Supply Chain Terminology

Acknowledgement

A communication by a supplier to advise a purchaser that a purchase order has been received. It usually implies acceptance of the order by the supplier.

Actual Cost System

A cost system that collects costs historically as they are applied to production, and allocates indirect costs to products based on the specific costs and achieved volume of the products.

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-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. AMB uses activity-based cost information and performance measurements to influence management action.See Activity-Based Costing.

Assignment

A distribution of costs using causal relationships. Because cost causal relationships are viewed as more relevant for management decision making, assignment of costs is generally preferable to allocation techniques. Synonymous with Tracing. Contrast with Allocation

Assembly

A group of subassemblies and/or parts that are put together and constitute a major subdivision for the final product. An assembly may be an end item or a component of a higher-level assembly.

Attributes

A label used to provide additional classification or information about a resource, activity, or cost object. Used for focusing attention and may be subjective. Examples are a characteristic, a score or grade of product or activity, or groupings of these items, and performance measures.

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 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 (outpputs) 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.

American Trucking Associations

A motor carrier industry association composed of sub-conferences representing various motor carrier industry sectors.

Agglomeration

A net advantage a company gains by sharing a common location with other companies.

American National Standards Institute (ANSI)

A non-profit organization chartered to develop, maintain, and promulgate voluntary US national standards in a number of areas, especially with regards to setting EDI standards. ANSI is the US representative to the International Standards Organization (ISO).

Arrival Notice

A notice from the delivering carrier to the Notify Party indicating the shipment's arrival date at a specific location (normally the destination).

Accumulation Bin

A place, usually a physical location, used to accumulate all components that go into an assembly before the assembly is sent out to the assembly floor.Synonym

Aggregate Planning

A process to develop tactical plans to support the organization's business plan. Aggregate planning usually includes the development, analysis and maintenance of plans for total sales, total production, targeted inventory, and targeted inventory, and targeted customer backlog for families of products. The production plan is the result of the aggregate planning process. Two approaches to aggregate planning exist - production planning and sales and operations planning.

ABC Inventory Control

An inventory control approach based on the ABC volume or sales revenue classification of products (A items are highest volume or revenue, C - or perhaps D - are lowest volume SKUs.)

ATFI

Automated Tariff Filing Information System

Algorithm

a clearly specified mathematical process for computation; a set of rules, which, if followed, produce a prescribed result.

Airport and Airway Trust Fund

A federal fund that collects passenger ticket taxes and disburses those funds for airport facilities.

Artificial Intelligence

A field of research seeking to understand and computerize the human thought process.

American Waterway Operators

A domestic water carrier industry association representing barge operators on inland waterways.

Ad Valorem Duty

A duty calculated as a percentage of the shipment value. Also see

ANSI

*See American National Standards Institute (ANSI)

ABI

*See Automated Broker Interface (ABI)

ATP

*See Available to Promise (ATP)

Allocation

1) A distribution of costs using calculations that may be unrelated to physical observations or direct or repeatable cause-and-effect relationships. Because of the arbitrary nature of allocations, costs based on cost causal assignment are viewed as more relevant for management decision-making. 2) Allocation of available inventory to customer and production orders.

Acceptance Sampling

1) The process of sampling a portion of goods for inspection rather than examining the entire lot. The entire lot may be accepted or rejected based on the sample even though the specific units in the lot are better or worse than the sample. There are two types

Administrative Monetary Penalty System (AMPS )

A Canada Customs system of monetary penalties that will be imposed against violations of Canada Customs regulations.

Accelerated Commercial Release Operations Support System (ACROSS)

A Canada Customs system to speed the release of shipments by allowing electronic transmission of data to and from Canada Customs 24 hours a day, 7 days a week.

Air Transport Association of America

A U.S. airline industry association.

Air Waybill (AWB)

A bill of lading for air transport that serves as a receipt for the shipper, indicates that the carrier has accepted the goods listed, obligates the carrier to carry the consignment to the airport of destination according to specified conditions.

Accessibility

A carrier's ability 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, or any other charge deemed appropriate.

ABC Analysis

A classification of items in an inventory according to importance defined in terms of criteria such as sales volume and purchase volume.

Accredited Standards Committee (ASC)

A committee of ANSI chartered in 1979 to develop uniform standards for the electronic interchange of business documents. The committee develops and maintains US generic standards (X12) for Electronic Data Interchange.

