Glossary of Materials Management Terms

ABC Inventory Control

An inventory control approach based on the ABC volume or sales revenue classification of products (A items are highest volume or revenue, C—or perhaps D—are lowest-volume SKUs

Absolute Advantage

A competitive strength enjoyed by a party as a result of a natural endowment or other natural gifts that other parties do not have

Acceptance

The intentional indication of an offer to be bound by the terms of an offer

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 Testing

A statistical quality control technique used to evaluate the overall condition of a given lot by inspecting only a sample, drawn randomly from the lot

Accessorial Charges

Costs that carriers usually charge in addition to the transportation cost. They include single shipment, inside delivery, loading, unloading, notification and storage and redelivery charges.

Accessibility

The ability of a carrier to provide service between an origin and a destination.

Administered Price

A price determined by certain policies rather than by the competitive forces of the marketplace. For example, prices of sugarcane etc. in India is determined by the government rather than the market forces of demand and supply

AD Valorem Rate

Customs duty charged in terms of percentage on the value of goods that are dutiable, irrespective of quality, weight, or any other considerations. The ad Valorem rates of duty are ascertained from the invoice

Activity Based Costing

A method for calculating indirect costs, based on the activities that drive cost. This is in contrast to the classical accounting methods which pool and arbitrarily allocate indirect cost.

Accounting System

The grouping of records and procedures that find out, record, classify and report information about the financial position and operations of an organization

Acculturation

The process of becoming familiar with another culture. It helps in conducting transnational businesses

Acknowledgement

A written communication used to inform the buyer by the supplier that the supplier has accepted the purchase order placed on him. An acknowledgement thus creates a bilateral contract as long as the terms of the acknowledgement are not significantly different from those of the purchase order

Acquisition Cost

Acquisition costs are the total costs associated with the acquisition of a material. Such costs include costs towards ordering, transportation, handling, inventory holding etc. It is noted in the context of the Economic Order Quantity (EOQ)

Acquisition Process

The sequential activities involved in obtaining necessary inputs for an organization is the Acquisition process. It includes determination of need, communication of need, identification of potential sources, invitation and consideration of bids, placement of the Purchase Order, receipt and inspection and making payment

Advance Payment

Payments in advance of delivery for a mutually agreed amounts or for specified percentage of the purchase price that buyer shall pay to the seller

Advance Shipping Notice

A standardized Electronic Data Interchange form detailing an inbound shipment to a receiving location (consignee)

Advanced charges

The amount of freight or other charges on a shipment advanced by one carrier to another, or to the shipper, to be collected from the consignee

Agency

It’s a legal entity denoting the legal relationship that exists between two parties by which one is authorized to perform or transact specified business activities for the other

Agent

A person or an authorized another person or organization in dealings with a third party.

Air Waybill

A document used for shipment of air freight by national and international air carriers and declares therein the modesties shipped, shipping instructions and shipping costs.

Anticipated Inventories

Those stocks that are accumulated for a well defined future need. They differ from buffer (safety) stocks in that they are committed to specific future plans

ASP

Application Service Provider is an organization that provides software applications over the internet.

Carrying Cost

It is the per unit cost of holding inventory for a certain period of time. Usually, it is expressed in terms of percentage of the average inventory

Cartage

A charge made for hauling and transferring goods, on a local basis. It also denotes the physical movement of the goods

Cartel

An association, formal or otherwise of producers of the same commodity to control the market.

Cash Discount

In order to encourage quick payment by the buyer it is a percentage discount allowed on the invoiced amount

Cash On Delivery

Prior to release of the goods by the carrier, payment through cash mode for goods and transportation cost (total invoiced amount) asked by the seller from the buyer

Categorical Method

A method of rating supplier performance usually on a scale of plus, minus and neutral w.e.f.. a list of evaluation factors.

Caveat Emptor

Any purchase is done at the buyer’s risk who has to beware (“Let the buyer beware”—Latin)

Centralized Purchasing

When Purchasing for the most of the organizational requirement is done by one agency, often called Purchasing department.

Certificate of origin

A document required by customs officials, identifying the country of origin of imported materials

Certified Purchasing Manager

A world wide recognized certification program for the purchasing and supply professional conducted by the ISM, USA

Certified Supplier

A supplier whose Quality assurance system producing reliable product / service are accepted by the buyer. Inspection may not be done for this supplier’s product

Change Order

A written authorization from the purchaser to the supplier on an existing order to change it. It is also called amendment to order

Class Freight Rate

Commodity rates are available only on selected commodities, a class rate can be found for all items shipped. It helps in simplifying the process of providing a specific rate for each commodity being shipped. It’s thus a rate resulting from classification rating of the freight.

