the involvement of all qualified employees in all maintenance activities. Source: http://www.apics.org/ (10th ed.)

Training

Managers must ensure that appropriate personnel receive periodic training with respect to the organization’s ethical and professional standards. Supply managers should ensure that their personnel receive training on current thinking…

Warehouse Management Layouts

This refers to the configuration of the warehouse site with lines, storage areas, aisles, etc. Layout or storage plan of a warehouse should be planned to facilitate product flow. Special…

What is Supply Chain Management?

By: Robert Handfield, Ph.D. Posted 01-11-2011

What is Supply Chain Management? The concept of Supply Chain Management is based on two core ideas. The first is that practically every product that reaches an end user represents…