Activity Ratio

A financial ratio used to determine how an organization's resources perform relative to the revenue the resources produce. Activity ratios include inventory turnover, receivables conversion period, fixed-asset turnover, and return on assets.

Assemble to Order

A production environment where a good or service can be assembled after receipt of a customer's order. The key components (bulk, semifinished, intermediate, sub-assembly, fabricated, purchased, packing, and so on) used in the assembly or finishing process are planned and usually stocked in anticipation of a customer order. Receipt of an order initiates assembly of the customized product. This strategy is useful where a large number of end products (based on the selection of options and accessories) can be assembled from common components.

American Society of Transportation & Logistics

A professional organization in the field of logistics.

Association of American Railroads

A railroad industry association that represents the larger U.S. railroads.

Agency Tariff

A rate bureau publication that contains rates for many carriers.

Any-Quantity (AQ) rate

A rate that applies to any size shipment tendered to a carrier; no discount rate is available for large shipments.

Aggregate Tender Rate

A reduced rate offered to a shipper who tenders two or more class-related shipments at one time and one place.

Activity-Based Costing System

A set of activity-based cost accounting models that collectively defines data on an organization's resources, activities, drivers, objects, and measures.

APU

APUs automatically shut down the main locomotive engine idle while maintaining all vital main engine systems at greatly reduced fuel consumption

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.

Actual Demand

Actual demand is composed of customer orders (and often allocations of items, ingredients, or raw materials to production or distribution). Actual demand nets against or consumes the forecast, depending on the rules chosen over a time horizon. For example, actual demand will totally replace forecast inside the sold-out customer order backlog horizon (often called the demand time fence), but will net against the forecast outside this horizon based on the chosen forecast consumption rule.

ATA

Actual time of arrival, or also known as the American Trucking Associations.

ATD

Actual time of departure

API

American Petroleum Institute; also Application Programming Interface

Advanced Shipment Notice (ASN)

An EDI term referring to a transaction set (ANSI 856) where the supplier sends out a notification to interested parties that a shipment is now outbound in the supply chain. This notification is list transmitted to a customer or consignor designating items shipped. The ASN may also include the expected time of arrival.

Anti-Dumping Duty

An additional import duty imposed in instances where imported goods are priced at less than the "normal" price charged in the exporter's domestic market and cause material injury to domestic industry in the importing country

Air Cargo Agent

An agent appointed by an airline to solicit and process international airfreight shipments.

All-Cargo Carrier

An air carrier that transports cargo only.

Action Message

An alert that an MRP or DRP system generates to inform the controller of a situation requiring his or her attention.

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.

Agent

An enterprise authorized to transact business for, or in the name of, another enterprise.

Air Carrier

An enterprise that offers transportation service via air.

Aggregate Forecast

An estimate of sales, oftentimes phased, for a grouping of products or product families produced by a facility or firm. Stated in terms of units, dollars, or both, the aggregate forecast is used for sales and production planning (or for sales and operations planning) purposes.

Air Taxi

An exempt for-hire air carrier that will fly anywhere on demand; air taxis are restricted to a maximum payload and passenger capacity per plane.

Accountability

Being answerable for, but not necessarily personally charged with, doing specific work. Accountability cannot be delegated, but it can be shared. For example, managers and executives are accountable for business performance even though they may not actually perform the work.

Accreditation

Certification by a recognized body of the facilities, capability, objectivity, competence, and integrity of an agency, service, operational group, or individual to provide the specific service or operation needed. For example, the Registrar Accreditation Board accredits those organizations that register companies to the ISO 9000 Series Standards.

ABC Classification

Classification of a group of items in decreasing order of annual dollar volume or other criteria. This array is then split into three classes called A, B, and C. The A group represents 10 to 20% by number of items, and 50 to 70% by projected dollar volume. The next grouping, B, represents about 20% of the items and 20% of the dollare volume. The C-class contains 60 to 70% of the items, and represents about 10 to 30% of the dollar volume.

Air Cargo Containers

Containers designed to conform to the inside of an aircraft. There are many shapes and sizes of containers. Air cargo containers fall into three categories

Air Cargo

Freight that is moved by air transportation.

