Supply Chain Solutions

Advance Components Supply Chain Solutions

Supply Chain Management Solutions

Value-Added Services

Custom Counting, Bagging, Kitting & Digital Certs

Distributor Partnership Program

Reduce Price Volatility, Improve Cash Flow and Reduce Transaction Costs.

Master Stocking Distributor Program

Find the Right Supply Chain Partner.

Supply Chain Management Terminology

Learn to Talk the Talk.

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Value-Added Services

Custom Counting, Bagging, Kitting & Digital Certs

Custom counting/bagging, kitting and digital certifications are cost-saving and time-saving services we offer to our customers and suppliers to improve efficiencies in their supply chain process.

Utilizing state of the art equipment from the industry’s best manufacturers, our highly trained team delivers reliable and precise count accuracy while at the same time providing maximum operational flexibility.

Automated Counters with Automated Bagging Systems

These are super accurate fully automated high-speed counting/bagging systems that feature Batching System, Inc.’s newest Batchmaster III continuous counters with Sharp Packaging System’s MAX 12 continuous roll bagging systems. All systems are equipped with vibratory bowl feeders and Autobag P1 412C thermal transfer labelers for a complete totally automated solution.

Weigh Counters with Automated Bagging Systems

This combination provides a complete semi-automatic solution and is ideal for products that tangle or do not flow easily. Our systems are comprised of an Automated Packaging Systems’ Accu-Scale 220 in-feeding weigh-count scale combined with an Autobag AB 180 bagging system and an Autobag P1 412C thermal transfer labeler.

Allowing for quick set-up and rapid product changeovers so short runs can be accommodated, this set-up provides extreme weigh counting accuracy that is ideal for product flexibility. Advance stocks bags in sizes: 5” x 7”, 8” x 10” – other sizes available.

Kitting Options – Hand Scale or Hand Count with Automated Bagging Systems

When accurate counting scales are necessary for packaging small parts, Advance Components utilizes the Setra Supercount High-Resolution Counting Scale which features a patented variable capacitance weighing technology lets the scale display weight changes as minute as 1 part in 125,000.

Whether measure-counting parts by weight or counting parts by hand, we will also use an automated bagging system. For kitting projects, we frequently use the Sharp kitting table which mounts directly over an Autobag AB 180 Bagging System. With this setup, parts are sorted directly into the bags greatly increasing speed and efficiency.

Custom kits, barcoding & logos

Advance also prepares custom hardware kits with custom labeling, logos, and barcoding.

With our in-line thermal transfer printers we can custom print barcodes and logos onto every bag. Advance stocks bags in sizes 5” x 7” and 8” x 10” – other sizes are available. Additionally, we offer manual packaging, boxing, re-boxing, and palletizing as well as warehousing and shipping.

Digital Product Certifications by SmartCert

We are happy to partner with SmartCert to offer our customers with automated digital product certifications. SmartCert is a cloud-based platform that simplifies receiving, processing and sharing digital quality certs and documentation. SmartCert helps Advance, our suppliers and customers streamline internal processes and improve the transfer of product certifications, while also creating a digital database that is updated in real time. Read more about SmartCert in FastenerLab.

Contact Brad Burel, Vice President Sales, for more information about our Value-Added Services. Download the Bagging & Kitting brochure.


Contact Brad Burel, Vice President Sales, for more information about Our Value-Added Services. Download brochure.

Distributor Partnership Program

How Can You Reduce Price Volatility, Improve Cash Flow and Reduce Transaction Costs?

Our Distributor Partnership Program (DPP) is focused on supporting distributor’s VMI programs through strategic opportunities for mitigrating price volatility, improving cash flow and reducing transactional costs. The DPP is one of our supply chain solutions for fastener distributors and manufacturers that allows you to streamline your procurement process.

We work with you to create customized solutions that include:


Based on your projections, we’ll always have your customer’s inventory available and in-stock. Benefits include elimination of factory lead times and minimums, improved inventory turns, and less waste.


Flexible program allows you to place an order and schedule releases as needed for up to 12-months. Reduces the the adminstrative costs of placing multiple orders.


Reduce your carry costs for inventory. We can directly ship to your customers anywhere, anytime.


By consolidating orders from multiple suppliers into a single shipment, you reduce transactional and shipping costs.


With fewer transactions, you’ll enjoy faster response times and lower labor costs.


Lock in pricing reduces volatility and ensures consistent profitability.


Create a single PO for products offered by our Premier Fastener Suppliers and their competitors. Schedule multiple releases to fit your customer’s requirements.

Contact Brad Burel, Vice President Sales, for more information about the DPP Program or other supply chain solutions. Download the Distributor Partnership Program brochure.

Reduce Price Volatility, Improve Cash Flow and Reduce Transaction Costs.

Contact Brad Burel, Vice President Sales, for more information about the DPP Program. Download brochure.

The Master Stocking Distributor Program

How Do Manufacturers Find the Right Supply Chain Partner?

The Master Stocking Distributor Program (MSDP) is for manufacturers who need support with distribution, sales and inventory management.


