The supply chain, and particularly the world of pallet pooling, operate using very specific terminology.
If you are looking improve your company’s supply chain management, or just wish to gain a clearer understanding of how supply chain management works in a more general sense, knowing the specific terms and processes involved is essential.
In this article you will learn the language of the supply chain as we highlight 50 definitions within logistics management.
Also known as the “20 30 50”, this ranking method allows you to sort your products and classify them into three distinct groups based on their output volume:
In Group A you will store the products most popular with your customers. On average, 20% of inventory that makes up 80% of the value.
Group B will consist of products that sell often but do not produce as much profit. On average, 30% of inventory that makes up 15% of the value.
And finally, Group C includes all the products that you sell the least. On average, 50% of inventory that constitutes just 5% of the value.
The ABC analysis identifies the products that are most in demand. A company can then use its precious warehouse space to adequately stock those priority goods and maintain lower stock levels for Group B or C items.
Allotment is a complex procurement mechanism. It consists of delivering batches of products intended for different end locations (sales outlets, factories, etc.) to a single relay location (warehouse, shipping centre, etc.). The lots will then be transported to their destination in a separate, second stage.
Best Before Date
The best before date (BBD) describes the advisable date to consume a non-perishable food product.
Once the BBD has expired, the product may lose some or all of its nutritional properties: less taste, different texture, fewer vitamins, etc.
Selling beyond the BBD is not prohibited, although it is discouraged for the sake of customer satisfaction.
Capacity Control enables production to be measured to compare it to previously planned capacity needs, control the gaps and take the necessary decisions to fill them.
Inventory management (or Capacity Management) is the set of measures for controlling volumes of goods and references. Inventory management takes place at all levels of your supply chain (in your storage centres, in your distribution points, etc.). It allows you to define your supply strategy and avoid stock shortages.
The ‘charterer’ performs the intermediary role between the customer wishing to ship the goods and the hauliers who will perform the movement of goods. Depending on the type of goods to be shipped, the charterer is responsible for choosing the most suitable method of transport (i.e. lorry, plane, boat, train etc.) and is responsible for their delivery.
Consolidation makes it possible to bring together the various shipments of goods from several shippers into a single batch. This batch is then transported to its destination by a haulier.
The coverage rate represents the company's ability to meet customer demands through the immediate availability of its stock (without restocking or lost sales).
It is a good stock management indicator, because it represents the demand that could be achieved if stock management were optimised. The service rate is calculated by taking the average of the number of requests processed correctly across all orders.
Cross-channel is a distribution model that makes it possible to supply several sales channels (e-commerce site, store, application, etc.) in a coordinated and optimised manner. A good cross-channel model will mean that a customer will be able to find the exact same products online as in-store.
Cross-docking makes it possible to skip the stage of storing goods and all the logistics it entails by passing them directly from the unloading dock to the shipping dock.
Devaluation (or inventory write-off) represents the net loss of value of your stock. Several causes may be responsible for this: expiry, malfunction of part of the stock, manufacturing defects or loss of intrinsic value.
Display (note: Point of Sale)
Displays are supports for points of sale to present products to their customers. A display can take the form of a pallet, a shelf, a display unit, etc.
The distribution centre is where you distribute your products directly to your customers.
Distribution costs are the costs directly related to the actions involving distribution of products until they arrive in the hands of the buyer. They consist of order tracking, storage costs, transport, personnel management, etc.
EAN (European Article Numbering)
European Article Numbering (EAN) is an international standard that identifies all products available on the market using a unique bar code associated with them. Since 2005, the Global Standards 1 (GS1) have replaced the National EAN organizations.
First In First Out (FIFO)
The inventory management method known as first in, first out (FIFO) involves taking the first goods to have entered the warehouse out of stock.
First Expired First Out (FEFO)
The first expired, first out method (FEFO) involves taking the first goods to expire out of stock. In the context of perishable goods, we strongly encourage that you adopt this system.
Gross requirement identifies the quantities of components required for the manufacture of a product in advance. It is the combination of internal and external needs and is calculated using the Production Distribution Program (PDP) method.
It is important not to confuse gross requirement with net requirement. Unlike the latter, gross requirement must be calculated before deducting stock and receiving components.
Inventory consists of counting all the products and goods that your company owns. It is useful for accounting purposes. It also gives you valuable information on the state of your stock levels. There are three types of inventories:
Physical inventory: occasionally check your stock status by visually counting the number of items in stock.
The permanent inventory: keep your stocks up to date by entering the status of your stocks daily into your management software.
Cyclical inventory: check that your computer stocks are up to date and that there are no errors by carrying out a physical inventory of the stock on a regular and repetitive basis.
The Inventory gap highlights the discrepancies between physical stock and computer system stock levels. These discrepancies may be due to a counting error, an oversight, a supplier error, theft, data entry errors, etc.
Inventory valuation usually occurs for accounting reasons. It can be calculated in different ways (weighted average price, replacement price, FIFO, LIFO, etc.) and allows you to assign a conventional value to your stocks.
Just-in-time selling is a selling method that involves selling goods without stocking them. The goal is to predict and get as close as possible to market demand to produce only what it needs to reduce lead times and avoid all unnecessary storage costs.
Be careful though, before choosing just-in-time sales, make sure you can accurately coordinate your entire supply chain.
Last In, First Out (LIFO)
The last in, first out method distributes the most recently received stock first.
This method is only suitable for non-perishable products (at the risk of losing part of the stock).
