A

The division of stocks into three fundamental groups for inventory control and planning following an ABC analysis. The three basic categories are labeled A, B and C in the following order, however multiple divisions can be created:

• “A” items: a product that, according to an ABC classification, is part of a select group that represents only 15-25% of inventory items while representing approximately 75-80% of annual demand, use or production volume. Most of the attention is paid to this product category A for inventory control and planning purposes. Likewise, one thing could be crucial from a business point of view.
• Things B a middle class that receives less attention from management and accounts for about 5-10% of annual demand, utilization or value of production, however, represents 20-25% of the total.
• Items classified as C are those that make up 60-65% of inventory but only represent 10-15% of annual demand, utilization or production value. At least for the purposes of inventory planning and control, this category receives the least attention and purchasing choices for such items can be automated.

Absolute Advantage
A competitive advantage that one party has over another due to natural endowment or other natural gifts.

Absolute Requirement
The total requirement expected for a particular product in the future. Normally used for products in the last phase of their life cycle, when production is (almost) stopped.

Acceptance
A deliberate statement that a recipient of an offer agrees to be bound by its provisions.

Acceptance test
A statistical quality control method that simply examines a sample of the batch to assess the overall health of the batch.

Administered Price
A price established by rules rather than by competitive market forces. For example, the Indian government sets the price of sugar cane and other commodities rather than letting supply and demand determine the prices.

Activity Based Costing
This is a technique for estimating indirect costs based on cost production activities. Contrary to traditional accounting procedures, which group and attribute indirect costs in an arbitrary way.

Accounting System
The collection of documents and processes that collect, document, classify and present data relating to the operations and financial position of an organization.

Acculturation
The process of assimilation into a new culture. Conducting international trade just got easier.

Acknowledgement
A written message from the supplier informing the buyer that the supplier has accepted the purchase order sent to him. Therefore, if the terms of the confirmation are not materially different from those of the purchase order, it constitutes a bilateral contract.

Active inventory
Anything in your inventory that has recently been used or sold is considered active inventory. usually set at one year.

Acquisition cost
Acquisition costs are the total costs associated with acquiring a material. These costs include costs for ordering, transportation, handling, inventory keeping, etc. It is indicated in the context of the Economic Order Quantity (EOQ).

Acquisition process
The operations that must be completed for an organization to receive the required inputs are known as the acquisition process. It includes identifying possible sources, determining the need, communicating the need, inviting and evaluating offers, placing the purchase order, receiving the object for inspection and payment.

Advance rate
Upfront Commission: The shipper can specify a commission as a percentage of the amount paid upfront as this often results in net costs that are passed on 1 on 1. Credit limitation is another name for this cost.

Advance payment
Advance payments are amounts agreed upon prior to delivery or a predetermined portion of the total price that the buyer is required to pay to the seller.

Advance shipping notice
A standardized electronic data exchange form detailing an incoming shipment to a place of receipt (recipient).

Advance expenses
The amount of freight or other charges on an advance shipment from one carrier to another or to the shipper, to be collected by the recipient.

AFTK
Tons of goods available per kilometer (AFTK).

Agency
It is a legal entity that denotes the legal relationship that exists between two parties from which one is authorized to carry out or negotiate specific commercial activities for the other.

Agent
A person or organization who acts as another person or representative of an organization in communications with a third party is known as an agent.

Aggregate Inventory Management
Due to the size of many inventories, groupings need to be created for control purposes. To enable the creation of operational policies, key performance indicators, objectives and reports, the aggregated inventory is the further collection of these classifications into a single entity. Aggregate inventory management allows for things like determining the overall expected level of inventory and then implementing the necessary controls to ensure that individual operational choices achieve that goal, at the lowest possible cost.

Allocated Stock
An item that has been reserved but has not been taken out of stock or distributed, making it unavailable for use in other ways.

All Time Order
The last order for a particular product in the last phase of its life cycle. This order is of such a size that the stock supplied will do so.

The stock resulting from the evaluation of a standing requirement and the delivery of a standing order. If necessary, you can set up controls for that stock to avoid consuming items for reasons other than those for which they were intended to be used.

Ancillary Costs
Commissions that carriers generally add up to the cost of transport. These rates cover internal delivery, loading, unloading, notification, storage and redelivery in addition to the single shipment.

Stocks held in order to satisfy seasonal fluctuating demand with a production level that does not fluctuate at all or that varies less than demand.

The primary measure of system performance is the expected percentage of the supported system that will be available at a random time and not out of service due to lack of parts.

The uncommitted portion of a company’s inventory and planned production, kept in the main schedule to support customer order promise. The ATP quantity is the unconstrained inventory balance in the first period and is normally calculated for each period in which an MPS receipt is planned. In the first period, the ATP includes available inventory net of customer orders that have expired and expired.

B

Backhaul
Generally a backhaul is any return cargo picked up after delivery has been made. An example of this would be the collection of supplier cargoes from the supplier by the retailer for delivery in the retailer’s DRC.

Back order
Ordered items that were not dispatched because they were out of stock or for other reasons. It serves as a benchmark for supplier and customer service performance.