We help manufacturers develop their core competencies, allowing them to improve their operational efficiency and profitability so they can focus on what they do best – manufacture their products. The goal of the MSDP program is to help suppliers succeed.


By consolidating non-core customers to Advance, suppliers can focus on their most important customers where key growth opportunities exist. Advance takes on the challenges of administration, high frequency transactions, freight and warehousing. We help manufacturers and reduce the costs of inventory management.


As a true Master Stocking Distributor, we focus on selling to distributors. This requires having relationships built on trust. Our strong value proposal is supported by the industry’s best sales and support team, a robust “smart” inventory program, and a suite of value-added services.


We’ve been serving the industrial market for 50 years, so we are known for our level of trust with customers. Over the past twelve years, we’ve established a strong track record of success by implementing Master Stocking Distributor programs with a number of premier manufacturers, transitioning literally thousands of customers successfully.


  • Focus on core customers where growth exists
  • Consolidate more efficient production runs
  • Expand sales solutions; more “feet on the street”
  • Reduce inventory, warehouse, transactional costs

Contact Brad Burel, Vice President Sales, for more information about the Master Stocking Distributor Program. Download the Master Stocking Distributor Program brochure.

Find the Right Supply Chain Manager.

Contact Brad Burel, Vice President Sales, for more information about the MSDP Program. Download the brochure.

Supply Chain Terminology

What are Some Common Supply Chain Words?

To help our customers understand the ins and outs of Supply Chain Management, here is our dictionary of some common supply chain terms.



A first‐party logistics provider is a firm or an individual that needs to have cargo, freight, goods, produce or merchandise transported from a point A to a point B. The term first‐party logistics provider stands both for the cargo sender and for the cargo receiver.


A second‐party logistics provider is an asset‐based carrier (a trucking or freight company), which actually owns the means of transportation (vehicles).


A 3 third part logistics provider is a provider of outsourced logistics services. Logistic services encompass anything that involves management of the way resources are moved to the areas where they are required. The term comes from the military. In business, 3PL has a broad meaning that can be applied to any service contract that involves storing or shipping things. A 3PL service may be a single service such as transportation or warehouse storage or it can be a system wide bundle of services capable of managing the entire supply chain. The term 3PL was originally coined to differentiate logistic providers who used the Internet to enhance their services from those that did not.


The concept of a fourth part logistics provider is an integrator that accumulates resources, capabilities and technologies to run complete supply chain solutions. Main difference between 3PLs and 4PLs is the 3PL targets a single function, whereas the 4PL manages the entire process. A 4PL may manage the 3PL.



A communication indicating that something has been received or understood. In purchasing it usually refers to a form that is received from a supplier that accepts or sometimes modifies the purchase order.

Acceptable Quality Level (AQL)

In quality management, when a continuing series of lots is considered, AQL represents a quality level that, for the purposes of sampling inspection, is the limit of a satisfactory process average.

Acceptable Sampling Plan

In quality management, a specific plan that indicates the sampling sizes and the associated acceptance or non‐acceptance criteria to be used.

Acceptance Number

In quality management, a number used in acceptance sampling as a cut off at which the lot will be accepted or rejected. For example, if x or more units are bad within the sample, the lot will be rejected.

Accounts Payable (A/P)

The value of goods and services acquired for which payment has not yet been made.

Accounts Receivable (A/R)

The value of goods shipped or services rendered to a customer on whom payment has not been received. Usually includes an allowance for bad debts.

Acceptance Sampling

The process of sampling a portion of goods for inspection rather than examining the entire lot.

The entire lot may be accepted or rejected based on the sample even though the specific units in the lot are better or worse than the sample.

Accumulation Bin/Assembly Bib

A place, usually a physical location, used to accumulate all components that go into an assembly before the assembly is sent out to the assembly floor.

Active Stock

Goods in active pick locations and ready for order filling.

Ad Valorem Duty

A duty calculated as a percentage of the shipment value.

Advanced Shipment Notice (ASN)

Detailed shipment information transmitted to a customer or consignee in advance of delivery, designating the contents (individual products and quantities of each) and nature of the shipment. May also include carrier and shipment specifics, including time of shipment and expected time of arrival. Also, an EDI term referring to a transaction set where the supplier sends out a notification to interested parties that a shipment is now outbound in the supply chain. This notification is list transmitted to a customer or consignor designating items shipped.

All‐Cargo Carrier

An air carrier that transports cargo only.

All Water

Term used when the transportation is completely by water.

Any‐Quantity (AQ) rate

A rate that applies to any size shipment tendered to a carrier; no discount rate is available for large shipments.

Arrival Notice

A notice from the delivering carrier to the Notify Party indicating the shipment’s arrival date at a specific location (normally the destination).

Assemble to Order

A production environment where a good or service can be assembled after receipt of a customer’s order. The key components (bulk, semi‐finished, intermediate, sub‐assembly, fabricated, purchased, packing, and so on) used in the assembly or finishing process are planned and usually stocked in anticipation of a customer order. Receipt of an order initiates assembly of the customized product. This strategy is useful where a large number of end products (based on the selection of options and accessories) can be assembled from common components.



The act of retaining a quantity to ship against an order when other order lines have already been shipped.

