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Top Terms to Know in Supply Chain

Here are the top terms around supply chain operations that you must grasp as a proactive professional. Treat this not as a spotlight on your knowledge gaps, but rather a crash course or memory-jogger on terminology essential to the supply chain landscape.

By India Index

4 min read

In the intricate landscape of the supply chain, your vantage point is what shapes your engagement. Within the supply chain network, several roles come into play, including— raw material suppliers, manufacturers, distributors, retailers, and consumers. Depending on your position in the chain, you may interact with both the providers of resources and those receiving the offering. 

Indeed, mastering a well-functioning business supply chain intimates a better grasp of various dynamics and, most essentially, a command over essential principles. 

As seasoned or young professionals, you must set a course toward understanding the intricacies that underpin each strategic maneuver.

This is hardly a daunting voyage as we can help make this journey far simpler. Here are the top terms around supply chain operations that you must grasp as a proactive professional. Treat this not as a spotlight on your knowledge gaps, but rather a crash course or memory jogger on terminology essential to the supply chain landscape.

Supply Chain Management:

  • Supply Chain Management: Management of activities involved in the flow of goods/services across the supply chain.
  • Source to Pay: End-to-end process, encompassing all activities from sourcing/ procurement to payment and managing vendors.

B2B Marketplaces:

  • B2B Marketplaces: Online platforms to buy and sell products/services for businesses.
  • Platform as a Service (PaaS): Cloud-based platforms that facilitate online marketplaces for seamless transactions between businesses.
  • Marketplace Aggregator: Centralized platforms that consolidate product listings from multiple sellers to streamline procurement processes.
  • Escrow Services: Third-party services that secure funds in trust during transactions, enhancing trust and security in B2B transactions.
  • Electronic Catalog Management: The management of digital catalogs containing product information, pricing, and availability for use in procurement processes.
  • Supplier Self-Service Portal: An online portal that allows suppliers to access and update information, submit bids, and track orders without direct intervention from the buyer.

Buyer and Supplier Agreement:

  • Buyer and Supplier Agreement: Formal terms and conditions between buyer and supplier.
  • Due Diligence: Thorough investigation of potential business partners before entering into agreements.
  • Compliance Requirements: Ensuring supplier adherence to regulatory and industry standards to maintain legality and integrity in supply chain operations.
  • Service Level Agreement (SLA): Establishing performance expectations and standards for supplier services to maintain quality and reliability.
  • Non-Disclosure Agreement (NDA): Protecting confidential information shared between buyers and suppliers during business transactions.
  • Master Services Agreement (MSA): A comprehensive contract that outlines the terms and conditions governing the relationship between a buyer and a supplier for ongoing services.
  • Force Majeure Clause: A contractual provision that excuses parties from fulfilling their obligations in the event of unforeseen circumstances beyond their control, such as natural disasters or political unrest.
  • Quality Assurance Agreement (QAA): A contractual agreement between a buyer and a supplier that defines quality standards, inspection procedures, and quality control measures.
  • Incoterms: International commercial terms that define the responsibilities of buyers and sellers in international trade transactions, including terms of delivery, transportation, and risk allocation.
  • Performance-Based Contracting (PBC): A contracting approach where payment is based on achieving predefined performance metrics or outcomes rather than the completion of tasks or deliverables.

Sourcing and Procurement:

  • Sourcing: Identifying suppliers for goods/services.
  • Procurement: Process of acquiring goods/services for organizations.
  • Vendor Management: Process of sourcing, evaluating, and collaborating with suppliers to get top-quality goods/services in line with business needs.
  • E-Auction: Online auction where suppliers bid for contracts/products.
  • Supplier Diversity Initiative: Actively seeking out and partnering with diverse suppliers to promote inclusion and innovation.

Logistics and Transportation:

  • Cross Docking: Logistics technique of having incoming goods directly transferred from inbound to outbound transportation.
  • EDI (Electronic Data Interchange): Digital system that enables seamless exchange of documents between trading partners.
  • Inbound Logistics: The management of the flow of materials, parts, and supplies into a manufacturing or distribution facility, including transportation, warehousing, and inventory control.
  • Outbound Logistics: The management of the flow of finished goods from a manufacturing or distribution facility to the end customer, including transportation, order fulfillment, and delivery scheduling.
  • Multimodal Transportation: The use of multiple modes of transportation (e.g., truck, rail, air) within a single shipment to optimize cost, speed, and reliability.
  • Freight Visibility: The ability to track and monitor the movement of freight throughout the supply chain, providing real-time information on shipment status, delays, and exceptions.
  • Drayage: The short-distance transportation of goods, typically by truck, between ports, terminals, and distribution centers, often as part of a larger intermodal shipment.
  • Freight Consolidation: The combining of multiple smaller shipments into a single larger shipment to optimize transportation efficiency, reduce costs, and minimize environmental impact.
  • Route Deviation: A change in the planned route or schedule of a shipment due to unexpected events or disruptions, such as traffic congestion or weather conditions.
  • Transportation Management System (TMS): Software that helps companies plan, execute, and optimize the movement of goods and freight, including carrier selection, route planning, and shipment tracking.
  • Freight Brokerage: The intermediary service that connects shippers with carriers to arrange transportation services, often leveraging technology platforms to match supply and demand.

