Supply Chain Acronyms and Terminology
Quick reference for the most common acronyms, abbreviations and technical terms in supply chain management, with expansions and operational meaning.
SCM
Supply Chain Management. Integrated management of material, information and financial flows from raw material procurement to final customer delivery. Encompasses planning, sourcing, production, logistics and relationship management with commercial partners.
S&OP
Sales & Operations Planning. Monthly cross-functional alignment process that reconciles commercial forecasts (demand) with operational plans (supply), producing a single business plan approved by management. Prerequisite for tactical production and procurement planning.
SKU
Stock Keeping Unit. The minimum reference unit for inventory management: uniquely identifies a product in a specific combination of variants (colour, size, packaging). SKU proliferation increases operational complexity; SKU rationalisation reduces inventory and costs.
MRP
Material Requirements Planning. Computerised planning system that calculates net component and raw material requirements based on MPS, BOM and current inventory. Generates planned orders with release and due dates. MRP II extends MRP to production capacity planning.
MPS
Master Production Schedule. Primary production plan specifying quantities and timing for each finished product, typically over a 3-to-18-month horizon. The primary input to MRP and the bridge between aggregate demand planning and production scheduling.
BOM
Bill of Materials. Structured, hierarchical list of all components, sub-assemblies and raw materials required to manufacture a product, with quantities. Types include single-level, multi-level, planning (modular) and engineering BOMs. Fundamental for MRP and product variant management.
EOQ
Economic Order Quantity. The optimal order or batch size that minimises the sum of ordering/setup costs and inventory holding costs. Derived from Wilson's formula (1913): EOQ = √(2DS/H), where D is annual demand, S is the per-order cost and H is the annual unit holding cost.
ROP
Reorder Point. The inventory level at which a replenishment order is triggered. Calculated as: average demand during lead time + safety stock. Determines when to order; EOQ determines how much to order.
SS
Safety Stock. Buffer inventory held in excess of cycle stock to absorb variability in demand and lead time. The statistical method is based on the standard deviation of demand and/or lead time during the replenishment period.
OTIF
On-Time In-Full. Service KPI measuring the percentage of order lines delivered on time (by the confirmed date) and in full quantity. Widely used by large retail organisations as a contractual standard; penalties for OTIF below target are common in retail supply agreements.
3PL
Third-Party Logistics. External provider that manages warehousing, transport, fulfilment and value-added services on behalf of a client. A 4PL (Fourth-Party Logistics) coordinates the 3PL network and acts as supply chain integrator for the client.
DC
Distribution Centre. Logistics facility optimised for outbound goods flow to customers or stores, with high throughput and minimal dwell time. Differs from a traditional warehouse in its emphasis on flow over storage capacity.
WMS
Warehouse Management System. Software optimising internal warehouse operations: receiving, putaway, picking, packing, shipping and cycle counting. Modern WMSes integrate with ERP, TMS and automation systems (conveyors, AGVs, robots).
TMS
Transportation Management System. Platform that plans, executes and optimises shipments (carrier selection, routing, rating, track-and-trace, document management). Integrates with WMS and ERP to orchestrate inbound and outbound logistics.
ERP
Enterprise Resource Planning. Integrated business management system centralising core processes on a single data platform: finance, manufacturing, procurement, sales, warehouse. In supply chain, manages purchase orders, goods movements, MRP and P2P/O2C processes. Major vendors: SAP, Oracle, Microsoft.
EDI
Electronic Data Interchange. Standardised electronic exchange of commercial documents between partner IT systems (purchase orders, acknowledgements, ASNs, invoices). Key standards: EDIFACT (UN/CEFACT, prevalent in Europe) and ANSI X12 (USA). Replacement by REST API/JSON is underway but EDI remains dominant in mature supply chains.
ASN
Advanced Shipping Notice. Electronic document sent by the supplier before delivery, detailing shipment contents (items, quantities, lots, packaging). Enables pre-receipt in the WMS and cross-docking planning.
VMI
Vendor-Managed Inventory. Arrangement in which the supplier has visibility of customer stock levels and takes responsibility for managing them within agreed parameters, placing replenishment orders autonomously. Reduces administrative burden for the customer and aligns supplier incentives with product availability.
CPFR
Collaborative Planning, Forecasting and Replenishment. Structured process in which retailer and supplier share demand forecasts and replenishment plans to optimise inventory and service levels across the chain. Standard defined by GS1/VICS.
JIT
Just-In-Time. Production and logistics philosophy aiming to receive materials and manufacture products exactly when and in the quantity needed, eliminating buffer stocks. Originated in the Toyota Production System. Maximises efficiency but requires highly reliable suppliers and increases vulnerability to supply chain disruptions.
TCO
Total Cost of Ownership. Sum of all costs associated with acquiring and using a product or service over its lifecycle, including purchase price, transport, warehousing, quality, maintenance and disposal. The correct basis for strategic sourcing decisions.
GS1
International organisation that defines global standards for product identification (GTIN/EAN/UPC), locations (GLN) and traceability (SSCC for pallets, SGTIN for serialisation). The EAN-13 barcode and GS1 DataMatrix QR Code are GS1 standards. Fundamental for interoperability in global supply chains.
GTIN
Global Trade Item Number. Global identification code for commercial products, assigned under GS1 standards. Includes EAN-13 (European retail), UPC-A (US retail), ITF-14 (secondary packaging). GTIN is the key for product data lookups in commercial data exchange systems.
RFID
Radio-Frequency Identification. Automatic identification technology using radio frequency: transponders (tags) on products or pallets emit their ID when interrogated by a reader, without line-of-sight. Enables bulk reading (pallet level), real-time tracking and automated goods receipt. Standard: EPC Gen 2 / ISO 18000-63.
IoT
Internet of Things. In the supply chain context, IoT sensors on products, vehicles, shelves and equipment collect real-time data on location, temperature, humidity and vibrations. They feed supply chain visibility platforms and predictive maintenance. Cold chain IoT ensures compliance with cold chain requirements.
DOS
Days of Supply. Indicator measuring how many days of future consumption can be covered by current stock. DOS = Available stock / Average daily consumption. Used to monitor inventory coverage by category, enabling proactive action before stockouts.
KPI
Key Performance Indicator. In supply chain, key KPIs include: OTIF, fill rate, Days of Supply, inventory turnover, perfect order rate, cost-to-serve and cash-to-cash cycle time. KPIs should be SMART (Specific, Measurable, Achievable, Relevant, Time-bound).
P2P
Procure-to-Pay (or Purchase-to-Pay). Full procurement cycle: from purchase requisition to supplier payment approval. Includes: purchase requisition → purchase order → goods receipt → invoice → payment. P2P automation via ERP and OCR reduces cycle times and errors.
O2C
Order-to-Cash. Full order fulfilment cycle: from customer order receipt to payment collection. Includes: order receipt → credit check → picking/packing/shipment → invoicing → collection. O2C KPIs measure speed, accuracy and first-time-right rate.
DRP
Distribution Requirements Planning. Extension of MRP to the multi-level distribution system. Calculates replenishment requirements for each network node (regional DCs, branches) from the point-of-consumption demand, consolidating them into the manufacturing plant's MPS.