Barcode
These are machine-readable codes that feature an alternating pattern of parallel bars and spaces that stand in for various characters and numbers. Lower mistake rates, faster input times, and more accurate counting are the key advantages of adopting bar coding technology in receive and store activities.

Battle of the Forms
The “battle of the Forms” is what occurs when a dispute arises over which terms and conditions prevail in a transaction. Competent management of the contract should aim to prevent this from happening.

Benchmarking
It is the process of evaluating where something is, for instance, the procurement department in terms of systems and processes, and figuring out what changes can be made to put you on par with international quality.

BID
A bid is an offer made by a seller to a buyer, typically in a sealed envelope. It is thought to be sacred in law. Typically, the offer submission and opening times are predetermined. One type of offer is Single Part, which lists the price and all the technological and commercial terms and conditions on one cover. Three sections, where the technical, commercial, and price components are each presented individually. Two parts, where the techno-commercial part and the price part are each kept in a separate cover and not open at the same time.

BID Analysis
A comparison of the advantages and disadvantages of the various offers received during a competitive bidding process

Bid Offer
Financial document that a tender presents together with the offer and is also referred to as bid security. Because the bid bond is ultimately forfeited by the buyer in the event that the bidder declines to accept the order, the disposal of the bid bond is made to eliminate proposals that are not serious.

Bid Opening
It is a time when offers from suppliers are opened, which is specified by a specific day and hour. Bids are often opened in front of bidders, buying managers, and other parties who might be involved in the purchase case.

Bilateral Contract
A bilateral Contract is one where both sides make promises to one another. Typically, a contract of this kind is created when a buyer or recipient considers and accepts an offer.

Bill of Exchange
A document created by the seller regarding the buyer that directs the buyer to pay the purchase price under certain conditions.

Bill of Materials
A BOM or B/M is a list of all the ingredients required to make one unit of a final product, including their quantities and descriptions. Utilizing a material requirement planning (MRP) system requires the use of a bill of materials.

Bill of Loading
A bill of loading is a document that a carrier issues certifying that the sender’s goods have been received on board. It includes information on the delivery, the port of unloading, the numbers of the containers, etc.

Boilerplate Clauses
Boilerplate clauses, which are typically included at the end of a contract and are monotonous, routine, small print provisions, are sometimes missed. Never disregard the normal provisions of a contract because they serve as its framework.

BOM
A BOM, sometimes referred to as a BOM, is a list of components that come together to form a whole.

Bottleneck Items
In manufacturing, a product is categorised as a Bottleneck Item if it has LOW influence on profit but HIGH supply risk. There would be a “bottleneck” in the production line if we ran out of this product. As a result, plans must be made to guarantee a steady supply.

BPO
Business process outsourcing (BPO) is the practise of a corporation contracting a business function to a third party (such as sourcing, marketing, payroll, or accounting).

Beyond Economic Repair (BER).
If the estimated repair cost exceeds a management-determined portion of the item’s replacement cost, which commonly applies to repairable or rotatable items.

C

Category
A group of items that may be managed, are unique from one another, and are perceived by customers as being connected.
Category control. Managing groupings of interchangeable, or substitutable, products to satisfy consumer wants as opposed to the conventional focus on individual products and brands.

Central Distribution Center
A warehouse that acts as the sole storage location for the distribution system it supports is known as a central distribution centre. Food companies frequently have national or central distribution hubs that serve numerous retail distribution warehouses and are replenished from various production points.

Co-managed Inventory
It is a support arrangement akin to Vendor Managed Inventory, but in which the user and the vendor come to an agreement on replacement orders for vendor-owned stock prior to delivery.
Component: A part, ingredient, or subassembly that functions as both a parent part for additional components and a component for a top-level part.

Component Part
Raw materials, ingredients, parts or subassemblies that go into an assembly, compound, or any higher-level portion are referred to as component parts.

Composite Delivery
A distribution facility with multiple temperatures for composite delivery. Various on-site facilities that operate at different temperatures would normally be used for product reception, storage, and handling.

Composite Distribution Center
A multi-temperature distribution centre is called a composite distribution centre (CDC). Various on-site facilities that operate at different temperatures would normally be used for product reception, storage, and handling.

Consignment Stock
Consignment stock refers to inventory that is kept by a third party client but is still the supplier’s property; payment is only made upon the customer’s sale or usage of the stock.

Consolidation
Using one vehicle to transport two or more supplier supplies to a dealer’s DRC. This seeks to increase cargo utilisation while also speeding up DRC unloading.

Consolidation Centers
Consolidation Centers are storage facilities that hold and/or process fully loaded merchandise (see cross docking) for delivery to RDC resellers.

Consumable
An inventory category for things or products that are used up completely in use, such paper, oil, grease, etc.

Cost to serve
It is an analytical supply chain method that allocates costs to customers, products, and channels while using activity-based costing approaches to identify the costs of servicing certain customers with particular items.

Cross Docking
It is a procedure in which items for store orders are processed into store orders as soon as they arrive at the DRC rather of being stored on warehouse racks for later picking. Incoming shipments may need to be divided into store-ready shipments, or if they are large enough to fill a pallet, the pallets may need to be moved through the docking area and loaded onto a delivery vehicle for the store. The method is known as such because the product is moved through the docking bays of the warehouse vehicles.

