Supply Chain & Manufacturing Glossary
In the world of Supply Chain & Manufacturing, there are a lot of terms and acronyms often used. Our team at C2W has put together an extensive list to help you understand and expand your knowledge.
0-9
3D printing is also known as additive manufacturing.
3D printing is a manufacturing technology that converts a CAD design into a three-dimensional solid object by successively laying down thin layers of materials one on top of another. In simple terms, it converts a virtual design into a physical object by adding many layers of material to build up the desired shape.
It’s opposed to subtractive processes like cutting, milling, and machining.
In a nutshell, there are three elements for 3D printing:
- Three-dimensional
- Additive
- Layer-based
Two common materials for 3D printing:
- Filament
- Resin-based
3PL stands for third-party logistics, which is interchangeable with order fulfilment.
A third-party logistics company acts as a fulfilment company that provides all the services you need to outsource your logistics operations.
Typically, a 3PL company provide services as follow:
- Inventory Management
- Warehousing
- Picking & Packing
- Kitting & Customization
- Distribution
- Fulfilment
- Reverse logistics (Returns)
5S, also known as Five S’s, is a set of five steps to ensure proper organization of items and working areas to save costs, reduce waste, improve workplace management, and increase productivity.
The 5S quality tool is derived from five Japanese terms beginning with the letter "S" including:
- Sort
- Set in Order
- Shine
- Standardize
- Sustain
A
Agile manufacturing is a manufacturing approach, tools or training to leverage flexibility, bottom-up innovation and augmentation to adapt, through an iterative process, to changing conditions.
The advantages of agile manufacturing:
- Improve Productivity
- Increase Quality
- Control Costs
- Empower Power
- Respond to Customer Demands Quickly
B
B2B, or BtoB, stands for “business-to-business”.
B2B refers to a business that is conducted between companies, rather than between a company and individual consumer.
B2B is often contrasted with business-to-consumer (B2C).
B2C stands for “business-to-consumer” while DTC is an acronym for “direct-to-consumer”. They are always interchangeable.
The two terms refer to a business model that sells directly to individual consumers.
BOM stands for a bill of materials.
BOM is a comprehensive list of raw materials, sub-assemblies, intermediate assemblies, sub-components, parts, and the quantities of each needed to manufacture an end product, essentially a recipe for the production of an item.
In process industries, the BOM is also known as the formula, recipe, or ingredients list.
In a nutshell, BOM outlines:
- What raw materials to buy
- How much of each entity to purchase
- Where to obtain these supplies.
- How to produce the finished product using the purchased raw materials
C
C2C is an acronym for “customer to customer”.
C2C is a business model in which customers can trade with individual customers in an online environment.
Two implementations of C2C markets are auctions and classified advertisements. C2C marketing has soared in popularity with the arrival of the Internet and companies such as eBay, Etsy, and Craigslist.
CAD means computer-aided design.
It’s a computer-based software that digitally creates 2D drawings and 3D models of real-world products before they’re ever manufactured.
CAD software is widely used for conceptual design and spatial visualization throughout the entire product development phase.
CBM is an acronym for cubic meter, which is a measurement of the volume of a shipment. It determines how much space your cargo will take up on a ship, aircraft or truck, which in turn will decide how much it will cost to transport.
CE is short of Conformite Europeenne, which means European Conformity.
CE marking is the indicator placed on commercial products showing the good's conformity with EU health, safety, and environmental protection standards.
CEM means contract electronic manufacturer while ECM is an acronym for an electronic contract manufacturer. They are always interchangeable.
CFR means Cost and Freight. It’s one of the four Incoterms® 2020 rules for sea and inland waterway transport.
“Cost and Freight” indicates that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss or damage to the goods passes when the goods are on board the vessel.
CIF stands for Cost, Insurance and Freight. It’s one of the four Incoterms® 2020 rules for sea and inland waterway transport.
“Cost, Insurance and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered.
