Do you know that feeling when you meet a new group of people, and you notice it is difficult to follow them as they have their “own words and expressions”?
Similarly, it happens when you join a new Supply Chain organization,
discover here the most important supply chain acronyms,
Supply Chain Acronyms
If you are new in any supply chain organization, you may wonder what these people are talking about, you will hear words such as FR, DD, OOS … and many others like this,
it may happen, all sounds Greek to you.
it is not that people are talking in a very strange language (that sometimes can be the case, he he he),
it is rather that they are so used to using those acronyms in a day-to-day basis,
that it is just natural for them.
The most important Supply Chain Acronyms
The most important Supply Chain Acronyms you need to know are:
Let’s see each of them in detail below and a surprise at the end.
SC – Supply Chain
This is an easy one, and it is the base of everything.
SC stands for Supply Chain.
You can understand the Supply Chain as getting materials from suppliers, producing materials in a production plant, distributing goods to the DCs and shipping to the final customers.
Let’s see in detail a more detailed description of what a supply chain is about.
What is Supply Chain?
A supply chain is all the processes that need to take place to ensure the right product gets to the right place at the right time.
Part of these processes involves getting raw and pack materials, converting them into finish goods at a production plant, shipping them to a Distribution centre and from there making it available on the shelf for the final consumers.
A supply chain is all about planning, coordinating, tracking, and monitoring activities to ensure that goods and services are delivered in a cost-effective, timely and efficient manner.
In a nutshell – converting raw and pack materials into finished goods ready to be used by the final customers.
KPI – Key Performance Indicator
KPI is the sort of version of Key Performance Indicator.
One of the key things you need to learn once you start a new assignment in the supply chain is which are your KPIs – meaning which processes and results in your work will be measured against.
If you think about a production plant,
they will have a scorecard with all the KPIs (Key Performance Indicators) that they will monitor daily in their DDS Meetings (DDS = Daily Direction settings)
Examples of KPIs that can be tracked in a Scorecard in the Supply Chain:
- FR – Service
- PPP – Production Plan Performance
- Number of incidents
- Speed of the line
FR – Fill Rate / Service / Order fulfilment
FR is also known as Fill Rate, Order fulfillment or Service.
It is one of the most crucial KPIs measured in SC.
FR stands for how much is shipped (either products or $) versus how much has been ordered (either products or $) and it is measured in percentage %.
Learn more about how to calculate Fill Rate and increase it in your business
The target for high-performing organizations is between 95-98%. It could not be higher than 100%. You cannot ship more than it was ordered (Sometimes it may happen due to pick-up mistakes at the DC – what is the DC? – keep reading).
DC – Distribution Center
DC stands for distribution centre (and can also be called warehouse).
(DC and warehouse are the same).
The main role of the DCs is to store the goods once they have been produced in a production plant.
There can be different levels of DCs: First level, Second level…
First level DC:
It is the one that it is directly connected to the production plant.
Meaning the product is produced (for example a diaper) in a production plant, and it is directly shipped from the plant to the DC. You can imagine a First level DC as a hub where products get accumulated and get distributed directly to customers, to the DCs of your clients or the Second Level DCs.
In some cases, the First level DC may be located exactly in the same location where the production plant is.
Second level DC:
It is the DC that is connected to a First Level DC.
The Second level DC tends to be smaller in terms of the capacity of pallets versus de First level DC.
The route of the product would be a product is produced in a production plant, and from there it is shipped to First Level DC and later to a Second level DC.
OOS – Out of Stock
OOS means out of stock.
To put it in other words when you don’t have enough product to fulfil the other.
The best way to understand it, it is with an example:
Imagine your customer places an order of 1000 items for the product XYZ, and you are OOS in this product, you will be “cutting” this order.
Your FR (Fill Rate) for this order will be 0%.
FR is calculated by dividing how much can be shipped by how much it was ordered.
Let’s see it with numbers:
Order = 1000 items
Shipped = 0 items
Why? You are OOS. You don’t have stock in the DC to ship to your customers
Cut = Order – Shipped = 1000 – 0 = 1000 items.
In this case, you cut 1000 items.
There are a few reasons why you may be “cutting” an order: Issues with transportation, capacity challenges at the production plant, wrong DD provided by the supplier…
DD – Delivery Date
DD means Delivery Date.
The expected date when a raw / pack material (normally from a supplier) is expected to arrive at a certain location (normally a production plant)
If you are working with a supplier who is responsible to provide you with pack materials,
you may get information that DD at the production plant is 15th April 2023.
This means that all the production of the Pack Material at their side and shipment to your production plant will be completed by that time, and you will have your Pack Materials ready to be used in your productions on 15th April 2023.
ETA – Estimated Time of Arrival
ETA means the estimated time of arrival.