D

Decoupling Stock
Inventory built up across related activities in the flow of products to lessen the necessity for perfectly timed operations.

Demand-Driven Supply Chains
Here, a system of offers is made in response to a single question mark. To meet the demand it is attempting to meet, a supply chain’s various parts are coordinated.

Deterministic Models of Inventory Control
Method of controlling inventory where every variable and parameter is known or can be estimated with accuracy. The replenishment time is considered to be constant and independent of demand, and it is expected that the item demand rate and associated inventory costs are known with certainty.

Direct In-Store Delivery
Instead of going via DC resellers, suppliers deliver their products directly to their clients’ points of sale.

DRP or Deployment Resource Planning
The extending MRP to include planning for the important resources found in a distribution system

E

Economic Order Range (EOI)
An analysis of the trade-off between the cost of placing an order and the cost of stock holding in fixed order interval systems will yield the interval between orders that, under a certain set of conditions, will minimise the total cost of inventory.

Expression of Interest (EOI)
A summary of the requirements is frequently distributed to potential suppliers of goods and/or services during the first phase of outsourcing.

Economic Order Quantity (EOQ)
In fixed order quantity systems, the size of an order that, under a specific set of conditions, minimises the total cost of inventory is determined by examining the trade-off between the price of placing the order and the price of stock storage.

Economical Stock
Physical inventory plus orders for items that have not yet arrived minus sales of goods that have not yet been delivered but for which a corporation accepts the risk of a price decline and unmarketability are considered.

Effective Stock
The total of a product’s physical inventory plus the quantity that has been ordered for a specific time period but hasn’t yet arrived.

Efficient Consumer Response (ECR)
A project wherein the supply chain’s components cooperate to better, quicker, and more affordably fulfil consumer demands.

Electronic Commerce (Electronic Commerce)
A method of leveraging computer and telecommunication networks, such as the Internet, to conduct business and exchange information with other companies, customers, or the government.

Electronic Data Exchange (EDI)
The transmission of structured data between computers for processing automatically.

Enterprise Resource Planning
A further development of MRP in which every area of corporate operations is included and integrated into a single database application.

European Article Numbering (EAN)
A global standard for product identification that is applied to the retail and commercial grocery sectors.

Excess Stock
Any quantity of inventory held or on order that is greater than the known or projected advance demand to the point where disposal should be taken into account.

F

Factory Price
A project run by resellers with the goal of cutting transportation costs and boosting productivity in the supply chain’s main hub. The principal (inbound) freight is typically managed by the reseller, who subtracts the expense from the supplier’s product price.

Family Group
A collection of similar products for which the demand can be combined in order to evaluate the overall demand for the components that make up the products in the family group.

Fill Rate
An item-based measurement that shows the percentage of requests that were fulfilled at the time they were submitted. The fill rate only measures what happens when requests occur.

Finished Goods
Warehouse to which production-added ultimate value improvements have been added.

G

General Agents
Agents having a great deal of discretion and authority to complete the tasks assigned to them by their superiors

GATT
In order to lower trade obstacles, multilateral agreements were established in 1947. the World Trade Organization succeeded (WTO)

Global Sourcing
The international, or outside of a country, purchase of goods or services.

Global Tender
A bid that is soliciting bids from interested bidders on a global scale. To reach a global audience, it receives a lot of publicity.

Goods Booked to Self
A phrase that refers to the practise of only accepting delivery of a shipment upon display of a railway receipt in railway transportation

H

Hand-to-Mouth Shopping
Frequent small-scale purchases that are made to satisfy only today’s needs. Planning inbound material purchases and flows is another practise included in it, and it does so without the requirement for high levels of inventories.

Hazardous Substances
Materials or chemicals that must follow the regulations because they have been found by a government agency to pose a harm to property, health, or both.

Hedging
A purchase or sale undertaken with the intention of balancing a sale or purchase that has already

High Sea Sale
When the product is on the open sea, it represents the transfer of goods from the buyer been made or that is under contract, in order to counteract the effects of potential market price variations.

Host Country
Any nation where an organisation maintains its global headquarters,

Holding Costs
The average cost of transporting a unit of an inventory item is known as carrying cost.
Typically, it also includes the potential cost of keeping inventory as well as additional related expenses like overhead and variable costs.

Hub
A major producer or merchant with many of trading partners

Hundred Pound
100 pounds is referred to as “hundred weight” in the transportation industry.

In Process Goods
Final items that have not yet been fully completed but are still in the production process because of an accumulation of unfinished tasks or a backlog of supplies that need to be processed.

Integrated Business Planning:
In order to optimise financial value, an enterprise business or government entity implements integrated business planning across two or more functions. The specific type of IBP process is determined by the particular functional areas of a firm as well as the industry domain linked with the company. The main prerequisites for IBP are the involvement of two or more functional process areas and the maximisation (optimization) of financial value.

Independent Demand
A classification used in inventory control systems where variations in demand occur due to arbitrary effects from the market place and where the demand for any one item has no relationship with the demand for any other item.

