Warehouse Dictionary

ABC Analysis thru Average Cost



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ABC Analysis
A classification of items in an inventory according to importance defined in terms of criteria such as sales volume and purchase volume.
ABC Classification
Classification of a group of items in decreasing order of annual dollar volume or other criteria. This array is then split into three classes called A, B, and C. The A group represents 10 to 20% by number of items, and 50 to 70% by projected dollar volume. The next grouping, B, represents about 20% of the items and 20% of the dollar volume. The C-class contains 60 to 70% of the items, and represents about 10 to 30% of the dollar volume.
ABC Inventory Control
An inventory control approach based on the ABC volume or sales revenue classification of products (A items are highest volume or revenue; C – or perhaps D – are lowest volume SKUs.)
ABC Model
In cost management, a representation of resource costs during a time period that are consumed through activities and traced to products, services, and customers, or to any other object that creates a demand for the activity to be performed.
ABC System
In cost management, a system that maintains financial and operating data on an organization’s resources, activities, drivers, objects and measures. ABC Models are created and maintained within this system.
Abnormal Demand
Demand in any period that is outside the limits established by management policy. This demand may come from a new customer or from existing customers whose own demand is increasing or decreasing. Care must be taken in evaluating the nature of the demand: Is it a volume change; is it a change in product mixes, or is it related to the timing of the order?
Absorption Costing
Allocation Costing
In cost management, an approach to inventory valuation in which variable costs and a portion of fixed costs are assigned to each unit of production. The fixed costs are usually allocated to units of output on the basis of direct labor hours, machine hours, or material costs.
Absorption Costing vs. Variable Costing – From Sacramento State
Acceptable Quality Level (AQL)
In quality management, when a continuing series of lots is considered, AQL represents a quality level that, for the purposes of sampling inspection, is the limit of a satisfactory process average.
Acceptable Sampling Plan
In quality management, a specific plan that indicates the sampling sizes and the associated acceptance or non-acceptance criteria to be used.
Acceptance Number
In quality management, a number used in acceptance sampling as a cut off at which the lot will be accepted or rejected. For example, if x or more units are bad within the sample, the lot will be rejected.
The value of the test statistic that divides all possible values into acceptance and rejection regions.
Acceptance Sampling
1) In quality control, the process of sampling a portion of goods for inspection rather than examining the entire lot. The entire lot may be accepted or rejected based on the sample even though the specific units in the lot are better or worse than the sample. There are two types: attributes sampling and variables sampling. In attributes sampling, the presence or absence of a characteristic is noted in each of the units inspected. In variables sampling, the numerical magnitude of a characteristic is measured and recorded for each inspected unit; this type of sampling involves reference to a continuous scale of some kind.
2) A quality control method of measuring random samples of lots or batches of products against predetermined standards.
A carrier’s ability to provide service between an origin and a destination.
Accessorial Charges
A carrier’s charge for accessorial services such as loading, unloading, pickup, and delivery, or any other charge deemed appropriate.
Being answerable for, but not necessarily personally charged with, doing specific work. Accountability cannot be delegated, but it can be shared. For example, managers and executives are accountable for business performance even though they may not actually perform the work.
Accounts Payable (A/P)
The value of goods and services acquired for which payment has not yet been made.
Accounts Receivable (A/R)
The value of goods shipped or services rendered to a customer on whom payment has not been received. Usually includes an allowance for bad debts.
Accredited Standards Committee (ASC)
A committee of ANSI (American National Standards Institute) chartered in 1979 to develop uniform standards for the electronic interchange of business documents. The committee develops and maintains US generic standards (X12) for Electronic Data Interchange (EDI).
ASC X12 FAQs – X12.org
Accumulation Bin
A place, usually a physical location, used to accumulate all components that go into an assembly before the assembly is sent out to the assembly floor.
In quality management, the degree of freedom from error or the degree of conformity to a standard. Accuracy is different from precision. For example, four-significant-digit numbers are less precise than six-significant-digit numbers; however, a properly computed four-significant-digit number might be more accurate than an improperly computed six-significant-digit number.
A communication by a supplier to advise a purchaser that a purchase order has been received. It usually implies acceptance of the order by the supplier.
Acquisition Cost
In cost accounting, the cost required to obtain one or more units of an item. It is order quantity times unit cost.
Active Stock
Goods in active pick locations and ready for order filling.
Work performed by people, equipment, technologies, or facilities. Activities are usually described by the action-verb-adjective-noun grammar convention. Activities may occur in a linked sequence and activity-to-activity assignments may exist.