Backorders are usually caused by stock shortages. Also, the quantity remaining to be shipped if an initial shipment(s) has been processed.

Bar Code

A symbol consisting of a series of printed bars representing values. A system of optical character reading, scanning, tracking of units by reading a series of printed bars for translation into a numeric or alphanumeric identification code. A popular example is the UPC code used on retail packaging.

Bar Code Scanner

A device to read bar codes and communicate data to computer systems.

Bar Coding

A method of encoding data for fast and accurate readability. Bar codes are a series of alternating bars and spaces printed or stamped on products, labels, or other media, representing encoded information which can be read by electronic readers called bar.

Batch Picking

A method of picking orders in which order requirements are aggregated by product across orders to reduce movement to and from product locations. The aggregated quantities of each product are then transported to a common area where the individual orders are constructed.

Bill of Lading (BOL)

A transportation document that is the contract of carriage containing the terms and conditions between the shipper and carrier.

Bill of Material (BOM)

A structured list of all the materials or parts and quantities needed to produce a particular finished product, assembly, subassembly, or manufactured part, whether purchased or not.

Blanket Purchase Order

A long‐term commitment to a supplier for material against which short‐term releases will be generated to satisfy requirements. Oftentimes, blanket orders cover only one item with predetermined delivery dates.

Blanket Release

The authorization to ship and/or produce against a blanket agreement or contract.

Bonded Warehouse

Warehouse approved by the Treasury Department and under bond/guarantee for observance of revenue laws. Used for storing goods until duty is paid or goods are released in some other proper manner.


The act of requesting space and equipment aboard a vessel for cargo which is to be transported.


An enterprise that arranges the buying & selling of transportation of goods or services. There are advantages to working with both types of entities, depending on what the shipper is looking for. Unlike the classic broker, a modern day 3PL might have some assets, whether brick‐and‐mortar facilities or vehicles for moving freight. Brokers play a key role when the customer wants basic service from a non‐asset‐based provider. There are times when the terms “3PL” and “broker” overlap, says Abernathy. Both are intermediaries between the shipper and the carrier. Yet their roles can differ significantly. A broker typically focuses on the execution of an individual shipment, working to meet specific goals for cost and service. Customers might rely on brokers to provide a percentage of their transportation needs, giving them the flexibility to adjust to seasonal changes in the market.


An occurrence where two or more products are combined into one transaction for a single price.

Business‐to‐Business (B2B)

As opposed to business‐to‐consumer (B2C). Many companies are now focusing on this strategy, and their web sites are aimed at businesses (think wholesale) and only other businesses can access or buy products on the site. Internet analysts predict this will be the biggest sector on the web.

Business‐to‐Consumer (B2C)

The hundreds of e‐commerce web sites that sell goods directly to consumers are considered B2C. This distinction is important when comparing web sites that are B2B as the entire business model, strategy, execution, and fulfillment is different.


Can‐Order Point

An ordering system used when multiple items are ordered from one vendor. The can‐order point is a point higher than the original order point. When any one of the items triggers an order by reaching the must‐order point, all items below their can‐order point are also ordered. The can‐order point is set by considering is set by considering the additional holding cost that would be incurred if the item were ordered early.


A method whereby a business dispenses its product, such as a retail or distribution channel, call center, or a web‐based electronic storefront.

Channel Conflict

This occurs when various sales channels within a company’s supply chain compete with each other for the same business. An example is where a retail channel is in competition with a web‐based channel set up by the company.

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.

Commercial Invoice

A document created by the seller. It is an official document which is used to indicate, among other things, the name and address of the buyer and seller, the product(s) being shipped, and their value for customs, insurance, or other purposes.

Common Carrier

Transportation available to the public that does not provide special treatment to any one party and is regulated as to the rates charged, the liability assumed, and the service provided. A common carrier must obtain a certificate of public convenience and necessity from the Federal Trade Commission for interstate traffic.

Configure/Package to Order

A process where the trigger to begin to manufacture, final assembly, or packaging of a product is an actual customer order or release rather than a market forecast. In order to be considered a configure‐to-order environment, less than 20% of the value‐added takes place after the receipt of the order or release, and virtually all necessary design and process documentation is available at time of order receipt.


With regards to EDI, a formal notice (by message or code) from a electronic mailbox system or EDI server indicating that a message sent to a trading partner has reached its intended mailbox or has been retrieved by the addressee.

Confirming Order

A purchase order issued to a supplier listing the goods or services and terms of an order placed orally or otherwise before the usual purchase document.


An affirmative indication or judgment that a product or service has met the requirements of a relevant specification, contract, or regulation.


The party to whom goods are shipped and delivered. The receiver of a freight shipment.


A shipment that is handled by a common carrier. Also, the process of a supplier placing goods at a customer location without receiving payment until after the goods are used or sold.

Consignment Inventory

Goods or products that are paid for when they are sold by the reseller, not at the time they are shipped to the reseller. Also, goods or products which are owned by the vendor until they are sold to the consumer.


The party who originates a shipment of goods (shipper). The sender of a freight shipment, usually the seller.