Intermediate Product
A product for which both independent demand and demand as a component of another higher level product is possible.

Inventory
A phrase used to describe all the products and materials that a company keeps on hand in anticipation of a sale, or to refer to a stockpile of things.

Inventory Management
The control and maintenance of the proper quantity of each item in stock or the provision of the necessary level of service at the lowest possible price.

Inventory Modeling
The analysis or simulation of different inventory design parameters or attributes in order to support management decisions

Inventory Policy
The analysis or simulation of different inventory design parameters or attributes in order to support management decisions

Inventory Process
Any inventory-related business process. includes accepting parts, storing them, withdrawing them from storage, issuing them, and moving them through the work-in-progress while tracking their movement and keeping track of those actions and their results in records.

Inventory Records
The Documents that show the quantity and type of inventory that a company has in stock, has committed (assigned) to work in progress, and has ordered.

A statement of all the components that must be issued. Issues based supply chain development. A supply chain’s difficulties, issues, and root causes are first assessed using this method, after which the supply chain’s strategic gaps are understood using the root causes.

Issuing Documents
The tangible records that express precisely how much of what must be distributed where. Documents that are issued include problem lists, issue tickets, and issue decks.

INCOTERMS
The world-recognized INCOTERMS are international guidelines for interpreting the phrases used in international trade contracts.

Indefinite Delivery Contracts
In general, there are three different forms of indefinite delivery or term contracts: Uncertain amount contracts for definite deliveries indefinite quantities, requirements contracts, and contracts for definite deliveries

Indemnification

This phrase, which is often referred to as “keep harmless,” “defend,” or “indemnify,” is designed to shield a customer or supplier from harm. The terms “keep blameless” and “indemnify” refer to receiving compensation for fines or liabilities that one party incurs as a result of another’s behaviour and concern monetary or financial loss. By using the phrase “defend,” a contracting party commits to supporting the other in any legal action and bearing the associated costs. Purchase Orders make use of these clauses.

Independent Demand
Demand that is not correlated with the demand for other products or finished goods manufactured by the company

Inspection
It speaks about evaluating the caliber of goods and services to see if they match requirements. Typically, the buyer has the option to inspect the materials before purchasing them.

Inventory in Transit
Moving materials between two or more places, typically those that are geographically apart; an example of this would be the shipment of finished items from a plant to a distribution centre. The availability of the entire supply chain includes in-transit inventory, which is often overlooked.

Igloos
Airborne pallets and containers; the igloo shape is created to meet the inside wall contours of a narrow body aircraft.

Import
Movement of goods between countries via import. One example is the importation of vehicles from Germany to the United States.

Inbound Logistics
The transfer of commodities from vendors and suppliers into production facilities or storage areas.

Integrated Logistics
A thorough, system-wide perspective of the complete supply chain as an unified activity, from the provision of raw materials to the delivery of finished items. Instead of managing specific functions independently, the entire supply chain is controlled as a single unit.

Inter-coastal carriers
Conveyance by water between ports on the East and West coasts, typically via the Panama Canal.

Inter-corporate hauling
If the subsidiary is fully owned (100%) or if the private carrier has common carrier status, carrying the goods of a subsidiary while charging the subsidiary a charge is legal.

Intermediately Positioned Warehouse
A warehouse that is situated between manufacturing facilities and customers to improve customer service and lower distribution costs.

Intermodal Transportation
Freight movement involving the use of two or more modes of transportation, such as truck and rail or truck and ship.

In-transit Inventory
Inventory that is in transit is stock that is being moved between two or more sites that are typically separated by distance, such as finished items being transported from a manufacturing facility to a distribution centre. The availability of the entire supply chain includes in-transit inventory, which is easily ignored.

Intrinsic Forecast Method
A projection in forecasting that is based on internal variables, like the average of previous sales.

Inventory Management
The management of inventories, focusing on issues like how much of a quantity to hold, when to order, and how much of a particular item to order.

Inventory Planning Systems
Solutions that aid in strategically balancing the supply chain’s inventory policy and customer service standards. Using certain inventory procedures, these systems determine safety stock and time-phased order quantities.

J

Kaizen
The phrase used in Japanese to describe continuous improvement that involves both managers and employees. Kaizen in manufacturing refers to identifying and getting rid of waste in equipment, labour, or production processes.

Kaizen Blitz
a quick upgrade of a small process region, such a production cell. Workers from that area make up a portion of the improvement team. The goals are to employ creative thinking to cut out non-value-added work and to execute the changes as soon as possible, ideally within a week. Additional advantages include the area work team taking ownership of the project and the improvement of the team’s problem-solving abilities.

Keiretsu
A type of cooperative agreement between Japanese businesses where the organisations mainly maintain their legal and financial independence despite cooperating closely in a variety of ways, such as financial support and exclusive sourcing. A member of a keiretsu often holds a small percentage of stock in the businesses that are also members. Although “distribution” (supply chain) keiretsus connect businesses from raw material suppliers to retailers, keiretsus typically organise around a bank and a trading company.