Abnormal Demand

Demand in any period that is outside the limits established by management policy. This demand may come from a new customer or from existing customers whose own demand is increasing or decreasing. Care must be taken in evaluating the nature of the demand

Advanced Shipping Notice (ASN)

Detailed shipment information transmitted to a customer or consignee in advance of delivery, designating the contents (individual products and quantities of each) and nature of the shipment. May also include carrier and shipment specifics, including time of shipment and expected time of arrival. Also see

American Society for Quality (ASQ)

Founded in 1946, a not-for-profit educational organization consisting of 144,000 members who are interested in quality improvement.

Active Stock

Goods in active pick locations and ready for order filling.

Activity-Based Costing Model

In activity-based cost accounting, a model, by time period, of resource costs created because of activities related to products or services or other items causing the activity to be carried out.

Acquisition Cost

In cost accounting, the cost required to obtain one or more units of an item. It is order quantity times unit cost.

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.

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.

Absorption Costing

In cost management, an approach to inventory valuation in which variable costs and a portion of fixed costs are assigned to each unit of production. The fixed costs are usually allocated to units of output on the basis of direct labor hours, machine hours, or material costs. Synonym

Acceptance Number

In quality management, 1) A number used in acceptance sampling as a cut off at which the lot will be accepted or rejected. For example, if x or more units are bad within the sample, the lot will be rejected. 2) The value of the test statistic that divides all possible values into acceptance and rejection regions. Also see

Acceptable Sampling Plan

In quality management, a specific plan that indicates the sampling sizes and the associated acceptance or non-acceptance criteria to be used. Also see

Accuracy

In quality management, the degree of freedom from error or the degree of conformity to a standard. Accuracy is different from precision. For example, four-significant-digit numbers are less precise than six-significant-digit numbers; however, a properly computed four-significant-digit number might be more accurate than an improperly computed six-significant-digit number.

Acceptable Quality Level (AQL)

In quality management, when a continuing series of lots is considered, AQL represents a quality level that, for the purposes of sampling inspection, is the limit of a satisfactory process average.

Advance Material Request

Ordering materials before the release of the formal product design. This early release is required because of long lead times.

AQL

See Acceptable Quality Level (AQL).

A/R

See Accounts Receivable.

Alert

See Action Message.

ABC Costing

See Activity-Based Costing (ABC)

ABM

See Activity-Based Management (ABM).

ABP

See Activity-Based Planning (ABP).

ASQ

See American Society for Quality.

ACD

See Automated Call Distribution.

AS/RS

See Automated Storage/Retrieval System

After-Sale Service

Services provided to the customer after products have been delivered. This can include repairs, maintenance, and/or telephone support. Synonym

Advanced Planning and Scheduling (APS)

Techniques that deal with analysis and planning of logistics and manufacturing over the short, intermediate, and long-term time periods. APS describes any computer program that uses advanced mathmatical algorithms or logic to perform optimization or simulation on finite capacity scheduling, sourcing, capital planning, resource planning, forecasting, demand management, and others. These techniques simultaneously consider a range of constraints and business rules to provide real-time planning and scheduling, decision support, available-to-promise, and capable-to-promise capabilities. APS often generates and evaluates multiple scenarios. Management then selects one scenario to use as the official plan. The five main components of an APS system are demand planning, production planning, production scheduling, distribution planning, and transportation planning.

All Water

Term used when the transportation is completely by water.

Amtrak

The National Railroad Passenger Corporation, a federally created corporation that operates most of the United States' intercity passenger rail service.

Agility

The ability to successfully manufacture and market a broad range of low-cost, high-quality products and services with short lead times and varying volumes that provide enhanced value to customers through customization. Agility merges the four distinctive competencies of cost, quality, dependability, and flexibility.

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's used to assign activity costs to cost objects or to other activities.

Actual Costs

The labor, material, and associated overhead costs that are charged against a job as it moves through the production process.

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.

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.

Accounts Payable (A/P)

The value of goods and services acquired for which payment has not yet been made.

Accounts Receivable (A/R)

The value of goods shipped or services rendered to a customer on whom payment has not been received. Usually includes an allowance for bad debts.

Aerodynamic Drag

Wind resistance

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. (1) In activity-based cost accounting, a task or activity, performed by or at a resource, required in producing the organization's output of goods and services. A resource may be a person, machine, or facility. Activities are grouped into pools by type of activity and allocated to products. (2) In project management, an element of work on a project. It usually has an anticipated duration, anticipated cost, and expected resource requirements. Sometimes major activity is used for larger bodies of work.