Term
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Definition
| Similar to an LTA – An agreement as to terms, price, etc. under which specific requirements for shipments can be requested from time to time as needed |
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Term
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Definition
| the tendency of demand volumes to become more variable (larger peaks and valleys in demand volume ) as you go upstream from the retailer to the distributor, then to the manufacturer and raw materials providers. |
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Definition
| Manufacturing performed under contract by other companies who simply sell the service of fabricating parts or performing assembly. The firm whose brand name goes on the product may use several contract manufacturers for the same parts and assemblies. Likewise, contract manufacturers may produce items for several different customers whose brand name will end up on the product. Some firms may have their entire product produced by contract manufacturers |
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Term
| Diminishing Manufacturing Sources |
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Definition
| the problem of finding suppliers for components when those components have become obsolete long before the end of the use of the product by customers. Big problem with software and electronics in long-use products like factory equipment, buildings, airplanes, etc. Example – It requires about 10 years to design and test a new military airplane. During that time, software and electronics technology turns over 3 times. |
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Definition
| humanitarian movement which seeks such goals as higher worker wages, safer working conditions, stopping use of child or slave labor, and environmental protection at suppliers in developing nations. |
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Term
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Definition
| a product, such as a can of soup, having predictable demand, high volume with low profit margins per item, few product variations. Stockouts are not a big issue because demand is predictable based on history. Excess inventory is not a big issue because of predictable demand and long product lifetimes. Functional products should be produced/distributed using efficient supply chains whose focus is low unit costs |
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Term
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Definition
| a product, such as a pair of designer fashion sunglasses, having highly unpredictable demand, with low volumes but large profit margins per unit. The costs of having stockouts are significant because of the lost profit margins per unit. The costs of having excess inventory are significant because these products are quickly out of style or obsolete. Unit costs are not a big issue because of the large profit margins per unit. Innovative products should be produced/distributed using responsive supply chains that can react quickly to actual demand. |
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Term
| Long Term Agreement (LTA) |
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Definition
| A document signed by a company and a supplier in which the supplier and the company agree to terms, conditions, price, etc. over an extended time horizon into the future. Specific purchase orders still have to be issued as items are required, but the price, terms, etc. have already been agreed to in the LTA. |
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Term
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Definition
| - in the traditional 3-way match process, attempts to match up the information from the Purchase Order (PO), invoice sent you by the supplier, and receiving report which your employees filled out when the items arrived. If these 3 things agree, then Accounts Payable pays the supplier for the items received. |
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Term
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Definition
| The decision to make or else purchase something. This decision may be driven by strategic issues, capacity issues, market pull issues, or emergencies caused by down equipment. |
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Term
| MRO (Maintenance, Repair, Operations) |
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Definition
| Non-production items used for activities such as maintenance, repair, cleaning, etc. |
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Term
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Definition
| Purchased material that does not end up part of a production BOM. Examples would include office supplies, shop and maintenance supplies, etc. Similar in meaning to the terms ‘indirect’ or ‘horizontal’. |
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Term
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Definition
| Taking production work performed in your company and giving this work to suppliers. |
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Term
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Definition
| Purchased material that ends up part of a production BOM. Similar in meaning to the terms ‘direct’ or ‘vertical’ |
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Term
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Definition
| A formal legal authorizaton from a purchaser to a supplier for the supplier to provide material. The PO will specify information like part number, quantity wanted, date wanted, terms & conditions, how/when paid, etc. The PO may either be a paper document, or electronic as in EDI. |
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Term
| Purchase Requisition (PR) |
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Definition
| A request from a using organization to the purchasing organization to purchase a specified item, in a specified amount by a specified date. The buyer then takes the PR information, finds a supplier source if one does not already exist, and issues a PO. |
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Term
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Definition
| A document created by your employees at the receiving dock that says you received a shipment, having a certain quantity and condition, on a certain date in time. The receiving report goes to Accounts Payable. |
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Term
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Definition
| A document from a company to prospective suppliers asking for a price. The company issuing the RFQ must provide all necessary information about the scope of work to be priced, schedule dates, etc. |
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Term
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Definition
| practices in buying and selling goods which, while not capable of being proved illegal in a court of law, are still unfair, unethical, and dishonest in their intent |
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Term
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Definition
| A potential or actual supplier of something. |
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Term
| Supply Chain Operations Reference (SCOR) Model |
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Definition
| A framework of supply chain processes and best practices defined by the Supply Chain Council. The five overarching processes are Plan, Source, Make, Deliver, and Return. |
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Term
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Definition
| The extent to which a company produces its entire product bill-of-material. The extreme case of vertical integration was seen by Ford Motor Co. in the early years when they owned the rubber plantations which provided rubber for the tires, the ore mines from which the raw iron ores came for the body components, etc. Advances in communication and information technologies have allowed companies to be far less vertically integrated, and focus only on core competencies. The extreme case is that a company is a virtual manufacturer only, using contract manufacturers to produce all parts and assemblies. |
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Term
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Definition
| – supplier is responsible for tracking inventory levels at their customer’s location(s) and providing more supply when needed. In some cases, the supplier is not paid for their materials in stock at their customer’s location until their customer uses or sells the items. |
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