Glossary

3PL

A "third-party logistics provider" is an external third-party provider that offers logistics services such as storage, transport and distribution as a service.

4PL

A “fourth-party logistics provider” is an external provider who, unlike a 3PL, does not have its own facilities (e.g. trucks, warehouses, etc.). A 4PL provides management and orchestration of the supply chain and logistics as a service for other companies.

AVP

Available to Promise helps companies to determine the available stock of goods that can be reserved for future customer orders without jeopardising the fulfilment of existing orders.

BAFA

BAFA: The Federal Office of Economics and Export Control is a German authority within the Federal Ministry of Economics and Climate Protection. The BAFA reviews companies for compliance with their statutory due diligence obligations (current buzzword: German Supply Chain Law, "LkSG").

BMK

The Austrian Federal Ministry for Climate Action, Environment, Energy, Mobility, Innovation and Technology

C2C Cycle Time

The cash-to-cash cycle time describes the time frame that a company requires from the time of payment for raw materials/pre-products to the time of realisation of payments for the finished products.

CBAM

CBAM: Carbon Border Adjustment Mechanism is used for the fair pricing of CO2-intensive products imported into the European Union and counteracts environmentally harmful relocation of production. The aim is to promote clean industrial production. The products concerned include iron, steel, cement and fertilisers.

CEAP

CEAP - Circular Economy Action Plan - is the European Commission's action plan for the promotion of the circular economy through the adoption of related directives and regulations.

Circular Economy

The circular economy represents a shift away from linear economic activity. Circular economy is a sustainable counter-model in which production and consumption aim to extend the life cycle of products.

Circular Supply Chain

Circular supply chains extend the life cycle of a physical product, from the extraction of raw materials, through production and use, via several stages of reuse, to recycling and reutilisation. The prerequisite for the creation of circular supply chains is the intrinsic value of products at the end of their life cycle.

COC

A code of conduct clarifies an organization’s mission, values and principles, linking them with standards of professional conduct. The code articulates the values the organization wishes to foster in leaders and employees and, in doing so, defines desired behavior. As a result, written codes of conduct or ethics can become benchmarks against which individual and organizational performance can be measured.

Cradle-to-Cradle

The cradle-to-cradle principle was developed by Michael Braungart, a German chemist. Products are designed in such a way that at the end of their product life cycle, their ingredients can be returned to the natural biological cycle or can either be technically reused or recycled.

Cradle-to-Grave

The cradle-to-grave principle considers the linear product life cycle - from creation to the end of use. Disposal, refuse incineration and landfill have a negative impact on the environment. In contrast to cradle-to-cradle, sustainability aspects are not included in the design of the products.

CSDDD

CSDDD: The Corporate Sustainability Due Diligence Directive deals with the due diligence obligations of companies along their chain of activities. The aim is to prevent negative impacts on human and environmental rights in companies' supply chains. CSDDD contributes to the transition to a sustainable economy.

CSR

Corporate Social Responsibility - CSR is the management concept that private businesses adopt to improve their sustainability related to the triple bottom line: people, planet, and profit.

CSRD

The Corporate Sustainability Reporting Directive (CSRD) is a directive on sustainability reporting in companies. It is based on the ESG criteria (see also ESG).

CT

Cycle time refers to the total time required to complete a specific work step from start to finish. It measures the time it takes to move a unit through a process.

CTP

The Capable to Promise concept is used to evaluate the current capacity and availability of resources in order to promise binding delivery dates to customers.

DOTIF

“Delivered on-Time in-Full” is a more precise specification of OTIF, in which “on-time” and “in-full” explicitly refer to delivery to the consignee (“delivered”), and not to other points, e.g. EXW “ex works”.

DRM

The “Demand Review Meeting” is an instrument in the S&OP process with the aim of defining a demand plan (forecast). This should be agreed by consensus in the DRM with all key stakeholders (e.g. Sales, SCM, Finance).

EFRAG

EFRAG is a European Financial Reporting Advisory Group. The individual standards under the Corporate Sustainability Reporting Directive (CSRD) are developed and subsequently published by EFRAG.

ESG

ESG: Environmental, Social and Governance - ESG comprises criteria for sustainable business. E stands for environmental standards, S for social criteria and G for sustainable corporate governance, i.e. the values that a company stands for.