Coincident Indicator

A measure of economic activity that changes concurrently with changes in the business cycle

Collusion

A secret agreement or cooperation between two or more parties in which parties act in collusion to fix their bids in an advantageous manner eliminating the scope for genuine competitive bidding.

Collusive Bidding

An unholy and illegal practice in which suppliers act in collusion to fix their bids eliminating genuine competition in bidding. It’s also known as formation of syndicate or cartel.

Commodity Council

Cross-functional teams and/or multi-division teams are responsible for selecting suppliers, negotiating contracts and monitoring supplier performance including quality and delivery performance

Commodity Freight Rate

It’s a transportation rate for a specific commodity, moving between specified points, in a certain direction and for a specific minimum quantity.

The purpose of the commodity rate is to provide a lower rate to reflect the economic benefits to the carrier resulting from more predictable and larger quantity movements over certain routes.

Commodity Segmentation

It refers to dividing a firm’s total spending into categories of goods and services in order to leverage spending and increase purchasing efficiency. Common practice involves using a matrix to divide the commodities into four quadrants: Acquisition – low risk, low value items, Critical – high risk, low value, Leverage- low risk, high value and Strategic-high risk, high value items

Common Carrier

A carrier that serves all kinds of customers but carries only the types of freight for which it holds itself out to carry. It helps in enabling transportation to the needy, knowledge of rates, provision of service on a schedule, service availability in a designated area and most importantly service for a given class of commodity and movement

Common Market

A market with no internal tariffs, common external tariffs and free flow of labour and capital

Comparative Advantage

A competitive strength that a country enjoys in producing a product more efficiently than other countries

Competent Parties

Parties entering into a contract must be in a position to enter into contract and execute it

Competitive Bidding

It’s a method of awarding a contract in which bids are invited from competing vendors through a notice inviting bids. Usually, the award is made on the lowest price offering bidder.

Competitive proposals

A proposal, in response to the bidding invitation by a vendor in the face of other bidders proposal out of which one or more may enter into contract is a competitive proposal

Concealed Damage

Damage to the contents of a package that seems to in good condition externally

Consequential Damages

Loss of profit / earning incurred by purchaser as a result of a seller’s breach

Consideration

An exchange of value for value, required to form a valid contract

Consignee

The person or organization to whom a shipper directs the carrier to deliver the goods, generally the purchaser of the goods

Consignment Buying

A method of procurement in which a supplier maintains inventory on the premises of the purchaser. The purchaser pays for the goods only when goods are used or issued from the stock

Consignor

The shipper of a specified quantity of goods

Consolidation

Combining less than truck load shipments from various facilities at a centrally located point and transporting them as a large shipment, generally at a lower freight rate

Consortium

A small group of businesses that join forces in purchasing selected products.

Early Purchasing Involvement (EPI)

A practice involving supply management professionals in a new product development process from its inception

Early Supplier Involvement (ESI)

A practice that brings together one or more selected suppliers with a buyer’s product design team early in the product development process

E-Business

A means of doing business that uses electronic technologies such as EDI, Internet, Web based supply chain integration to the benefit of an organization. It’s also known as E-commerce

Economic Indicators

Activities that change relative to the economy

Economic Order Quantity

A deterministic model that minimizes total acquisition and inventory carrying cost. Popularly it is known as EOQ

Economies of Scale

The reduction in average unit costs experienced as an organization’s volume increases

Electronic Commerce

Utilization of technology of the computer, including such tools as EDI, the internet, intranets,

Extranets to do commercial transaction

Electronic Data Interchange

Popularly known as EDI it’s computer to computer exchange of business information in a standard format. Transaction documents are transmitted electronically from purchaser’s computer to the seller’s computer

Electronic Fund Transfer

The electronic transmission of funds from one party, usually the Purchaser to other party, usually the Supplier. The transfer is often done through internet using credit card

Electronic Requisitions

Purchase requisitions / Indents generated and transmitted by computer, replacing paper forms

Marketplace

A place to conduct e-commerce where sellers and purchasers meet on the net. It is used for purchasing , auctioning etc.

