Top 20 Supply Chain Terms to Know – Cheat Sheet.

The cheat sheet has the supply chain terms to know with short definitions. Below the cheat sheet you will find expanded definitions. In the expanded definitions sections you will find links to posts that dive deep into the terminology.

Greater Detail, Expanded from Above:

Supply Chain: A supply chain is a complex system that connects different entities, including suppliers, manufacturers, distributors, retailers, and customers, to deliver a product or service. It encompasses everything from obtaining raw materials to manufacturing and delivering the final product. The goal is to meet customer needs efficiently while minimizing costs.
Logistics: Logistics refers to the detailed planning, implementation, and management of the movement and storage of goods, services, and information within a supply chain. It includes inbound logistics (moving materials from suppliers to manufacturers) and outbound logistics (moving finished products to customers). Effective logistics management ensures timely delivery, reduces transportation costs, and improves customer satisfaction.
Inventory: Inventory represents the stock of goods a company holds at various stages of the production and supply process. It includes raw materials (used for production), work-in-progress (items being processed), and finished goods (ready for sale). Effective inventory management is essential for balancing supply with demand, reducing holding costs, and avoiding stockouts or overstocking.
Lead Time: Lead time is the total time required to complete a supply chain process from start to finish. For example, it includes the time taken to order materials from suppliers, manufacture the products, and deliver them to customers. Reducing lead time can improve responsiveness to customer demand and enhance supply chain efficiency.
Procurement: Procurement involves identifying, sourcing, and acquiring goods, services, or raw materials needed by a business. It includes selecting suppliers, negotiating contracts, and ensuring that purchased items are delivered on time and meet the necessary quality standards. Strategic procurement helps organizations minimize costs while ensuring a reliable supply of materials.
Demand Forecasting: Demand forecasting is the process of using historical data, market trends, and other variables to predict future customer demand. Accurate forecasting helps businesses plan production, manage inventory levels, and allocate resources efficiently, reducing the risk of excess stock or stockouts.
Just-in-Time (JIT): JIT is a lean manufacturing and inventory strategy designed to reduce waste by receiving materials and producing goods only as needed. JIT minimizes inventory costs, but it requires precise coordination with suppliers and the ability to respond quickly to changes in demand or supply disruptions.
Warehousing: Warehousing involves storing goods in a controlled environment until they are needed for production or delivery to customers. Warehouses play a critical role in supply chain management by ensuring product availability, supporting order fulfillment, and enabling bulk purchasing. Different types of warehouses include distribution centers, fulfillment centers, and storage warehouses.
Distribution: Distribution refers to the entire process of getting products from the manufacturer or warehouse to the end customer. It involves transportation, warehousing, and handling activities. Efficient distribution networks help companies meet customer expectations for timely delivery while minimizing transportation and storage costs.
Third-Party Logistics (3PL): A third-party logistics provider (3PL) is an external company that manages all or part of a business’s logistics operations. 3PLs offer services such as transportation, warehousing, inventory management, and order fulfillment. Outsourcing logistics to a 3PL can help companies reduce costs and focus on their core competencies.
Supply Chain Management (SCM): SCM is the strategic coordination and oversight of all activities involved in sourcing, production, and delivery of products or services. It aims to optimize the entire supply chain, improve efficiency, reduce costs, and enhance customer satisfaction by integrating suppliers, manufacturers, logistics providers, and retailers.
Bill of Materials (BOM): A Bill of Materials is a comprehensive list of raw materials, components, and subassemblies needed to manufacture a product. It outlines the quantities, part numbers, and specifications of each item required. The BOM is a key document used in production planning and inventory management, ensuring that all necessary parts are available for manufacturing.
Freight Forwarder: A freight forwarder is a company that organizes and arranges the transportation of goods on behalf of other companies. Freight forwarders handle all aspects of shipping, including documentation, customs clearance, transportation, and delivery. They act as intermediaries between shippers and carriers and are skilled in navigating complex international logistics.
Cross-Docking: Cross-docking is a logistics practice in which products from inbound shipments are directly transferred to outbound shipments without being stored in a warehouse for long periods. This practice reduces handling and storage costs and accelerates the movement of goods, making it an effective strategy for fast-moving items or perishable goods.
Order Fulfillment: Order fulfillment refers to the entire process of receiving, processing, and delivering customer orders. It includes order picking, packing, shipping, and handling returns. Effective order fulfillment is crucial for customer satisfaction, as it ensures that customers receive the correct products in a timely manner.
Reverse Logistics: Reverse logistics involves managing the return of products from customers to the company, whether for returns, repairs, recycling, or disposal. It includes handling customer returns, warranty claims, product recalls, and recycling programs. An efficient reverse logistics process can improve customer service and reduce waste.
Safety Stock: Safety stock is extra inventory held as a buffer to protect against uncertainties in demand or supply disruptions. It is used to avoid stockouts, ensuring that a business can continue to operate smoothly even if demand is higher than expected or suppliers experience delays. Safety stock levels are often based on historical data and risk assessments.
Vendor-Managed Inventory (VMI): VMI is a supply chain strategy where the supplier takes responsibility for monitoring and replenishing inventory at the customer’s location. The supplier tracks the customer’s inventory levels and ensures that stock is replenished as needed. VMI helps improve supply chain efficiency, reduce stockouts, and lower inventory costs.
Supply Chain Visibility: Supply chain visibility refers to the ability to track and monitor products, materials, and information as they move through the supply chain. It provides real-time insights into inventory levels, order status, and potential delays. Enhanced visibility enables better decision-making, improves responsiveness to disruptions, and supports traceability.
Total Cost of Ownership (TCO): TCO is a financial estimate that considers not only the purchase price of a product but also the long-term costs associated with owning, operating, and disposing of the product. These costs include maintenance, transportation, energy consumption, and end-of-life disposal. TCO analysis helps companies make more informed purchasing decisions by understanding the full cost impact of their choices.

Supply Chain Quotes

“It is not necessary to change. Survival is not mandatory.” ~W. Edwards Deming
“Many supply chains are perfectly suited to the needs that the business had 20 years ago.” ~Jonathan Byrnes
“All businesses need to be young forever. If your customer base ages with you, you’re Woolworth’s.” ~Jeff Bezos
“Learning is not compulsory… neither is survival.” ~W. Edwards Deming
“I probably have traveled and walked into more variety stores than anybody in America. I am just trying to get ideas, any kind of ideas that will help our company.” ~Sam Walton
“The Dell Theory of Conflict Prevention argues that no two countries that are both part of the same global supply chain will ever fight a war as long as they are each part of that supply chain.” ~Thomas Friedman
“Supply Chain is like nature, it is all around us.” ~Dave Waters
“The supply chain stuff is really tricky.” ~Elon Musk
“Cutting carbon in the supply chain is the next critical stage in the business contribution to reduce carbon emissions to tackle climate change and represents a significant commercial opportunity.” ~Tom DeLay
“There’s nobody who has as big of a real-time logistics network than Uber.” ~Jason Calacanis