Supply Chain Definitions

A
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ABC Inventory Management

Managing inventories differently based on a classification scheme. "A" items: top 10
percent of product line based on importance or profitability; "B" items: next 15-20 percent
of items, based on profits; "C" items: those that sell infrequently or are low margin.

Absolute Error
Absolute means that a negative sign is disregarded. For example, if the error in a particular
forecast was -3, the associated absolute error would be +3.

Acceptable Quality Level

The deviation that is allowed from a defined performance standard.

Acceptance
The intentional indication of an offeree to be bound by the terms of an offer.

Accessorial Charges
A charge assessed by a carrier for services in addition to basic transportation, e.g., loading,
stop-offs, unpacking, delivering inside offices, etc.

Acquisition Chain
The series of activities involved in obtaining necessary inputs for an organization. Key
steps are: 1) determination of need; 2) communication of need; 3) identification of potential
sources; 4) solicitation and evaluation of bids and proposals; 5) preparation of the purchase
order; 6) receipt and inspection; 7) clearing the invoice and payment; and 9) maintenance of
records.

Activity-Based Costing
An approach to determining cost by observing what causes cost to reach their reported level
and then analyzing the "drivers" of the cost.

Adder
One of the two types of transformation factors (the other one being the multiplier). The
adder is a cost that is added to a vendor‘s bid and is used when you have fixed costs for
each vendor that are independent of the raw price. Adders are used when you need to
convert raw bids to a common basis for comparison. Examples are site visit costs,
relocation costs, and additional shipping costs. In the transformation equation y=mX+a, the
adder is represented by a.

Ad Valorem Rate
Customs duty charged on the value of goods that are dutiable, irrespective of quality,
weight, or any other considerations. The ad valorem rates of duty are expressed in
percentages of the value of the goods, usually ascertained from the invoice.

Advance Shipping Notification (ASN)

A standardized electronic data interchange form detailing an inbound shipment to a
receiving location.

Advanced Charges
The amount of freight or other charges on a shipment advanced by one carrier to another, or
to the shipper, to be collected from the consignee.

Agenda 21
One of the agreements of the First Earth Summit, held in Rio de Janeiro in 1992: a plan of
action to be taken by organizations of the United Nations, governments and others in every
area in which humans impact on the environment.

Aggregate Tender
Rates that apply when two or move smaller shipments are released to the carrier under the
same conditions and time; an aggregate or lower rate would apply.

Air Waybill
A document used for the shipment of air freight by national and international air carriers
that states the commodities shipped, shipping instruction, and shipping costs.

Alignment Tool
A tool that is used to determine current and target Sustainable Development alignment
levels for the various steps in the Contracting and Procurement process of the organization
being assessed.

Allocation Rules
Business rules that determine which product is allocated to different customers when
demand exceeds supply.

Alternative Tenders
Alternative tenders are other ways to fulfill a business requirement.

American National Standards Institute (ANSI)

An umbrella organization that issues national standards based on consensus by all
stakeholder organizations.

Annual Average Inventory

See Average Annual Inventory.

Annual Inventory Cost

The carrying charge multiplied by the average annual inventory multiplied by the value of
an item.
ANSI x.12
A set of standards promulgated by the American National Standards Institute (ANSI) for
use in formatting and handling purchasing-related documents transmitted by electronic data
interchange.

Any Quantity (AQ)

The rate is fixed regardless of the amount shipped within a single transportation unit (e.g.,
truckload).

Application Service Provider

A company that delivers software by a new model, offering access to IT on a "per use" or
subscription basis. The company may offer support as well.

Assignment
A transfer of a right (such as a contract or a purchase order) or title to another party. In
shipping, it is commonly used with a bill of lading that involves transfer of rights, title, and
interest by means of endorsement. Such endorsement gives, to the party named, the title to
the property covered by the bill of lading.

Assessment Matrix
A tool through which Sustainable Development activities can be grouped by each
Sustainable Development Principle and plotted against each step in the Contracting and
Procurement process.

Assessment Process
The process you work though to determine your organization‘s current and target
Sustainable Development profile and develop action plans to close the gaps.

Assessment Toolkit
A repository containing all tools needed to go through the overall assessment process.

Association of Southeast Asian Nations (ASEAN)

Organization established in 1967 to promote economic growth, social progress, cultural
development, and peace in Southeast Asia. Current member countries in ASEAN are
Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines,
Singapore, Thailand, and Vietnam.

Auction Parameters
Auction design options to be determined when setting up an auction (includes auction
format, feedback profile, starting price yes/no).

Average Annual Inventory

The average number of items carried in inventory over the period of a year. "Average
inventory" calculated as (Beginning inventory plus Ending inventory) divided by 2. The
more often "average inventory" is measured during a year, the more accurate "annual
average inventory" will be.
Average Cost Per Unit
The average cost of merchandise; based on total dollars purchased divided by the total
number of units purchased.

Axle
The bar connecting a set of wheels on a vehicle. Axle spread is the distance between the
centre lines of the foremost axle and the rearmost axle of a vehicle. Axle weight is the sum
of the weights transmitted to the road surface by all the wheels of a vehicle axle.

B
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Back Order
Items ordered but not shipped due to a stock out or some other reason. This is widely used
as a measure of supplier performance and customer service (e.g., percent back orders,
number of occurrences, number of back order days).

Backhaul
Shipments sent back over part of a route it has already traveled.

Backload
A load arranged to fill empty vehicle capacity on a vehicle that is returning from making a
delivery. An alternative term is a return load.

Bar Code
Machine-readable code; a pattern of alternating parallel bars and spaces, representing
numbers and other characters. The major advantages of using bar coding technology in
receiving and stores operations are the reduction in error rate and improved entry speed and
count accuracy.

Barter
The act of exchanging one good or service for another, as distinct from trading by use of
currency. Barter is also a form of countertrade sometimes used in international business.

Basing Point Pricing

A pricing system that has a transportation cost constructed as origination or finalizing in a
certain city or zone when in fact the actual cities and zones are different.

Benchmarking
Process of using measurements to create goals, operating targets, and productivity
programs.

Bids
Legally binding offers to sell or to buy. In public sector purchasing, a bid is an offer in a
sealed bidding process, as opposed to other forms of procurement where the offer may be
referred to as a proposal or a quotation.
Bid Decrement
A bit decrement is the minimum amount by which vendors must lower their bids.

Bid Evaluation Models

Model used by the tender team to score tender submissions.

Bid Extension Rules

An auction parameters, bid extension rules determine if, when and by how much the end
time of an auction will be extended.

Bid Format
Selected by the buyer, the bid format determines the type of bidding in an auction.

Bill of Exchange
A document drawn by the seller on the buyer, instructing the buyer to pay the amount of the
purchase under specified circumstances.

Bill of Lading (BL)

A carrier‘s contract and receipt for goods it agrees to transport from one place to another
and to deliver to a designated recipient (consignee). There are numerous types of bills of
lading.

Bill of Material (BOM)

Detailed list of materials used to explode finished goods requirements into detailed material
requirements.

Bin Warehouse
Distribution centers comprised of small buildings, some no larger than 16 square meters
(144 square feet), where selected products can be dropped off and then picked up later for
redistribution. Companies can drop product there at night so that drivers can pick them up
early in the morning for local delivery to retail stores.

Biodiversity
The number and varieties of plants and animal species that exist in a particular
environmental area or in the world generally, or the problem of preserving and protecting
this.

Bio-fuels
Petrol or diesel made from plants.

Bitumen
A black tar-like substance used especially for making roads.

Blank Check PO
A special P.O. that has attached with it the check for actual payment. It is used for low
value, low risk standard purchases for both materials and services. It solves the excessive
administrative expense for payment of small items. Today, it is rarely used; it is replaced by
procurement cards.

Blanket Order
If this has been established with a supplier, a supplier might automatically ship
predetermined levels of re-supply without a requisition or the storeroom supervisor may
order directly without the need for a requisition or purchase order. Often used
interchangeably with systems contract.

Blanket Purchase Order

As part of an agreement between a buyer and seller of goods, the seller has the right to ship
goods to the buyer without having received a specific purchase order for each shipment or
order. Rather, the order is triggered by a certain event, such as a forecast of future needs by
the buyer, or the inventory at the buyer's location falling below a pre-specified minimum.

Blocked Currency
The non-convertibility of a country‘s currency.

Break Bulk
The splitting of one consolidated or large-volume shipment into smaller ones for ultimate
delivery to consignees.

Breakeven Analysis
A method for identifying the output level at which revenues equal cost or that the costs of
two systems are the same.

Bucket (or bucket size)

Linked to the time horizon, companies plan in time segments known as buckets, basing
bucket-size on the amount of time involved. For shorter time horizons, buckets represent
hours, days or weeks while for longer time horizons, buckets represent quarters or years.
For example, an annual forecast could be represented in 52 weekly buckets, 12 monthly
buckets, or four quarterly buckets.

Brundtland Report
The final report published by the United Nations World Commission on the Environment,
led by the former Prime Minister of Norway Gro Harlem Brundtland, in 1987. The official
title of the report is Our Common Future.

Business Case
A structured proposal for business improvement that functions as a decision package for
organizational decision-makers. A business case includes an analysis of business process
performance and associated needs or problems, proposed alternative solutions,
assumptions, constraints and a risk-adjusted cost-benefit analysis.

Business Plan
A statement of long-range strategy and revenue, cost, and profit objectives usually
accompanied by budgets, a projected balance sheet, and a cash flow statement. Also a
document consisting of the business details (organization, strategy, and financing tactics)
prepared by an entrepreneur to plan for a new business.

Business Process Outsourcing (BPO)

Outsourcing for everything from logistics to human resource management, payroll
processing, purchasing, marketing, sales, accounting, administration, and information
technology.

Business-to-Business
Transactions between businesses as opposed to between businesses and other groups such
as consumers or end users. Often, referring to e-commerce. Abbreviated B2B

Business-to-Consumer
A business' transactions (often via electronic commerce) with consumers or end users
rather than with other businesses. Abbreviated B2C

Buyback
A type of countertrade in which an organization builds a plant in a foreign country (or
supplies technology, equipment, training, or other services) and agrees to take a certain
portion of the plant‘s output as partial payment for the investment.

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C&P Sustainable Development Focal Point

A person tasked with facilitating the further incorporation of Sustainable Development in
Contracting and Procurement. A member of the C&P Sustainable Development Network.

C&P Sustainable Development Network

Network that aims to support the ongoing and future activities to further embed Sustainable
Development in Contracting and Procurement.

Cabotage
Regulations that require coastal and intercostal traffic to be carried in vessels that are built
and registered in the country in question.

CAN (Contract Award Notice)

Contract Award Notice (CAN), to be reported to the Commission within 48 days of
contract awards for contract above Euro 5 million. Each CAN must include the details as
specified by the Directive.

Carbon Concrete
Binding agent produced as a product of the refinery process, which would otherwise be
used in heavy heating oil and would produce relatively high emissions of CO2 when
burned.
Carload
The load a rail car can carry.

Carousel
A circular conveyor on which objects are displayed or rotated: a baggage carousel in an
airport.

Carrier
A company that provides freight transportation – can be airline, marine, truck, or rail.

