Backward Integration is the process whereby a firm purchases or creates production facilities needed to produce its goods, such as an automobile manufacturer that buys a steel mill.
Backward vertical integration is a strategic process where a firm takes ownership or increased control of its supply systems, aiming to streamline operations, better control costs, and eliminate intermediaries, thereby enhancing competitiveness in the marketplace.
A Bill of Lading is a legal document issued by a carrier to a shipper, detailing the type, quantity, and destination of the goods being carried. It serves as a shipment receipt and is a key part of international trade.
Goods brought into a country that are placed in a bonded warehouse until all duties are paid.
The book-to-bill ratio is a crucial metric in many industries, particularly in semiconductors, that measures the ratio of orders booked for future delivery to orders being shipped immediately and billed.
Capacity planning is a long-term strategic process that determines the production capacity needed by an organization to meet changing demands for its products.
Carload Rate refers to a discounted transportation charge applicable when a shipment meets a certain volume or quantity of freight that is sufficient to fill a freight car. This rate is especially relevant for large-volume shipments.
Cartage refers to the charge or service for moving goods by truck, wagon, or other vehicle. It plays a crucial role in logistics and supply chain management.
The Channel Captain is the dominant company in a vertical marketing system that controls the Channel of Distribution, having significant influence over what products or services are developed and distributed throughout the channel.
A channel of distribution refers to the means or pathway used to transfer merchandise from the manufacturer to the end user. The intermediaries involved in this process are known as middlemen, and they can either take title to the merchandise or not.
A professional organization based in the UK, dedicated to those working in procurement, supply-chain management, and related areas. It offers training, qualifications, and various professional support services.
The Chartered Institute of Purchasing and Supply (CIPS) is a global professional body dedicated to promoting excellence in procurement and supply management.
An entity that combines less-than-carload shipments into full carloads to take advantage of lower shipping rates for full carloads.
The interval between the placement of an order for replenishing stock and the receipt of that ordered item. It is a key metric in supply chain and inventory management, influencing operational efficiency.
Demurrage is a charge levied on shipping vehicles when they are held by the consignor or consignee for an excessive amount of time beyond agreed laytime.
A distribution strategy is management's plan for moving products to intermediaries and ultimately to final customers. It involves decision-making regarding the channels of distribution, the logistics and transportation of goods, and the mechanisms for inventory management.
Drop-Shipping is an e-commerce model where retailers sell products without storing them in their own inventory. Instead, customer orders are fulfilled directly by the supplier who ships the products directly to the end customer.
The Economic Order Quantity (EOQ) is a formula used by businesses to determine the optimal order quantity that minimizes the total inventory costs associated with ordering and holding stock.
Electronic Data Interchange (EDI) is a system of transferring standardized data between business entities in a structured, machine-readable format.
Electronic Data Interchange (EDI) is the process of transferring data between and within companies electronically, utilizing standardized formats to enhance efficiency and accuracy.
Forward integration is a type of vertical integration strategy employed by companies to gain control over the direct distribution or supply chain of their products.
Forward Integration is a business strategy that involves a company expanding its operations to include control over its direct distribution or supply chain. This often means moving closer to the consumer by acquiring or establishing its retail outlets.
A freight forwarder, also known as a forwarding company, acts as an intermediary between a shipper and various transportation services, facilitating the global movement of goods while managing logistics and documentation.
A document used by businesses to confirm and record the receipt of goods ordered. The GRN ensures that the items received match the order in terms of quantity, quality, and specification.
A Goods Received Note (GRN) is an important document used in the accounting and inventory management process, signifying the receipt of goods by a business.
Inventory planning is the process of determining the quantity and timing of inventory needed to meet production or sales requirements. Effective inventory planning is crucial for reducing costs and increasing productivity by ensuring that inventory levels are optimized to meet demand without incurring unnecessary expenses.
Lead time refers to the lag time between the placement of an order and its actual receipt. It can be reduced by implementing Just-in-Time Inventory Control (JIT).
The comprehensive plan for scheduling the delivery of required supplies and materials at destinations as needed.
Manufacturing inventory refers to the parts or materials on hand, needed for the manufacturing process. Adjusting manufacturing inventory to current production needs is a critical management responsibility.
The elapsed time between placing a production order and the receipt of the completed production.
Material Requirements Planning (MRP) is a production planning, scheduling, and inventory control system used to manage manufacturing processes. Most notably, it ensures that materials are available for production, products are available for delivery to customers, and inventories are maintained at the lowest possible level.
Materials handling involves the moving, packaging, and storing of raw materials, in-progress inventory, and finished goods within a business, including shipping, receiving, and processing operations.
A Materials Returns Note (MRN) is a document used in the inventory and supply chain management process to record the return of materials from production or other departments to the warehouse or storage location.
Maximum capacity refers to the highest amount or output that a system, facility, company, or equipment can handle under specified conditions without having to violate specific regulations or operational constraints.
The maximum stock level represents the highest quantity of inventory planned to be held by a company. Surpassing this limit results in excess stock, which could indicate overstocking and tie up capital and storage resources unnecessarily.
Motor freight refers to the use of trucks, as opposed to railroad trains, to ship freight. This mode of transport is frequently faster on a door-to-door basis compared to rail freight.
A ratio that measures the average number of days an organization's stock is held before it is sold or used in production.
Order processing encompasses all the activities required to prepare, confirm, and fulfill a customer order. It includes steps such as order receipt, sorting, lining, picking, packing, and shipping, aiming to ensure timely and accurate delivery.