Kanban
Card, billboard, or sign are some approximate translations of the Japanese phrase meaning “visible record.” It was made popular by the Toyota Corporation and involves delivering necessary parts to the assembly line “just in time” for utilisation using standard containers or lot sizes.

Key Custodians
the individuals designated by trading partners’ security administrators who give or receive a part of either the master key or exchange key used to encrypt data encryption keys. This control method calls for dual control, split knowledge, and two key custodians.

KPIs, or key performance indicators, are quantitative or qualitative metrics that can be incorporated into a contract. They can be used to gauge how well suppliers and/or workers are performing.

L

Lead Time
It takes into account the time needed for order transmission, processing, preparation, and transit.

Less-Than-Carload (LCL)
A cargo known as a less-than-carload (LCL) is one that does not fill an entire rail car (lot shipment).

Letter of Credit
An international contract that guarantees payment to the seller upon completion of the sales agreement by the bank issuing the letter of credit

Less-Than-Truckload (LTL) Carriers
Trucking companies that consolidate and transport smaller (less than truckload) shipments of freight by utilising a network of terminals and relay points.

Letter of credit
An international contract that guarantees payment to the seller upon completion of the sales agreement by the bank issuing the letter of credit

Life Cycle Cost
The life cycle of a product, as used in cost accounting, is the time span between the conception of the product and its eventual discontinuation from sale and disposal. Research, development, introduction, maturity, decline, and abandonment are some of the identified stages that make up a product life cycle. The total costs that a product incurs during these stages are referred to as life cycle cost.

Logistics Channel
The group of parties involved in the supply chain who perform storage, handling, transfer, transportation, and communication tasks to ensure the smooth flow of commodities.

Logistics Data Interchange (LDI)
A system that uses computers to send logistics data electronically.

Logistics Management
Planning, implementing, and controlling the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the site of consumption in order to meet customer requirements is known as logistics management.

Logistics Management Activities
A few examples of logistics management activities include the management of inbound and outbound transportation, fleet management, warehousing, material handling, order fulfilment, logistics network design, inventory management, supply/demand planning, and management of third-party logistics service providers.

Lean Manufacturing
Lean Manufacturing is a methodology that emphasises reducing waste and boosting value for the customer.

Lien
A corporation has the legal right to detain or sell the items in the case of an unpaid debt if they place a contractual lien on the debtor’s property while it is in their possession.

Life Cycle Analysis
Life-Cycle Costing aids in calculating the whole cost of purchasing, operating, maintaining, and disposing of a capital asset.

Liquidated Damages
“Liquidated Damages” refers to a pre-estimated amount that is enforced in the event of a contract breach (for example, ₹9000 in liquidated damages for each day a building project’s deadline is postponed). This is represented by a liquidated damages clause in a contract.

M

Material Requirements Planning
A procedure for effectively planning all of the resources of a manufacturing company. It should include simulation capabilities to address what-if scenarios, unit-based operational planning, and unit-based finance planning. This system is made up of many interrelated processes, including business planning, master (or production) planning, master production scheduling, material requirements planning, capacity requirements planning, and the execution systems for capacity and priority. The outputs from these systems will be integrated with financial reports like the company plan, buy commitment report, shipping budget, stock estimations in money, etc. The expansion and logical progression of planning for material requirements is planning for manufacturing resources.

Make to Order
A manufacturing process method where an actual customer purchase or release, rather than a market projection, serves as the catalyst to start manufacturing a product.

Make to Stock
An approach to manufacturing where finished goods are continuously kept in plant or warehouse inventories to satisfy anticipated incoming orders or releases based on a forecast.

Materials Management
The organisation, planning, and management of all inventory-related activities, including purchase, storage, production-in-progress, shipment, and distribution of finished items.

Maximum Stock
The maximum that the stock of an item should typically be permitted to increase, expressed in quantitative, financial, or time-based terms.

Maximum Order
Quantity a minimum order amount that, in theory, cannot be exceeded.

Minimum Order
The minimum order amount that is, in theory, permitted.

Minimum Stock
A control limit in a stock control system that could indicate when to make an order or whether stock levels are too low for a particular item.

Machine Downtimes
The period of time when a machine cannot be used. Breakdowns, maintenance, switchovers, and other events can cause machine downtime.

The outside environment of a company, which includes technological, economic, natural, and governmental variables that marketing cannot influence.

Maintenance, Repair, and Operating Supplies (MRO)
Items like maintenance supplies, spare parts, and consumables used in manufacturing and supporting activities are examples of maintenance, repair, and operating supplies (MRO), which are utilised in support of general operations and maintenance.

Major Carrier
A certified for-hire air carrier that typically flies between major population centres and generates yearly operational revenues of $1 billion or more.

Make-or-Buy Decision
selecting whether to make something internally or purchase it from a third party provider Costs, capacity availability, proprietary and/or specialised knowledge, quality considerations, talent needs, volume, and scheduling are some factors to take into account while making a selection.

Make-to-Stock (Manufacture-to-Stock)
A manufacturing process approach where finished goods are continuously kept in stock at the factory or in warehouses to satisfy forecasted incoming orders or releases.

Manifest
A document that lists each order that is included in a shipment.