ESRS

The European Sustainabilty Reporting Standards (ESRS) create the framework for sustainability reporting under the CSRD regime. The individual standards explain the reporting requirements in the areas of environmental, social and corporate governance (see also ESG).

ETO

ETS

European Union Emissions Trading System - The EU ETS is the cornerstone of the EU's strategy for fighting climate change. It is the first international trading system for CO2 emissions in the world and has been in operation since 2005.

EU taxonomy

The European Taxonomy Regulation is a classification system for sustainable economic activities. It is based on six environmental objectives: climate change mitigation, climate change adaptation, sustainable use of water resources, transition to a circular economy, pollution prevention and protection of ecosystems and biodiversity.

EUDR

The European Deforestation Regulation (EUDR) comes into effect on 1st January 2025. The new regulation requires businesses to: Remove deforestation and forest degradation from their supply chain; Comply with local social and environmental laws in the country of production; Implement traceability, risk assessments and contingency planning; and Produce a ‘Due Diligence Statement’.

EXW

“Ex Works” means on the one hand a standardized contractual clause from the INCOTERMS, which means collection by the buyer from the seller's warehouse. On the other hand, it is also used in common business language for “collection at the warehouse”.

FCA

In the supply chain management (SCM) context, “forecast” usually refers to the demand forecast or sales forecast. The FC is an important variable in the planning process and serves especially in medium-term planning (S&OP) as a basis for steering measures in the supply chain (e.g. regarding inventory build-up, capacity expansion, supplier management).

FCA

Forecast accuracy (usually demand or sales forecast) measures the quality of a forecast. FCA shows how close the forecasted quantity is to the actual value. FCA can be measured using different methods, e.g. MAPE, RMSE, MAE and enables effective decision-making, e.g. in the S&OP process.

FCB

"Forecast Bias" means the tendency of a forecast to be consistently higher or lower than the actual value. That means, FCB shows if inaccuracy in the forecast was under- or overforecasting. It is based on the comparison of demand forecast (FC) and the actual demand. FCB can be measured in absolute figures or percentage

Green Deal

Under the Green Deal, the European Union has set itself the goal of comprehensively reducing pollutant emissions and promoting a circular economy. The goal is to achieve climate neutrality in the European Union by 2050.

IBP

“Integrated business planning" is a series of decision-making processes for balancing supply and demand, operational planning and for linking high-level strategic plans with day-to-day operations. Compared to S&OP, IBP is strongly characterized by the overarching view of processes and functions (integration), and includes, for example, financial planning in the process.

ISO 14001

ISO 14001 has become the international standard for designing and implementing an environmental management system. The standard is published by ISO (the International Organization for Standardization), an international body that creates and distributes standards that are accepted worldwide.

JIT - Just in Time

This supply chain concept promotes the receipt of raw materials and other essentials just before they are needed, rather than keeping them in storage for longer periods of time. This approach can significantly reduce storage costs, particularly for products known to have a brief shelf life.

LCA

Life Cycle Analysis - An LCA is an assessment of the sum of a product’s effects (e.g. GHG emissions) at each step in its life cycle, including resource extraction, production, use, and waste disposal. This assessment helps evaluate the environmental impact of a product.

LkSG

The Lieferkettensorgfaltspflichtengesetz (LkSG) is the German supply chain law. The law defines due diligence obligations along the supply chain and obliges companies to respect human rights and environmental protection. With the adoption of the European Directive (CSDDD), the legislator will adapt the German law accordingly to the European Directive.

MAE

“Mean absolute error” is a key figure for measuring the extent of a forecast error (means the deviation of the forecast value from the actual value). MAE is characterized by the fact that the result has the same scaling as the source data and is therefore easy to interpret.

MAPE

“Mean absolute percentage error” is a key figure for measuring the extent of a forecast error (means the deviation of the forecast value from the actual value). MAPE is characterized by beeing very user-friendly.

MoSCoW

MoSCoW is a prioritization method in project management, often used in software implementation projects. It stands for “Must-have (M)”, “Should-have (S)”, “Could-have (C)” and “Won't-have (W)” and represents the importance of requirements or work packages in descending order. The lower-case letters “o” are only used to make the text easier to read.

MPS

"Master Production Schedule" describes a plan that defines the planned production quantities for each product over a certain period of time. Demand forecasts, stock levels and production capacities are taken into account to ensure that material planning runs smoothly.

