Glossary

ABC (Activity-Based Costing) - An approach to evaluating the costs of production which examines the sequence of value-added activities which are undergone during the production process. It makes a truer estimate of cost because it is not based upon the highly aggregated assumptions of unit costing.

Access Management - Closely related to yield management, access management controls the time-based access to a resource, such as a railroad corridor or electrical power from the grid. This is usually done by constructing the time period as time-slots which are then allocated based upon contracts, baseload and demand patterns.

APS (Advanced Planning and Scheduling) - APS is done with the visualization of a dynamic model of the operational system. This dynamic model-based approach is more effective than mathematical modeling because it embeds a complete model of the causal constraints in the system.

Animated Planning and Scheduling - Animated planning and scheduling or APS quickly analyses the impact of alternative decisions at various planning horizons in a highly visual manner. Schedules and plans can be brought to life by effective animation which builds support and trust in its dynamic models.

Baseload (Demand) - A certain proportion, usually large, of a company's demand is based upon annual contracts with established clients or with established customer segments. Because information about this demand is contractual and has long lead times, it enables management to plan a base response to it.

Big Picture - A way of looking at a system's operation which views its productive and commercial interactions with at least its immediate suppliers and its immediate customers. A bigger picture contains some modelling of the market response to the company's production, and hence, its future demand.

Black Box - A "black box" capability or software tool, provides the end-user with results to inputs without any means of understanding how the results were obtained, and especially whether the means of achieving the results make any sense to operational staff.

Bullwhip Effect (Whiplash) - This effect is like a whiplash. It can move rapidly from one extreme value to its extreme opposite. Although this phenomenon is being rapidly addressed by new technology and synchronizing relationships in the supply chain, the instability of the bullwhip effect can still be experienced in supply chains. 

Cargo Assembly - Cargo assembly is the specifications of a shipment (e.g. for a ship load) translated into a schedule of blending (if required) and assembly into a cargo, and its final transport movements to a ship. 

CPFR (Collaborative Planning, Forecasting and Replenishment) - A means for the stakeholders in a supply chain to exert synchronized control over its flows. In particular, it goes a long way to stem the bullwhip effect.

Clearance Strategy - Methods and tactics used to guide the scheduling of the delivery of the commodity to the loading point (e.g. port). This may mean combining the production of several mines, or gathering of grain into and out of many incoming points. 

Channel Compression - To pursue compression (shortening lead times and removing components) of the supply chain structure. 

Concurrency - Elements of the production process which are being carried out simultaneously. Many products may be assembled in a given facility, and simultaneously accessing many of its resources. Concurrent access and usage of common resources greatly complicates the method of applying unit costs or unit profits.

Continuous Replenishment - A program where a company takes over the inventory management function of the customer by insuring them that they will replenish their inventories in a manner that reduces the customer's total inventory costs. 

Contribution Relativities - An investment made by an individual stakeholder may bring increases in revenue for others in the supply chain.

CRI (Common Reference Image) - CRI implies the visualization of a dynamic model. It is not just a “black box” model, it is an active representation whose animation demonstrates how the system works.

Cycle Stock -Inventory on hand which addresses the expected requirements of periodic demands.

Data Mining - A method of finding data which fits a required pattern, in a large database. The database structure does not have records organized according to that pattern. Used to target customers for highly specific needs or preferences.

Determining Constraint - The determining constraint is that resource in the dynamics of the supply chain which is limiting overall throughput. It often occurs at transport or logistics “hubs” where several supply chains and transport flows are consolidated.

Demand Planning - The joint effort of a number of stakeholders in a (discrete product) supply chain to both forecast demand and plan production and delivery schedules to meet such demand.

Direct Loading - Also known as cross-docking, or “single hit”, this a coordination where an incoming transport mode connects directly with an outgoing transport mode, without stopping in a storage or stockpile area. 

Dirty Data - Data which enters an information system in a format or with values which the system has not been programmed to handle. Using various assumptions, such data can be "cleaned" or filtered in order to make it usable to the software.

