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“Introduction to Supply Chain Analytics using Microsoft Excel”

Glossary of Terminology
The Manufacturing Academy, 2024

ABC Analysis: A method for categorizing inventory items based on their importance, typically using
categories like A (high importance), B (moderate importance), and C (low importance).

Aggregate Planning
A high-level plan for production, inventory, and workforce levels that balances supply and demand
over a medium-term horizon.

Algorithm
A step-by-step procedure for calculations and problem-solving, often used in data analysis and
decision-making.

ANOVA (Analysis of Variance)

A statistical method to determine if there are significant differences between the means of multiple
groups.

Benchmarking: The process of comparing processes, practices, or performance metrics to

industry standards or best practices.

Bill of Materials (BOM)

A comprehensive list of raw materials, components, and instructions required to manufacture a
product.

Capacity Planning
The process of determining the production capacity needed to meet demand.

Central Limit Theorem

A principle stating that the distribution of sample means approximates a normal distribution as the
sample size increases.

Coefficient of Determination (R²)

A statistical measure indicating how well data fit a regression model, showing the proportion of
variance explained.

Constraint
A restriction or limitation in a mathematical model or supply chain process that must be met.

Constraint-Based Modeling: A type of mathematical modeling that incorporates limitations or

constraints in order to optimize certain objectives, like minimizing costs or maximizing output.

Correlation
A measure of the relationship between two variables, indicating whether they move together or
independently.

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Cost-Benefit Analysis: An assessment that compares the costs and benefits of a decision or
project, used for evaluating the potential return on investment.

Critical Path Method (CPM)

A project management technique that identifies the sequence of critical tasks determining the
project duration.

Cycle Time
The time required to complete one cycle of a process, from start to finish.

Data Cleaning
The process of identifying and correcting or removing inaccurate, incomplete, or irrelevant data.

Data Visualization
The graphical representation of data to reveal trends, patterns, and insights.

Decision Tree
A graphical model used to visualize decision-making processes and possible outcomes.

Demand Forecasting
Predicting future demand for products or services to guide inventory and production planning.

Dependent Demand
The demand for items directly related to the production of another item, such as components for
assembly.

Descriptive Analytics
The analysis of historical data to understand past trends and performance.

Economic Order Quantity (EOQ)

An inventory management formula for determining the optimal order quantity to minimize total
inventory costs.

Exponential Smoothing
A forecasting technique that applies weighted averages of past data to predict future values.

Facility Layout
The arrangement of equipment, machines, and work areas in a production setting to optimize
workflow and efficiency.

Factor Analysis
A statistical method used to identify underlying relationships among variables.

Failure Mode and Effects Analysis (FMEA)

A risk assessment tool used to identify potential failure points and assess their impact.

FIFO (First In, First Out)

An inventory method where the oldest items are used or sold first.

Forecast Accuracy
The degree to which a forecast matches actual demand, often measured as a percentage.

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Gantt Chart
A type of bar chart used in project management to display project timelines and progress.

Histogram
A graphical representation of data distribution, showing frequencies of different ranges of values.

Heuristic: A problem-solving approach that finds a good-enough solution using trial-and-error,

often applied when exact solutions are too time-consuming.

Independent Demand
Demand for items not related to the production of other items, like finished goods sold directly to
customers.

Inferential Statistics
Methods used to make predictions or inferences about a population based on sample data.

Inventory Turnover
A measure of how often inventory is sold or used within a specific time period.

Just-in-Time (JIT)
An inventory strategy to increase efficiency by receiving goods only as they are needed in
production.

Kaizen
A Japanese term for continuous improvement, often applied to quality and productivity
improvements.

Key Performance Indicator (KPI): A measurable value that indicates how effectively a company or
department is achieving its key business objectives.

Kurtosis
A measure of the "tailedness" of a distribution, indicating the extremity of values within a dataset.

Lead Time
The time between the initiation of a process and its completion, such as order placement to
delivery.

Linear Programming
A mathematical technique used to optimize decision-making with linear relationships and
constraints.

Load Balancing: Distributing work or resources evenly across machines or processes to maximize
efficiency and minimize bottlenecks.

Logistics
The management of the flow of goods, services, and information between origin and consumption
points.

Machine Learning
The study of algorithms that allow computers to learn from and make predictions on data.

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MAD (Mean Absolute Deviation)

A measure of forecast accuracy, calculating the average absolute differences between forecast
and actual values.

Manufacturing Resource Planning (MRP II)

An integrated method for planning all resources in a manufacturing organization.

Marginal Analysis
Evaluating the cost or benefit of producing or consuming one additional unit.

