Glossary – Optimizing the Supply Chain


Ad valorem taxes. Latin for “according to value,” a tax based on the assessed value of an item (most often real estate or personal property).

Cash-to-Cash Cycle. The period of time between when a company spends a dollar on purchases from a supplier until it becomes a dollar of revenue from the customer. The shorter that timeframe, the better.

Cash-to-Cash Method. A way of improving a company’s financial health focusing on three main elements. Running the Business, Optimizing the Supply Chain, and Building a Productivity Machine.

Cross-functional Team. A group of employees from all levels of an organization with different skills and expertise working toward a common goal.

C-TPAT (Customs Trade Partnership Against Terrorism). Launched in 2001, C-TPAT is a voluntary, U.S. Customs and Border Protection (CBP) trade partnership program in which CBP and members of the trade community work together to secure and facilitate the movement of legitimate international trade.

EDI Transmissions. Electronic Data Interchange; businesses communicating documents, such as purchase orders or invoices, electronically in a standardized format.

Employee Churn. Employee turnover within a company, the hiring of new employees to fill the positions as current employees move out of the company.

End-to-end Process (End-to-end Cycle). All tasks or steps of a process (cycle), from beginning to end that are required to complete the process.

ERP (Enterprise Resource Planning). A process of business management, often facilitated by software, where data from core activities are collected, stored, and interpreted.

Export Control Classification Number (ECCN). A U.S.-based alphanumeric coding system used to identify dual-use items (items that have both potential civilian uses and conventional weapons-related end-uses) for export control purposes.

Gamesmanship. Use of ethically questionable methods, without violating rules or contracts, to gain an advantage or achieve a desired outcome.

HS Codes. The Harmonized Commodity Description and Coding System, a standardized system of numbers used internationally to classify traded products.

Just in Time (JIT). An inventory strategy where each step makes what is needed, when it’s needed, for the next step so the production process works in a continuous flow.

Kaizen. A Japanese productivity philosophy that involves all employees and focuses on deliberate, continuous, and constant improvements to all processes and practices in order to eliminate waste and improve efficiency and quality.

Kanban. A technique used to instruct the frequency and timing of delivery of materials, components, or products from one operation to the next; the following production process withdraws only the parts it needs, in the necessary quantity, when it needs them—the preceding process only produces parts that will be consumed by the following process.

Master Production Scheduling (MPS). A process used to plan the manufacturing of products during a certain period. The plan specifies when and in what amounts items will be produced, as well as inventory, staffing levels, and other resources required for each time period.

Mercosur. A South American trade bloc (group of countries engaging in international trade) established in 1991; includes Argentina, Brazil, Paraguay, Uruguay, and Venezuela (suspended) as full members.

Milk Run Pickups. A disciplined delivery method involving the sequential collection/distribution of goods with predetermined terms (number of suppliers, available volume and weight, and time window for collection/delivery) set by the customer/service provider and no handling of goods beyond transport.

Nine (9) Block. A method of evaluating employees, based on performance and a pre-established set of business values.

North American Free Trade Agreement (NAFTA). A North American trade bloc (or group of countries engaging in international trade) established in 1993; includes Canada, Mexico, and the United States as members.

NUMMI (New United Motor Manufacturing, Inc.). Established in 1984 as a joint venture between Toyota and General Motors in Fremont, California.

Product Rationalization. Reducing the number of products sold to enable more investments in the products that make higher profits.

Push-and-Pull Processes. In a push system of production the MRP looks at the schedule to determine what to produce next. Conversely, a pull system looks at the next stage of production to determine what is needed—and only produces what is needed.

Sales Inventory and Operations Planning (SIOP). The process that brings a business together to create a forward-looking 12- to 18-month plan that aligns functions and makes decisions on how to optimize resources, as well as how to achieve the goals of the business

Sarbanes–Oxley. Referring to the Sarbanes–Oxley Act of 2002 (SOX); a U.S. federal law, created in response to several major corporate accounting scandals, containing 11 sections outlining reforms including responsibilities of a public corporation’s board of directors, criminal penalties for misconduct, and Securities and Exchange Commission regulations defining how public corporations are to comply with the law.

Scope Creep. In project management, scope creep refers to changes and continuous or uncontrolled growth in a project’s scope, at any point after the project begins. This can occur when the requirements of a project are not properly defined, documented, or controlled.

Six Sigma. A method of quality control using a set of management techniques and tools to improve business processes. Improvements are made by identifying and reducing the causes of an error or defect and minimizing variation in production. The approach has been proven to create a more predictable business processes, significant money savings, and increased customer satisfaction.

Stage Gate Review Process. A project management process used for moving a new product/service from idea to launch in which the process is broken down into predetermined stages divided by decision points (or “gates”), a roadmap for a new product to help manage the project and increase efficiency.

Statistical Process Control (SPC). A quality control method using statistics and data to monitor the manufacturing process with a focus on early detection and prevention of issues to help assure maximum efficiency, less waste, and reduction in production time.

Takt Time. The average time between the start of production of one unit and the start of production of the next unit.

The 5 Whys. A problem-solving technique used to determine the root cause of an issue by repeatedly asking the question “Why.”

Total Acquisition Cost (TAC). A managerial accounting concept that includes all the costs associated with buying goods, services, or assets. Generally, it is the net price plus other costs needed to purchase the item and get it to the point of use.

Toyota Production System (TPS). Toyota Motor Corporation’s vehicle production system. It is based on the philosophy of conserving resources and eliminating waste and the practice of using the most efficient methods of producing vehicles of high quality. The TPS is based on two concepts. “Jidoka” (loosely meaning “automation with a human touch”) and “Just in Time” (each step makes what is needed, when it’s needed, for the next step so the process works in a continuous flow). The system is a precursor of the idea of lean manufacturing.

Value Stream Mapping. A lean manufacturing method that uses a flowchart to illustrate the movement of information, materials, and events required to create a product or service from the very first step through to the delivery to the consumer.

WMS (Warehouse Management System). Software used to support and optimize warehouse management.