DEFINITIONS

ABC inventory

The classification of a group of items in decreasing order of annual dollar volume (price multiplied by projected volume) or other criteria.  This array is then split into three classes, called A, B, and C.  The A group usually represents 10% to 20% by number of items and 50% to 70% by projected dollar volume.  The next grouping, B usually represents about 20% of the items and about 20% of the dollar volume.  The C class contains 60% - 70% of the items and represents about 10% to 30% of the dollar volume.  The ABC principle states that effort and money can be saved through applying looser controls to the low-dollar-volume class items than will be applied to high-dollar-volume class items.  The ABC principle is applicable to inventories, purchasing, sales, etc. 

Activity based COST accounting (ABC accounting)

A cost accounting system that accumulates costs based on activities performed and then uses cost drivers to allocate these costs to products or other bases, such as customers, markets, or projects.  It is an attempt to allocate overhead costs on a more realistic basis than direct labor or machine hours.

Balanced Scorecard^TM (BSC) 

A list of financial and operational measurements used to evaluate organizational or supply chain performance.  The dimensions of the balanced scorecard might include customer perspective, business process perspective, financial perspective, and innovation and learning perspectives.  It formally connects overall objectives, strategies, and measurements. Each dimension has goals and measurements.

Customer Relationship Management (CRM)

A realignment and focus upon customers who are profitable and fit within the overall strategy.  Customer categorization according to expected and appropriate service levels established.  

JASPERSOLUTIONs PYRAMID TO IMPROVING SUPPLY CHAINS

KANBAN

A method of Just-in-Time production that uses standard containers or lot sizes with a single card attached to each.  It is a pull system in which work centers signal with a card that they wish to withdraw parts from feeding operations or suppliers.  The Japanese word kanban loosely translated, means card, billboard, or sign.  The term is often used synonymously for the specific scheduling system developed and used by the Toyota Corporation in Japan. 

KAIZEN

The Japanese term for improvement; continuing improvement involving everyone- managers and workers.  In manufacturing, kaizen relates to finding and eliminating waste in machinery, labor, or production methods.

LEAN MANUFACTURING

A philosophy of production that emphasizes the minimization of the amount of all the resources (including time) used in the various activities of the enterprise.  It involves identifying and eliminating non-value-adding activities in design, production, supply chain management, and dealing with the customers. Lean producers employ teams of multi-skilled workers at all levels of the organization and use highly flexible, increasingly automated machines to produce volumes of products in potentially enormous variety.  It contains a set of principles and practices to reduce  cost through the relentless removal of waste and through the simplification of all manufacturing and support processes.  

LOGISTICS

The art and science of obtaining, producing, and distributing material and product in the proper place and in proper quantities.

PROCESS 

A planned series of actions or actions or operations (e.g., mechanical, electrical, chemical, inspection, test) that advances a material or procedure from one stage of completion to another.  2) A planned and controlled treatment that  subjects materials or procedures to the influence of one or more types of energy (e.g., human, mechanical, electrical, chemical, thermal) for the time required to bring about the desired reactions or results.

SALES AND OPERATIONS PLANNING (S&OP)

A process to develop tactical plans that provide management the ability to strategically direct its businesses to achieve competitive advantage on a continuous basis by integrating customer-focused marketing plans for new and existing products with the management of the supply chain.  The process brings together all the plans for the business (sales, marketing, development, manufacturing, sources, and financial) into one integrated set of plans.  It is performed at least once a month and is reviewed by management at an aggregate (product family) level.  The process must reconcile all supply, demand, and new-product plans at both the detail and aggregate levels and tie to the business plan.  It is the definitive statement of the company’s plans for the near to intermediate term covering a horizon sufficient to plan for resources and to support the annual business planning process.  Executed properly, the sales and operation planning process links the strategic plans for the business with its execution and reviews performance measurements for continuous improvement.

SCOR MODEL

The Supply-Chain Operations Reference-model (SCOR) is a process reference model that has been developed and endorsed by the Supply-Chain Council as the cross-industry standard diagnostic tool for supply-chain management. SCOR enables users to address, improve, and communicate supply-chain management practices within and between all interested parties.

SCOR is a management tool. It is a process reference model for supply-chain management, spanning from the supplier’s supplier to the customer’s customer. The SCOR-model has been developed to describe the business activities associated with all phases of satisfying a customer’s demand. By describing supply chains using process building blocks, the Model can be used to describe supply chains that are very simple or very complex using a common set of definitions. As a result, disparate industries can be linked to describe the depth and breadth of virtually any supply chain. The Model has been able to successfully describe and provide a basis for supply chain improvement for global projects as well as site-specific projects.

SIX SIGMA

A term used generally to indicate that a process is well controlled, i.e., tolerance limits are 6 sigma from the  centerline in a control chart.  The term is usually associated with Motorola, which name one of it key operational initiatives Six Sigma Quality.

SUPPLY CHAIN (SC)

The integration of suppliers, manufacturers, warehouses, and stores, so that products and services are produced, distributed, and returned at the right quantities, to the right locations and at the right time.  The goal of this integration of otherwise independently run organizations is to minimize system-wide costs while satisfying the end customer.

SWOT analysis

An analysis of the strengths, weaknesses, opportunities, and threats of and to an organization.  SWOT analysis is useful in developing strategy.

TOTAL QUALITY MANAGEMENT (TQM)

A term coined to describe Japanese- style management approaches to quality improvement.  Since then, total quality management (TQM) has taken on many meanings.  Simply put, TQM is 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.  The methods for implementing this approach are found in teachings of such quality leaders as Philip B. Crosby, W. Edwards Deming, Armand V. Feigenbaum, Kaoru Ishikawa, J.M. Juran, and Genichi Taguchi.

Work in Progress (WIP)

A good or goods in various stages of completion throughout the plant, including all material from raw material that has been released for initial processing up to completely processed material awaiting final inspection and acceptance as finished goods inventory.  Many accounting systems also include the value of semifinished stock and components in this category.