Marine Insurance
Insurance to guard against cargo damage and loss when shipping by water.

Master Production Schedule (MPS)
The master level or top level schedule that a manufacturing facility uses to determine its production plan.

Master Data
In an ERP system, master data refers to the data that may be used across all of the modules (eg: Supplier data, Material Data, Contracts Data). Those with the necessary authorization can develop and manage master data, and requests for updates/changes typically necessitate the completion and approval of a form.

MSDS
A Material Safety Data Sheet (MSDS) is a document that includes crucial details about a chemical for the sake of safety.

Multimodal Transport
A Multimodal Transport is when a shipment is being moved by more than one method of transportation (Air, Road, Rail, Ocean

N

National Industrial Traffic League
The National Industrial Traffic League is a group that advocates for shippers’ and receivers’ rights when it comes to laws and policies governing transportation.

Net Asset Turns
The number of times during your yearly sales cycle that you refill your net assets. a gauge of how rapidly assets are turned into revenue.

Net Change
A method where the computer continuously stores the material requirements plan. A partial explosion and netting are made for just those parts that are affected whenever a modification is necessary in the requirements, open order inventory status, or bill of material.

A fixed location where items remain in a company’s logistics system; includes factories, warehouses, supply sources, and markets.

O

Obsolescent Stock
Parts that have been replaced by a substitute but can still be utilised up until the stock is gone.

Off Shoring

This typically refers to the off-shoring (outsourcing) of production and manufacturing.

On-Hand Balance

A product’s physical stock level as indicated by the inventory records.

Opening Stock

The quantity of a certain item in stock at the start of an inventory accounting period.

Order Lead Time

The total amount of internal processing time required to convert a replenishment quantity into an order and send that order to the receiver.

Order Picking
Obtaining products from a storage facility in order to fulfil a store or customer order.

Order Point Inventory System
A reorder request is generated and sent to a supplier in an inventory control system for independent demand products when the amount of inventory on hand reaches a certain level.

Outsourcing
A situation when a third party, or “contractor,” handles specific business tasks on the client’s behalf. This usually refers to storage and transportation in the supply chain.

Open-to-Buy
a method of maintaining control in aggregate inventory management in which purchasing authorizations are given without committing to particular vendors. Management frequently examines these authorizations using metrics like commodities in dollars and by time period.

Open-to-Receive
A statement that permits the receipt of products, such as a broad release, a specific item on a firm purchase order, or a supplier schedule Open-to-receive shows the short-term influence on inventory and is frequently tracked as a management tool for overall inventory. The sum of the company’s open-to-receive, other longer-term purchasing obligations, and open-to-buy shows its cash exposure for goods and services.

Opportunity Cost
The cost of retaining inventories is number one. The following formula should be used to base this on your company’s unique cost of capital guidelines. Calculation: Average Net Value of Inventory x Cost of Capital

P

Parent Part
Any finished goods, end item, or part that is made from one or more other components can be referred to as a Parent Part.

Pareto Principle
According to the heuristic rule, a small number of contributors account for the bulk of a result when there are many contributors. The 80/20 rule (also known as the Pareto principle) argues that, in many circumstances, roughly 80% of the turnover (stock, etc.) may be attributed to roughly 20% of the customers, items, or orders. By rating the customers, products, and other factors in a given situation in terms of magnitude, it is possible to estimate the real ratio in that situation by figuring out what proportion of turnover (stock, etc.) corresponds to a customer’s, product’s, or other factor’s 10%, 20%, 30%, etc. the ABC analysis’s foundation.

Part Number
a special identifying code given to a particular part, either by the manufacturer or the end user.
System of perpetual inventory. a method of inventory management that keeps track of the quantity of stock stored for each item.

Periodic Inventory
An inventory control system categorization for independent demand items where the size of any resulting order depends on the stock on hand at the time of the review and the number of goods kept is reviewed at a fixed time interval

Pick Face
the main area of a warehouse where order picking for orders smaller than pallet loads is carried out.

Picking List
An output from an inventory control system that identifies the parts, descriptions, and quantities of the things that need to be retrieved from stock to meet client demand.

Pipeline Stocks
The items that are now being transported from one place to another.

Primary Freight (Strategy)
An initiative led by retailers to reduce transportation costs and boost productivity in the supply chain’s main section The primary (inbound) transport is often managed by the retailer, who subtracts the cost of this transport from the supplier’s invoice based on an established cost per pallet or case.

Primary Transport
The “leg” of transportation that goes from the Supplier to the Customer. typically understood to be from the distribution centre (DC) of the supplier to the DC of the customer. also see secondary transport

Probabilistic (or Stochastic) Inventory Control
Models a technique for controlling inventories in which each parameter and variable is treated as a random variable. It is presumptively plausible to declare the probability distribution of the demand, especially during the lead time for replenishment, and that the average demand for things is roughly constant throughout time.

Production Lead Time
When an item must be manufactured or produced before it can be packaged after an external order has been received.

Proof of Delivery
Information provided by the carrier that includes the recipient’s name, the date and time of delivery, and other details on the delivery of the product.