Combining two or more shipments in order to realize lower transportation rates. Inbound consolidation from vendors is called “make‐bulk” consolidation; outbound consolidation to customers is called “break‐bulk” consolidation.

Continuous Replenishment

Continuous replenishment is the practice of partnering between distribution channel members that changes the traditional replenishment process from distributor‐generated purchase orders based on economic order quantities to the replenishment of products based on actual and forecasted product demand.

Continuous Replenishment Planning (CRP)

A program that triggers the manufacturing and movement of product through the supply chain when the identical product is purchased by an end user.


An agreement between two or more competent persons or companies to perform or not to perform specific acts or services or to deliver merchandise. A contract may be oral or written. A purchase order, when accepted by a supplier, becomes a contract. Acceptance may be in writing or by performance, unless the purchase order requires acceptance in writing.

Cost and Freight (C & F)

The seller quotes a price that includes the cost of transportation to a specific point. The buyer assumes responsibility for loss and damage and pays for the insurance of the shipment.

Customer Relationship Management (CRM)

This refers to information systems that help sales and marketing functions as opposed to the ERP (Enterprise Resource Planning), which is for back‐end integration.


A distribution system in which merchandise received at the warehouse or distribution center is not put away, but instead is readied for shipment to retail stores. Cross docking requires close synchronization of all inbound and outbound shipment movements. By eliminating the put‐away, storage, and selection operations, it can significantly reduce distribution costs.

Cross Shipment

Material flow activity where materials are shipped to customers from a secondary shipping point rather than from a preferred shipping point.

Cycle Inventory

An inventory system where counts are performed continuously, often eliminating the need for an annual overall inventory. It is usually set up so that A items are counted regularly (i.e., every month), B items are counted semi‐regularly (every quarter or six months), and C Items are counted perhaps only once a year.


Demand Management

The function of recognizing all demands for goods and services to support the market place. It involves prioritizing demand when supply is lacking. Proper demand management facilitates the planning and use of resources for profitable business results.

Distribution Center (DC)

The warehouse facility which holds inventory from manufacturing pending distribution to the appropriate stores.

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.

Drop Ship

To take the title of the products but not actually handle, stock, or deliver it, e.g., to have one supplier ship directly to another or to have a supplier ship directly to the buyer’s customer.


Electronic Commerce (EC)

Also written as e‐commerce. Conducting business electronically via traditional EDI technologies, or online via the Internet. In the traditional sense of selling goods, it’s possible to do this electronically because of certain software programs that run the main functions of e‐commerce support, such as product display, ordering, shipment, billing, and inventory management. The definition of e‐commerce includes business activity that is business‐to‐business (B2B) and/or business‐to‐consumer (B2C).

EDI Interchange

Communication between partners in the form of a structured set of messages and service segments starting with an interchange control header and ending with an interchange control trailer.

Electronic Product Code (EPC or ePC)

An electronically coded tag that is intended as an improvement to the UPC bar code system. The EPC is a 96‐bit tag which contains a number called the global Trade Identification Number (GTIN).

Unlike a UPC number, which only provides information specific to a group of products, the GTIN gives each product its own specific identifying number, giving greater accuracy in tracking.

Enterprise Resource Planning (ERP)

A class of software for planning and managing enterprise‐wide the resources needed to take customer orders, ship them, account for them, and replenish all needed goods according to customer orders and forecasts. Often includes electronic commerce with suppliers.


Moving shipments through regular channels at an accelerated rate. Also, to take extraordinary action because of an increase in relative priority.


Full Containerload (FCL)

A term used when goods occupy a whole container.

First‐in, First‐out (FIFO)

An accounting method of valuing inventory based on the ending inventory cost of the most recent material received and the cost of goods sold as the cost of the oldest purchases including beginning inventory.

Finished Goods Inventory (FG or FGI)

Products completely manufactured, packaged, stored, and ready for distribution.

Flexible‐Path Equipment

Materials handling devices that include hand trucks and forklifts.


The time required for documents, payments, etc. to get from one trading partner to another.

Free on Board (FOB)

Indicates the place where the title or ownership passes from the seller to the buyer.

Four‐Wall Inventory

The stock which is contained within a single facility or building.

Freight Consolidation

The grouping of shipments to obtain reduced costs or improved utilization of the transportation function. Consolidation can occur by market area grouping, grouping according to scheduled deliveries, or using third party pooling services such as public warehouses and freight forwarders.

Freight Forwarder

An organization which provides logistics services as an intermediary between the shipper and the carrier, typically on international shipments. Freight forwarders provide the ability to respond quickly and efficiently to changing customer and consumer demands and international shipping (import/export) requirements.

Full Truckload (FTL)

Same as Full Containerload, but in reference to motor carriage instead of containers.



Movable property, merchandise, or wares. Also, all materials which are used to satisfy demands. Also, whole or part of the cargo received from the shipper, including any equipment supplied by the shipper.


Handling Costs

The cost involved in moving, transferring, preparing, and otherwise handling inventory.

Hard Copy

Computer output printed on paper.


In a transportation network as a “hub and spoke”. For example, a Distribution Center (DC) serves as the focal point for the origin and termination of long‐distance trucking from outlying areas where they are fed into the hub for connecting shipments or deliveries.


