In the very beginning of your buyer career there are a lot new terms to learn. it’s important to understand the terminology that forms the backbone of supply chain management.

Top 20 list of Supply chain Terms

Here’s a list of the top 20 supply chain terms every professional buyer should know:

1. Supply Chain: The entire network of entities, directly or indirectly, involved in producing, manufacturing, supplying, and selling a product.
2. Logistics: The coordination and movement of resources from one location to another.
3. Inventory Management: The overseeing and controlling of order, storage, and use of components that a company uses in the production of items it sells.
4. Lead Time: The total time taken from the initiation of a process to its completion.
5. Just-In-Time (JIT): An inventory management system where materials are produced or acquired only as needed.
6. Vendor Managed Inventory (VMI): A process where the supplier manages the inventory of its products at the customer’s location.
7. Demand Planning: The process of forecasting demand to ensure products can be reliably delivered and meet customer demand.
8. Supply Chain Optimization: The process of ensuring the most efficient use of resources within the supply chain.
9. Warehouse Management System (WMS): A software application that supports the day-to-day operations in a warehouse.
10. Distribution Center: A facility for the receipt, storage, and redistribution of goods to company stores or customers.
11. Freight Forwarder: A company that arranges the transport of goods on behalf of a shipper.
12. Third-Party Logistics (3PL): A service that allows businesses to outsource operational logistics.
13. Lean Manufacturing: A production method aimed at reducing waste without sacrificing productivity.
14. Value Chain: A model that describes the full range of activities needed to create a product or service.
15. Supply Chain Visibility: The ability to track products as they move from the manufacturer to the final destination.
16. Bill of Lading (BOL): A legal document between a shipper and a carrier detailing the type, quantity, and destination of the goods being carried.
17. Reverse Logistics: The process of moving goods from their typical final destination for the purpose of capturing value, or proper disposal.
18. RFID (Radio Frequency Identification): The use of radio waves to read and capture information stored on a tag attached to an object.
19. SKU (Stock Keeping Unit): A unique code that refers to a specific item in inventory.
20. Incoterms: A series of pre-defined commercial terms published by the International Chamber of Commerce relating to international commercial law.

Understanding these top 20 Supply Chain Terms are fundamental for professional buyers to effectively manage and navigate the complexities of the supply chain. Each term represents a critical piece of the supply chain puzzle, essential for ensuring operational efficiency and business success.  

Why not add another top 20 Supply Chain Terms, just for fun:

1. Capacity Planning: The process of determining the production capacity needed to meet changing demands for its products.
2. Cross-Docking: The practice of unloading goods from inbound delivery vehicles and loading them directly onto outbound vehicles, with minimal or no storage time.
3. Demand Forecasting: The process of predicting future customer demand using historical data and analytics.
4. Economic Order Quantity (EOQ): The ideal order quantity a company should purchase to minimize inventory costs such as holding, shortage, and order costs.
5. Fill Rate: A measure of a company’s ability to fulfill customer orders from available inventory.
6. Integrated Supply Chain: A cohesive system where all stages including procurement, production, distribution, and sales are integrated and coordinated.
7. Kanban: An inventory control system used to manage supply chains, based on real-time demand signals.
8. Landed Cost: The total price of a product or shipment once it has arrived at a buyer’s doorstep, including the original price, transportation fees, customs, duties, taxes, insurance, currency conversion, crating, handling, and payment fees.
9. Minimum Order Quantity (MOQ): The smallest amount of set stock that a supplier is willing to sell.
10. Non-Stock Inventory: Items that are not regularly kept in stock and are ordered as needed.
11. Quality Control (QC): A process through which a business seeks to ensure that product quality is maintained or improved.
12. Safety Stock: Additional quantity of an item held in the inventory to reduce the risk that the item will be out of stock.
13. Total Cost of Ownership (TCO): The purchase price of an asset plus the costs of operation, assessing the full cost of procurement.
14. Working Capital: The capital of a business used in its day-to-day trading operations, calculated as the current assets minus the current liabilities.
15. Zero Inventory: An approach to inventory management that minimizes inventory in the production process.
16. Backorder: An order for a good or service that cannot be filled at the current time due to a lack of available supply.
17. Consignment Inventory: A supply chain model in which a product is sold by a retailer, but ownership is retained by the supplier until the product is sold.
18. Dropshipping: A retail fulfillment method where a store doesn’t keep the products it sells in stock, but instead directly ships them from the supplier to the customer.
19. Forecast Accuracy: The degree to which forecasted demand matches the actual demand.
20. Inventory Turnover: A ratio showing how many times a company’s inventory is sold and replaced over a period.

If you want to learn the introduction level of procurement, on top of these Top 20 Supply Chain Terms, we recommend a bundle of our introduction level procurement courses: Introduction to LHTS and Procurement. It is an introduction to operative procurement, tactical procurement and procurement management. The procurement basic roles and concepts. Learn how LHTS organize its learning and how to integrate learning in your day to day work (we call it Micro learning).

Hope you have enjoyed getting a first introduction to the top 20 Supply Chain Terms. The terms come from the top of my mind. If you find terms we should include or replace, please contact me. /// Fredrik

About Learn How to Source

Learn How to Source (LHTS) is an online platform based in Sweden, offering a range of procurement courses accessible globally. It serves as a community where procurement experts share their knowledge through online courses, designed for various experience levels from introductory to expert. Courses are concise, about 30 minutes each, and cover different aspects of procurement, tailored for different buyer roles. The courses focus on practical knowledge, presented by seasoned professionals, and include quizzes and certificates. They can be accessed from any device, emphasizing microlearning for flexibility and efficiency.

Note: Illustration of Top 20 Supply Chain Terms is created by CHAT-GPT on January 27, 2024.

Visit Utbildning Inköp för information about LHTS’ courses in Swedish.