Downstream (Upstream) - In a sequence of processes which comprise the production of a good or service, a "downstream" process or work station is one that is later in the sequence; whereas "upstream" indicates an earlier process in the sequence. In an automobile plant, if part of the sequence of processes is Frame assembly, Paint, and Trim… then Trim is downstream from Paint, and Frame is upstream from it.

Drum-Buffer-Rope - This is the term applied to the “Constraint Management” approach to scheduling in manufacturing systems.  The “drum” refers to the rate at which the primary bottleneck, or determining constraint, can move items down the line. Buffer refers to the placing of a time-buffer equivalent to the amount of time which could be lost by a contingency in the production line leading up to the constraint. A buffer of items corresponding to this delay is kept in front of the constraint, which provides some slack or “rope” to the overall line. 

Dynamic congruence - Exists between a software model (e.g. a simulation) and a physical system, when the behavior of one over time mimics the behavior of the other.

Dynamic Trade - The CRI can be “dynamic trade” ready: its dynamic model-based construction can include in a timely manner any of the results of transactions in the supply chain.

Dwell (Time) - The time spent by a transport vehicle at an intermodal or vehicle transfer point.

End-User Control - The degree to which a user of a software tool can choose how to use the tool. There is little control when the tool can only be used in highly specific manners in highly specific sequences.

Equity - In some jurisdictions, there are either traditions or legislated rules of equity in terms of equality of access to scarce and common facilities.

ERP (Enterprise Resource Planning) - An integrated approach to the planning of the allocation of resources to production targets or to demand.

Extended Enterprise - The notion that when individual companies collaborate with the other stakeholders in their supply chains, that they are really acting as part of a larger entity, the local industry represented by the supply chain, for instance.

Feral Behavior - The tendency of individual companies to act in highly autonomous ways in support of a very self-centered interest which avoids any interest in cooperative actions which could benefit both themselves and other companies.

Flexible (work practices) - The ability to utilize a number of different labor allocations both in time and in skill, in order to meet bursts and gaps in demand in an effective manner.

Functional Organization - An organization based upon the primary function its people deliver to it. By reinforcing such specialties as purchasing, advertising, marketing, quality, etc. it is felt that economies of scale and focused expertise reduce costs. Unfortunately, this "silo" approach to organizations, does not account for the production process from market demand to market delivery, and consequently large delays and inefficiencies prevail as product or service moves from specialty to specialty.

Grid lock - A situation in a system wherein there are competing requirements for various resources by activities, while these same activities hold some of the resources which the others require. This perhaps seem most easily in transportation systems, where a vehicle which wants to advance, cannot because the next space is occupied by another vehicle which wants its space. When several vehicles are involved in this circular fashion, we call it a "traffic jam".

Harmony (schedule) - Schedule harmony refers to situations where the arrival of goods at an intermodal point, corresponds to the departure of the same goods via a different transportation mode, given a small time buffer to absorb expected variations.

Immediate Coordination - The realm of immediate coordination between the organizations is just the places where the material, information and financial flows join up. This means the flow of product/material, the flow of orders, the flow of invoices, and the flow of financial payment

Indirect Coordination - This refers to the way in which the policies, decision-making and scheduling of these flows is carried out within each firm.

Intermodal - A description of a transportation activity which involves the switching between at least two different transportation modes, such as truck and rail, or rail and ship.

JIT (Just-in-Time) - Just in time processes, typically for production and sometimes logistics, arrange that the supply of parts is delivered just when they are needed in production and not before, avoiding large work-in-process inventories. In logistics, it means that transportation vehicles arrive just when they are needed and not before or later. See also, Pull.

Life-Cycle (Commodity) - In a supply chain context, as opposed to software or product development for instance, this refers to the cycle of demand, supply of material, production, delivery to market, renewal of market demand. By supporting all aspects of the cycle, the commodity can be made globally competitive.