Carrier Management
All activities related to the administration and operation of a company that provides freight
transportation services via one or more mode (i.e., motor, rail, air, water, pipeline, or
intermodal).

Carrying Charge
The cost to hold ("carry") an item in inventory, typically expressed as a percentage.
Calculated as the carrying cost (total cost of inventory) divided by the value of the item in
inventory. If the carrying charge is 25 percent, it costs 25 cents to maintain $1 or €1's worth
of inventory for a year.

Carrying Cost
Cost to hold ("carry") the total amount of inventory in the supply chain; includes capital
costs, inventory service costs (insurance, taxes), storage space costs (warehousing), and
inventory risk costs (obsolescence, damage, shrinkage, transshipments).

Cartage
A charge made for hauling and transferring goods, usually on a local basis and short-haul in
nature. The word also is used to denote the physical movement of the goods. The word
drayage is also used for short-hauls of goods.

Cartel
An association of producers that attempt to control the market for their product; generally
illegal in the U.S. under antitrust laws. A prominent example of an international cartel is the
organization of petroleum exporting countries (OPEC), which attempts to control prices for
crude oil.

Cash Discount
A discount designed to encourage prompt payment of an account. The net price of the
purchased item (after allowing for the cash discount) yields a fair profit to the supplier and
is the price the supplier expects most customers to pay. Those who do not pay within the
specified time limit must pay the gross (undiscounted) price.

Cash Flow
The path cash takes as it runs into and out of a company.
Cash on Delivery (C.O.D.)
Cash payment for purchases and their transportation costs upon their delivery but prior to
release of the goods by the carrier. This is a common precaution used by sellers shipping to
organizations in bankruptcy or of doubtful credit rating.

Categorical Method
A method for rating supplier performance based on a defined list of evaluation criteria.
Two scales used for this method are 1) plus, minus or neutral and 2) positive, neutral or
negative.

Category of Purchase
A factor in the supplier selection process; defines the value and risk of the purchase to the
buyer.

Certificate of Origin
A document required by customs officials, identifying the country of origin of imported
goods, and certified by government consular officials overseas.

Change Order
A purchaser‘s written authorization to the supplier to modify or change an existing
purchase order. In public sector purchasing, these changes generally must be within the
scope of the contract.

Changeover
Process of making necessary adjustments to change or switchover the type of products
produced on a manufacturing line.

Channel Partners
Members of a supply chain (i.e. suppliers, manufacturers, distributors, retailers, etc.) who
work in conjunction with one another to manufacture, distribute, and sell a specific product.

Charter Service
This type of carrier leases tankers and bulk carriers to customers on a voyage or time basis
and follows routes of the customer's choosing. The charter customer normally uses the
entire capacity of the ship for large volume freight. Basically, liner service is much like a
scheduled bus service (that is, fixed route, standard service) while charter service is similar
to taxicab service (customer specified route, tailored service).

Civilian Use Items

Items that have no military application.

Class Freight Rate

A rate resulting from a classification rating of the freight. While commodity rates are
available only on selected commodities, a class rate can be found for all items shipped.
Class rates were created to simplify the process of providing a specific rate for each
commodity being transported.

Clean Bill of Lading

A carrier-receipted bill of lading which is provided when a shipment is deemed to be in
good condition and contains no exceptions.

Climate Change
Changes in the climate resulting from the environmental impacts of the emission of so-
called greenhouse gases (e.g. CO2, produced by burning fuels).

Collaborative Planning Forecasting and Replenishment

Abbreviated CPFR. An approach to improve inventory forecasting that involves sharing
information on expected demand and planned promotions between manufacturers and
retailers.

Collect Freight
The receiver at the point of receipt pays transportation charges.

Collusion
A secret agreement or cooperation between two or more parties to accomplish a fraudulent,
deceitful, or unlawful purpose; frequently an agreement on prices to charge (sellers) or pay
(buyers).

Collusion
Acting together secretly and illegally in order to deceive or cheat.

Combination
A combination rate is a combination of separately established rates that are used to
establish a through rate.

Commercial Zones Carrier

A for-hire carrier that only operates within a specific commercial zone and is subject only
to economic regulations specific to that zone.

Common Carriers
For-hire carriers that service the general public. Required to serve, deliver, and charge
reasonable rates to any that apply.

Common Market
A regional market with no internal tariffs, common external tariffs, and free flow of labor
and capital.

Commission
The EU Commission.
Competition
Trying to win or be more successful than another person or organisation.

Competitive Advantage
Value created by a company for its customers that clearly distinguishes it from the
competition, and provides its customers a reason to remain loyal.

Competitive Bid
A price/service offering by a supplier which must compete with offerings from other
suppliers.

Consensus Demand Plan

The Demand Plan that is agreed upon by all the stakeholders and used to drive business in
an organization.

Consequential Damages
The loss of revenues and/or profits incurred by a purchaser as a result of a seller‘s breach;
may involve injury to a person or property, including loss of life or business.

Consolidation
Combining products from multiple sources that are moving to the same destination to gain
economies of scale, usually in transportation.

Consolidator
A carrier that collects small shipments from several shippers (less-than-truckload, less-
than-carload) and consolidates them into larger shipments (truckloads, carloads, containers)
for delivery to the consignee.

Consortium
A small group of businesses that join forces in purchasing selected products.

Consumer Price Index (CPI)

A monthly measure of changes in the prices of goods and services consumed by urban
families and individuals. The relative importance given to individual items in the index‘s
basket is based on periodic surveys of consumer expenditures.

Container
A box used to contain articles or orders. For transport purposes, this is typically made of
reinforced cardboard or wood. The most common is the standard ISO (International
Standards Organisation) container (20ft or 40ft), used to carry modules via road, rail, sea
and sometimes air.

Container
A "box", typically ten to forty feet long, which is used primarily for ocean freight
shipments. For travel to and from ports, containers are loaded onto truck chassis‘ or on
railroad flatcars.
Containerization
1) Using box-like device to store, protect and handle a number of packages as a unit of
transit. 2) Shipping system based on large cargo-carrying containers that can be
interchanged between trucks, trains and ships without rehandling contents.

Containerized Freight
Freight that is loaded into/onto storage equipment (e.g. a container or pallet) at the origin
and delivered to the destination in/on that same piece of equipment with no additional
handling.

Contract Board
A Contract Board may also be referred to as Tender Board in this document. Advise line
management on commercial and procedural matters regarding category management and
contracting.

Contracting & Procurement

Please note that wherever we use ‗Contracting & Procurement‘ (CP) we also refer to
Supply Chain Management (SCM), which is the naming for CP in Exploration and
Production (EP).

Contract Carrier
A carrier that provides transportation and/or related services to selected shippers according
to a contractual agreement. Tariff rates do not apply to contract transportation services, and
contract rates will generally be lower than common carrier rates.

Contract Carriers
For-hire carriers that only service those with whom a specific contractual relationship
exists.

Cooperative Purchasing
An approach in which several organizations jointly buy selected items. They may form or
utilize a centralized buying service that purchases specified types of items for all members
of the group or cooperate informally. The resulting volume buying usually produces
significant cost savings for group members.

Co-Packer
Independent manufacturers that make product to a manufacturer's specifications.

Corporate
In the context of this course, corporate refers to a business entity with its own legal status.

Cost Analysis
The analysis of the cost elements in the price, which may result in a better evaluation and
comparison of price quotes. Cost analysis is best suited to the purchase of leverage items
where the volume purchased leads to focus on price per unit.

Cost and Freight (C&F)

A sales practice, usually in international trade, in which the supplier quotes a price that
includes the cost of the goods and the cost of transportation to the named point of
destination.

Cost Containment
Typically, a detailed plan to hold costs and purchased prices within certain target limits
over a period of time.

Cost Control History

Where the buyer reviews cost control and cost reduction steps taken by the supplier and
looks for areas where costs could be further reduced or eliminated.

Cost, Insurance, and Freight (CIF)

International shipping term that obligates a seller to transport the goods to the destination
country, insure them to the benefit of the buyer, pay the freight charges, and provide
documents necessary to clear the import of them.

Cost of Capital
The cost of all sources of capital-debt and equity; the additional cost of acquiring the cash
for purchasing the assets needed to make the products (or provide the services) over and
above the operating costs.

Cost per Order

A frequently-used measure of fulfillment cost performance that evaluates what it costs to
deliver an order to the customer. Calculated as the total relevant costs over a time period
divided by the total number of orders handled.

Cost per Unit

Similar to cost per order, this measure evaluates what it costs to deliver a unit (e.g. case,
carton, etc.) to the customer. The most relevant "unit" depends on the situation, but is most
often the predominant form handled by the operations.

Counterpurchase
A form of countertrade that occurs when an organization agrees to purchase a specified
amount of materials from a country in return for a sale made to that country.

Courier or Express Carrier

A fast door-to-door service for high-value shipments.

Cover
A remedy available to a buyer in the event of breach of contract by a seller. Displaying due
diligence, the buyer is entitled to obtain the goods in the open market and to recover
damages from the seller.

CP
A quality measurement for process capability that is the ratio of the specification width to
the natural variation of the process.

CP
Contracting and Procurement. Within the context of this course CP refers to both
Contracting and Procurement and Supply Chain Management (SCM; CP in EP).

CPK
A quality measurement index for process capability.

Credit Memo
A document used to correct an overcharge, pay a rebate, or credit the value of goods
returned.

Critical Record Systems

Critical record systems are application software systems which have been configured to
meet management‘s need for data. These systems have data stewards who monitor the
output to ensure integrity of the data. Structured management reports are common.

Cross-Docking
The process that moves product from one transportation vehicle across the dock to another
vehicle for ultimate shipment to the customer. Product is not put in storage and product
flow is almost uninterrupted.

Cross-Functional Team
Individuals from a variety of organizational functions who work together to achieve
specific goals that could not be reached by an individual working alone. Purchasing
professionals participate on cross-functional teams to achieve goals related to new
product/service development, commodities, sourcing, etc.

Cumulative Discount
A discount that is based on the quantities of an item purchased over a specified period of
time, rather than being computed on the size of a single order placed at one time. Suppliers
commonly offer this type of discount as an incentive to a customer for continued or
increased patronage.

Current Alignment Level

An assessment of the extent to which the Sustainable Development principles are
incorporated in the steps making up the Contracting and Procurement process using a four-
point scale.
Customer-Facing Employees
Those that deal directly with customers, usually face-to-face, by telephone, or through e-
mail

Customer Focus
Placing customers at the center of a set of activities, so that the customer becomes the
principal consideration

Customer-Focused Process
A process designed around the customer rather than to meet the needs of the service
provider

Customer Insight
The process of gaining an understanding of customers‘ expectations, processes, and
products and of the relevant aspects of how the customer‘s organization operates

Customer Interface
The point at which a person or organization connects directly with a customer, often in
order for a transaction to be conducted

Customer Loyalty
An allegiance based on service and product excellence; why some customers tend to return
to the same service deliverer

Customer Relationship
A relationship that forms as a result of a number of individual customer transactions

Customer Relationship Management

An approach used by organizations that is designed to retain and grow business with
existing customers and to win new customers. It operates by building up comprehensive,
detailed customer information across all or most areas of the organization. Abbreviated
CRM

Customer Satisfaction
The feeling that a customer gets when he or she is happy with the customer service that has
been provided

Customer Service
The sum total of what an organization does to meet customer expectations and assure
customer satisfaction

Customer Service Framework

A structure that shows where people fit in a business in order to fulfill its commitment to its
customers. It enables everyone involved with the business to play their part in providing
excellent customer service.
Customer Service Strategy
A high-level plan that communicates to all involved in an organization how it develops
relationships with its customers in order to maximize customer satisfaction and achieve
business success

Customer Transaction
A single exchange of information, products, or services between a customer and a service
deliverer

Customs
The government authorities designated to collect duties levied by a country on imports and
exports. The term also applies to the procedure involved in such a collection.