In activity-based cost accounting, a task or activity, performed by or at a resource, required in producing the organization’s output of goods and services. A resource may be a person, machine, or facility. Activities are grouped into pools by type of activity and allocated to products.
In project management, an element of work on a project. It usually has an anticipated duration, anticipated cost, and expected resource requirements. Sometimes major activity is used for larger bodies of work.
Activity Analysis
The process of identifying and cataloging activities for detailed understanding and documentation of their characteristics. An activity analysis is accomplished by means of interviews, group sessions, questionnaires, observations, and reviews of physical records of work.
Activity-Based Budgeting (ABB)
An approach to budgeting where a company uses an understanding of its activities and driver relationships to quantitatively estimate worklaoad and resource requirements as part of an ongoing business plan. Budgets show the types, number of, and cost of resources that activities are expected to consume based on forecasted workloads. The budget is part of an organization’s activity-based planning process and can be used in evaluating its success in setting and pursuing strategic goals.
Activity-Based Costing (ABC)
A methodology that measures the cost and performance of cost objects, activities, and resources. Cost objects consume activities and activities consume resources. Resource costs are assigned to activities based on their use of those resources, and activity costs are reassigned to cost objects (outputs) based on the cost objects proportional use of those activities. Activity-based costing incorporates causal relationships between cost objects and activities and between activities and resources.
Activity-Based Costing Model
In activity-based cost accounting, a model, by time period, of resource costs created because of activities related to products or services or other items causing the activity to be carried out.
Activity-Based Costing System
A set of activity-based cost accounting models that collectively defines data on an organization’s resources, activities, drivers, objects, and measures.
Activity-Based Management (ABM)
A discipline focusing on the management of activities within business processes as the route to continuously improve both the value received by customers and the profit earned in providing that value. AMB uses activity-based cost information and performance measurements to influence management action.
Activity-Based Planning (ABP)
Activity-based planning (ABP) is an ongoing process to determine activity and resource requirements (both financial and operational) based on the ongoing demand of products or services by specific customer needs. Resource requirements are compared to resources available and capacity issues are identified and managed. Activity-based budgeting (ABB) is based on the outputs of activity-based planning.
Activity Level
A description of types of activities dependent on the functional area. Product-related activity levels may include unit, batch, and product levels. Customer-related activity levels may include customer, market, channel, and project levels.
Activity profiling
The systematic analysis of the items and orders handled in a warehouse in order to improve its design and operation.
Actual Cost System
A cost system that collects costs historically as they are applied to production, and allocates indirect costs to products based on the specific costs and achieved volume of the products.
Actual Costs
The labor, material, and associated overhead costs that are charged against a job as it moves through the production process.
Actual Demand:
Actual demand is composed of customer orders (and often allocations of items, ingredients, or raw materials to production or distribution). Actual demand nets against or consumes the forecast, depending on the rules chosen over a time horizon.
Administrative Monetary Penalty System (AMPS)
A Canada Customs system of monetary penalties that will be imposed against violations of Canada Customs regulations.
Administrative Monetary Penalty System Overview – Canada Border Services Agency
Advance Material Request
Ordering materials before the release of the formal product design. This early release is required because of long lead times.
Advanced Planning and Scheduling (APS)
Techniques that deal with analysis and planning of logistics and manufacturing over the short, intermediate, and long-term time periods. APS describes any computer program that uses advanced mathematical algorithms or logic to perform optimization or simulation on finite capacity scheduling, sourcing, capital planning, resource planning, forecasting, demand management, and others. These techniques simultaneously consider a range of constraints and business rules to provide real-time planning and scheduling, decision support, available-to-promise, and capable-to-promise capabilities. APS often generates and evaluates multiple scenarios. Management then selects one scenario to use as the official plan. The five main components of an APS system are demand planning, production planning, production scheduling, distribution planning, and transportation planning.
Advanced Shipping Notice (ASN)
Detailed shipment information transmitted to a customer or consignee in advance of delivery, designating the contents (individual products and quantities of each) and nature of the shipment. Advanced Shipping Notice may also include carrier and shipment specifics, including time of shipment and expected time of arrival.
After-Sale Service
Services provided to the customer after products have been delivered. This can include repairs, maintenance, and/or telephone support.
An enterprise authorized to transact business for, or in the name of, another enterprise.
The separation of invoices, orders, inventory and production lots into time buckets based on due dates, receipt dates, expiration dates, or other factors. Used to focus attention on past due and most urgent items.
Aggregate Forecast
An estimate of sales, oftentimes phased, for a grouping of products or product families produced by a facility or firm. Stated in terms of units, dollars, or both, the aggregate forecast is used for sales and production planning (or for sales and operations planning) purposes.