Embargo

A government’s total ban on trade with a specific country

Enterprise

A complete business organization from front line employees to top management, all functions in between

ERP

Enterprise Resource Planning refers to a system that integrates various functions within an organization. It may be used for forecasting, Materials Management etc. It’s a computerized system now days

Escalation Clause

A contract clause permitting a specified increase in the price of goods or services in the event of certain conditions. Such a clause also specifies de-escalation

Established Market Price

A current price generated in the usual course of business between buyers and sellers free to bargain and which can be substantiated from an independent source

Exchange Barriers

The restrictions imposed on exchanging a country’s currency against those of other countries

Exchange Rate

The price of a currency as it is being exchanged for another

Exempt Commodities

Commodities that are not subject to import duties or can be transported exempt of regulation

Expediting

Contacting a supplier or carrier with the goal of speeding up the delivery date of an inbound shipmen

Export license

A permit from a host country government, enabling organizations to take goods out of a country

Express Warranty

A specific assurance made by the seller concerning the performance , quality, or nature of the goods or services sold

External Customer

The ultimate marketplace purchaser / user of an organization’s outputs

Economy of Scale

A phenomenon whereby larger volumes of production reduce unit cost by distributing fixed costs over a larger quantity.

EDI Standards

Criteria that define the data content and format requirements for specific business transactions (e.g. purchase orders). Using standard formats allows companies to exchange transactions with multiple trading partners easily.

Efficient Consumer Response (ECR)

A demand driven replenishment system designed to link all parties in the logistics channel to create a massive flow-through distribution network. Replenishment is based upon consumer demand and point of sale information.

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 is possible to do this electronically because of certain software programs that run the main functions of an e-commerce website, such as product display, online ordering, and inventory management. The definition of e-commerce includes business activity that is business-to-business (B2B), business-to-consumer (B2C).

Electronic Data Interchange (EDI)

Inter-company, computer-to-computer transmission of business information in a standard format. For EDI purists, “computer-to-computer” means direct transmission from the originating application program to the receiving, or processing, application program. An EDI transmission consists only of business data, not any accompanying verbiage or free-form messages. Purists might also contend that a standard format is one that is approved by a national or international standards organization, as opposed to formats developed by industry groups or companies.

Electronic Funds Transfer (EFT)

A computerized system that processes financial transactions and information about these transactions or performs the exchange of value. Sending payment instructions across a computer network, or the company-to Company, company-to-bank, or bank-to-bank electronic exchange of value.

End-of-Life Inventory

Inventory on hand that will satisfy future demand for products that are no longer in production at your entity.

Enterprise Resource Planning (ERP) System

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. Examples of ERP systems are the application suites from SAP, Oracle, PeopleSoft and others.

FEE

In cost reimbursement contracts, an agreed upon amount beyond the initial cost estimate, usually reflecting a variety of factors, including risk and services. The fee may be fixed initially (Cost-plus-fixed-fee arrangement) or it may vary (cost-plus-incentive-fee or cost-plus-award-fee arrangement)

FIFO

First in – First out, describes the flow of inventory. It is average costing where rather than keeping track of the inventory value of individual units of the same item separately, they are averaged so that all units of the same items of inventory have the same value

Fill Rate

The percentage of requisitions filled from stock present on the shelf. The inverse of it is “Stock out rate.

Financial Lease

Financing for the full life of a piece of equipment

Finished Goods

Goods that have completed the manufacturing or assembly process and are ready for sale to external customers

Firm Bid

It’s a legal offer to sell which can become a contract simply on acceptance by the buyer

Force Majeure

Major and usually uncontrollable events, that excuse a party from the performance of its obligations. The contract provision is referred to as the “Act of God” and is kept in the contract to protect both the purchaser as well as the supplier

Forecasting

Projection of future business conditions and their impact on the organization

Foreign Freight Forwarder

A party that acts to arrange for export and import movement of goods for shippers and consignees

Form, Fit & Function

An overall quality related term common in purchase agreements that encompasses the physical attributes of something (from), its desired outputs or performance (function) and fitness (appropriate for the application)

Forward Buying

Buying in excess of current requirements, as a strategy because of an anticipated shortages, strikes, price increase etc

Free Alongside Vessel

Under this arrangement, the supplier agrees to deliver the goods in proper condition alongside the vessel. The buyer assumes all subsequent risks and expenses after delivery to the pier

Free On Board

These are shipping terms under which title is transferred between the supplier and the purchaser at the FOB point. There are many arrangements under FOB such as:

• FOB destination: Under it the seller bears risk until the goods are transported to the buyer’s dock, after which the risk will pass to the buyer.
• FOB destination, Freight collect: Title passes from the supplier to the buyer at the destination point and freight charges are the responsibility of the purchaser. The supplier owns the goods in transit and is responsible for filling loss and damage claims against the carrier, but the purchaser pays and bears the freight charges and files any overcharge claims.
• FOB destination, Freight prepaid: Title passes from the supplier to the buyer at destination point and freight charges are paid by the supplier. The supplier pays and bears the freight charges, owns the goods in transit and may file claims for overcharges, loss and damage.
• FOB destination, Freight prepaid and Invoiced: Title passes at the destination point; freight charges are paid by the supplier and added to the invoice. The supplier pays the freight charges, owns the goods in transit and file claims for overcharges, loss and damage. The purchaser ultimately bears the freight charges.
• FOB Origin: The seller bears the risk until it loads the goods onto an appropriate carrier after which the buyer assumes the risk of loss and must claim against the carrier for damage or loss in transit.
• FOB Origin, Freight allowed: Purchaser obtains title where the shipment originates and is responsible for all claims against the carrier but the supplier pays the freight charges.
• FOB Origin, Freight Collect: Title passes on to the buyer at the point of origin and the buyer must pay the freight charges. The buyer owns the goods in transit and files all claims against the carrier.
• FOB Origin, Freight Prepaid and Invoiced: Title passes to the buyer at the point of origin , freight charges are paid by the supplier and then collected from the purchaser by adding them to the invoice. The supplier pays the freight charges and files claims for overcharges. The purchaser bears the freight charges, owns the goods in transit and files claims for loss and damage with the carrier.

Free Trade

The uninhibited flow of goods and services across national boundaries

Free Trade Zone

A site in which imported goods are exempted from custom duties. Countries establish it to encourage economic development such as manufacturing and distribution

Freight Bill

The carrier’s invoice for transportation charges applicable to a shipment

Freight Claim

A claim against a carrier due to loss of , or damage to, goods transported by that carrier, also for erroneous rates and weights in assessment of freight charges

Freight Forwarder

A third party, licensed to make transportation arrangements

Functional Acknowledgement

A standardized EDI form that indicates the receipt of a shipment. It is automatically generated and sent back to the shipping organization.

Futures Contracts

Contracts for the purchase or sale and delivery of commodities or currencies at a specified future date, primarily used as a hedging device against market price fluctuations or unforeseen supply shortages

Fair-share Quantity Logic

In inventory management, the process of equitably allocating available stock among field distribution centers. Fair-share quantity logic is normally used when stock available from a central inventory location is less than the cumulative requirements of the field stocking locations. The use of fair-share quantity logic involves procedures that “push” stock out to the field, instead of allowing the field to “pull” in what is needed. The objective is to maximize customer service from the limited available inventory.

Field Finished Goods

Inventory which is kept at locations outside the four walls of the manufacturing plant (i.e., distribution center or warehouse).

Field warehouses

A warehouse on the property of the owner of the goods that stores goods that are under the custody of a bonafide public warehouse manager. The public warehouse receipt is used as collateral for a loan.

Finished Goods Inventory (FG or FGI)

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

Finite Forward Scheduling

An equipment scheduling technique that builds a schedule by proceeding sequentially from the initial period to the final period while observing capacity limits. A Gantt chart may be used with this technique.

First In, First Out (FIFO)

Warehouse term meaning first items stored are the first used. In accounting this tem is associated with the valuing of inventory such that the latest purchases are reflected in book inventory. Also see: Book Inventory

Fixed Costs

Costs, which do not fluctuate with business volume in the short run. Fixed costs include items such as depreciation on buildings and fixtures.

Fixed interval inventory model

A setup wherein each time an order is placed for an item, the same (fixed) quantity is ordered.

Fixed Order Quantity

A lot-sizing technique in ERP or inventory management that will always cause planned or actual orders to be generated for a predetermined fixed quantity, or multiples thereof if net requirements for the period exceed the fixed order quantity.

Fixed Reorder Cycle Inventory Model

A form of independent demand management model in which an order is placed every “n” time units. The order quantity is variable and essentially replaces the items consumed during the current time period. Let “M” be the maximum inventory desired at any time, and let x be the quantity on hand at the time the order is placed. Then, in the simplest model, the order quantity will be M – x. The quantity M must be large enough to cover the maximum expected demand during the lead time plus a review interval. The order quantity model becomes more complicated whenever the replenishment lead time exceeds the review interval, because outstanding orders then have to be factored into the equation. These reorder systems are sometimes called fixed-interval order systems, order level systems, or periodic review systems. Synonyms:

Fixed Reorder Quantity Inventory Model

A form of independent demand item management model in which an order for a fixed quantity is placed whenever stock on hand plus on order reaches a predetermined reorder level. The fixed order quantity may be determined by the economic order quantity, by a fixed order quantity (such as a carton or a truckload), or by another model yielding a fixed result. The reorder point may be deterministic or stochastic, and in either instance is large enough to cover the maximum expected demand during the replenishment lead time. Fixed reorder quantity models assume the existence of some form of a perpetual inventory record or some form of physical tracking, e.g., a two-bin system that is able to determine when the reorder point is reached.