Inbound Logistics

Includes the receipt of materials, parts or resale products from external suppliers, and the subsequent storage, handling, and transportation requirements to facilitate either manufacturing or market distribution (see Outbound Logistics).

Intermediate Destination

A stopping point for a shipment prior to the final destination.

Intermediately Positioned Warehouse

A warehouse located between customers and manufacturing plants to provide increased customer service and reduced distribution cost.

Inventory Turnover

Number of times the average inventory has been sold during the year. Calculated by dividing the cost of goods sold by the average value of inventory.


Just in Time (JIT)

A scheduling system that minimizes inventory by having material arrive just as it is about to be put in use.



A Japanese term for improvement ‐ continuing improvement involving everyone ‐ managers and workers. In manufacturing, kaizen relates to finding and eliminating waste in machinery, labor, or production methods.


Japanese word for visible record, loosely translated means card, billboard, or sign. Popularized by Toyota Corporation, it uses standard containers or lot sizes to deliver needed parts to the assembly line just in time for use.


Light assembly of components or parts into defined units, Kitting reduces the need to maintain an inventory of pre‐build, completed products, but increases the time and labor consumed at shipment.



The cargo carried in a transportation vehicle.

Less Carload (LCL)

Often refers to a freight rate that is usually higher than for a full carload.

Letter of Credit

A form of payment, used especially in international trade, that transfers funds from the buyer’s bank account to the seller’s bank account. An Irrevocable Letter of Credit cannot be cancelled or revoked by the buyer as long as all documents are proper and approved by the bank and the goods have been delivered to the specified place for shipment to the buyer.

Last‐in, First‐out (LIFO)

An accounting method of valuing inventory based on the assumption that the last items purchased are the first sold. Compare with FIFO.

Logistic Management

The part of supply chain management that plans, implements, and controls the efficient, effective forward, and reverse flow and storage of goods, services, and related information between the point of origin (manufacturer) and the point of consumption (OEM or consumer) in order to meet customer’s requirements. The process of strategically managing the procurement, movement and storage of materials, parts and finished inventory (and the related information flows) through the organization and its marketing channels in such a way that current and future profitability are maximized through the cost‐effective fulfillment of orders.

Less Truckload (LTL)

Often refers to a freight rate that is usually higher than for a full truckload.


Market Demand

In marketing, the total demand that would exist within a defined customer group in a given geographical area during a particular time period given a known marketing program.

Market Segment

A group of potential customers sharing some measurable characteristics based on demographics, psychographics, lifestyle, geography, benefits, etc.

Materials Handling

The physical handling of products and materials between procurement and shipping.

Materials Management

The management function of an organization that may include all or a portion of the responsibility for purchasing, inventory control, traffic, shipping, receiving, and warehousing.

Make to Order / Manufacture to Order

A manufacturing process strategy where the trigger to begin manufacture of a product is an actual customer order or release rather than a market forecast. For make‐to‐order products, more than 20% of the value‐added takes place after the receipt of the order or release, and all necessary design and process documentation is available at the time of order receipt.

Make to Stock / Manufacture to Stock

A manufacturing process strategy where finished product is continually held in plant or warehouse inventory to fulfill expected incoming orders or releases based on a forecast.


A document which describes individual orders contained within a shipment.

Manufacturing Lead Time

The total time required to manufacture an item, exclusive of lower‐level purchasing lead time. For make‐to‐order products, it’s the length of time between the release of an order to the production process and shipment to the final customer. For make‐to‐stock products, it’s the length of time between the release of an order to the production process and receipt into finished goods inventory. Included are order preparation time, queue time, setup time, run time, move time, inspection time, and put‐away time.

Market Demand

In marketing, the total demand that would exist within a defined customer group in a given geographical area during a particular time period given a known marketing program.

Market‐Positioned Warehouse

Warehouse positioned to replenish customer inventory assortments and afford maximum inbound transport consolidation economies from inventory origin points with relatively short‐haul local delivery.

Materials Handling

The physical handling of products and materials between procurement and shipping.

Maximum Order Quantity

An order quantity modifier applied after the lot size has been calculated that limits the order quantity to a pre‐established maximum.

Manufacturing Resource Planning (MRP‐II)

A method for the effective planning of all resources of a manufacturing company. Ideally, it addresses operational planning in units, financial planning in dollars, and has a simulation capability to answer what‐if questions. It consists of a variety of processes, each linked together: business planning, production planning (sales and operations planning), master production scheduling, material requirements planning, capacity requirements planning, and the execution support systems for capacity and material. Output from these systems is integrated with financial reports, such as business plan, purchase commitment report, shipping budget, and inventory projections in dollars. Manufacturing resource planning is a direct outgrowth and extension of closed‐loop MRP.

Minimum Order Quantity (MOQ)

The amount required to place an order.

Maintenance, Repair and Operating Supplies (MRO)

Items used in support of general operations and maintenance, such as maintenance supplies, spare parts, and consumables used in the manufacturing process and supporting operations.



A fixed point in a firm’s logistics system where goods come to rest; includes plants, warehouses, supply sources, and markets.