Customs Broker
An individual or an organization licensed by a government to assist in processing incoming
shipments through customs; receives a commission.

Customs Invoice
A pro forma invoice used by the government customs service to determine the source,
classification, and value of goods being imported in order to compute customs duties.

Customs Union
A multilateral agreement that features lower internal tariffs and common external tariffs.

Cycle Counting
Less disruptive than an annual physical inventory, this is a process of counting only a small
subset of inventory at defined intervals (i.e., daily, weekly, monthly, every 4 weeks,
quarterly, annually, or one time). The subset can be selected at random or based on a
classification scheme (e.g., selecting "high profit" items to be counted more frequently). All
items are counted at least once in a fiscal year.

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Days of Supply
A measure that shows how often the average inventory is sold. That is, if there are 10 days
of supply, that means the inventory gets turned over every 10 days. Calculated as the
average annual inventory divided by annual shipments and multiplied by the number of
days in a year.

Deadpile
Product that is loaded unpackaged and that requires packaging at the warehouse.

Dedicated Fulfillment
A fulfillment model with a separate distribution centre for a company's eCommerce
operations.
Declared Value
The practice of stating the value of goods being transported on the shipping document.
Declared value can be used for the purpose of achieving a lower freight rate or for
obtaining insurance.

Demurrage
A fee charged by a carrier to compensate for the detention of the carrier‘s equipment (rail
car or container) in excess of allowable free time for loading, unloading, reconsigning, or
stopping in transit.

Density Rate
Rate is based on the cube of the shipment, not the actual weight.

Detailed Material Plan

A plan, which lists the requirements for each material that is required for manufacturing the
finished goods.

Detention
A fee charged by a carrier to compensate for the detention of the carrier‘s equipment
(trucks) in excess of allowable free time for loading, unloading, reconsigning, or stopping
in transit.

Depot
A specialised building used for the storage and distribution of goods. For transport, this
may just be a centre or garage where vehicles are based.

Design SOW
This type of Statement of Work is used mainly in construction. This is the most detailed
type of SOW and typically includes plans, blueprints, computer-aided designs (CAD)
and/or specifications.

Differentiated Competition
A type of competition within a market or industry where there are many sellers with
slightly different strengths to choose from.

Digital Certificate
A security attachment to an electronic message to verify the identity of the sender and
enable the receiver of the message to reply. Third parties known as ―certification
authorities‖ issue digital certificates.

Digital Signatures
Short units of data bearing mathematical relationships to the data in the document‘s content
that are transmitted using public key cryptography programs. These programs create a pair
of keys (one public key and one private key), and what the public key encrypts only the
private key can decrypt. Alternatively, what the private key encrypts only the public key
can decrypt. This ensures confidentiality of information and the digital signature allows the
receiver to verify the sender of the data.

Direct Goods
Ingredients used in making finished products or producing delivered services.

Direct Monitoring
Inspection to measure output on a contract that occurs while the work is being performed.

Direct-Store-Delivery
A customer-centered delivery system with the manufacturer making deliveries directly to a
retail customer's stores, without going through the retailer's distribution center.

Discounts Discount(s)
The supplier provides reduced prices to the customer to influence some aspect of the
customer's buying behavior.

Distribution Center
A facility handling fulfillment tasks where the predominant activity is moving products and
completing value-added services like labeling, price-marking, kitting, etc. rather than
inventory storage.

Distribution Channel
One or more companies or individuals who participate in the flow of goods and services
from the manufacturer to the final user or consumer.

Distribution Resource Planning

A computer system that uses MRP (Manufacturing Resource Planning) techniques to
manage the entire distribution network and to link it with manufacturing planning and
control.

Diversion
A carrier service that permits changing the destination or consignee of a shipment that is en
route, either with or without an additional fee. This can be performed only at the request of
the owner of the goods.

Diversity
The mix of people from different genders, races, nationalities, ages, religions and cultural
backgrounds.

Dow Jones Sustainability Index

A global index that tracks the financial performance of the leading sustainability-driven
companies worldwide.
Principal direction of movement for products from suppliers to manufacturers to retailers.
Opposite of upstream.
Downstream
One or more companies or individuals who participate in the flow of goods and services
from the manufacturer to the final user or consumer.

Draw-bar Trailer
Self standing trailer with four or more wheels that can be pulled by a rigid vehicle to form a
drawbar combination.

Drop-Ship Fulfillment
Where a company other than the one with primary customer contact provides fulfillment
services, but which is also not a third-party service provider. Most often this is a
manufacturer or distributor providing this service to a retailer who markets their products.

Duty
A tariff imposed by a government on imported goods, exported goods, or the use of goods.

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Eaches
A term referring to individual pieces of products, as one might buy in a retail store.

Early Purchasing Involvement (EPI)

A practice that involves supply management professionals in a new product development
process from its inception.

Early Supplier Involvement (ESI)

A practice that brings together one or more selected suppliers with a buyer‘s product design
team early in the product development process. The objective is to utilize the supplier‘s
expertise and experience in developing a product specification that is designed for effective
and efficient product rollout.

Eco-efficiency
Business activities that create economic value while reducing ecological impact and use of
resources.

Economic Order Quantity (EOQ)

A manual or computer computation of the min/max levels of inventory to be stocked. It
considers historical and forecasted usage, transit time and costs, ordering process cycle and
ordering administrative costs, inventory carrying costs, safety time, and the cost and risk of
stock outage. When inventory levels drop below min, the requisition is for a replenishment
amount equal to the on-hand levels, less on-order, up to max levels including EOQ
allowances.
Economies of Scale
Savings gained by dealing with large quantities. For example, bulk discounts can offer
economies of scale by driving the cost per unit down.

Edifact
Acronym for European electronic data interchanges for administration, commerce, and
trade; the most commonly used standard for electronic purchasing forms used in
international commerce.

Effective Leadtime
The effective leadtime is a very similar concept to the order aging chart, except that it
presents a weighted average leadtime, as opposed to a cumulative service level, in a
multilevel system.

Efficient Consumer Response

Abbreviated ECR. A term coined by consumer products manufacturers and retailers to
describe their intent to optimize their supply chains.

eFulfillment
All the activities required to physically satisfy demand for products ordered via the Internet.

E-Learning
The use of electronic information and communications technology to provide learning
opportunities directly to individuals. Typically delivered via computer and may make use
of CD or DVD formats, Internet-based delivery, or local network delivery. Also electronic
learning

Electronic Commerce
Business activities of an enterprise that utilize the technology of the computer, including
such tools as EDI, the Internet, intranets and/or extranets to streamline and enhance
commercial transactions of both private and public sector entities.

Electronic Catalogues
Digital version of a paper catalog, usually accompanied with electronic ability to purchase
and pay.

Electronic Data Interchange (EDI)

Abbreviated EDI. Computer-to-computer communication between two or more companies
allowing them to generate bills of lading, purchase orders, invoices, and similar business
information exchanges. These exchanges are governed by standards from ANSI,
EDIFACT, and others.

Electronic Funds Transfer (EFT)

The electronic transmission of funds from one party (purchaser) to another (supplier).
Electronic Kanban Signals
An electronic signal, usually in the form of EDI which reduces the inventory "cards" in a
traditional KANBAN process. Kanban is a Japanese term to describe a simple, just-in-time
inventory system.

eMarketplace
New market models for conducting eCommerce, including aggregators, auctions, bid
systems, and exchanges.

Embargo
The prohibition of commerce and trade with a certain country

Encryption
The process of transforming data such that it cannot be deciphered during transmission
without specific translation software. This is a method of securing transmitted information.

End Users
A person, organization, or business that receives a product, service, or information but is
not part of the organization supplying it; a type of external customer

Ending Inventory
Calculated as follows: Beginning inventory plus Scheduled receipts minus Demand. For
"demand," use actual orders if available; if not, use demand forecast.

Energy from hot rocks

Energy produced by using the heat of subsurface rocks.

Enterprise Resource Planning (ERP)

A cross-functional/regional planning process supporting regional forecasting, distribution
planning, operations centers planning, and other planning activities. ERP provides the
means to plan, analyze, and monitor the flow of demand/supply alignment and to allocate
critical resources to support the business plan.

Enterprise Resource Planning (ERP) systems

Usually refers to a particular type of computer software package that integrates various
functions within an organization. It may be used for activities such as forecasting, materials
management, purchasing, etc.

EOQ (Economic Order Quantity)

Companies seek to minimize their total costs when determining order quantities. This is
referred to as EOQ.

Equilibrium
The price of a product or service at which the quantity demanded matches the quantity
supplied.
Escalation
An upward movement of price, also known as economic price adjustment.

Escalation Clause
A contract clause generally permitting a specified increase in the price of goods or services
in the event of certain conditions, such as an increase in the supplier‘s raw materials or
labor costs. Escalation clauses in a contract typically also provide for de-escalation.

eTailer
An eCommerce retailer.

European Union
Term for those countries in Europe that have formed common customs boundaries and
economic and political coordination, formerly known as the European Commission (EC) or
European Economic Community (ECC). The Euro is one such example of this
collaboration among the countries belonging to it.

EU Utilities Directive
Directive 2004/17/EC of the European Parliament and of the Council of the European
Union of 31 March 2004 coordinating the procurement procedures of entities operating in
the water, energy, transport and postal services sectors.

EU Directive 2004/17/EC
EU Directive of the European Parliament and of the Council of the European Union of 31
March 2004 coordinating the procurement procedures of entities operating in the water,
energy, transport and postal services is applicable to your sourcing process. In this
Directive specific rules for the use of Online Bidding have been included. The Directive is
of relevance for contracts including an EPE scope. Evaluation model (link; no definition)

Exempt Carrier
A for-hire carrier hauling commodities that are exempt from economic regulation.

Exponential Smoothing
A procedure for updating the parameter(s) of a model based upon the most recent forecast
error. For a stationary model the adjusted value of the level is the old value plus a portion
of the forecast error.

Export Bill of Lading

An inland carrier to contract for the movement of goods from an interior point of origin to a
port for the ultimate movement to a foreign destination issues.

Export License
A permit from a host country government, enabling organizations to take goods out of a
country.
External Customer
A customer that is not part of the organization supplying products, services, or information

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Fill Rate
A measure of the percent of demand that is filled completely when the customer wanted it.
There are three ways this is typically measured: 1) as the percentage of SKU items that
were filled completely, 2) as the percentage of units ordered that were filled, and 3) as the
percentage of orders that were filled completely.