Fixed-Location Storage

A method of storage in which a relatively permanent location is assigned for the storage of each item in a storeroom or warehouse. Although more space is needed to store parts than in a random-location storage system, fixed locations become familiar, and therefore a locator file may not be needed. Also see: Random-Location Storage Flag of convenience: A ship owner registers a ship in a nation that offers conveniences in the areas of taxes, manning, and safety requirements; Liberia and Panama are two nations known for flags of convenience.

FOB Destination

Title passes at destination, and seller has total responsibility until shipment is delivered.

FOB Origin

Title passes at origin, and buyer has total responsibility over the goods while in shipment.

For-hire carrier

A carrier that provides transportation service to the public on a fee basis

Forecast

An estimate of future demand: A forecast can be constructed using quantitative methods, qualitative methods, or a combination of methods, and it can be based on extrinsic (external) or intrinsic (internal) factors. Various forecasting techniques attempt to predict one or more of the four components of demand: cyclical, random, seasonal, and trend

Forecast Cycle

Cycle time between forecast regenerations that reflect true changes in marketplace demand for shippable end products.

Forklift truck

A machine-powered device that is used to raise and lower freight and to move freight to different warehouse locations

Fourth-Party Logistics (4PL)

Differs from third party logistics in the following ways; 1)4PL organization is often a separate entity established as a joint venture or long-term contract between a primary client and one or more partners; 2)4PL organization acts as a single interface between the client and multiple logistics service providers; 3) All aspects (ideally) of the client’s supply chain are managed by the 4PL organization; and, 4) It is possible for a major third-party logistics provider to form a 4PL organization within its existing structure (Strategic Supply Chain Alignment; John Gattorna).

Free Alongside Ship (FAS)

A term of sale indicating the seller is liable for all changes and risks until the goods sold are delivered to the port on a dock that will be used by the vessel. Title passes to the buyer when the seller has secured a clean dock or ship’s receipt of goods.

Free on Board (FOB)

Contractual terms between a buyer and a seller that define where title transfer takes place.

Freezing inventory balances

In most cycle counting programs the term “freezing” refers to copying the current on-hand inventory balance into the cycle count file. This may also be referred to as taking a snapshot of the inventory balance. It rarely means that the inventory is actually frozen in a way that prevents transactions from occurring.

Freight-all-kinds (FAK)

An approach to rate making whereby the ante is based only upon the shipment weight and distance; widely used in TOFC service.

Freight bill

The carrier’s invoice for transportation charges applicable to a freight shipment.

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.

Frozen Zone

In forecasting, this is the period in which no changes can be made to scheduled work orders based on changes in demand. Use of a frozen zone provides stability in the manufacturing schedule.

General Agents

Agents with broad powers and considerable latitude in using their own judgment to carry out duties assigned to them by their principals

GATT

Multilateral agreements created in 1947 to reduce barriers to world trade. Succeeded by the World Trade Organization (WTO)

Global Sourcing

The procurement of goods or services outside the limits of a country i.e. international

Global Tender

A tender which is open internationally for offers by the interested tenderness. It is given wide publicity so as to have global reach

Goods Booked to Self

A term used in Railway transportation where the delivery of the consignment can be taken only on production of the Railways Receipt

Gain Sharing

A method of incentive compensation where supply chain partners share collectively in savings from productivity improvements. The concept provides an incentive to both the buying and supplier organizations to focus on continually reevaluating, re-energizing, and enhancing their business relationship. All aspects of value delivery are scrutinized, including specification design, order processing, inbound transportation, inventory management, obsolescence programs, material yield, forecasting and inventory planning, product performance and reverse logistics. The focus is on driving out limited value cost while protecting profit margins.

General commodities carrier

A common motor carrier that has operating authority to transport general commodities, or all commodities not listed as special commodities.

General-merchandise warehouse

Warehouses that are used to store goods that are readily handled, are packaged, and do not req1ire a controlled environment.