Material Requirements Planning (MRP)

A system for calculating the materials and components needed to produce a product.

Mean
The average value of a set of numbers, calculated by dividing the sum of all values by the count.

Median
The middle value in a dataset when the values are arranged in ascending or descending order.

Mode
The value that appears most frequently in a dataset.

Monte Carlo Simulation: A technique that uses random sampling to model the impact of risk and
uncertainty in forecasting and decision-making.

Moving Average
A forecasting technique that calculates the average of a set number of past data points to smooth
fluctuations.

Multicollinearity
A condition in regression analysis where independent variables are highly correlated, affecting
reliability.

Network Optimization: Techniques and models that seek to optimize the flow of materials and
goods through a supply chain network.

Nonparametric Statistics
Statistical methods that do not assume a specific distribution for the data.

Normal Distribution
A symmetric, bell-shaped distribution where most values cluster around the mean.

Objective Function
A function in mathematical programming that represents the goal to optimize, such as minimizing
costs.

Optimization
The process of making a system or decision as effective or functional as possible.

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Outlier
An observation significantly different from others in a dataset, often investigated for errors or
insights.

Pareto Principle
The 80/20 rule, stating that 80% of effects often come from 20% of causes, applied in quality and
resource management.

PERT (Program Evaluation and Review Technique)

A project management tool for planning and scheduling complex tasks, accounting for
uncertainties.

Poisson Distribution
A probability distribution used to model the number of events occurring in a fixed interval of time or
space.

Prescriptive Analytics
The use of models and data to determine optimal actions and decision-making strategies.

Process Capability
A measure of how well a process can meet specification limits, typically measured by indices like
Cp and Cpk.

Product Life Cycle

The stages a product goes through, from development and introduction to decline and
obsolescence.

Production Planning
The process of organizing production activities to ensure efficient use of resources and timely
output.

Profit Margin
A measure of profitability, calculated as net income divided by revenue, often expressed as a
percentage.

Quality Assurance
Activities focused on ensuring a product or service meets a certain standard of quality.

Regression Analysis
A statistical technique used to understand the relationship between variables and predict future
outcomes.

Reorder Point
The inventory level at which a new order should be placed to avoid stockouts.

Risk Management
The process of identifying, assessing, and controlling risks to minimize their impact on operations.

Root Cause Analysis

A problem-solving method for identifying the fundamental cause of an issue.

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Safety Stock
Extra inventory held to prevent stockouts due to demand variability or supply delays.

Sampling
The process of selecting a subset of individuals or items from a larger population to estimate
characteristics.

Seasonality
Patterns in data that repeat over specific time periods, often analyzed in demand forecasting.

Service Level
A metric that measures the performance of an inventory or service system in fulfilling demand.

Simulation
A technique for modeling complex systems to observe outcomes under different scenarios.

Single-Minute Exchange of Die (SMED): A lean manufacturing technique that reduces setup or
changeover time to less than 10 minutes, increasing flexibility.

SKU (Stock Keeping Unit)

A unique identifier for each distinct product item, used in inventory management.

Solver
An Excel tool for performing optimization and solving complex equations within constraints.

SPC (Statistical Process Control)

A method of using statistical tools to monitor and control a process.

Standard Deviation
A measure of the spread or dispersion of data around the mean.

Stockout
A situation where demand cannot be met due to insufficient inventory.

Supply Chain
The interconnected network of suppliers, manufacturers, and distributors involved in producing
and delivering a product.

Sunk Cost
A cost that has already been incurred and cannot be recovered.

Theory of Constraints (TOC): A management approach focused on identifying and managing

bottlenecks that limit overall performance.

Time Series Analysis

A statistical technique for analyzing data collected over time to identify trends, patterns, and
seasonality.

Total Quality Management (TQM)

A management approach focused on continuous improvement of processes, products, and
services.

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Trend
A general direction in which data points move over time, often observed in time series analysis.

Turnover Rate
The rate at which inventory is sold or used in a given period.

Value Stream Mapping (VSM): A lean tool that visualizes the steps in a process to identify waste
and improve flow.

Variance
A measure of the spread between numbers in a dataset, showing how much the data vary from the
mean.

WACC (Weighted Average Cost of Capital)

The average rate of return a company is expected to pay its investors, weighted by each capital
component.

Warehouse Management System (WMS)

Software designed to optimize and control warehouse operations, such as inventory tracking and
order fulfillment.

Work in Progress (WIP)

Inventory that is in the production process but not yet completed.

What-If Analysis: A technique for assessing the effects of hypothetical scenarios on outcomes,
commonly used in Excel for decision support.

Yield
The percentage of units produced that meet quality standards, used as a measure of process
effectiveness.

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