Live (nearly real-time) - Technology for planning and scheduling is considered "live" when it supports operators and management to make decisions, when they are required. This is done by making current data available via a dynamic model of the situation, and enabling the decision-maker to evaluate various alternatives.

Live Imaging - This refers to schematic display which dynamically shows the current state of a system.

Live Management - People want to be able to make effective and profitable short lead-time decisions when circumstances change. This is not “real-time” in the strict sense of process control, but a capability we refer to as “live management”. 

Metric - A method of measurement. The means of measurement often embed various assumptions about the situation being measured.

Middle ware - Connectivity software, enabling an enterprise-wide range of data sources to be integrated into the decision-making database of the common reference model, is a strong requirement for success.  Interfaces with various ERP, MRP, databases and specialized software are required for these translators between IT applications. 

Model-Based (Management) - When management decision-making is based upon performance measures from a dynamic model of a work area, a entire organization, or an entire supply chain. The decision-support context depends upon the dynamic model, and is hence, model-based.

MRP (Manufacturing Resource Planning) - Is a methodology that uses bills of materials, inventory data, and production schedules to determine requirements for obtaining materials. It schedules the release of purchase orders for raw materials. See also Push.

Murphy's Curve - In systems where demand arrives in a random fashion (e.g. vehicles) for services (e.g. at a weigh station) which themselves may be random, congestion can occur. The average arrival rate divided by the average service rate is called the utilization coefficient. A graph of the average congestion over time, versus this coefficient (ranging from 0 to 1) can be called Murphy's curve. When there is random variation present in the system, the congestion can rapidly rise to huge values as the coefficient approaches one. The name is an allusion to Murphy's law, because many systems breakdown when decisions are based upon utilization efficiency which does not account for random variation and the behavior of this curve. Such situations could be called hyper-efficient.

Multiple Perspectives - Once a whole-system approach to managing the supply chain is undertaken, it will eventually move from simply a “birds-eye view” of the overall system, to include the multiple perspectives of the stakeholders and customers.  

Mutual Self-Interest - Companies run on the maximization of their self-interest. When it becomes their self-interest to build excellent relationships, then this self-interest is transformed into a mutual interest which serves both the firm and the larger picture presented by the supply chain.

Non-linear - Where the output from a system produced by a change in input, is not a simple proportion of that input change. Non-linear outputs may multiply the input changes, or hardly change at all, or suddenly expand out of sight. See Murphy's curve.

Pipeline Stock - This refers to the work-in-process inventory which is a necessary consequence of the production process, such as vehicles on an assembly line, vehicles in a paint shop, vehicles in the trim line.

Pool (Resource) - This refers to a limited resource of mobile services, which when used return to their home-base or depot. Hence their behavior circulates. This could be locomotives used for various train services returning to depot, air hostesses plying various flights returning to home base, or plumbers addressing requirements at various sites.

Process-Oriented (thinking, management) - Is when the process of production of goods and services is viewed as a sequence of activities from start to finish, and planning or management decisions are based upon its cross-functional aspects. Viewing processes this way enables their production to be streamlined, and unnecessary delays avoided. It then enables much more profitable planning. see Functional Organization, ABC.

Pull (Demand) - This refers to production scheduling in which the timing of actual demand, pulls material and parts through the production process to enable the product to be delivered at the time of demand. This is down by having "demand" transmitted backwards from completion, through each of its earlier required steps, in effect pulling product out of the system. See also, JIT.

Push (Demand) - This refers to production schedules which determine the start of production of batches of products or services, and then follow the consequences of those start times through the production process. Because the start of subsequent activities are determined by the preceding activity, it is "pushing" the product through the system. See also, MRP.

Recovery (Time) - Periods when a system has insufficient capacity to meet required demand, congestion will grow indefinitely (see Murphy's curve as well). Such overflows can create havoc to work-in-process inventories, or extreme frustration to system users. After such an episode, the system needs some recovery time. This is a period when capacity is significantly greater than demand, enabling the previous overflows to be reduced. If there is not enough recovery time before the next surge in over-capacity demand, then the system just gets worse and worse.

