Introduction
The logistics world is full of jargon. For those who work with transportation, warehousing or inventory management on a daily basis, terms such as JIT, SKU or ERP are cut and dry. But even if you are indirectly involved in supply chain processes, it is valuable to understand these terms. Therefore, in this blog you will find a clear overview of 100 frequently used terms within Supply Chain Management (SCM). Practically explained, so you always know exactly what it’s about.
The complete overview of 100 SCM terms
I have divided the terms into clear categories. This helps to see connections between processes, systems and strategies within the chain.
1. Basic concepts in supply chain management
- Supply Chain: The entire chain from raw material to end customer.
- SCM (Supply Chain Management): Managing the flow of goods, services and information within the supply chain.
- Logistics: The organization of storage and transportation.
- Procurement: The process of purchasing goods and services.
- Sourcing: selecting and evaluating suppliers.
- Lead Time: The time between ordering and receiving goods.
- Just-in-Time (JIT): Inventory strategy in which goods are delivered only when they are needed.
- Inventory: All the goods a company has in stock.
- Inventory Turnover: How often inventory is sold and replenished in a given period.
- Safety Stock: Extra stock to prevent shortages.
2. Inventory management and order processing
- Stock Keeping Unit (SKU): Unique code for a specific product.
- Demand Forecasting: predicting future customer demand.
- Capacity Planning: Estimate of production capacity needed.
- Bill of Materials (BOM): List of materials and parts for a product.
- Supply Chain Visibility: Understanding the location and status of products in the chain.
- Distribution: delivering products to the customer.
- Distribution Center (DC): warehouse that stores and distributes products.
- Fulfillment: the processing and shipping of customer orders.
- 3PL (Third-Party Logistics): External party providing logistics services.
- 4PL (Fourth-Party Logistics): External party that manages the entire chain.
3. Transportation and infrastructure
- Reverse Logistics: return process from customer to vendor.
- Cross-Docking: Goods are transferred directly without storage.
- Freight: transportation of goods in bulk.
- Carrier: Carrier that transports goods.
- Freight Forwarder: Intermediary who organizes shipments.
- LTL (Less than Truckload): Cargo that does not fill an entire truck.
- FTL (Full Truckload): Cargo that utilizes an entire truck.
- Load Planning: loading freight as efficiently as possible.
- Transportation Management System (TMS): transportation management software.
- Warehouse Management System (WMS): warehouse management software.
4. Supply chain planning and analysis
- Order Management: processing customer orders.
- Supply Chain Network: All the links and partners within a supply chain.
- Vendor Managed Inventory (VMI): Supplier manages your inventory.
- ABC Analysis: Classification of stock by value and importance.
- Economic Order Quantity (EOQ): Ideal order size for minimum cost.
- Minimum Order Quantity (MOQ): Smallest quantity that can be ordered.
- On-Time Delivery (OTD): Percentage of deliveries that arrive on time.
- Order Lead Time: Time between order placement and delivery.
- Outsourcing: outsourcing work to external parties.
- Risk Management: Recognizing and managing risks.
5. Collaboration and digitization
- Supplier Relationship Management (SRM): Supplier Relationship Management.
- Supply Chain Resilience: Resilience of the chain to disruptions.
- Supply Chain Integration: Coordination between links in the chain.
- Collaborative Planning, Forecasting and Replenishment (CPFR): joint planning between partners.
- EDI (Electronic Data Interchange): Electronic exchange of documents.
- Blockchain in SCM: Technology for transparency and traceability.
- Incoterms: International agreements on delivery responsibilities.
- Total Cost of Ownership (TCO): Total cost of acquisition and use.
- Kaizen: Continuous improvement of processes.
- Lean Manufacturing: Production with the least possible waste.
6. Quality and flexibility
- Six Sigma: Quality improvement methodology.
- Agile Supply Chain: Flexible chain that responds quickly to change.
- Cold Chain: Conditioned chain for perishable goods.
- Green Logistics: Sustainable logistics processes.
- Order-to-Cash (O2C): From order to payment.
- Procure-to-Pay (P2P): From purchase requisition to payment.
- Supply Planning: Planning the required supply chain capacity.
- Demand Planning: Planning based on expected customer demand.
- Advanced Planning and Scheduling (APS): advanced planning software.
- SCOR Model: Reference model for supply chain performance.
7. Performance and stock types.
- KPI (Key Performance Indicator): Measure of performance.
- Fill Rate: Degree to which customer demand is met.
- Cycle Counting: periodic control of inventory.
- Dead Stock: unsalable stock.
- Obsolete Inventory: Obsolete inventory.
- Perpetual Inventory: Inventory system that continuously updates.
- Physical Inventory: Manual inventory.
- Lot Tracking: Track inventory by lot.
- Serialized Inventory: Inventory tracked by serial number.
- Order Cycle Time: Time between order receipt and shipment.
8. Systems and processes
- Distribution Requirement Planning (DRP): inventory planning for distribution.
- Material Requirement Planning (MRP): material requirement planning.
- ERP (Enterprise Resource Planning): Software for business processes.
- SCM Software: Digital tools for supply chain management.
- Capacity Utilization: ratio of used to available capacity.
- Total Quality Management (TQM): Organization-wide quality approach.
- Kitting: bundling items into a shipping-ready set.
- Drop Shipping: Supplier delivers directly to customer.
- Transportation Mode: Method of transportation such as air, sea or road.
- Inbound Logistics: flow of goods towards the company.
9. Distribution and international trade
- Outbound Logistics: Flow of goods towards the customer.
- Forward Logistics: Normal flow of goods from producer to customer.
- Omnichannel: Seamless experience across multiple sales channels.
- Track and Trace: Tracking shipments in real time.
- Customs Clearance: clearing goods at customs.
- Harmonized System (HS Code): Global coding for commodity classification.
- Freight Bill: Invoice for transportation services.
- Proof of Delivery (POD): confirmation that delivery has been received.
- Tariff: Tax on imported goods.
- Free Trade Agreement (FTA): trade treaty between countries.
10. Stock triggers and e-commerce
- Reorder Point: Stock level at which to reorder.
- Bullwhip Effect: Fluctuations in demand lead to greater inventory fluctuations.
- Demand Variability: Changes in customer demand.
- Containerization: use of standard containers in transportation.
- E-commerce Fulfillment: Logistics for online orders.
- Omni Inventory: Stock visibility across all sales channels.
- Service Level Agreement (SLA): Agreements about the service to be provided.
- Net Requirements: Stock required after corrections.
- Master Production Schedule (MPS): scheduling of finished products.
- Last Mile Delivery: final part of the delivery process to the customer.
Closing
Whether you work operationally in logistics or are responsible for strategic supply chain decisions, these terms help you communicate better, improve in a more focused way and work more efficiently. Want to know how we concretely apply these terms in our services? Feel free to contact us – we’d love to think with you.