Global Trade Item Number (GTIN

A unique number that comprises up to 14 digits and is used to identify an item (product or service) upon which there is a need to retrieve pre-defined information that may be priced, ordered or invoiced at any point in the supply chain. The definition covers raw materials through end user products and includes services, all of which have pre-defined characteristics. GTIN is the globally-unique

EAN.UCC System identification number, or key, used for trade items (products and services). It’s used for uniquely identifying trade items (products and services) sold, delivered, warehoused, and billed throughout the retail and commercial distribution channels. 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.

Gondola

A rail car with a flat platform and sides three to five feet high; used for top loading of items that are long and heavy.

Goods Received Note (GRN)

Documentation raised by the recipient of materials or products as a mark of receipt of goods.

Gross Inventory

Value of inventory at standard cost before any reserves for excess and obsolete items are taken.

Gross weight

The total weight of the vehicle and the payload of freight or passengers.

Hand -to-mouth buying

Frequent purchases in small quantities to meet only immediate , short term requirements

Also, it is a practice of planning inbound material purchases and flows without the need for significant inventory levels

Hazardous Materials

Materials or substances that have been determined by a government agency to be a risk to health, safety and property and thus need to comply with the prescribed safeguards. The term includes such items as explosives, flammables, poisons, corrosive, radioactive substances. These materials must be packaged, labeled, handled and transported according to strict regulations from several agencies. International shipments must comply with docket HM-181, where the term “dangerous goods” is often used interchangeably with hazardous materials

Hedging

A purchase or sale entered into for the purpose of balancing a sale or purchase already made or under contract, in order to offset the effect of potential market price fluctuations.

Host Country

Any country where an organization has its world headquarters

Hundred Weight

100 pounds, a unit of weight used in transportation

High Sea Sale

It describes the transfer of Goods from the buyer when the material is on high sea

Holding Cost

Also called Carrying cost, it is the average cost of carrying a unit of an inventory item. It normally includes opportunity cost of holding inventory and other related costs such as overhead and variable costs

Hub

A large retailer or manufacturer having many trading partners

Handling Costs

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

Hawthorne Effect

From a study conducted at the Hawthorne Plant of Western Electric Company in 1927-1932 which found that the act of showing people that you are concerned usually results in better job performance. Studying and monitoring of activities are typically seen as being concerned and results in improved productivity

Hedge Inventory

A form of inventory buildup to buffer against some event that may not happen. Hedge inventory planning involves speculation related to potential labor strikes, price increases, unsettled governments, and events that could severely impair a company’s strategic initiatives. Risk and consequences are unusually high, and top management approval is often required.

Heijunka

In the Just-in-Time philosophy, an approach to level production throughout the supply chain to match the planned rate of end product sales.

Honeycombing

The practice of removing merchandise in pallet load quantities where the space is not exhausted in an orderly fashion. This results in inefficiencies due to the fact that the received merchandise may not be efficiently stored in the space which is created by the honey-combing.

The storing or withdrawal or supplies in a manner that results in vacant space that is not usable for storage of other items. 3. Creation of unoccupied space resulting from withdrawal of unit loads. This is one of the major hidden costs of warehousing.

Hopper cars

Rail cars that permit top loading and bottom unloading of bulk commodities; some hopper cars have permanent tops with hatches to provide protection against the elements.

Horizontal Play/Horizontal Hub

This is a term for a function that cuts across many industries, usually defines a facility or organization that is providing a common service.

• A large retailer or manufacturer having many trading partners.
• A reference for a transportation network as in “hub and spoke” which is common in the airline and trucking industry. For example, a hub airport serves as the focal point for the origin and termination of long-distance flights where flights from outlying areas are fed into the hub airport for connecting flights.
• A common connection point for devices in a network.
• A Web “hub” is one of the initial names for what is now known as a “portal”. It came from the creative idea of producing a website, which would contain many different “portal spots” (small boxes that looked like ads, with links to different yet related content). This content, combined with Internet technology, made this idea a milestone in the development and appearance of websites, primarily due to the ability to display a lot of useful content and store one’s preferred information on a secured server. The web term “hub” was replaced with portal.

Hybrid Inventory System

An inventory system combining features of the fixed reorder quantity inventory model and the fixed reorder cycle inventory model. Features of the fixed reorder cycle inventory model and the fixed reorder quantity inventory model can be combined in many different ways. For example, in the order point-periodic review combination system, an order is placed if the inventory level drops below a specified level before the review date; if not, the order quantity is determined at the next review date. Another hybrid inventory system is the optional replenishment model.