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.

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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.