Finished Goods
Product that is manufactured and sold to customers.

Firm Bid
Although many purchasers use the terms ―bid,‖ ―proposal,‖ and ―quote‖ interchangeably in
conversation, a ―firm bid‖ or ―firm offer,‖ or a ―firm quote‖ is a legal offer to sell, which
can become a contract simply on acceptance by the buyer.

First Earth Summit

Summit held in Rio de Janeiro in 1992, under the auspices of the United Nations, at which
international leaders agreed a program of action in pursuit of Sustainable Development
(‗Agenda 21‘).

Fixed Costs
A company‘s infrastructure costs: building and equipment, management overhead, and
other items that do not change much with volume.

Fixed Exchange Rates

Exchange rates set and maintained by governments.

Fixed or Firm
Refers to a supplier's pricing strategy. The supplier determines its total cost, and then adds a
profit to determine the price. If a price is set as fixed or firm the supplier gets any benefit of
reducing its cost and absorbs the risks if costs come in higher. It creates an incentive to
improve. Might be used in situations where the supplier has a great deal of experience, or in
pricing mass produced items.

Flagship Project
Any project or initiative that can serve as a successful example of the application of
Sustainable Development principles in Contracting and Procurement.

Flagship Project Template

A template through which the key characteristics of a Flagship Project can be captured in a
uniform way.
Flammable Goods
Goods that give off vapors that become combustible at a certain temperature.

Flammable Liquid
Any liquid having a flash point below a set temperature as determined by government tests.

Flammable Solid
Any solid material, other than an explosive, which is liable to cause fires through friction,
retained heat from manufacturing or processing, or which can be ignited readily. To be
classified as a flammable solid, a material when ignited must burn so vigorously and
persistently as to create a serious transportation hazard.

Fleet
The number of vehicles in a company‘s freight transport operation.

Flexibility
Ability to respond quickly and efficiently to changing customer and consumer demands.

Floating Exchange Rates

Exchange rates determined by market forces, rather than government decisions.

Flow-Thru Fulfillment
A fulfillment model that makes use of a firm's existing stores by taking orders online and
then shipping them to a local store for customer pickup.

FOB Destination
A term that indicates the seller owns the goods in transit, is responsible for freight charges,
and administers claims. See Free on Board.

FOB Origin
A term that means the customer owns the goods in transit, pays the freight bills, and
handles any claims. See Free on Board.

Focus Group
An interview technique designed to solicit individuals' views and feedback, usually
achieved through a small, face-to-face group discussion led by a trained facilitator.

Follow-up monitoring
Inspection to measure output on a contract that occurs after work is completed.

Forecast
Prediction of how much of a product will be purchased by customers. Relies upon both
quantitative and qualitative methods.

Forecast Error
The forecast error is the actual demand minus the forecast.
Foreign Freight Forwarder
A party that acts to arrange for export and import movement of goods for shippers and
consignees (distinct from domestic freight forwarders that take on different obligations).

Formal Teams
Teams made up of individuals who are designated members of a formal group.

Forward Buying
Buying product in large quantities in order to take advantage of significant discounts
offered in connection with volume purchasing.

Forward Integration
A type of vertical integration in which a supplier seeks ownership of, or some control over,
its buyers; for example, a PC manufacturer takes over its largest wholesaler or retailer.

FPAL/Achilles
FPAL/Achilles is a third party service provider. FPAL/Achilles is recognised by the
European Commission as acting on behalf of the industry. They annually publish a
consolidated overview of work expected in the industry and that overview is published in
the Commission‘s journals. When compliance with the EU Utilities Directive is needed, the
short-list of bidders for each invitation to tender has to be drawn up from companies listed
in the FPAL/Achilles Europe database.

Free On Board (FOB)

The point at which the ownership and title of the goods pass from a seller to a buyer. See
FOB Destination and FOB origin.

Free Trade Zone (FTZ)

A site in which imported goods are exempted from customs duties. Many countries of the
world establish these in order to encourage economic development such as manufacturing
and distribution.

Freight all Kinds (FAK)

All kinds of freight have the same rate when shipped together.

Freight Bill
The carrier‘s invoice for transportation charges applicable to a shipment. Invoice or PRO
— a bill for goods or services purchased that includes pertinent information with respect to
the quantity, price, terms, and nature of delivery.

Freight Forwarder
A third party, licensed by the government that makes transportation arrangements and fills
out forms under power of attorney.

Fulfillment
Process involving the movement and storage of materials, products, and information from
point of origin to the final customer in a manner that satisfies the customer at the lowest
cost, thus producing the highest value for the customer.

Fulfillment Network
The chain of parties and relationships involved in fulfilling a customer's order.

Fulfillment Plan
A plan, which allocates inventory/capacity to orders to ensure that they get fulfilled on
time.

Futures Contracts
Contracts for the purchase or sale and delivery of commodities or currencies at a specified
future date, primarily used as a hedging device against market price fluctuations or
unforeseen supply shortages.

Functional
In the context of this course, functional refers to an area of professional expertise that is
applied across business organisation. Examples include CP, Finance and HR.

Functional SOW
A type of Statement of Work that defines what the buyer is trying to accomplish, leaving it
up to the supplier to achieve the desired outcome by the most effective, efficient means.

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Global Category Managers

Global Category Managers and their teams set the overall strategy for their specific
categories and support respective sourcing requirements and events. Global Category
Management is the standard process by which selected categories can be managed through
their entire life cycle. It seeks to encourage a consistent approach in the market and will
exploit opportunities offered by the globalised approach to the Group's major suppliers in
addition to providing for a commonality of supply chain characteristics.

Greenhouse gases
The greenhouse effect is a natural process whereby gases present in the atmosphere, such as
water vapor, carbon dioxide (CO2) and methane (the so-called greenhouse gases) keep the
earth warmer than it would otherwise be.

Green procurement
Procurement that seeks to minimize the environmental effects of the goods and services
required.

Group standard OLB documents

OLB documents as developed by the OLB cross-business network and as outlined in the
OLB Guide. Please click here to view and download all relevant material.
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Handling Equipment
Typically, the equipment used in a warehouse distribution center to lift, move, redirect, or
store products. It includes racks, conveyors, lift trucks, and other more specialized
machinery for these purposes.

Haulier
A company or a person engaged in the road transport of goods.

Hazardous Materials
Materials or substances that have been determined by the government to be a risk to health,
safety, and property. The term includes such items as explosives, flammables, poisons,
corrosives, and radioactive materials. These materials must be packaged, labeled, handled,
and transported according to stringent regulations from several agencies. International
shipments must comply with docket hm-181, where the term ―dangerous goods‖ is often
used interchangeably with hazardous materials.

Hedging
A ―futures‖ purchase or sale entered into for the purpose of balancing a sale or purchase
already made, or under contract, in order to offset the effect of potential market price
fluctuations.

High Street Stores

Shops or stores that are to be found in a typical high street in a town or city.

Historic price
The historic price is the price the buyer previously paid for the items that are currently
being bid on. If this is a new part or service, the historic price can be defined as the target
price. The historic price is the price against which all savings are measured by the OLB
system.

HSE
Health, Safety and Environment.

Horsepower
Unit of measurement of a rate of work – the power output of an engine. Engine power is
normally stated in Imperial measure as bhp (brake horse power) or in metric as kW
(kilowatt).

Hypermarket
A very large self-service store, usually on the outskirts of a town or city.

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Import Declaration
Statistical document used to inform the government of an importing country about the
nature, value, and origin of goods being imported.

Import License
Permit from the government enabling importers to bring goods into the country. A general
license authorizes anybody to import specified goods. A validated license is a document
authorizing importation of a specific shipment.

Incentive Rates
Specialized rates to encourage shipment, at a discount, of certain commodities in certain
directions.

Incentive Schemes
An arrangement (normally embodied in a contract) by which the achievement of a defined
level of performance is encouraged.

INCOTERMS
International transfer points and sales terms guidelines created by the International
Chamber of Commerce in 1936 and updated every ten years. These guidelines advise the
title transfer of international shipments.

Incremental Funding
The obligation of funds to a contract (which contains a total price or estimated cost) in
periodic installments as the work progresses, rather than in a lump sum.

Indemnification
The terms ―hold harmless,‖ ―indemnify,‖ and ―defend‖ commonly refer to contract clauses
used to protect a purchaser or supplier from loss or damage. The words ―hold harmless‖ (or
―save harmless‖) and ―indemnify‖ refer to being reimbursed for penalties or liabilities
incurred by one party because of another‘s actions and normally pertain to financial or
monetary loss. The term ―defend‖ imposes an obligation on one contracting party to defend
the other in a legal action and to incur the cost of such legal action. Such clauses are
commonly found in purchase order forms.

Indirect Goods
Ingredients used to support functions of an organization, but not ingredients used in
producing finished products nor delivered services.

Informal Groups
Small and structured groups within an organization structured informally around specific
interests of their members. They may be social groups, special-interest groups, or
sometimes pressure groups pushing for change.

Informal Sources
Informal sources of information vary from person to person and from function to function.
Informal sources can be written summaries of a supplier site visit or a conversation with a
peer who talked to a supplier at a retail store.

Information Technology
That combination of hardware, software, and connectivity that help streamline order
processing by automating many activities and that must exist behind a firm's activities.

Insourcing
The act of bringing together a function that was performed outside the organization
(outsourced) to being performed inside the organization.

Integrated Air Carriers

Provide door-to-door service; a consistent schedule of pickups and deliveries; and standard,
expedited service through their hub-and-spoke network. Because these carriers make air
transportation of time-sensitive goods such a simple, well-controlled process, they
dominate the U.S. domestic market for next day and second day movement of letters, small
packages, and small shipments. In contrast, nonintegrated carriers provide air-only service
and rely on freight forwarders or the customer to provide pickup and delivery service. The
advantage of these carriers is the flexibility of direct movement; same day pickup and
delivery; and tailored services.

Integrated Fulfillment
A fulfillment model with shared facilities offering fulfillment capabilities across different
divisions, channels, and/or products, integrating eCommerce fulfillment with existing needs
within the same distribution centers and warehouses.

Integrated Logistics
Integrated logistics is that part of the supply chain process that plans, implements, and
controls the efficient, effective flow and storage of goods, services, and related information
from the point of origin to the point of consumption in order to meet Customers'
requirements.

Integrated Processes
Processes within an organization that fit seamlessly with other processes, so that customers‘
transactions are not disrupted or delayed during a transfer from one person, function, or
department to another

Intermodal
A combination of two or more modes of transportation. For example, containers shipped by
ocean carrier and then transferred to rail or truck for additional transport.

Intermodal Transportation
Shipments involving more than one mode of transportation, e.g., rail-motor, motor-air, rail-
water.
Internal Customer
Individuals, departments, or subgroups from the same organization as the service provider.
Providing excellent service to internal customers leads to excellence with external
customers

International Monetary Fund (IMF)

International organization established in 1946 to provide technical and financial assistance
to promote international monetary cooperation, exchange arrangements, and assistance to
countries in need of balance of payments adjustments.