RCM (Reference Capacity Model) - A dynamic model whose simulation gives sufficiently accurate results that practical capacity of a system can be evaluated. This means that operational details, demand variation, and variation in resource allocations are included. With such a model as a reference, various system alterations can be evaluated with respect to their resultant changes to capacity. Moreover, effective planning and scheduling can be done. See also, Capacity Management.

Safety Stock - This is the segment of inventory that exists as a buffer to surges to variation in demand, avoiding the negative impacts of stock out situation on subsequent demand.

Segmentation (Demand) - This refers to the categorization of different types of demand, which make sense in the decision-making or planning process. These segments have sufficient properties in common, that they can be treated similarly when investigating business developments or capacity management.

Single Desk - The marketing and purchasing tasks of large organizations such as grain boards, often apply a “single desk” approach to buying and selling. This enables more capability to provide and accept volume discounts on a competitive basis. Without the coherence and focus of this single position, the company’s capability to effect the best trading relationships possible is significantly diluted. Having a central location (spatially and cyber-wise) to other essential management functions will reap broader but similar benefits. 

Slots - A period of time, usually of a constant length, to which the allocation of a time-limited resource can be assigned to some demand. For instance, access to a rail corridor. The slot size is based upon the maximum time required for exclusive access (e.g. section running time) to a component of the resource

Smooth Flow - Refers to the manner in which materials, products, or services are delivered downstream to the next work station or stakeholder in a supply chain. The flow is smooth when in a) the continuous case, the rate changes value slowly enough that the downstream station can effectively adjust, or b) in the batch case, the quantities are supplied quite regularly through time. When input flow is smooth, management can carry out optimal scheduling and planning.

Spot Demand - This is demand for a product or service which is difficult to anticipate, except through statistical expectation. It is on-demand requirements with very short lead times. Normally it is supplied at a premium. It does not contribute to baseload planning, except as as a statistical quantity.

Staged Capacity - A proactive management approach is to have a range of capacity available in response to demand. 

Steward - An individual or an independent entity appointed to lead the process to overview and manage the implementation and coordination of a supply chain.

Sub-optimzation - Refers to the practice of local decision-making which pays no attention to the inter dependencies in a system. Often it occurs that optimizing the local department creates waste, inefficiency and other burdens on downstream parts to the same system. Hence, it usually does not support optimal decision-making for the entire business. In order to do that, decision-making must support system interdependency in sequencing, flow, work-in-progress and overall throughput. See also, Smooth flow, Throughput.

Transparency - Refers to the ability of end-users of a decision-support tool to see how the software works in delivering its outputs, or how it arrives at its decisions, evaluations or other outputs. This is in contrast to black box methods.

Throughput - Focuses on what the overall outputs are of a system. It does not follow that local throughput of a certain work station should be maximized. This depends upon the bottlenecks and determining constraints existing throughout the system. Overall throughput is limited (constrained) by these bottlenecks, and having other parts of the system produce at greater rates is counter-productive and even wasteful.

Utilization (Coefficient) - This is the ratio of demand which is serviced to the effective capacity. When these rates are variable, then this coefficient can give an indication of how much congestion to expect in a system. It does not follow that this coefficient should be one. See also, Murphy's Curve.

VMI (Vendor Managed Inventory) - Is the arrangement between an inventory keeper or warehouse and a supplier, for the supplier to manage and replenish products at appropriate levels. In effect, this transfers ownership of your inventory to your suppliers, keeping such inventory off the balance sheet.

Whiplash Effect (Bullwhip) - This effect is like a whiplash. It can move rapidly from one extreme value to its extreme opposite. Although this phenomenon is being rapidly addressed by new technology and synchronizing relationships in the supply chain, the instability of the bullwhip effect can still be experienced in supply chains. 

Yield Management - Yield management is a budget plan of how time-sensitive resources (called slots) will be acquired by different market segments at different prices.