Pull System
A method where orders are routed through the manufacturing to fulfil demand for an end product. A pull mechanism is demonstrated by the Just In Time & Kanban process.

Purchasing Lead Time
The period of time between choosing to buy something and actually adding it to stock.

Purchasing Lead Time
The overall time it takes from when you decide to buy something until it’s ready to be shipped from the supplier in question (that is, the sum of the order lead-time, the production lead time and any time necessary for packing or preparation for dispatch of a specific order).

Push System
A system where orders are delivered for fulfilment by deadlines that are set and based on anticipated lead times, or where lower levels control and direct the material flow in a product structure

Put Away Rules
Internal policies and practises for placing inventory in a warehouse or store after receiving and processing products

Q

Qualitative Forecasting Techniques
A method of forecasting that is based on intuitive or moral judgement. When data are few, unavailable, or no longer relevant, it is typically employed. Personal insight, sales force estimates, panel consensus, market research, visionary forecasting, and the Delphi method are examples of common qualitative approach types. Examples include creating long-term projections and launching new products.

Quality
Compliance with specifications or suitability for use. Four main methods can be used to define quality:

• Excellence must meet the criteria of transcendent quality.
• A product attribute is the foundation of product-based quality.
• User-based quality is usability.
• Conformance to specifications is manufacturing-based quality.

Quality Circle
A small team that routinely meets to identify and resolve issues with product quality, process capabilities, or process control is known as a quality management team.

Quality control
The managerial activity that aims to ensure that the goods or services produced or purchased adhere to the requirements for the good or service

Quality Function Deployment (QFD)
An organised process that uses an ongoing stream of “what-how” matrices to convert user requirements into explicit design specifications. QFD connects design, development, engineering, production, and service functions to the needs of the client (end user). It aids businesses in identifying both explicit and implicit demands, turning them into plans of action, and concentrating different corporate operations on accomplishing this common objective.

Quantitative Forecasting Techniques
A forecasting method that projects future demand using data on past demand. Typically, intrinsic and extrinsic methods are employed.

Quarantine
Setting aside products from use or sale until all necessary quality tests have been completed and conformity has been verified is known as quality management.

R

Rack
A material storage system that can handle pallets. One or more pallets are frequently placed in a tier of vertical storage on a rack. Several pallets’ worth of storage space can be accommodated by some racks. Some racks are static, which implies that unless the rack is physically moved, its contents remain stationary. Some racks allow things to “flow” down the sloped shelf when a product is removed from the front. On a flow rack, product replenishment may occur from the front or from the back in a “push back” manner.

Radio Frequency
A?form of wireless communication where users can send information over electromagnetic waves from a terminal to a base station, which is then linked to a host computer. The terminals can be held in the worker’s hand, mounted on a forklift, or permanently placed in a designated area. The base station has a transmitter and a receiver for interacting with the terminals. RF systems use either narrow-band or spread-spectrum broadcasts. While narrow-band data transfers travel along a single, limited radio frequency, spread-spectrum transmissions span a number of frequencies. When a radio-frequency system is combined with a bar-code system to identify inventory items, information can be transmitted fast, updating inventory records in what is known as “real time.”

Random Location Storage
Parts are stored in any open space that is available as they arrive in the storeroom, regardless of location. Despite typically requiring less storage than a fixed-location storage approach, this random strategy utilises a locator file to pinpoint the positions of the components.

Rate Based Scheduling
Rate-based scheduling is defined as scheduling that is based on a regular rate, such as daily, weekly, or monthly. In the past, high-volume and process industries have used this method. With the help of cellular layouts and mixed-model level schedules, the idea has lately been implemented in job shops where the production rate is matched to the selling rate.

Receiving
the process of receiving goods physically, checking the incoming shipment for compliance with the purchase order (quantity and damage), identifying and delivering the material to its destination, and creating receiving reports.

Receiving Dock
The location of the distribution centre is where the carrier’s acquired goods is actually physically received.

Re-consignment
A carrier service that enables destination and/or consignee changes after the shipment has arrived at the destination for which it was originally charged, with through rates from the origin to the final destination being charged.

Reorder Point
A specified inventory level at which placing an order becomes necessary. This bare minimum level offers enough stock to cover expected demand while waiting for the order.

Request for Quote
When a product has been selected and price quotations from various suppliers are needed, a form is utilised to solicit vendor responses.

Reverse Auction
A kind of auction in which sellers contend with one another to sell things to buyers (e.g. retailer). As the bidding progresses, the prices drop.

Reverse Logistics
A specialised branch of logistics that focuses on the movement and control of resources and products following the sale and consumer delivery. consists of product returns for credit or repairs.

RTP
RTP also known as Request to Payment, refers to the procurement process from the point at which a request is made for goods or services until these goods or services are paid for and completed.

RFI
RFi also known as a request for information, an RFI is a written request made to prospective suppliers to learn more about the goods and services they offer and their capabilities.

RFP
Request for Proposal, or RFP, is a procurement procedure used when a requirement is clear but a good solution to it is not, allowing possible vendors to offer their solution. Scope of Work, Terms & Conditions, Technical Specifications, Schedules, Bidder’s Meetings, and other information are all included in the RFP.