International Organization for Standardization (ISO)

A worldwide federation established in 1947 that promotes the development of global
standards to enhance international business interactions. The ISO is comprised of standards
organizations from 130 countries.

Interstate versus Intrastate

Interstate rates subject to controls by the Interstate Commerce Commission (ICC).
Intrastate, local, and commercial zone rates are subject to state and/or local economic
controls.

In-Transit Privileges
Special privileges that give rail shippers (buyers and sellers) the right to stop a shipment en
route, unload it, perform certain processing operations on the material, reload the processed
material, and continue the shipment at the original rate plus a modest additional charge.

Inventory
A quantity of goods, finished or unfinished, held in storage.

Inventory Turns
How many times a year the average inventory for a firm changes over, or is sold.

Invitation for Bid (IFB)

(1) The request made to potential suppliers for a bid on goods or services to be purchased.
(2) Government Purchasing: The solicitation document used in sealed bidding and in the
second step of two-step bidding.

Invitation for Bids (IFB)

1) The request made to potential suppliers for a bid on goods or services to be purchased. 2)
In government purchasing, the solicitation document used in sealed bidding and in the
second step of two-step bidding.

Invitation For Proposals (IFP)

The request made to potential suppliers for a bid on goods or services to be purchased.

ISO 9000, ISO 14000

Families of standards and guidelines relating to quality management systems and processes.
ISO 9000 is primarily concerned with quality; ISO 14000 primarily concerns
environmental management.

ITT
Invitation to Tender: detailed bid request against a specified contract scope. Also referred to
as RFP (Request for Proposal) or RFQ (Request for Quotation).

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Jacks
Collapsible legs that are used to support a demountable box when it is stored away from its
vehicle.

Job Completion Rate

A job completion rate is the probability that all the service parts are available for a product
that is composed of multiple parts.

Johannesburg Plan of Implementation

A plan adopted at the Johannesburg World Summit on Sustainable Development against
which progress is monitored by a UN agency.

Johannesburg World Summit on Sustainable Development

A UN-organized summit intended to give new impetus to Sustainable Development, held in
2002.

Joint Venture
A strategic alliance between two or more parties to undertake economic activities together.

Just in Time (JIT)

Where the pre-approved supplier will consolidate orders and ship orders in the exact
sequence to arrive just-in-time for usage by the work center. Orders often shipped in
specialized shipping containers that can be directly loaded to the work-center station,
bypassing receiving and storage.

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K11
An oil and gas producing platform offshore The Netherlands, de-commissioned in the early
1990‘s./p>

Kaizen
Japanese term for continuous improvement. The understanding that process (and therefore
product) quality can improve as the result of numerous small improvements made
continuously over time.
Kanban
When the first bin is depleted, a second bin has an inventory quantity sufficient to cover
demand during the re-ordering period. The second bin also contains a card that serves as a
complete requisition document that can be sent directly to purchasing or pre-approved
suppliers for re-ordering.

Keiretsu
Japanese term for a relationship in which a cross-ownership network links buyers and
suppliers.

Key Performance Indicator

KPI. An objective measure of performance of an activity (such as transportation) that is
critical to the success of an organization.

Kitting
Combining different components that are to be used at the same time regardless of their
origin. These components are sent out just in time as one package and might, for example,
be needed to carry out a repair operation, or which might go into a step of product
assembly.

Kyoto Protocol
An agreement on climate change signed at the 1997 Earth Summit.

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Landed Cost
The production costs plus transportation costs plus related logistics costs involving
shipment preparation, import/export fees, product handling and storage, and other value
added services for a product.

Landed Price
The price of product actually delivered, including all duties, taxes, handling charges,
transportation charges, and other costs borne directly or indirectly by the customer.

Lead Time
The total time that elapses between order‘s placement and its receipt. It includes the time
required for order transmittal, order processing, order preparation, and transit.

Learning Curve
An empirical relationship between the number of units produced and the number of labor
hours required to produce them. The curve is most applicable to the production of
repetitively produced complex products. Buyers can use the learning curve to analyze the
effects of learning on unit costs, and production managers can use it to determine staffing
and scheduling requirements.
Legs
In transport routing and scheduling this refers to a part of a trip or journey.

Less-than-Truckload
Shipments through motor transport that will likely be cross-docked and consolidated by the
carrier while in transit to other destination. This form of transport is used for smaller
quantities of product and usually carries a higher cost per pound than truckload.

Less-than-Truckload Carrier (LTL)

A for-hire carrier that picks up, consolidates, and delivers smaller LTL shipments.

Letter Contract
A preliminary written contractual instrument that authorizes the contractor to begin
immediately performing the manufacturing or services requested. The letter contract
typically is followed by a definitive contract document.

Letter of Credit
A document that assures the seller that payment will be made by the bank issuing the letter
of credit upon fulfillment of the terms of the sales agreement.

Letter of Intent (LOI)

A pre-contractual document used to enter into preliminary agreements requiring further
negotiation to develop a definitive contract.

Level the Playing Field

The process of making supplier bids comparable for price analysis. It comprises three steps:
1) Develop Specifications (for goods) or Statement of Work (for services); 2) Send Request
for Quotation (RFQ) including Terms and Conditions; 3) Adjust Supplier Prices.

Leverage Buying
The process by which multiple organizations jointly buy items to realize significant costs
savings from volume purchases.

Life-Cycle Costing
A cost-analysis tool that incorporates the purchase price of a piece of equipment and all
operating and related costs over the life of the item; including, but not limited to
maintenance, downtime, energy costs, and salvage value. Life-cycle costing is the concept
of total cost of ownership applied to capital acquisitions.

Lighter
An ocean-going vessel where large barges or lighters are used to discharge and load cargo
that is then stowed and shipped in the lighters.

Linehaul Service
Transportation service between major markets and customers within those markets.
Liner Services
Employ a wide variety of ships (container ships, general break bulk ships, roll on/roll off
vessels, etc.) in their fixed route, published schedule service. Liner service carriers typically
handle smaller, individual shipment deliveries for their customers, including containers,
pallets, and other unit loads.

Link
In a fulfillment network, links are transportation providers that physically move product
between nodes.

Loading Allowance
A reduced rate or refund offered to shippers and/or consignees who load and/or unload a
shipment.

Load Planning
Developing freight loading patterns for pallets, trailers, trucks, intermodal containers, and
air-cargo containers with the goal of maximizing the utilization of cubic space and weight
capacity.

Loads
Quantity of a product that is being carried – typically by truck.

Local Content
Adding value in the local economy through Contracting and Procurement.

Long Haul Carriers

Include the eight major carriers that provide a full array of interregional or regional
services. They primarily provide linehaul service between major markets and customers
within those markets. These carriers move freight in container, carload, and unit train
quantities.

Lot duration
Lot duration is the period between the start and end time of a specific lot in an auction.

Lotting strategy
Way of structuring the scope of a contract to be online bid, by using logical groupings of
the goods and/or services that will be quoted and awarded together.

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Maintenance Repair and Operating (MRO)

Items, commonly called indirect materials, are typically parts and supplies that do not go
into the finished product; for example, fasteners, hand tools, and lab supplies.
Make-buy Analysis
A team-based phase where suppliers are identified, and a careful analysis of the total cost of
ownership of making versus buying is developed and compared. A sensitivity analysis is
also performed at this time.

Malampaya deep water gas to power

A major project in The Philippines, through which offshore gas reserves were developed
and used to supply an onshore power station.

Manifest
An itemization of the items included in a particular shipment, plus related details.

Margin
Net profit after taxes divided by sales for a given 12-month period, expressed as a
percentage.

M.A.S.C.I. Template
A template that facilitates the easy identification of all relevant stakeholders and the
detailed structuring of action plans. M.A.S.C.I.: Make it happen, Approve, Support,
Consult, Inform.

Material and Method of Manufacture Specification

A specification that details the performance criteria required for a particular material or
product. It is often called a Statement of Work for a service purchase.

Materials Requirements Planning (MRP)

To plan what materials are required to meet manufacturing requirements.

Mathematical formulas (Online Bidding)

Formulas used to properly apply transformation factors to ‗raw‘ bids submitted by suppliers
or contractors in a transformation auction. Such formulas are used to value or ‗normalise‘
the non-priced aspects of bids so that prices may be directly and fairly compared. (See also
‗Transformation auctions‘).

Mean Absolute Error

If the errors are available for a number of different periods, the mean absolute error is just
the average of the absolute values of the individual errors. (See the above absolute error
entry.)

Mean Square Error

If the errors are available for a number of different periods, then the mean square error is
obtained by squaring each error and then computing the average of the squared terms.

Mileage Rate Structure

The rate varies in relationship to the total distance with shorter distances higher than longer
distances to compensate for the fixed cost elements.
Minimum Weight
Regardless of actual weight or cube, the rate has a minimum charge.

Milestones
Milestones define significant points in performance or delivery to be accomplished by a
supplier in a contract.

Mindset
A fixed mental attitude or disposition that predetermines a person's responses to and
interpretations of situations

Miscellaneous Rates
The range of miscellaneous rates is almost limitless – each is a rate to address a specific
situation. Today, under deregulation they are rarely used. Most have been replaced by
contractual rates between the shipper and carrier.

Mission Statement
A declaration of the main purpose, or mission, of an organization

Modal Options
Methods of transportation, such as motor, rail water, air, pipeline, or intermodal.

Monopoly
An organisation or group that has complete control of an area of business, so that others
have no share.

Most Favored Customer

A price protection clause in a contract that obligates a seller to offer the buyer the lowest
price made available to other buyers under comparable circumstances. Sometimes referred
to as ―most favored nation.‖

Moving Average
A procedure for estimating the level of demand. In an N-period moving average the
estimate is the average of the demands in the most recent N periods.

MRO Supplies
Maintenance, repair and operating supplies.

Multilateral
In the context of this course, multilateral means involving more than 2 countries.

Multiplier
One of the two types of transformation factors (the other one being the adder). The
multiplier is a number that is multiplied by the vendor‘s raw bid and used when you need to
convert raw bids to a common basis for comparison. Examples are product efficiency,
reliability rate, and experience of the workforce. In the transformation equation y=mx+a,
the adder is represented by m. If a multiplier is not defined, it defaults to 1.

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NAM
Nederlandse Aardolie Maatschappij (the Netherlands based OU in EPE).

NDC
National Distribution Centre: generally, a single central stockholding point or depot used
for the distribution of goods to customers within that national boundary.

Negotiation with more than one vendor

When negotiating with more than one vendor, prices are collected by discussing a specified
contract scope with several vendors. After one or more negotiation rounds a selection is
made of the offer that presents the best overall value for money.

Net Material Requirements

The required materials for manufacturing after taking into account on-hand inventory,
scheduled receipts, and work-in-process inventory.

NGO
A Non-Governmental Organisation.

Node
In a fulfillment network, nodes are facilities such as plants, warehouses, and stores.

Noise
A random component of demand whose exact value is not predictable ahead of time.

Non-Discount Period
A block of time where a discount would not apply, such as after the supplier's payment
terms have been exceeded, or during periods where demand is high and supply is low, such
as around holidays.