Financial Management:

  • Payment Terms: Vetted conditions regarding payment timelines/methods.
  • Working Capital Optimization: Maximizing operational efficiency by managing working capital effectively.
  • Cost Containment: Implementing strategies to control and reduce costs across the supply chain.
  • Cash Flow Forecasting: Projecting future cash inflows and outflows to ensure sufficient liquidity for business operations.
  • Total Cost of Ownership (TCO) Analysis: Evaluating the total costs associated with procuring and owning goods or services over their lifecycle.
  • Working Capital Turnover: A financial metric that measures how efficiently a company uses its working capital to generate revenue.
  • Cost Variance Analysis: A comparison of actual costs incurred with budgeted costs to identify variances and their causes.
  • Days Sales Outstanding (DSO): A measure of how long it takes for a company to collect payment from customers for sales made on credit.
  • Cash-to-Cash Cycle Time: The time it takes for a company to convert its investments in raw materials into cash receipts from customer sales.
  • Supply Chain Finance: Financial services that optimize cash flow and working capital for supply chain partners through techniques such as factoring and dynamic discounting.

Documentation and Communication:

  • HS Code (Harmonised System Code): A code assigned to products to categorize them for customs/trading purposes.
  • IEC Certificate (Import-Export Code Certificate): Registration needed by businesses in India to partake in international exchange/trade of goods across the border.
  • RFQ (Request for Quote): Document requesting suppliers for quotations on goods and services.
  • RFP (Request for Proposal): Document requesting suppliers to send in a project proposal.
  • Workflow Management Tool: Platform or tool used to manage multiple projects, compliance, and engagements between buyers and suppliers.

Management and Relationship:

  • Management Tool: SaaS project software/tool to manage conversations and engagement stages between a buyer and supplier as a project.
  • Buyer Management: Strategies for managing buyer relations.
  • Supplier Management Software: Software and/or processes to oversee supplier relationships.
  • Supplier Relationship Management (SRM): Strategic approach to managing interactions with suppliers to maximize value and minimize risks.
  • Contract Compliance: Ensuring that supplier contracts are adhered to in terms of quality, delivery, and pricing.
  • Conflict Resolution: Resolving disputes and conflicts that arise between supply chain partners.
  • Performance Metrics: Key performance indicators (KPIs) used to evaluate the effectiveness and efficiency of supply chain processes.
  • Vendor Scorecard: Performance evaluation tool used to assess and rank suppliers based on various criteria such as quality, cost, and delivery.
  • Value Stream Mapping: A lean management technique used to analyze and optimize the flow of materials and information through the supply chain.
  • Contract Manufacturing: The outsourcing of manufacturing activities to third-party contractors to reduce costs and increase flexibility.
  • Demand Planning: The process of forecasting customer demand for products and services to optimize inventory levels and production schedules.

Order Management:

  • MOQ (Minimum Order Quantity): The order specification of the supplier in quantity or price (expressed in units per SKU). The MOQ of a supplier is sometimes based on the MOQ conditions of their sub-suppliers. Especially in China, some suppliers rely on high MOQs because they often have lower profit margins.
  • Backorder: Products that are ordered but temporarily out of stock.
  • Order Fulfillment: Process of receiving, processing, and delivering customer orders.
  • Pick and Pack: Process of selecting items from inventory and packaging them for shipment.
  • Order Tracking: Monitoring the status and location of orders in real time.
  • Dropshipping: Fulfilling orders by directly shipping products from a manufacturer or wholesaler to the customer.
  • Inventory Management: Process of overseeing and controlling the flow of goods into and out of an organization's inventory.
  • Just-In-Time (JIT): Inventory management strategy where goods are received and processed as they are needed, minimizing storage costs and waste.
  • Allocation: The process of assigning available inventory to customer orders based on predefined rules.
  • Wave Picking: A method of order picking where multiple orders are grouped together and picked simultaneously to increase efficiency.
  • Dock Appointment Scheduling: A system for scheduling and managing the arrival and departure of trucks at loading docks to minimize wait times and maximize throughput.
  • SKU Rationalization: The process of reducing the number of stock-keeping units (SKUs) to simplify inventory management and improve efficiency.
  • Inbound Logistics: The management of the flow of goods and materials into a warehouse or distribution center.
  • Outbound Logistics: The management of the flow of finished goods from the warehouse or distribution center to the customer.

Whether you are a novice or a seasoned pro, the supply chain industry pushes you to explore a complex web of interconnected processes and specialized terms. Having a reliable keyword guide acts as a trusted map to help you find your way. 

While this guide will not transform you into a supply chain pundit overnight, it will strengthen your understanding of crucial jargon and terminology. This knowledge will, in turn, help smooth out communications and streamline operations at your workplace.

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