CIP stands for “Carriage and Insurance Paid to”. It’s one of the seven Incoterms® 2020 rules for any mode(s) of transport.
“Carriage and Insurance Paid to” means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination. The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage.
The buyer should note that under CIP the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its extra insurance arrangements.
CM refers to a contract manufacturer.
As a form of outsourcing, contract manufacturing is who you go to when a factory is needed for your company.
A contract manufacturer is a firm hired by a company to focus on the manufacturing or assembly of all or part of the final product.
CNC, computer numerical control, is an automated control of machining tools using a computer.
CNC milling is also known as CNC machining. It is a manufacturing process that employs computerized controls and rotating multipoint cutting tools to progressively remove material from the workpiece and produce a custom-designed part or product.
CPT stands for “Carriage Paid to”. It’s one of the seven Incoterms® 2020 rules for any mode(s) of transport.
“Carriage Paid To” means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.
In a CPT transaction, the seller is obliged to deliver the goods to the agreed destination.
D
D2C is an abbreviation of direct-to-consumer.
D2C is a new business model, meaning that a company produces a given product in its facility, as well as distributes it within its channels.
DAP means “Delivered at Place”. It’s one of the seven Incoterms® 2020 rules for any mode(s) of transport.
“Delivered at Place” means that the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. The seller bears all risks involved in bringing the goods to the named place.
DAT means “Delivered at Terminal”. The DAT rule was removed from the 2020 rules and was replaced by DPU (Delivered at Place Unloaded).
“Delivered at Terminal” means that the seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the disposal of the buyer at a named terminal at the named port or place of destination. “Terminal” includes a place, whether covered or not, such as a quay, warehouse, container yard or road, rail or air cargo terminal. The seller bears all risks involved in bringing the goods to and unloading them at the terminal at the named port or place of destination.
Dropshipping is a business model that purchases products from a third-party supplier who ships them directly to your customers.
Dropshipping allows entrepreneurs to jumpstart a business and sell products to their buyers without keeping any product in stock.
DDP is an acronym for Delivered Duty Paid. It’s one of the seven Incoterms® 2020 rules for any mode(s) of transport.
DDP is a delivery agreement meaning the seller covers all of the responsibilities, costs and risks during shipping to an agreed-upon location including:
- Shipping costs
- Export and import duties
- Insurance
- Import clearance and taxes
DDU is an acronym for Delivered Duty Unpaid.
DDU is a trade term indicating that the seller is responsible for the safe delivery of goods to a named destination, paying all transportation expenses, and assuming all risks during transport. And the buyer is responsible for import duties.
DDU shipping provides take more of a "hands-off" approach when it comes to the destination country's shipping rules.
DPU stands for “Delivered at Place Unloaded”. It’s one of the seven Incoterms® 2020 rules for any mode(s) of transport.
DPU means that the seller delivers the goods while transferring the risk to the buyer when the goods are unloaded from the arriving means of transport at the disposal of the buyer at the named place of destination or any other agreed point within that place.
E
EMS means Electronic Manufacturing Services. It is also referred to as Electronics Contract Manufacturing (ECM).
EMS is a term used in the electronic components industry. It’s a term used for companies that design, manufacture, test, distribute, and provide return/repair services for electronic components and assemblies for original equipment manufacturers (OEMs).
EXW means Ex Works or EX Warehouse.
EXW is one of the seven Incoterms® 2020 rules for any mode(s) of transport. It means that the seller delivers when it places the goods at the disposal of the buyer at the seller’s premises or another named place such as a factory or warehouse.
In simple terms, the buyer needs to take care of all the shipping requirements including:
- Export Documentation
- Transportation
- Loading & Unloading
- Clearance
- Export & Import
This rule may be used irrespective of the mode of transport selected and may also be used where more than one mode of transport is employed. EXW is mostly suitable for domestic trade.
In the case of EXW, the seller has minimal obligations, risks & costs whereas the buyer has all the risks and obligations.
ETA stands for Estimated Time of Arrival.