North American Free Trade Agreement (NAFTA)

A free trade agreement, implemented January 1, 1994, between Canada, the United States and Mexico.


Obsolete Inventory

Inventory for which there is no forecast demand expected. A condition of being out of date. A loss of value occasioned by new developments that place the older property at a competitive disadvantage.


Utilizing an outsourcing service provider located in a country other than where the client is located.

Original Equipment Manufacturer (OEM)

A manufacturer that buys and incorporates another supplier’s products into its own products. Also, products supplied to the original equipment manufacturer or sold as part of an assembly. For example, an engine may be sold to an OEM for use as that company’s power source for its generator units.


Pertaining to work performed when demand is present. Typically used to describe products which are manufactured or assembled only when a customer order is placed.

One‐Piece Flow

Moving parts through a process in batches of one.


A type of request for goods or services.

Order Cycle

The time and process involved from the placement of an order to the receipt of the order.

Order Cycle Time

The time that elapses from placement of order until receipt of order. This includes time for order transmittal, processing, preparation, and shipping.

Order Entry and Scheduling

The process of receiving orders from the customer and entering them into a company’s order processing system. Orders can be received through phone, fax, or electronic media. Activities may include “technically” examining orders to ensure an orderable configuration and provide accurate price, checking the customer’s credit and accepting payment (optionally), identifying and reserving inventory (both on hand and scheduled), and committing and scheduling a delivery date.

Order Picking

Assembling a customer’s order from items in storage.

Order Processing

Activities associated with filling customer orders.

Outbound Logistics

The process related to the storage and movement of the final product and related information flows from the end of the production line to the end user (see Inbound Logistics).

Outpartnering (Customer/Supplier Partnership)

The process of involving the supplier in a close partnership with the firm and its operations management system. Outpartnering is characterized by close working relationships between buyers and suppliers, high levels of trust, mutual respect, and emphasis on joint problem solving and cooperation. With outpartnering, the supplier is not viewed as an alternative source of goods and services (as observed under outsourcing), but rather as a source of knowledge, expertise, and complementary core competencies. Outpartnering is typically found during the early stages of product life cycle when dealing with products that are viewed as critical to the strategic survival of the firm.


A motor carrier operation that reflects long‐distance moves; the opposite of local operations.


Packing List

A document containing information about the location of each Product ID in each package. It allows the recipient to quickly find the item he or she is looking for without a broad search of all packages. It also confirms the actual shipment of goods on a line item basis.


The platform which cartons are stacked on and then used for shipment or movement as a group. Pallets may be made of wood or composite materials.

Parcel Shipment

Parcels include small packages like those typically handled by providers such as UPS and FedEx.

Pareto Principle

A management tool based on writings of Vilfredo Pareto, an Italian economist. The principle is that most of the occurrences of any happening are caused by a small percentage of the population. Applied to purchasing management it means that the largest percentage of cost reductions can be obtained from a small percentage of the items purchased or from a small percentage of the number of suppliers used. Erroneously sometimes referred to as the “80‐20 Rule”.

Peak Demand

The time period during which customers demand the greatest quantity.

Perfect Order

The definition of a perfect order is one which meets all of the following criteria:

  • Delivered complete, with all items on the order in the quantity requested.
  • Delivered on time to customer’s request date, using the customer’s definition of on‐time delivery.
  • Delivered with complete and accurate documentation supporting the order including packing slips, bills of lading and invoices.
  • Delivered in perfect condition with the correct configuration, customer ready, without damage, and faultlessly installed (as applicable).

Perpetual Inventory

An inventory record keeping system where each transaction in and out is recorded and a new balance is computed.

Physical Distribution

The movement and storage of finished goods from manufacturing plants to warehouses to customers; used synonymously with business logistics.


Picking and packing immediately into shipment containers.


The operations involved in pulling products from storage areas to complete a customer order.

Picking by Aisle

A method by which pickers pick all needed items in an aisle regardless of the items’ ultimate destination; the items must be sorted later.

Picking by Source

A method in which pickers successively pick all items going to a particular destination regardless of the aisle in which each item is located.

Pick List

A list of items to be picked from stock in order to fill an order; the pick list generation and the picking method can be quite sophisticated.

Poka Yoke (“make mistake proof”)

The application of simple techniques that prevent process quality failure. A mechanism that either prevents a mistake from being made or makes the mistake obvious at a glance.


The function of following up on open orders before the scheduled delivery date to ensure the timely delivery of materials in the specified quantity.


A freight term which indicates that charges are to be paid by the shipper. Prepaid shipping charges may be added to the customer invoice, or the cost may be bundled into the pricing for the product.

Prepaid Freight

Freight paid by the shipper to the carrier when merchandise is tendered for shipment that is not refundable if the merchandise does not arrive at the intended destination.

Process Improvement

A design or activity which improves quality or reduces costs, often through the elimination of waste on non‐value‐added tasks.

Procurement (Purchasing)

The business functions of procurement planning, purchasing, inventory control, traffic, receiving, incoming inspection, and salvage operations.