The lead time (or Procurement Lead Time) corresponds to the time elapsed between the moment when your company informs the supplier of its need for supply and the moment when that need is met. It is an important parameter to consider when choosing suppliers, but also when considering customer satisfaction.
Logistics is an area of expertise that brings together all the operations that make it possible to provide the right product, at the right time, in the right place, while minimising costs.
Minimum Order Quantity (MOQ)
The Minimum Order Quantity (MOQ) is, as its name suggests, the minimum quantity per order. It allows you to achieve significant economies of scale and increase your profitability.
By defining MOQs for your goods, you can find an optimal threshold for reordering components that will allow you to find the right balance between your needs and the costs of the order (costs of transport, storage, purchase, etc.).
The net requirement refers to the quantity of products needed after deducting available stock.
It is calculated through the Net Needs Calculation method, deducting available stock, the products already in progress, and the raw supplier orders.
The order backlog is a list of all orders that have not yet been honoured by the company.
Packaged Selling Unit
A packaged selling unit is the way in which the product is packaged at the time of sale to the end customer (by lot, in packs, individually, etc.)
Pallet pooling is a pallet rental-management system. This system allows companies to rent pallets rather than buying them and therefore offer reduced logistics costs.
Pooled pallets belong to a pooler (such as LPR - La Palette Rouge) who is responsible for the management of the pallet pool: quality of the pallets, supply, maintenance, delivery, collection, etc.
Once the pallets are used, they are collected directly from the distribution points and transported to service centres where they are inspected, and refurbished where necessary, before being reintroduced to the system to be used by other customers.
Picking is the way in which a product will be taken out of stock to bring it to the packing area (to be packaged for shipment). Several types of picking can be implemented:
Dynamic picking: by equipping your warehouse with metal shelving guaranteeing you easy management of orders when volumes are high
Pick and pack: when the sales units are stored directly in their package.
Pick then pack: when the sales units are only put away in their package at the end of the packing process.
Pick to belt: when the preparation of the sales unit is complete
Pick to light: by equipping your warehouse with a light system that guides your team members to the item to be collected.
Radio Frequency Identification (RFID)
RFID (Radio Frequency Identification) technology makes it possible to retrieve product data remotely using “radio tags”. Fitted with electronic chips, these tags simply identify an object or merchandise using an RFID reader.
Resource Distribution Planning
The Resource Distribution Planning allows you to anticipate the supply of goods to your distribution sites. In the short term, it also allows you to prioritise the distribution of your stocks according to the needs of your different sites and gives you a precise view of manufacturing needs.
Retail Management Replenishment (RMR)
Retail Management Replenishment (RMR) is an inventory management process that is carried out by the distributor (rather than the suppliers).
The distributor relies on its sales forecasts to set up replenishment programmes which it then sends to its suppliers, who then regularly restock its warehouses according to requirements.
Reverse logistics is the logistical actions aimed at ensuring the return of a product (due to non-conformity, breakdown, recycling, etc.) from the end customer to the supplier.
The service rate (or service cycle) represents the probability of not being out of stock during the next cycle (a cycle generally corresponding to the replenishment time).
It therefore corresponds to the probability of being able to meet customer demand without lost sales.
The shipping centre is where your products are first transported and consolidated ready to be shipped to the customers.
Single Use Pallet
Single use pallets are a low-quality pallet designed to be used only once. This type of single-use pallet is not profitable in the long term.
Slotting is a term used to describe the management of slots in your warehouse. Optimise your storage locations according to the goods, products and the handling required.
Stack pallets are storage pallets that wnever leave the warehouse.
The stock includes all the goods that you have in reserve that have not yet been consumed or sold. However, the stock can be classified into several areas:
Safety stock: is a quantity of goods intended to be used in the event of a delay in supply or production.
Minimum stock: is the stock corresponding to normal production and supply lead times.
Alert stock: is the threshold beyond which a new order must be placed
Mass stock: is the place in the warehouse where the goods are stored before being transported to the picking area.
Stock control allows you to judge the effectiveness of your stock management methods: supply, storage, availability, etc. Regular stock control allows you to optimise your processes to reduce costs.
Stock control applies to both components and finished products. It allows you to have a global view of your stock at all stages of production, from purchase to resale after processing.
Stock Keeping Unit (SKU)
The SKU (or Stock Keeping Unit) is a code identifying each stock item. The same item can have several different SKUs that will differentiate its size, colour, format, etc.
The stock unit corresponds to the type of packaging used within the warehouse: cartons, boxes, pallets, etc.
The supply chain brings together all the players involved in the supply of a product. It begins with the raw material producer and ends at the end customer who receives the goods, passing through the distributor, the haulier, etc.
At all levels of the supply chain, there are many optimisation opportunities. The objective is to be able to provide a product to an end consumer at the right time, in the right place and in the right quantity, while minimising the times and costs of delivery.
Supply Chain Management (SCM)
Supply Chain Management is the set of optimisation operations intended to reduce costs (delivery, storage, etc.), lead times, and to reduce order and delivery errors.
When management takes decisions aimed at reducing the environmental impact of the supply chain, we speak of Green Supply Chain Management.
Use By Date
The Use By Date is the date before which a perishable product must be consumed. Once this has passed, the product is considered expired and unfit for consumption.
Warehouse Control System (WCS)
The Warehouse Control System is an application that will direct the interactions between the distribution centre and the warehouse in real time.
Warehouse Management System (WMS)
The Warehouse Management System is software that optimises the management of all storage operations in the warehouse.
Interested in pallet pooling?
If you would like to improve the management of your supply chain, contact the experts at LPR - La Palette Rouge! They are here to help you to find the perfect solution for your needs.