Top 10 Supply Chain Terms and Definitions [Procurement, Logistics, Warehouse Management, etc.]

Introduction to Supply Chain Management

In this section, Eric Kimberling introduces the importance of supply chain management and highlights the need to understand key terms and definitions.

Understanding Procurement

• Procurement is a critical aspect of supply chain management that involves purchasing or acquiring raw materials and other items necessary for running an organization.

• Direct procurement involves acquiring raw materials used in producing finished products, while indirect procurement involves acquiring non-critical items such as office supplies.

Supplier Management

• Supplier management is essential in understanding who your suppliers are, measuring their quality, and identifying backup vendors in case of disruptions.

• It's important to proactively hedge risk by having backups for each vendor.

Overall, understanding procurement and supplier management are crucial aspects of supply chain management.

Inventory Management

This section discusses the concept of inventory management, warehouse management, and electronic data interface (EDI).

Understanding Inventory Management

• Inventory management is the process of tracking and managing inventory.

• It involves understanding what materials are available, where they are located, and when to order more.

• Warehouse management is also a part of inventory management as it involves managing the storage and placement of materials within a warehouse.

• The focus of inventory management is on understanding what products are available, their inventory levels, and where the material is located.

Electronic Data Interface (EDI)

• EDI or Electronic Data Interface is an electronic way to communicate with vendors, suppliers, and customers.

• It allows organizations to place orders electronically with their suppliers or receive orders from customers via EDI tools.

• Most organizations have moved to this EDI model as it helps manage communication with different players throughout the supply chain.

Freight and Transportation

• Moving raw materials or finished goods throughout the entire supply chain requires understanding how things move through freight and transportation.

• Organizations need to understand how raw materials get from manufacturers to their facilities via ships or trucks.

• They also need to know how finished goods will be delivered to customers either through trucks or shipping ports.

Logistics Management

• Logistics management refers to managing freight transportation in logistics operations.

• It involves moving things around throughout the supply chain while having visibility into it.

• Logistics managers ensure that shipments are managed from supplier's warehouse until they reach their destination port.

Warehouse Management

In this section, the speaker discusses the concept of warehouse management and its importance in supply chain management.

Definition of Warehouse Management

• Warehouse management is the function of managing an entire warehouse, including tracking inventory, inventory levels, triggering reorder quantities, pick pack and ship process.

• It involves managing the entire warehouse from tracking inventory to shipping products to customers.

Importance of Warehouse Management

• The process of producing a product using materials in your warehouse requires good information, data, systems and processes to manage it.

• Organizations are under pressure to get products produced and shipped as quickly as possible. This requires bypassing traditional warehouse management functions.

• Drop shipments are a way to speed up the whole supply chain.

Back Orders and Supplier Management

• Back orders occur when vendors or suppliers can't deliver raw materials or finished goods on time.

• Supplier management becomes important in such situations where having backup vendors can help deliver faster and cheaper.

Understanding Landed Cost

In this section, the speaker explains the concept of landed cost and how it can help businesses understand their total supply chain costs.

What is Landed Cost?

• Landed cost refers to the total cost of a product from the time it is ordered until it reaches the warehouse.

• It includes costs such as freight, customs, and other expenses associated with international trade and shipments.

• Knowing the landed cost per unit helps businesses price their products accurately and optimize their supply chain costs.

• For example, if freight costs are high due to air freight, switching to shipping via water may be a more cost-effective option.

Why is Understanding Landed Cost Important?

• Understanding landed cost allows businesses to fully comprehend their total supply chain costs at an individual product level.

• This knowledge can help businesses optimize their supply chain processes and ultimately affect pricing decisions.

Additional Resources

• Check out some of the links below for more information on supply chain management resources and digital transformation resources.

• The top 10 ranking of best supply chain management systems in the marketplace provides context for specific technologies that can help manage some of these functions.