North American Free Trade Agreement (NAFTA)

The major provisions of this law define the regulations for breaking down trade barriers
between the United States, Canada, and Mexico.

Normalization
Normalization is the process by which bids that are not identical are made comparable.
Nonstationary
A demand pattern is nonstationary if its average level depends upon time in a predictable
fashion.

Nontraditional services
Service acquisitions made by an organization without supply management involvement.

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Objectives Template
A template by means of which Sustainable Development objectives can be consistently
defined taking into account the views of all stakeholders.

Obsolescence
The property of being out of date and not current.

Ocean Bill of Lading

Consigned to the order of a third party, usually the shipper or a bank, whose endorsement is
required to transfer the title to the goods. This negotiable instrument of title must be
surrendered to the carrier before the goods will be released.

Offer
An intentional invitation to ―come do business with us on these terms.‖ It is a promise
made to another party that if the terms proposed are satisfactory, there will be a contract. It
is, in fact, a legal commitment to the other party to form a contract if that person or
organization agrees.

Offset
A form of countertrade, similar to counterpurchase, in which a supplier selling to a foreign
organization agrees to purchase a certain quantity of materials from the country it supplies.
The primary difference is that the supplier can fulfill its obligation by purchasing from any
business organization in the country it supplies. This term is primarily used in the sale of
military hardware.

OLB
OLB is the acronym for Online Bidding.

OLB
Online Bidding. A method of collecting prices over the Internet.

OLB parameter
Auction design options to be determined when setting up an auction (includes auction
format, feedback profile, starting price yes/no).
OLB spreadsheet
Pre-agreed off-line spreadsheet used by vendors to calculate their bid values. Values used
in this spreadsheet to calculate the winning bid form the basis of the schedule of rates and
prices in the awarded contract.

Oligopoly
A market or industry dominated by a few powerful sellers.

Online Bidding
Online Bidding, often referred to as OLB, is a means of gathering prices in the tendering
process using an Internet based auction tool.

Open-Ended Order
This type of order generally specifies all terms except quantity. Shipments are made against
the buyer‘s release orders per the contract; similar to a blanket order. Also referred to as a
standing order.

Operation / Operational Plan

Translates an organization‘s strategy and business plan into operational activities, including
raw material purchasing, product manufacturing, and product delivery to customers

Opportunity Cost
The cost of what you are not doing with the money you spend; the cost of the next best
alternative. For example, the money spent on inventory is money that cannot be spent on
new product design, or marketing.

Order Aging Chart

The order aging chart captures the dynamics of the multilevel system by graphing the
cumulative service level as a function of leadtime. It answers the question of the probability
that an order will be satisfied within a given leadtime in a multilevel system when service is
less than perfect at each level.

Order Confirmation (O.C.)

What the seller issues in order to communicate in a manner understood and accepted by
common trade conventions, to the buyer the acceptance of the purchase order and the
critical terms of availability, delivery, pricing, and other relevant issues to confirm to the
buyer that the seller fully understands the requirements of the P.O. and will comply. In
many cases, the O.C. takes many forms and is issued in many media, including the
commonly accepted condition of filling the P.O. without ever communicating an O.C.
Based on the O.C. or industry common trade conventions, the buyer establishes an open
P.O. file and an open Accounts Payable file or reserve.
Order Cycle Time
The elapsed time between the placement of an order by the customer to the receipt of the
order.

Order Management Systems

A computerized system that executes all of the activities related to the receipt and handling
of incoming customer orders and inquiries. It can receive, validate, process, price,
prioritize, expedite, and even invoice customer orders.

Order Processing
The activities associated with filling customer orders.

Our Common Future

The final report published by the United Nations World Commission on the Environment,
led by the former Prime Minister of Norway Gro Harlem Brundtland, in 1987. The report is
known by most people as the ‗Brundtland report‘.

Outsourcing
A version of the make-or-buy decision in which an organization elects to purchase an item
that previously was made or a service that was performed in-house; often utilized for
services. It involves sourcing and using a supplier that provides the completed item or
service rather than buying the components and manufacturing them in-house.

OU Bid Rules
These rules are specific rules surrounding the tender process.

Over, Short, And Damage Report

A report that indicates discrepancies between a bill of lading and the received freight on
hand.

Owner/Operator
A trucking operation where the owner is also the driver. Primarily exempt commodity
carriers.

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Pallet
Flat, usually wooden, base on which loads are stacked to enable ease of movement (via
fork-lift trucks) and storage (in racks or on top of each other).

Parts Per Million (ppm)

A measure of quantity that may be used in a quality specification, whereby defective parts
must not exceed a specified number of parts per million parts supplied; a ratio of number of
failures to number of parts supplied.
Path to Profitability
The new question being asked, "When will this thing make a profit?"

Payload
The load carried by a vehicle. In transport/haulage, this is the capacity in weight or volume
within the vehicle that is available for the load – thus the load for which payment is made to
the haulier.

Perfect Order
Concept of having a product with the following characteristics: The right product, To the
right customer, At the right time, At the right place, In the right condition, In the right
quality, At the right cost. While companies can seldom achieve this, it provides a good
benchmark to work toward.

Performance Indicator
A measurable characteristic used to determine the acceptability of a service.

Performance SOW
A type of Statement of Work that details everything wanted by the buyer. This SOW is
broken down into tasks describing the required outcome performance of the task(s).

Performance Specification
When a need is described by a complete description of an item, including the composition
of materials to be used in making the product, size, shape, capacity, dimensions, tolerances,
and sometimes method of treatment or manufacture.

Performance Standard
The quantitative value that defines the expected performance level for a selected
characteristic.

Physical or Chemical Specification

When a need is described by its physical or chemical characteristics, such as the chemical
compound required to clean floors.

Picking
The process of retrieving warehoused product for shipping.

Pilferage
Theft of inventory during storage.

PIN (Periodic Indicative Notices)

Advertisement of each EPE tender (or tender including EPE scope) either in the
Commission journal or a national newspaper.
Point-of-Sale Data (POS)
Price and quantity data from the retail location, which is captured and reported as sales
transactions occur.

Point to Point
A transportation network option that provides direct service from point of origin to point of
destination.

Point-to-Point Rate
A fixed rate that is the same for any two points and either direction.

Port of export
The harbor location from which goods are shipped out.

Post-Panamax
Ships classified as Panamax are of the maximum dimensions that will fit through the locks
of the Panama Canal. "Post-Panamax" is the term for ships larger than Panamax.

Postponement
The practice of assembling the finished product in the warehouse. The benefits are
significant because components can be shipped to the warehouse, often for cheaper than it
costs to ship the finished product.

Prepaid Freight
Transportation charges are paid by the shipper at the point of shipment.

Price Analysis
An analysis of a seller's price and associated terms made by comparing it to reasonable
price benchmarks.

Price Index
A ratio expressing the relationship between the price of a commodity at a given point in
time to its price during a specified base period. This information can be used to chart price
level changes.

Private Carriage
A carrier that owns or leases vehicles and provides transportation services for the
organization that owns it.

Private Carrier
A transportation activity that only provides service to its own firms or firms with which it
has proprietary responsibility for the freight that is moved.

Private Fleet
A group of vehicles owned and operated as a unit by the company whose products they
carry.
Private-Label
Products that are produced by a store – such as Safeway, rather than a manufacturer, such
as Nabisco.

PRO
The trucking industry‘s term for a truck freight bill. It stands for progressive number. A
safe guard requirement to reduce duplicate invoicing.

Procurement Card
While usually limited to small amounts, increasingly procurement cards are being used for
standard and routine purchases; for example, over 80 percent of department of defense
MRO ordering and payments are made via a procurement credit card. The use of
procurement credit cards has increased because the procurement data that is vital to
maintain control and optimize volumes is now available via the credit card infrastructure.

Procurement Cards
A payment method whereby requisitioners are empowered to deal directly with suppliers
for low-amount, high frequency, typically MRO-type purchases by using a card issued by a
bank or major credit card provider. The cards reduce paperwork and enable purchasing and
accounts payable personnel to focus on more value-added activities.

Producer Price Index (PPI)

A measurement tool reflecting the average change in prices charged by producers during a
given time period, compared to those charged in a base year. The PPI measures inflation at
earlier stages of the production and marketing process than does the Consumer Price Index
(CPI).

Product Life Cycle

The range of a product's life, including introduction, growth, maturity, and decline.

Production Capacity
Measure of how much production volume may be experienced over a set period of time.

Pro Forma Invoice

A document prepared in advance of a sale to provide evidence of the final form and amount
of invoice.

Progress Payments
Payments specified in a contract to be made at specific times, based on a supplier‘s
progress in completing the job.

Proportional Rates
Applies only to a through traffic over a certain segment of the through rate.
Purchase Order Draft
An ordering technique that includes a bank draft as the bottom portion of the purchase
order form. When the order is shipped, the supplier enters the amount due for payment on
the draft and sends it to the bank for deposit.

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Quadrant Analysis
A method that compares value and risk displayed in graphical form. The x-axis depicts the
value of the purchase to the buying organization; the y-axis depicts the risk in the supply
market. The resulting matrix allows a buyer to place specific purchases in one of the four
quadrants based on the value and risk characteristics of the item (Bottleneck Purchases,
Strategic Purchases, Non-Critical Purchases, and Leverage Purchases).

Qualifying bid round

A qualifying bid round is used in auction to determine if there is enough vendor interest in
each lot prior to the actual auction.

Quick Response (QR)

A method designed to make the supply chain more efficient. Involves a partnership
between vendors and retailers, which reduces inventory levels and provides quicker and
more accurate response to customers‘ orders.

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Radio Frequency Identification (RFID)

An identifier system using small tags and readers that does not require line of site between
the tag and a reader because of the use of radio waves.

Raw Materials
Crude or processed material that can be converted by manufacturing, processing, or
combination into a new and useful product.

RDC
Regional Distribution Centre: a depot, warehouse or stockholding point used for the
distribution of goods to customers within any given regional boundary.

Receiving Dock
Distribution center location where the actual physical receipt of the purchased material
from the carrier occurs.

Reciprocity
If buyers give preference to suppliers because they are also customers, the buyers are
engaging in a practice known as reciprocity. This purchasing action is illegal if it tends to
restrict competition or trade or if it is coerced.

Reorder Point
The level at which a replenishment order is placed. This level is defined by the inventory
on hand plus on order less backorders, less committed stock.

Request for Information (RFI)

A solicitation document used to obtain general information about products, services, or
suppliers. It is an information request, not binding on either the supplier or the purchaser,
and is often used prior to specific requisitions for items.

Request for Proposal (RFP)

A solicitation document used to obtain offers of price and proposed method of execution of
a project.

Request for Quotation (RFQ)

A solicitation document used to obtain price offers for a specified product or service. These
are often a follow-up to an earlier Request for Information (RFI).

Reserve price
The reserve price is the price at which the decision to award will be made if it is reached.
The reserve price can be thought of as the target price.

Return on Assets
The difference between the revenue and cost levels associated with their fulfillment
systems and how it is related to the dollars invested in the fulfillment system.

Return on Sales
Financial measure calculated by dividing profit by sales.

Reverse auctions

Reverse Fulfillment
The process of bringing items back to the manufacturer, disposing of them, or repairing or
reconditioning them in the warehouse.