Aggregate Planning
A process to develop tactical plans to support the organization’s business plan. Aggregate planning usually includes the development, analysis and maintenance of plans for total sales, total production, targeted inventory, and targeted inventory, and targeted customer backlog for families of products. The production plan is the result of the aggregate planning process. Two approaches to aggregate planning exist – production planning and sales and operations planning.
Aggregate Planning in the Supply Chain – San Franciscio State University
The ability to successfully manufacture and market a broad range of low-cost, high-quality products and services with short lead times and varying volumes that provides enhanced value to customers through customization. Agility merges the four distinctive competencies of cost, quality, dependability, and flexibility.
Agile Manufacturing – Lean Production
Air Cargo
Freight that is moved by air transportation.
Air Cargo Agent
An agent appointed by an airline to solicit and process international airfreight shipments.
Air Cargo Containers
Containers designed to conform to the inside of an aircraft. There are many shapes and sizes of containers. Air cargo containers fall into three categories: 1) air cargo pallets 2) lower deck containers 3) box type containers.
Air Carrier
An enterprise that offers transportation service via air.
Air Taxi
An exempt for-hire air carrier that will fly anywhere on demand; air taxis are restricted to a maximum payload and passenger capacity per plane.
Air Waybill (AWB)
A bill of lading for air transport that serves as a receipt for the shipper indicates that the carrier has accepted the goods listed obligates the carrier to carry the consignment to the airport of destination according to specified conditions.
air waybill
A distribution of costs using calculations that may be unrelated to physical observations or direct or repeatable cause-and-effect relationships. Because of the arbitrary nature of allocations, costs based on cost causal assignment are viewed as more relevant for management decision-making.
Allocation of available inventory to customer and production orders.
American National Standards Institute (ANSI)
A non-profit organization chartered to develop, maintain, and promulgate voluntary US national standards in a number of areas, especially with regards to setting EDI standards. ANSI is the US representative to the International Standards Organization (ISO).
American Society of Transportation & Logistics (AST&L)
A professional organization in the field of logistics. AST&L merged with APICS in 2015.
American Trucking Associations (ATA)
The ATA is a motor carrier industry association composed of sub-conferences representing various motor carrier industry sectors.
Any-Quantity (AQ) rate
A rate that applies to any size shipment tendered to a carrier; no discount rate is available for large shipments.
Arrival Notice
A notice from the delivering carrier to the Notify Party indicating the shipment’s arrival date at a specific location (normally the destination).
Assemble to Order
A production environment where a good or service can be assembled after receipt of a customer’s order. The key components (bulk, semi finished, intermediate, sub-assembly, fabricated, purchased, packing, and so on) used in the assembly or finishing process are planned and usually stocked in anticipation of a customer order. Receipt of an order initiates assembly of the customized product. This strategy is useful where a large number of end products (based on the selection of options and accessories) can be assembled from common components.
A group of subassemblies and/or parts that are put together and constitute a major subdivision for the final product. An assembly may be an end item or a component of a higher-level assembly.
Association of American Railroads
A railroad industry association that represents the larger U.S. railroads.
Actual time of arrival
Acronym for the American Trucking Associations.
Actual time of departure
A label used to provide additional classification or information about a resource, activity, or cost object. Used for focusing attention and may be subjective. Examples are a characteristic, a score or grade of product or activity, or groupings of these items, and performance measures.
In reference to freight bills, the term audit is used to determine the accuracy of freight bills.
A characteristic of modern information systems gauged by the ease with which data can be substantiated by tracing it to source documents, and the extent to which auditors can rely on pre-verified and monitored control processes.
Audit Trail
Manual or computerized tracing of the transactions affecting the contents or origin or a record.
Referring to an automated identification system. This includes technology such as barcoding and radio frequency tagging (RFID).
Automated Guided Vehicle System (AGVS)
A computer-controlled materials handling system consisting of small vehicles (carts) that move along a guideway.
Automated Storage/Retrieval System (AS/RS)
A high-density rack inventory storage system with unmanned vehicles automatically loading and unloading products to/from the racks.
Available to Promise (ATP)
The uncommitted portion of a company’s inventory and planned production maintained in the master schedule to support customer-order promising. The ATP quantity is the uncommitted inventory balance in the first period and is normally calculated for each period in which an MPS receipt is scheduled. In the first period, ATP includes on-hand inventory less customer orders that are due and overdue. Three methods of calculation are used: discrete ATP, cumulative ATP with look ahead, and cumulative ATP without look ahead.
ATP Explained

Average Cost
Total cost, fixed plus variable, divided by total output.

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