ETA indicates when a vehicle, cargo ship, or other modes of transportation will arrive at its final destination.
F
FAS means Free Alongside Ship. It’s one of the four Incoterms® 2020 rules for sea and inland waterway transport.
FAS means that the seller delivers when the goods are placed alongside the vessel (e.g., on a quay or a barge) nominated by the buyer at the named port of shipment. The risk of loss of or damage to the goods passes when the goods are alongside the ship, and the buyer bears all costs from that moment onwards.
FOB means Free on Board. It’s one of the four Incoterms® 2020 rules for sea and inland waterway transport.
FOB is used to indicate whether the seller or the buyer is liable for goods that are damaged or destroyed during shipping.
- FOB origin: It means the buyer is at risk once the seller ships the product.
- FOB destination: It means the seller retains the risk of loss until the goods reach the buyer.
FCA stands for Free Carrier. It’s one of the seven Incoterms® 2020 rules for any mode(s) of transport.
FCA means that the seller delivers the goods to the carrier or another person nominated by the buyer at the seller’s premises or another named place. The parties are well advised to specify as clearly as possible the point within the named place of delivery, as the risk passes to the buyer at that point.
In an FCA transaction, the seller must take care of:
- All Pre-export Documentation
- Export Customs Clearance
- Loading Formalities
On the other hand, the buyer must take care of:
- Transportation
- Clearance at Destination
I
Intellectual property (IP) is a set of laws that protect creative and innovative products through legal rights called patents, copyrights, and trademarks.
Read More Here:
5 Tips for IP Protection When Working With Manufacturing Firms In China
International Organization for Standardization (ISO) is an independent, non-governmental international standard-setting organization with a membership of 161 national standards bodies.
ISO 9000 is a set of standards that manufacturers adhere to ensure consumers are consistently getting good quality products or services.
ISO 9000 is the most popular standard family by far. There are fourteen quality management standards in the ISO 9000 family. Of these, ISO 9001:2015 is the only one that can be certified.
ISO 9001 is a standard that sets out the requirements for a quality management system. It helps businesses and organizations be more efficient and improve customer satisfaction.
ISO 9001 is the only standard in the ISO 9000 family that can be certified, and it can be applied by any organization, large or small, regardless of its field of activity.
There are over one million companies and organizations in over 170 countries certified to ISO 9001.
J
K
L
LCL means Less Than Container Load.
It refers to any shipment that does not take up the full capacity of a shipping container.
LTL stands for Less Than Truck Load or Less Than Load.
It is a term used for the transportation of small freight or when freight doesn’t require the use of an entire trailer.
Lead time is the latency between a customer's initial purchase and the delivery of the product.
It is summed up as the total time a customer must wait to receive a product after placing an order.
Lead time can be broken down into specific intervals through the manufacturing process including:
- Order preparation
- Setup time
- Run time
- Production time
- Inspection time
By breaking down lead time, managers can examine points in production where there are inefficiencies.
Lean manufacturing is defined as a practice that aims to reduce wasted time, effort and other resources in the production process without sacrificing productivity and efficiency.
M
Markup is the difference between the selling price of a product and the cost incurred to manufacture it.
The markup is generally expressed as a percent over the cost incurred.
N
NDA stands for Non-Disclosure Agreement.
A non-disclosure agreement is commonly used when a business shares sensitive information with another business, acknowledging a confidential relationship.
The requirements for an NDA:
- The names of the parties to the agreement
- A definition of what constitutes confidential information in this case
- Any exclusions from confidentiality
- A statement of the appropriate uses of the information to be revealed
- The periods involved
- Miscellaneous provisions
O
OEM stands for Original Equipment Manufacturer.
It refers to the idea that a factory manufactures products based on the design specifications of the original company.
An OEM firm plays a pure manufacturing role in supply chains, allowing both ends to benefit from their strengths.
Read More Here:
OEM Manufacturing in China — Why do You Need to Establish a Reliable Connection?
