While your managing and optimizing your organization’s supply chain, you’ll encounter a number of terms. Some might be old, familiar friends. Others might leave you puzzled.
Enter our Approved Glossary of Supply Chain Terms.
Below, you’ll find our definitions of some of the most common supply chain terms you’ll hear, plus links to further resources if you want to dive deeper. Use this glossary to decode the lingo you’ll hear—and sound like the supply chain expert you aspire to be.
3PL – An acronym that stands for 3rd–Party Logistics. When someone hires a 3PL, they’re turning over their logistics—including things like warehousing and fulfillment—to another organization for management.
ABC Analysis – An ABC analysis leverages the Pareto principle to argue that ~80% of the value of your inventory likely comes from ~20% of your products.
- A-level products are your best-sellers that may only account for 20% of your inventory but represent 70-80% of the entire value of your inventory.
- B-level products are the next 40% of your stock that account for about 15% of the value of your inventory.
- C-level products are the final 40% of your stock that represents about 5% of the value of your inventory.
Agile Supply Chain – A supply chain that’s built to flex and react when things change in the surrounding environment.
Amazon Effect – The rippling results of the eCommerce giant’s policies which have increased consumers’ expectations in terms of customer service levels, shipping speed, shipping costs, and more.
Asset-based – Refers to 3PLs, freight forwarders, or other logistics providers that own their own warehouses, run their own fleets, and employ their own delivery teams. Asset-based providers stand in contrast to those who use agents—i.e. contract with other companies to complete final delivery.
Automation – The process of removing the need for human intervention from certain tasks. Examples include leveraging warehouse fulfillment robots for picking inventory or instituting online systems, like return management authorization (RMA) software that allows your customers to process returns without speaking to a customer service representative.
Blockchain Technology – A distributed, decentralized ledger increasingly being used for supply chain applications, such as validating luxury goods to prevent counterfeiting and increasing transparency and traceability of goods and supplies.
BOPIS – Buy online, pick up in store. A retail strategy that allows customers to place online orders and pick up their items at brick-and-mortar locations for free, saving shipping costs for companies.
BORIS – Buy online, return in store. The other side to BOPIS, when customers return online purchases at retail outlets instead of mailing them back.
Circular Supply Chain – A model in which organizations attempt to reuse, repair, or recycle products once the initial owner is done with them to reduce waste.
Cross-Docking – A lean supply chain strategy in which goods are unloaded from an inbound shipment and, instead of being stored in a warehouse, are quickly reloaded into an outbound truck for delivery.
Dashboard – A management tool used by supply chain managers to a track supply chain metrics in a condensed, easy-to-read display.
The Deliver Process – The fourth of the six processes in the Supply Chain Council’s supply chain operations reference model (SCOR). Within this process, supply chain managers figure out how they’re going to put their products in customers’ hands.
Supply Chain Management & Its Delivery Phase
Demand Planning – Part of the planning phase of supply chain management in which a supply chain manager forecasts future customer purchases, often based on past sales data. May also be called demand forecasting.
Digital Twin – A digital rendering of an organization’s physical supply chain, used to anticipate challenges and uncover efficiencies.
Diversification – The process of reducing reliance on single sources for components, supplies, and/or finished goods. Using diversification strategies, if one source is hit with a natural disaster, political turmoil, or a similarly disruptive event, alternative sources can keep operations moving forward.
The Enable Process – The sixth of the six processes in the Supply Chain Council’s supply chain operations reference model (SCOR). This area deals with providing customer support after the purchase.
Internet of Things (IoT) – IoT devices are ones that connect to the Internet and report back on specific aspects of a supply chain. For example, IoT tags can monitor the temperature of a wine shipment in transit to ensure it stays at the correct temperature or offer up-to-the-second tracking updates for a shipment.
Freight Forwarder – A company that coordinates the movement of goods from their origin to their destination on behalf of their customer. For example, a freight forwarder may hire and coordinate multiple carriers to move goods via road, rail, ocean, and/or air freight.
Goods in Transit – Inventory that has been shipped by the seller, but have not yet reached the buyer’s destination.
Green Technology – Advances in logistics and freight that reduce environmental impact, often by leveraging renewable energy sources, such as wind and solar power.
Inventory Management System – A method for tracking goods throughout the entire length of your supply chain.
Just-in-Time – A supply chain management strategy that keep supply and inventory levels at a minimum in order to keep costs low and efficiency high. Products are created “just in time” to fulfill customer orders.
Just-in-Case – A supply chain management strategy for holding more supplies and inventory as a hedge against supply chain disruptions.
The Make Process – The third of the six processes in the Supply Chain Council’s supply chain operations reference model (SCOR). During this phase, a supply chain manager focuses on creating efficiencies within the actual creation of the operation’s products.
Landed Cost – The total cost to your business to get a product into inventory, which includes expenses like manufacturing costs, taxes, shipping, and other logistics costs.
Picking and Packing – The process of fulfilling an order by selecting an item from the warehouse shelves (picking) and placing it in a shipping box for mailing (packing).
The Plan Process – The first of the six processes in the Supply Chain Council’s supply chain operations reference model (SCOR). During this phase, a supply chain manager determines items like demand, location of facilities, manufacturing processes, distribution, sales strategy, and metrics for success.
Procurement – Sourcing, purchasing, and obtaining supplies, components, or goods needed to keep an operation moving forward. Some organizations hire a dedicated Procurement Manager to handle this role.
Production Planning – Part of the planning phase of supply chain management in which a supply chain manager determines how an operation will make their goods. Items to consider include things like purchasing pre-fabricated components, and whether or not to use a “push” system, in which production is driven by the company or a “pull” model driven by customer demand.
Reverse Logistics – Moving goods from their final destination back to their origin. A customer return, for example, falls under this category.
The Return Process – The fifth of the six processes in the Supply Chain Council’s supply chain operations reference model (SCOR). During this process, a supply chain manager looks for the most efficient and effective ways to take back products that consumers don’t want or products that are defective.
Second-Tier Supplier – A company that supplies one of your suppliers. May also be called a Tier 2 supplier or a junior-tier supplier.
SKU – Stock keeping unit. A unique number assigned to a product that’s used to track business inventory.
The Source Process – The second of the six processes in the Supply Chain Council’s supply chain operations reference model (SCOR). During this process, a supply chain manager considers the raw materials a business needs to produce its products.
Supplier Visibility – A strategy involving extensive research into suppliers, including junior-tier suppliers, in order to manage potential risks in that arena.
Supply and Inventory Planning – Part of the planning phase of supply chain management in which a supply chain manager estimates the supplies and raw materials the operation will need in the future.
Supply Chain Management – Supervising all the links in the chain to improve efficiency, reduce waste, and position a company for success in getting their product into the hands of their customers.
Supply Chain Manager – A position dedicated to overseeing and optimizing a company’s supply chain from cradle to grave.
Sustainability – Managing the environmental, social, and economic impacts of your supply chain.
Third-Tier Supplier – A company who sells components or supplies to a company who supplies your supplier. In other words, this company is two steps removed from a supplier you directly work with. May also be called a Tier 3 or a junior-tier supplier.
War Room – A place where the operations team can get together and review all available data to make critical supply chain decisions during challenging times, such as natural disasters or severe disruptions.
If you’re looking for more freight and logistics terms, make sure to check out our Approved Transportation Glossary.
Finally, if you have more questions about managing your supply chain, our experts would be happy to help. Just reach out for a free consultation to get started.
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