MRP

Material requirements planning describes the process of planning, forecasting and managing the demand for raw materials, components or other materials for production or operations within a certain period of time.

MTO

With the lean production strategy "Make-To-Order", products are only manufactured after a specific customer order has been received. Production therefore only takes place after the customer order has been placed.

MTS

With the "make to stock" production strategy, products are manufactured in advance based on forecasts or historical sales data without a specific customer order. The finished products are kept in stock so that customer orders can be processed quickly.

O2C

The order-to-cash process is an extension of the order-to-invoice process, as it maps the final receipt of payment by the customer in addition to the invoicing.

O2I

Order-to-invoice is a business process that handles customer orders from entry to invoicing. This includes order acceptance, warehousing, delivery and invoicing.

OTIF

On-time in-full (OTIF) is a key performance indicator (KPI) for measuring efficiency in logistics. OTIF is calculated as a percentage and indicates how many of the customer orders were delivered on time and in full.

P2P

The Procure-To-Pay business process covers the entire purchasing cycle from the determination of requirements to the procurement of goods and finally to payment to the supplier.

PCF

A life cycle product carbon footprint measures the total greenhouse gas emissions generated by a product, from extraction of raw materials, to end-of-life. It is measured in carbon dioxide equivalents (CO2e).

RACI

RACI stands for Responsible (for the operational execution), Accountable (for the result), Consulted, Informed and is a model to define and document responsibilities and roles in a process diagramm.

RMSE

“Root Mean Squared Error” is a key figure for measuring the extent of a forecast error (means the deviation of the forecast value from the actual value). RMSE is characterized by beeing very user-friendly.

ROI

Return on Investment - ROI is a ratio between net profit and cost of investment. A higher ROI indicates the investment is favorable. Stakeholders want a high ROI so that they can justify their investment.

S&OP

Sales & Operations Planning is a process that balances demand and supply. Sales and operations plans are synchronised to minimise bottlenecks. Sales forecasts, production capacities and financial targets are combined to ensure optimal and aligned planning.

S2C

The "Source to Contract" (S2C) describes the process of procurement management, starting with the identification of potential suppliers (source) through to contract negotiation, creation and management (contract).

SCM

SCM: Supply chain management covers the development and management of integrated material and information flows along the entire value chain. SCM begins with the extraction of raw materials and extends through the processing stages to the consumer. Supply chain management covers the active organisation of all processes to supply customers or markets with products, goods and services.

SIOP

“Sales, Inventory & Operations Planning” is another name for S&OP, which places a special focus on inventory. Accordingly, companies tend to use SIOP as a term when the (main) objective of the supply chain planning process is inventory optimization.

SIPOC

SIPOC is a Six Sigma tool used for process analysis and process description. It stands for Supplier, Input, Process, Output and Customer. SIPOC is used to capture a sequence of processes either to analyze the as-is processes or to define the to-be process flow

SKU

This common inventory management term references a scannable code for a particular item stored in a specific location. SKU codes make it easy to search products within catalogs, order forms, or invoices.

SRM - Supplier Relationship Management

Supplier Relationship Management (SRM) is a systematic approach to manage cooperation with suppliers and supplier development. Among other things, it involves optimizing processes such as onboarding and offboarding of suppliers, qualification and tendering procedures, monitoring supplier performance and selecting suitable segmentation strategies.

SRM - Supply Review Meeting

The “Supply Review Meeting” is an instrument in the S&OP process with the aim of matching the forecasted demand with available production capacity. Within the SRM, it shall be defined how to best meet demand under capacity constraints and which bottlenecks may occure.

TMS

This advanced logistics platform facilitates the efficient movement of incoming and outgoing freight, while also ensuring that operations are safe and compliant. The chief objective of the TMS typically involves reducing freight spend.

VMI

A common approach to inventory management, VMI draws on the power of partnership to limit the need for manually initiated purchasing orders. Under this system, vendors, such as retailers, handle all restocking needs by delivering new products as the typical reorder point draws near.

WIP

This term describes goods that have begun the manufacturing process (and therefore cannot be classified as raw materials) but are not yet completed. Information about WIP should be included in bills of materials.

WMS

Software solutions known as WMS offer insight into the supply chain fulfillment process. WMS can be integrated with a variety of other logistics solutions, such as transportation management systems and enterprise resource planning software.