ODM stands for Original Design Manufacturer.
It means that a manufacturer designs and manufactures products. The product is then sold to another party, which rebrands and markets them as their own.
An ODM product is also known as a private label product or white label product.
Order consolidation is an act of collecting the LCL cargo from the various shippers and packing.
The entity that handles such operations is known as Consolidators (Groupage Operators).
P
The term PCB refers to the printed circuit board or PC board.
PCB is a non-conductive material with conductive lines printed or etched. Electronic components are mounted on the board and the traces connect the components to form a working circuit or assembly.
Product Development Process (PDP) refers to the process of converting an idea into a workable software product.
The process begins with conceptual product needs and expands throughout the life of the product.
Typically, there are seven stages in the product development process:
- Stage 1: Idea Generation
- Stage 2: Idea Screening
- Stage 3: Concept Development & Testing
- Stage 4: Market Strategy/Business Analysis
- Stage 5: Product Development
- Stage 6: Market Testing
- Stage 7: Market Entry/Commercialization
A prototype is an early sample, model, or release of a product built to test a concept or process.
The prototype precedes the initial run of the product and is typically intended to test high-risk aspects of the design and establish any potential flaws or errors in the design. Prototyping serves to produce a tangible model of a product that can be tested and manipulated rather than a theoretical version of a design.
Q
QA refers to “quality assurance”.
The terms "quality assurance" and "quality control" are often used interchangeably to refer to ways of ensuring the quality of a service or product.
QC stands for quality control, also known as quality inspection.
Typically, there are three main categories of quality inspection to cover all stages of the production line including before, during, and after inspections.
- Pre-Production Inspections (PPI):
- Factory Audits & Verification
- Social Audits
- Pre-Production Inspection
- During Production Inspections (DPI/DUPRO)
- First Article Inspection
- In-Production Quality Control
- Defect Sorting Services
- Pre-Shipment Inspections
- Container Loading Inspections (LS)
Read More Here:
China’s Growing Quality – Advantages of 3rd-Party QC Inspection Service in China
R
Research and development (R&D, R+D) is the set of innovative activities undertaken by companies in developing new services or products and improving existing ones.
Typically, R&D is the first stage in the product development process.
Rapid prototyping is defined as a technique used to quickly produce a model of a part or assembly.
RFP stands for “request for proposal”.
An RFP is a business document that may include details such as:
- Project description
- Project goals
- Bidding process
- Contract terms
RFQ stands for “request for quote”, which is also known as an invitation for bid (IFB).
An RFQ is a business process in which a business solicits quotes from selected suppliers for a specific project. An RFQ is usually the first step in submitting a request for proposal (RFP).
Typically, RFQ may include details such as:
- Pricing
- Payment Terms
- Submission Deadline
- And More
S
Six Sigma (6σ) is a statistical- and data-driven tool that businesses can use to eliminate defects and improve processes to help boost their profits.
The supply chain is the sequence of processes involved in the manufacturing of raw materials into a final product to be sold to the end consumer.
Supply chain management, also known as SCM, is the management of the flow of goods and services and includes all processes that transform raw materials into final products.
Read More Here:
Coronavirus in Asia: What Should Companies do to Avoid Supply Chain Disruption?
T
The Toyota production system (TPS) was developed by Toyota Motor Corp. to provide the best quality, lowest cost and shortest lead time through eliminating waste. TPS is based on two pillars:
- just-in-time means "making only what is needed, only when it is needed, and only in the amount that is needed".
- jidohka (autonomation) means "automation with a human touch".
Y
The IASSC Certified Lean Six Sigma Yellow Belt™ (ICYB™) is a professional who is well versed in the foundational elements of the Lean Six Sigma Methodology.
Z
Zero defects (ZD) was a management-led program to eliminate defects in industrial production that enjoyed brief popularity in American industry from 1964 to the early 1970s.
It states that if people commit themselves to watch details and avoiding errors, they can move closer to the goal of zero defects.