The concept of ETA is comparable to DD.
The main difference is that ETA refers more to Finished goods (products ready to be used by the final customer) while delivery dates refer more to non-finish goods such as packaging, chemicals…
ETA refers more to finished goods, it is not a written-in-stone rule,
however, this principle of ETA (Finished goods) and DD (Raw and Pack materials) applies in many SC organizations. (Remember: SC stands for Supply Chain).
Let’s see with an example:
Imagine you are producing diapers in a production plant,
and you need to ship those diapers to a First Level DC and from there to the DC of your customer.
The ETA you will share with your customer, it is the best estimate of when your products will be available at their side.
DDS – Daily Directions Settings
DDS stands for Daily Directions Setting
The DDS is a meeting that happens daily (normally), where people from different functions connect for a short period of time (ideally maximum: 45 minutes), to discuss business results versus the previous days, the status of the open topics and focus elements to work on the rest of the day and the week.
The common structure of a DDS normally is:
- Review of KPIs
- For the elements off track – deep dive into what the drivers
- Review of open topics
- Review if a new issue
- Defining priorities for the rest of the day/week
Depending on the size of the team, you may expect a large group of people to join this connects,
it is important for having a healthy discussion,
to talk based on data,
to keep the discussion concise and to the point,
and if something is not clear or you are not sure about something, state it clearly and work it offline.
RCA – Root Cause Analysis
RCA stands for Root Cause Analysis.
Root cause analysis (RCA) is a methodology used in the supply chain (and many other industries) for identifying the cause (or causes) of an issue and developing the relevant actions to ensure there is no recurrence in the future.
How to conduct a Root Cause analysis
To put it simply,
a root cause analysis will allow you to trace the problem to its origins and prevent the problem of happening again in the future.
PDCA – Plan Do Check Act
PDCA stands for Plan Do Check Act
The PDCA cycle is a simple and effective methodology to continuously improve work processes (and consequently your results) commonly used in big corporations such as Procter & Gamble, Unilever, Henkel…
The PDCA cycle has four stages clearly differentiated: plan, do, check, and act.
Operating in a repetitive cycle.
Discover more about PDCA cycle in supply chain here.
Other important Acronyms
A list of +15 acronyms that can help you during your Supply chain journey.
|12M||12 months||1 year = 12 months|
|3PL||Third Party Logistics||Outsorcing part of operations to external vendor|
|4PL||Fourth party logistics||Manage a 3PL on behalf of the customer|
|CS||Customer Service||Placing orders into the system|
|FOCA||Folding Cartoon||Example of PM|
|MD||Master Data||Management of data into the system|
|OTC||Order to Cash||The process encompassing receiving, shipping, invoicing and payment from/to customers|
|PM||Pack Material||Packing – can , bottle , cartoon…|
|PM||Project Manager||Person responsible to lead an specific project|
|PSI||Production Shipments Inventory||A planning projection tool|
|RM||Raw Material||Ingredients – chemicals , ceramics…|
|SLA||Service Level Agreement||Official commitment that exists between a service provider and a client.|
|SS||Safety Stock||Stock that is maintained to mitigate risk of stockouts due to uncertainties in supply and demand.|
|VAR||Value at Risk||Inventory that will not be consumed by next 12M demand produced|
|YTD||Year to Date||Reporting – results from first day of the year until today|
Conclusion on Supply Chain Acronyms
At the beginning, especially if you are not familiar with many of the acronyms, it can be very difficult to get used to understanding all the acronyms flying around.
Don’t rush and give yourself some time and patience.
For example, you can target to learn 2 acronyms per week,
at the end of the year you will be familiar with more than 100 acronyms.
If there is any acronym you would love to know about and you can’t find it here, drop me an email at firstname.lastname@example.org.
FAQ Supply Chain Acronyms
Some often asked questions regarding supply chain acronyms.
What are the abbreviations of Supply Chain?
The supply chain can be called SC. You can understand Supply Chain as all the processes that need to take place to ensure the right product gets to the right place at the right time.
What is 3PL acronyms?
3PL stands for Third Party Logistics. It is an organization outside the company structure that is used to outsource certain elements of the supply chain such as production, transportation, or distribution…
What is 4PL acronyms?
4PL stands for Fourth Party Logistics. It is an organization responsible to manage a 3PL on behalf of the customers. A great example of a 4PL organization would be Amazon. They store products, they ship they offer software support…
What is RCA acronym?
RCA stands for Root cause analysis. It is an organization outside the company structure that is used to outsource certain elements of the supply chain such as production, transportation, or distribution…
What are the 5 R in Supply Chain?
5R is a common term in reverse logistics, and they stand for returns, reselling, repairs, replacements, and recycling.