Review Interval
In a periodic review environment the inventory is reviewed at regular time intervals (like
once a week) and replenishment orders are placed at that time.

RFID – radio frequency automatic identification

A location and identification system using radio frequency signals that employs a
transceiver, antenna, and tag associated with a product and location to transmit data. The
systems do not require a direct line of sight or contact and can transmit at high speed, but
are more costly than other data collection technologies such as bar coding. RFID systems
are often used for inventory tracking in large warehouse and distribution center facilities.

Risk of Purchase
A factor in the supplier selection process; defines the level of marketplace difficulty.

RFx
Request for x, whereby x may equal I (Information) or P (Proposal).

Ro-Ro
A coastal vessel or ferry where truck trailer or lorries are driven on and off the vessel.

Routing and Scheduling

Process of determining how and when shipment(s) will move between origin and
destination(s). Routing involves selection of carrier(s) and the actual path to be taken.
Scheduling involves building routes and pickup/delivery timetables within the constraints
of estimated travel time enroute, customer mandated deadlines and operating hours, and
labor availability.

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S&OP
The Sales and Operations Process (S&OP) brings together a cross-functional team with
representatives from Sales, Marketing, Finance, and Manufacturing to coordinate supply
and demand and ensure alignment with the strategies or financial goals of the company.
The S&OP team develops a single company game plan to manage inventories, and
maximize investment returns and customer satisfaction. The team also helps ensure
integration between planning functions—demand, supply, and production planning—and
the different entities of the organization. Refer to Topic 5 in this module for in-depth
discussion.

Safety Stock
This inventory is a buffer against unanticipated emergencies, thus it is rarely used. In many
companies it is never used and thus is actually excess inventory. Often because of this when
it is needed, the safety stock is not Ready-for-Issue (RFI) and is declared obsolete and
disposed of with a financial write-off.

Safety Stock
A minimum quantity of stock carried in inventory in addition to the forecasted customer
requirements. Safety stock is meant to provide sufficient stock for emergencies,
unanticipated demand, or unforeseen delays.

Sanction
Punitive measures adopted by a country or a group of countries against another nation for
political reasons.
Scanner Data
Information gathered from scanning a bar code at the cash register. The information is used
to support decision-making such as allocation of advertising dollars, placement of
advertising, inventory control, amount of shelf space, pricing, placement of orders, and
timeliness of product delivery.

SCM
Supply Chain Management. The Contracting and Procurement organisation in Exploration
and Production.

Scorecard
A tool used to track and report performance on service contracts.

Scorecards
Tools used to track and report performance on contracts.

Sealed-bid tender process

Method of collecting prices by sending out an ITT to two or more vendors, requesting for
sealed bids against a specified contract scope.

Seamless Service
Achieved by minimizing any disruption caused by transferring customers between different
people, departments, or functions

Seasonality
Having to do with times of the year. In relation to fulfillment, some products are either
consumed seasonally (e.g. Christmas related items) or are produced seasonally (e.g.
pickles).

Second Earth Summit

A UN-organised meeting held in New York in 1997 to review progress in implementing
Agenda 21.

Self-Directed Team
A concept whereby groups supervise themselves rather than rely solely upon traditional
supervisory management.

Sensitivity Analysis
A technique used to model how defined factors respond to changes in the inputs.

Service Characteristics
The individual elements that make up the service provided to customers; e.g., reliability,
empathy, responsiveness
Service contract
Agreement that calls for a supplier‘s labor, time and/or effort, often coupled with
intellectual content, and some sort of method of ―delivery.‖

Service Deliverer
The person in an organization seen by the customer as giving the customer service. Even if
that person is part of a team, he or she is seen as the service deliverer and represents the
organization to that customer

Service Profit Chain

A concept that links employee capability and productivity to customer satisfaction and
loyalty, and thereby to the profit and growth of a business. It means that an organization
can achieve financial success by focusing on internal customer service and internal
processes, ultimately as a way of satisfying external customers

Service Provider
An organization or person that provides customer service

Service Recovery
Processes that turn dissatisfied customers into ambassadors for the organization; customer
retention is the goal. Processes can include a policy on returns, training in dealing with
angry customers, and systems for identifying and implementing improvements based on
customer complaints/feedback

Sheeted
A method of protecting and securing an open load on a vehicle. The load is placed on a
vehicle flatbed and then weatherproof sheets and ropes are used to secure the load.

Shortline Carriers
Provide service to smaller markets, handle local delivery service, and facilitate the interline
process. These organizations operate tracks and serve markets that the long haul carriers no
longer find profitable. They work with the long haul carriers in the same way that
commuter airlines work with transcontinental air carriers.

Side-loaded
The ability to load pallets or goods onto either side of a vehicle Such vehicles are often
used where it is necessary to make several deliveries on a given route but the order of those
deliveries is unknown.

Single sourcing
Single Sourcing is a method of collecting prices from one vendor only via negotiation.

Six Sigma
A statistical term that defines the highest level of quality. Six sigma standards have only 3.4
defects per million units of a product or service.
Small Package Carriers
Handle shipments up to 150 pounds and move multiple shipments on a single van or truck.
They use networks similar to LTL carriers to move freight efficiently throughout the
country. United Parcel Service (UPS) and FedEx Ground are the two largest small package
ground carriers in the country.

Smart Card
A plastic card resembling a credit card that includes an embedded chip that stores
information in encrypted form. It provides additional managerial and accounting controls.

Smoothing Constant
A parameter (in the range 0 to 1) used in exponential smoothing. The higher its value the
more weight is given to recent history in estimating the level of demand.

Solar energy
Energy from the sun.

Solar integration (Europe)

Integrating the production of solar energy into the European net.

Sourcing
The process of identifying suppliers that could provide needed products or services for the
acquiring organization.

Sourcing team
The practice of utilizing teams for strategic sourcing is a method in which individuals from
several departments (such as supply management, operations, engineering and finance)
pool their expertise to make sourcing analyses and decisions jointly.

Specifications/Statement of Work
The key method of communicating requirements and expectations for goods
(Specifications) and services (Statement of Work) both with internal users and to external
suppliers. Represents the first step in leveling the playing field.

Spend analysis
Identifying and examining separate parts of the total amount spent with external suppliers
for the purpose of identifying management, sourcing and cost strategies.

Spend categories
A way to split the total spend into component parts. The category describes the goods or
services purchased.

Square root law

A mathematical proposition that indicates that the size of the safety stock held in inventory
will grow in proportion to the square root of the number of locations at which the inventory
is kept.
Stakeholders
Within the context of this course: all parties with an interest in and/or influence on the
tender process.

Standard Industrial Classification (SIC)

Classification system that is being phased out.

Starting gate
When the starting gate is enables vendors who do not submit a valid bid that satisfies the
starting gate criteria will not see any market information in the auction.

Starting price
The highest first bid that a vendor can submit.

Statement of Work (SOW)

A statement outlining the specific services a contractor is expected to perform, generally
indicating the type, level and quality of service, as well as the time schedule required.

Stationary
A demand pattern is stationary if its average level does not depend upon the specific time
period.

Statistical Process Control (SPC)

A measuring methodology that uses the graphically displayed concept of upper and lower
levels as the acceptable boundaries of quality or performance and the actual quality or
performance is displayed as a ―snake-in-the-box‖ moving line, that is the Acceptable
Quality Levels (AQL).

Stock Availability
A measure of whether the product desired by the customer is available when ordered. Often
measured in ways similar to fill rate, but based on what customers would like to order.

Stock-keeping Unit (SKU)

Abbreviated SKU. A unique class of items. For example, a specific style, color, and size of
garment. May be distinguished by any number of characteristics that are relevant to the
business, so that specific inventories can be identified, monitored, and managed.

Stock-out Percentage
A percent of the units or orders that were not available when desired. It is a metric that
evaluates how often a customer's order is filled completely. It is the reverse of fill rate or
stock availability.

Straight Bill of Lading

Is consigned directly to the consignee and therefore is not negotiable. Accordingly, the
goods will usually be delivered by the carrier without surrender of this type of bill of
lading. A delivery receipt is used at the destination.
Supplier day
Usually an annual event whereby a company recognizes several of its key suppliers who
have either helped trim costs or gained efficiencies through joint process improvement.

Substitution
Two items are substitutes if an increase in the price of one raises the quantity demanded for
the other at every price.

Supplier-Managed Inventory (SMI)

Inventory management system that holds a supplier responsible for ensuring that stock is
maintained at appropriate levels in the purchaser‘s facility and for replenishing items when
these levels drop. Sometimes referred to as Vendor-Managed Inventory (VMI).

Supply Base
The group of suppliers from which an organization typically purchases items. Some
organizations minimize the number of suppliers in order to reduce the costs of qualifying
and maintaining large supplier bases.

Supply Base Management Strategy

The strategy an organization employs to manage the size and composition of its supply
base.

Supply Chain Management

Software systems that enable trading partners to collaborate over the Internet on all sorts of
eFulfillment planning activities related to demand, inventory management, fulfillment,
production scheduling, procurement, transportation, and more.

Sustainable Development
―Meeting the needs of the present generation without compromising the ability of future
generations to meet their needs.‖ (from the ‗Brundtland Report‘, 1987)

Sustainable Development Area on the PGN

The area on the PGN dedicated to Sustainable Development.

Sustainable Development objectives

The Sustainable Development objectives of the Contracting and Procurement organization.
They are (or should be) in line with the Sustainable Development objectives of the
organization as a whole.
Sustainable Development policies and procedures
The Sustainable Development policies and procedures of the Contracting and Procurement
organization. They are (or should be) in line with the Sustainable Development policies and
procedures of the organization as a whole.

Skeletal Chassis
A special ―skeleton-type‖ frame as the vehicle or trailer body. Comes with twist-lock
fittings for the carriage of ISO containers.

Systems Contracts
Effective methods to ensure the benefits of volume advantages and standards protection are
achieved and the speed and convenience of direct user ordering are also preserved.
Purchasing sources, selects, negotiates, and contracts with pre-qualified suppliers who
provide repeat and frequent materials and services. Those contracts, commonly called
systems contracts or blanket orders, allow the pre-approved user expedient ordering
capabilities (often paperless), within control levels of financial commitments. Common
systems contracts include clerical and office supplies, temporary and janitorial help, and
other low-risk, high-frequency requirements.

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Target Alignment Level

An expression of the target level to which the Sustainable Development principles are to be
incorporated in the steps making up the Contracting and Procurement process using a four-
point scale

Target Costing
An approach to identifying the allowable price for a supplier‘s product or service in which
the buying organization‘s analysis begins by determining the selling price for the end
product or service in the marketplace and subtracting out the required profit. The amount
remaining is the total that it can cost the organization to make that product or to perform
that service, including materials. This cost is allocated among purchases and internal costs,
with the result being the target cost for each item. Purchasing then works with suppliers to
ensure that their prices come in at or below the target cost. Further analysis and negotiation
then seeks to remove costs from both the buyer‘s and the seller‘s operations to reduce the
price to the acceptable target level.