Perishable items are goods that have a limited shelf life and can spoil, decay, or become unsuitable for consumption if not handled, stored, and processed properly.
A 'Piece' refers to an individual unit of a product that is part of a batch, typically used in shipping and logistics to describe the smallest standard unit being handled.
Procurement is the acquisition of goods, services, or works from an external source, typically through a bidding process. It involves the process of finding, agreeing on terms, and acquiring goods, services, or works from an external source, often via a tendering or competitive bidding process.
An organization of producers who cooperate in the areas of buying supplies and equipment and of marketing. These cooperatives aim to achieve greater efficiency and market influence than they could individually.
The planning, coordination, and controlling of an organization's resources to efficiently facilitate the production process, encompassing key issues such as location, labor, transportation costs, and production forecasting.
Production planning is the administrative operation that ensures material, labor, and other resources necessary for the production process are available when and where needed in the required quantities.
A written authorization issued by a buyer to a vendor to supply goods or services at a stipulated price. Upon acceptance by the vendor, the purchase order turns into a legally binding contract.
A purchase requisition is a formal document completed by a user department within an organization and sent to the purchasing department to request the acquisition of specific items. It details the quantity, specifications, potential supplier, required date, and delivery point.
Raw material refers to the primary substances used as a component in the manufacturing process of finished goods. For instance, wool serves as the raw material in the production of woolen sweaters.
Reconsign refers to the process of changing the destination or consignee of freight while it is in transit. This often occurs to accommodate changes in supply chains or to correct delivery errors.
The reorder level represents the number of units of a particular item of stock to which the balance can fall before an order for replenishment is placed, ensuring efficient inventory management within a reorder-level system.
The minimum level of inventory at which a new order must be placed, to prevent stockouts and ensure continuous business operations.
Reserve-stock control is a technique designating appropriate inventory levels for the maintenance of business operations until new merchandise can be supplied. It considers the length of time necessary to physically replenish needed inventory.
In business, the term 'returns' can refer to responses generated by direct-mail promotions or merchandise returned to a supplier for credit. Returns are a critical aspect in both marketing and supply chain operations.
Reverse channels in marketing refer to a channel of distribution where products are moved from the consumer back to the producer. This often includes activities like recycling and product recalls.
Products made by a multinational corporation's overseas units for export to the home country.
Scheduled production refers to the planning and timetabling of the production process for specific products, detailing when and how each production sequence is to occur.
Stock control, also known as inventory control, refers to the processes and systems used to oversee the ordering, storage, and use of components that a company uses in the production of the items it sells, as well as the finished products themselves.
Stockout cost refers to the costs incurred by a firm when its current inventory is exhausted for one or more items. Lost sales revenue is a primary consequence when the firm is unable to meet current orders because of a stockout condition.
A store requisition is a document generated by user departments or individuals in an organization to request raw materials or supplies from the store or warehouse. It facilitates the internal movement and management of inventory within a company.
Stores in accounting refer to the part of an organization where various inventories are stored, which can include stationery stocks, maintenance components, production tools, raw materials, work in progress, and finished goods.
A Stores Issue Note (SIN) is a document used in inventory management to authorize the release or issue of inventory items from the warehouse to the production department or other requesting departments.
In accounting, stores oncost refers to the indirect costs or overheads associated with handling and storing materials used in production. These costs are not directly attributed to the cost of the raw materials themselves but are necessary for the overall production process.
Supply Chain Management (SCM) involves tracking the movement and demand for components used in manufacturing across various suppliers to provide insight and the ability to respond promptly to changes. SCM aims to optimize production, decrease manufacturing time, minimize inventory, streamline order fulfillment, and reduce costs.
Take-or-pay is an arrangement where a customer commits to purchasing a certain quantity of a product over a specified period, often at a predetermined price. If the customer fails to meet the agreed-upon purchase quantity, they must still pay the seller. This contract structure protects the buyer against price increases and secures the seller against price decreases.
Tare weight refers to the weight of an empty container, such as an empty truck or packing material, and is used in logistics to measure the net weight of goods.
Threshold-point ordering refers to the minimum inventory levels at which new orders must be placed to ensure continuous supply and meet expected demand based on anticipated usage. This technique aims to optimize inventory management.
The value chain is a series of processes involved in the production, distribution, and marketing of a good or service, each adding value for the consumer.
Vertical conflict represents the disagreements and disputes that arise between different hierarchical levels within the same channel of distribution, such as between manufacturers and retailers. This often results from mismatched objectives or perspectives regarding product sales and promotions.
Vertical integration refers to a strategy where a firm takes control over several production or distribution steps involved in the creation of its product or service. This can include owning the suppliers of raw materials, the manufacturing process, and the distribution channels.
Vertical integration involves the combination of companies operating at different stages within the same industry's supply chain. It strengthens control over production, distribution, and other critical steps, often resulting in increased efficiency and cost savings.
Visibility refers to the immediate insights that managers gain into a business operation through effective supply chain management. It involves tracking and managing all aspects of the supply chain process, from procurement of raw materials to delivery of the final product.
Work in Process (WIP) refers to the materials and components that have begun their journey in the production process but are not yet completed products. It is an essential concept in manufacturing and inventory management.
A strategic inventory management approach emphasizing minimal stock levels to cut costs and enhance organizational efficiency. Known for its potential to significantly boost profitability.