Proof of Delivery (POD)

Information supplied by the carrier containing the name of the person who signed for the shipment, the time and date of delivery and other shipment delivery‐related information. POD is also sometimes used to refer to the process of printing materials just prior to shipment.

Pull or Pull‐Through Distribution

Supply chain action initiated by the customer. Traditionally, the supply chain was pushed; manufacturers produced goods and pushed them through the supply chain and the customer had no control. In a pull environment, a customer’s purchase sends replenishment information back through the supply chain from retailer to distributor to manufacturer so goods are pulled through the supply chain.

Push Distribution

The process of building product and pushing it into the distribution channel without receiving any information from customers regarding requirements.

Purchase Order

Form that documents the purchase agreement or contract.

Put Away

Removing the material from the dock (or other location of receipt), transporting the material to a storage area, placing that material in a staging area, and then moving it to a specific location and recording the movement and identification of the location where the material has been place.


Quality Control

The management function that attempts to ensure that the goods or services in a firm manufacturers or purchases meet the product or service specifications.


The setting aside of items from availability for use or sale until all required quality tests have been performed and conformance certified.



The function encompassing the physical receipt of material, the inspection of the shipment for conformance with the purchase order (quantity and damage), the identification and delivery to destination, and the preparation of receiving reports.

Receiving Dock

Distribution center location where the actual physical receipt of the purchased material from the carrier occurs.

Request for Information (RFI)

A document used to solicit information about vendors, products, and services prior to a formal RFQ/RFP process.

Request for Proposal (RFP)

A document which provides information concerning needs and requirements for a manufacturer. This document is created in order to solicit proposals from potential suppliers. For example, a computer manufacturer may use an RFP to solicit proposals from suppliers of third party logistics services.

Request for Quote (RFQ)

A document used to solicit vendor responses when a product has been selected and price quotations are needed from several vendors.

Return Goods Handling

Processes involved with returning goods from the customer to the manufacturer. Products may be returned because of performance problems or simply because the customer doesn’t like the product.

Return Material Authorization/Return Merchandise Authorization (RMA) or Return Product Authorization (RPA)

A number usually produced to recognize and give authority for a faulty (perhaps) good to be returned to a distribution center or manufacturer. A form generally required with a warranty/return which helps the company identify the original product and the reason for the return. The RMA number often acts as an order form for the work required in repair situations, or as a reference for credit approval.

Return to Vendor (RTV) or Return to Supplier (RTS)

Material that has been rejected by the customer or the buyer’s inspection department and is awaiting shipment back to the supplier for repair or replacement.

Reverse Logistics

A supply chain that is dedicated to the reverse flow of products and materials for returns, repair, remanufacture, and/or recycling.

RFID Radio Frequency Identification

A system of marking products electronically so they can be located anywhere from a distant point. The use of radio frequency technology such as RFID tags and tag readers to identify objects. Objects may include virtually anything physical, such as equipment, pallets of stock, or even individual units of product.

Request for Proposal (RFP)

Another name for an RFQ. A form used to obtain bids from suppliers.

Request for Quotation (RFQ)

A form used to obtain bids from suppliers.

Restriction of Hazardous Substances (RoHS)

The European Union’s directive, effective July 1, 2006, regarding six hazardous materials (lead, cadmium, mercury, hexavalent chromium, polybrominated biphenyls, and polybrominated diphenyl ethers) used in the manufacture of electronic and electrical equipment.



A performance measurement tool used to capture a summary of the key performance indicators (KPIs)/metrics of a company. Metrics dashboards/scorecards should be easy to read and usually have red, yellow, green indicators to flag when the company is not meeting its metrics targets. Ideally, a dashboard/scorecard should be cross functional in nature and include both financial and non‐financial measures. In addition, scorecards should be reviewed regularly ‐ at least on a monthly basis and weekly in key functions, such as manufacturing and distribution where activities are critical to the success of a company. The dashboard/scorecards philosophy can also be applied to external supply chain partners like suppliers to ensure that their objectives and practices align.

Secure Electronic Transaction (SET)

In e‐commerce, a system of guaranteeing the security of financial transactions conducted over the Internet.

Shelf Life

The amount of time an item may be held in inventory before it becomes unusable. Shelf life is a consideration for food and drugs which deteriorate over time, and for high‐tech products which become obsolete quickly.

Single Source

Refers to where a supplier receives all the business from a buyer for an item even though there are other suppliers who offer the same item with the same specifications. Orders given to a single source obtain the advantages of economics of scale, quantity discounts, pin‐pointing responsibility, and eliminating the need for extra tooling (see Split Sourcing, Sole Sourcing).

Sole Sourcing

Indicates that there are no alternative suppliers that produce exactly the same product with exactly the same specifications. There is often only one source for patented items tooling (see Single Sourcing, Split Sourcing).

Statement of Work (S.O.W.)

The most critical ingredient of a successful procurement of services is the development and documentation of the requirements – the statement of work. The S.O.W. identifies what the contractor is to accomplish. It first clearly identifies the primary objective and then the subordinate objectives. One of the goals of the S.O.W. is to gain understanding and agreement with a contractor about the specific nature of the technical activity to be performed. The S.O.W. also impacts the administration of the contract by defining the scope of the contract in detail.