Tendering
Tendering is the method of collecting prices from two or more vendors at the same time.
Two main ways to do this: (1) Online Bidding and (2) Sealed bid.

Terms and Conditions (T&C)

Factors that the buyer and supplier work out in initiating a relationship, such as length of
time the buyer has to pay the invoice, expected quality levels, lead times, delivery terms,
and transfer of title for goods.
The 7 Rights of Fulfillment
Seven "right" things to do to make the perfect order: 1. The right product 2. To the right
customer 3. At the right time 4. At the right place 5. In the right condition 6. In the right
quantity 7. At the right cost.

The OLB Guide

This guide provides you with all material you will need to successfully set up and run an
OLB event and to properly close out any OLB project. It contains detailed overviews of the
steps you will need to take, including several handy checklists.

Third-Party Logistics
Abbreviated as 3PL. Firms that provide a wide array of transportation services, as well as
warehousing, traffic management, inventory management, customer service, assembly
and/or other fulfillment services.

Third Party Logistics Providers

Originally, they were the transportation extension of the buyer, scheduling the pick-up of
materials in a sequence to allow just-in-time delivery directly to the plant work center. That
role is now a de facto purchasing agent for the company. In some cases, the 3PL gets a
copy of the master production schedule and weekly work center schedule. It is the 3PL who
notifies the suppliers of their requirements and required delivery dates, and then the 3PL
schedules the actual prioritized sequenced pick-ups. In more extreme cases, the 3PL
actually receives, approves, and pays the supplier for the materials (the buyer establishes a
sub-account with their paying bank for the 3PL to use).

Third-Party Warehouse
Warehouses owned by external companies that supply logistics services to other
companies.

Through Bill of Lading

Issued by a shipping company or its agent, covering more than one mode of transportation
or two or more carriers in a through movement.

Through Rate
The rates that would apply from origin to destination.

Tie Bid Rules

Tie bid rules determine whether or not vendors can submit matching bids. If you choose
yes, you must also specify if bids can match regardless of position in the auction or if bids
can only match when the tie is not the lowest bid.

Total Cost of Ownership (TCO)

This starts with cost analysis and is expanded to include a calculation of the costs that will
be incurred during ownership of the purchased item. It also includes analysis of the cost
drivers that influence the cost elements of the supplier's price and the ownership costs.
Total Cost View
Evaluating the cost of carrying inventory based on its impact on all the costs associated
with the supply chain as well as the service level provided to customers.

Total Landed Cost

See Landed Cost.

Total Quality Management (TQM)

A management approach to long-term success through customer satisfaction. TQM is based
on the participation of all members of an organization in improving processes, goods,
services and the culture in which they work. TQM is composed of a philosophy and the
supporting techniques. The philosophy of TQM includes focus on the customer, continuous
striving for improvement, a willingness to suspend judgment and really look at what is
happening, and a willingness to work from data rather than opinion.

Trackage
The right of one railroad company to use the track system of another, and the charge for
this right; also, railway tracks.

Traffic Management
The strategic, operational, and analytical activities undertaken in pursuit of providing
customers (internal and external) with high quality, profit enhancing freight transportation
service. Key activities include: contract and rate negotiation, mode and carrier selection,
routing and scheduling, claims management, performance analysis, and private fleet
administration.

Transload Freight
Includes goods that are handled and transferred between transportation equipment multiple
times. Transload freight primarily consists of bulk-oriented raw materials that must be
scooped, pumped, lifted, or conveyed from one container to another when transferred from
one mode to another. For example, orange juice concentrate may be picked up using a rail
tank car, pumped into the hold of a cargo ship for the linehaul move, then pumped into a
tank truck for final delivery.

Trailer-on-Flatcar (TOFC)
A rail-truck service in which a highway trailer is loaded onto a rail flatcar and transported
to an intermediary destination. At this point, a tractor picks up the trailer and delivers it to
the final destination. This is also called a ―piggyback‖ transportation service.

Transformation Auctions
Online Bidding auction format that allows you to compare technical (non-priced) offerings
that are not the same in a real time bid environment in addition to adjustment of any cost
differences. It allows for adjustments of bids to account for multiple quantifiable factors to
level the playing field for all of your vendors. (See also ‗Mathematical formulas‘)

Transformation Factors
Transformation bidding allows you to compare vendor offerings that are not the same, for
example, in terms of quality level or total cost factors such as transportation or scope
increases etc. You can assign transformation factors, multipliers and/or adders, to all bids as
a way to evaluate them equally. Transformations are applied according to the formula
y=mχ + c. Transformation factors are just normalizations or evaluations and they are the
same factors you would use in the evaluation model for your contract

Transit Time
The total time during which a shipment is in transit. Calculated as the difference in time
between when the product is shipped and when it is received by its intended recipient.

Transload Service
Goods that are handled and transferred between transportation equipment multiple times.

Transportation
The physical movement of people and goods between two points.

Transportation Data Coordinating Committee (TDCC)

A committee developed by the transportation industry charged with the task of developing
industry electronic data interchange standards.

Transportation Management System

A transportation support software tool to help with the execution of day-to-day
transportation operations. This software is used by companies to manage multiple aspects
of their transportation network. It can be used in the following areas: load planning and
building, carrier selection, freight cost calculation, shipment scheduling, and inbound and
intra-company shipments. For private fleets and carriers it can also be used for shipment
routing, delivery scheduling preparation, and labor resource planning.

Transshipment Cost
An expense incurred to transfer an item laterally (e.g., factory to factory, not distribution
center to factory). Transshipments affect inventory carrying costs.

Trend
One of the components in a mathematical model of a demand pattern. A decline or growth
(usually linear) of the average demand level with time.

Triangulation
An approach to pricing analysis that uses multiple sources together (e.g., the Internet,
internal sources and past bids), which increases the likelihood of getting the best price for
goods or services from a supplier.

Truckload
A shipment that fills a typical truck and which is transported intact from point-to-point on
that truck. There is typically a minimum weight charge for a truckload shipment, around
20,000 pounds.
Truckload (TL) Carrier
A for-hire carrier that only transports full truckloads, usually on a point-to-point basis.

Turnover
How often the average inventory is sold.

Twenty-Foot Equivalent Unit

Standardized unit for measuring container capacity on ships, railcars, etc. Acronym: TEU

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Uniform Computer Information Transactions Act (UCITA)

Act approved in July 1999 by the National Conference of Commissioners on Uniform State
Laws (NCCUSL) and expected to be enacted by several states to govern electronic
commerce transactions. Formerly known as Uniform Commercial Code (UCC) article 2b,
UCITA would apply to computer software, multimedia products, computer data and
databases, online information, and other such products.

Uniform Electronic Transactions Act (UETA)

List of guidelines adopted in a number of states that requires commercial or government
contract agreement on automated transactions, electronic signatures, electronic agents,
electronic records, and security. UETA was adopted in 1999 by the National Conference of
Commissioners on Uniform State Laws (NCCUSL).

Uniform Freight Classification

A listing of commodities showing the assigned class rate to be used in determining rail
freight rates, together with governing rules and regulations.

Uniform Motor Freight Classification

A listing of commodities showing the assigned class rate to be used in determining motor
freight rates, together with governing rules and regulations.

Unilateral
In the context of this course, unilateral means involving one country only.

United Nations Standard Product and Services Classification Code (UN/SPSC)

An eight-digit commodity code standard for classifying products and services for world-
wide use.

Unitization
Methods for increasing the amount of product that can be handled at one time. For
example, boxes can be combined, or unitized into a pallet.
Upstream
Principal direction of movement for customer orders which originate at point of demand or
use, as well as other flows such as return product movements, payments for purchases, etc.

Usage Rate
Measure of demand for product per unit of time (e.g., units per month, etc.).

U.S. Citizen
Citizenship is a complex legal issue and if in doubt you should check. In general terms a
U.S. citizen may be regarded as someone who is entitled to hold a U.S. passport.

US Jurisdiction
US jurisdiction deals with the legal power or right of a court in the US to determine
disputes and enforce remedies against a defendant in a lawsuit brought in its court, even
though the defendant may physically reside outside the US. That power exists where a non-
US defendant, by virtue of its activities within the US, has a sufficient connection with the
territory of the US. In such cases the defendant is deemed, in effect, to be present within the
US, and the exercise of such power by a US court over the defendant is, accordingly,
considered to be fair.

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Value Analysis (VA)

Value analysis and a companion technique called Value Engineering (VE) are structured
processes for idea generation and evaluation that are used to identify lower-cost product
and service designs. This ultimately leads to increased process efficiencies and reduced
costs.

Variable Costs
Vary directly with volume, and include items such as raw materials, components, and labor
used in production or to provide the service.

Variable Margin Pricing

A pricing strategy where suppliers sell some of their products at higher margins than other
products, based on what the market will bear.

Vendor
Term used to refer to both suppliers (goods) and contractors (services).

Vendors
Within the context of this course, ‖vendors‖ refers to both suppliers (materials) and
contractors (services).
Vertical Integration
When a business takes on more and more control of its operations, such as buying a fleet of
trucks and distributing the products itself.

Vision
A statement describing where an organization aspires to be in the future. It may, for
example, describe how the organization sees itself over a period of two or five years if
everything goes to plan

Voluntary Interindustry Commerce Standards (VICS)

A voluntary, non-profit organization that establishes cross-industry standards to simplify
the flow of product and information in the general merchandise retail industry.

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Wafer
A small thin flat circular disk of a semi-conducting material, such as pure silicon, that is
prepared for separation into numerous individual electronic devices or for packaging as an
integrated circuit.

Warehouse
A facility whose principal role is to provide storage for inventory. Must also provide a
means to receive, pick, and ship products and may perform other services, as well.

Warehouse Management System

Abbreviated WMS. Software used in a warehouse or distribution center. Coordinates and
directs almost all aspects of facility operations, including receiving, product put away,
location of storage areas, order picking, bill of lading preparation, electronic data
interchange with trading partners, and inventory tracking.

Weight Computed
In order to qualify for a reduced or special weight or if the cube of the shipment is very
high, the weight used to compute freight charges may be higher than the actual rate.

Weight, Gross
Total combined weight of the article, container, and packing material.

Weight, Net
Weight of the contents of a container or the cargo of a vehicle.

Weight, Tare
Combined weight of an empty container and packing materials.

Weighted-Point Method
A very formal method of evaluation that allows buyers/purchasers to assign different levels
of importance (weights) to the various decision criteria. Typically, formal evaluations
include three key components to compute a total score (decision criteria, weight, and rating
scale).

Weight-to-Bulk Ratio
Indicates how much space a product takes up compared to its weight and its density,
commonly measured as pounds per cubic foot. One of several characteristics (like
susceptibility to damage, loadability, handling characteristics) that define a product's
"freight class," an index used to set transportation rates.

Work Breakdown Structure (WBS)

Project management term to describe document that shows the entire hierarchy of project
operations required to accomplish project objectives.

World Commission on the Environment

The committee that produced the Brundtland Report.

World Trade Organization (WTO)

International organization with the purpose of reducing trade barriers among countries.
WTO is the successor to general agreement on trade and tariffs (GATT).

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YPF
Yacimientos Petrolíferos Fiscales, an oil company based in Argentina.