Split Sourcing

Where more than one supplier is used to buy the same item tooling (see Single Sourcing, Sole Sourcing).

Stock‐Keeping Unit (SKU)

A category of unit with a unique combination of form, fit, and function (i.e., unique components held in stock).

Strategic Alliance

Business relationship in which two or more independent organizations cooperate and willingly modify their business objectives and practices to help achieve long‐term goals and objectives.

Supply Chain

Starting with unprocessed raw materials and ending with the final customer using the finished goods, the supply chain links many companies together. Also, the material and informational interchanges in the logistical process, stretching from acquisition of raw materials to delivery of finished products to the end user. All vendors, service providers, and customers are links in the supply chain.

Supply Chain Management (SCM)

The active management of supply chain activities to maximize customer value and achieve a sustainable competitive advantage. It represents a conscious effort by the supply chain firms to develop and run supply chains in the most effective & efficient ways possible. The management of the flow of goods and services involving the movement and storage of raw materials, work‐in‐process inventory, and of finished goods from point of origin to point of consumption. Interconnected or interlinked networks, channels and node businesses combine in the provision of products and services required by end customers in a supply chain. Supply‐chain management has been defined as the design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally.

Surety Bonds

An instrument of financial guarantee provided by a surety (insurance company or bank) that payments accruing due to liabilities under the contract shall be retired by the contractor or the surety will do so. There are three types of surety bonds, bid bonds, performance bonds, and payment bonds.

Systems Contract

Agreement with a supplier that requires the supplier to keep in stock all items of a certain type or category that may be needed by the buyer and provide them overall at a lower cost than could be obtained by buying them separately.


Tare Weight

The weight of the packaging material used to wrap or protect the actual required material being shipped.


A tax assessed by a government on goods entering or leaving a country. The term is also used in transportation in reference to the fees and rules applied by a carrier for its services.


The document which describes a business transaction to be performed.

Terms and Conditions (T’s & C’s)

All the provisions and agreements of a contract.

Third Party Logistics

Outsourcing all or much of a company’s logistics operations to a specialized company.

Third Party Logistics Provider (3PL)

A firm which provides multiple logistics services for use by customers. Preferably, these services are integrated or bundled together, by the provider. These firms facilitate the movement of parts and materials from suppliers to manufacturers, and finished products from manufacturers, and finished products from manufacturers to distributors and retailers. Among the services they provide are transportation, warehousing, cross docking, inventory management, packaging, and freight forwarding.

Third Party Warehousing

The outsourcing of the warehousing function by the seller of the goods.

Total Cost of Ownership (TCO)

In supply chain management, the total cost of ownership of the supply delivery system is the sum of all the costs associated with every activity of the supply stream. The main insight that TCO offers to the supply chain manager is the understanding that the acquisition cost is often a very small portion of the total cost of ownership.

Tracking and Tracing

Monitoring and recording shipment movements from origin to destination.

Trading Partner

Companies that do business with each other via EDI (e.g., send and receive business documents such as purchase orders).

Transactional Acknowledgement

Specific transaction sets, such as the Purchase Order Acknowledgement (855), that both acknowledges receipt of an order and provides special status information, such as reschedules, price changes, back order situation, etc.

Transit Time

The total time that elapses between a shipment’s pickup and delivery.


Uniform Product Code (UPC)

A standard product numbering and bar coding system used by the retail industry. UPC codes are administered by the Uniform Code Council. They identify the manufacturer as well as the item, and are included on virtually all retail packaging.

Unit Cost

The cost associated with a single unit of product. The total cost of producing a product or service divided by the total number of units. The cost associated with a single unit of measure underlying a resource, activity, product, or service. It’s calculated by dividing the total cost by the measured volume. Unit cost measurement must be used with caution as it may not always be practical or relevant in all aspects of cost management.


The practice of attempting to sell a higher‐value product to the customer.


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. Opposite of downstream.


Value Added

Increased or improved value, worth, functionality, or usefulness.

Value Proposition

What the hub offers to members. To be truly effective, the value proposition has to be two‐sided ‐ a benefit to both buyers and sellers.

Vendor Code

A unique identifier, usually a number and sometimes the company’s DUNS number, assigned by a customer for the vendor it buys from.

Vendor‐Managed Inventory (VMI)

The practice of retailers making suppliers responsible for determining order size and timing, usually based on receipt of retail POS and inventory data. Its goal is to increase retail inventory turns and reduce stock outs.


Wave Picking

A method of selecting and sequencing picking lists to minimize the waiting time of the delivered material. Shipping orders may be picked in waves combined by a common product, common carrier, or destination, and manufacturing orders in waves related to work centers.


Document containing description of goods that are part of common carrier freight shipment. Shows origin, destination, consignee/consignor, and amount charged. Copies travel with goods and are retained by originating/delivering agents. Used by carrier for internal record and control, especially during transit. Not a transportation contract.


Zone Picking

A method of subdividing a picking list by arrears within a storeroom for more efficient and rapid order picking. A zone‐picked order must be grouped to a single location and the separate pieces combined before delivery, or must be delivered to different locations such as a work center.

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