RFQ
Request for Quotation, or RFQ, is a procurement procedure in which vendors are requested to provide written quotes in response to specific requests for goods or services. After receiving all estimates, a straightforward evaluation is conducted using weighted criteria, and the selected supplier is given a purchase order. The RFQ document comprises places for the supplier to fill in their Price and other information, as well as parts for the delivery information, quantities, and terms of quote (such as deadlines). A competitive procedure that could result in greater savings is informed by an RFQ process, which makes it simple to compare proposals.

S

Safety Stock
The extra inventory a business keeps on hand to cover any potential supply delays or changes in client demand.

Salvaged Material
Unused goods with a marketable value that can be sold.

Saw-Tooth Diagram
An order point/order quantity inventory system’s quantity-versus-time graph displaying how inventory is received, used up, and then reordered.

Scrap Material
Material that is useless and has no monetary value.

Shelf Life
The period of time a product can be kept in stock before losing its usability. Food, medicines, and high-tech products that fast become out-of-date must all take shelf life into account.

Shingo’s Seven Wastes
Seven obstacles to better production were highlighted by Shigeo Shingo, a pioneer of the Japanese Just-in-Time philosophy. These include the waste of excess production, waiting, transportation, stockpiling, motion, producing faults, and the waste of the actual processes.

Ship Agent
A representative of a liner company or tramp ship operator who helps ships arrive, clear customs, load and unload cargo, and pay fees while at a particular port.

Ship Broker
A business that acts as a middleman between the chartering consignor or consignee and the owner of the tramp ship.

Shipper
The person who offers to convey items.

Shipper’s Agent
A company that mostly coordinates small shipments, particularly single-traffic piggyback loads to enable the use of twin-trailer piggyback rates.

Shipper’s Association
A nonprofit, cooperative freight forwarder that distributes and consolidates cargo that are owned or shipped by member companies.

Shipping
The department responsible for carrying out tasks related to product, component, and part shipments outbound. It comprises loading for shipping, labelling, weighing, and packaging.

Shipping Lane
A prearranged, charted path across the ocean that commercial ships frequently take to get from port to port. This assists ships in avoiding dangerous places. When analysing the amount of shipments between two points in general transportation, the logical path between the point of shipment and the point of delivery is used.

Shipping Manifest
A list of the components of a shipment. Whether a load is being transported to a single destination or a number of locations, a manifest typically covers the entire load. In a manifest, the items, piece count, total weight, and name and address of each destination are often listed.

Shrinkage
Theft, and deterioration expenses are referred to as shrinkage. Usually refers to the destruction of material as a result of abuse, theft, or carelessness.

Slotting
The positioning of goods inside a warehouse is referred to as warehouse slotting. By maximising product positioning and distributing the task, it seeks to improve picking efficiency and lower warehouse handling costs.

Stock Out
A phrase used to describe a circumstance where there wasn’t enough stock on hand to fulfil a client request or a production order during a pick operation. Stock outs can be expensive since they reduce sales revenue, damage goodwill, and necessitate costly replacements. Additionally known as Out of Stock (OOS)

Supplier Certification
Supplier certification procedures confirm that a supplier runs, maintains, enhances, and documents efficient procedures that are related to the needs of the client. Cost, quality, delivery, adaptability, maintenance, safety, and ISO quality and environmental standards are a few examples of such needs.

Supply Chain
The supply chain connects numerous businesses, beginning with raw materials that haven’t been processed and ending with the client using the finished goods. The exchange of materials and information during the logistical process, which lasts from the purchase of raw materials to the delivery of finished goods to the customer. Each supplier, customer, and service provider forms a link in the supply chain.

Scope of Work
A scope of work (SOW) is a document that outlines the tasks necessary to finish a project. An SOW, for instance, may be a part of an RFP (Request for Proposal) procedure.

Shared Services
The idea behind shared services is to turn a business function, like procurement, into a separate, laser-focused business unit while yet offering the rest of the company access to this internal service. For instance, a huge energy corporation has numerous locations, each of which handles its own purchasing and procurement. The company’s management makes the decision to establish a centralised procurement team that would competently handle all procurement-related issues. A shared service like this one is an example.

Single Source
Single sourcing is the practise of choosing one supplier above others when there are multiple suppliers who can provide the desired items. Single-Sourcing should always have a valid justification, especially for higher-value purchases.

Six Sigma
Using a statistical quality of less than 3.4 faults per million units, Six Sigma is a business process that strives to increase quality and performance. Although Six Sigma was primarily utilised in the manufacturing sector, it is applicable to the majority of other businesses.

Sole-Source Procurement
There is no open bidding procedure when a product or service can only be obtained from one vendor, typically because of some special requirement that only one vendor can meet. The terms Sole-Source and Single-Source are frequently misunderstood or used interchangeably.

Spend Analysis Procurement
To find potential for savings and improve compliance, a procurement cost analysis comprises segmenting the total spend (e.g., by category, commodity, geographic area, etc.). For this task, several businesses use spend analysis software.

Stakeholders
A stakeholder is a person or group that indirectly or directly affects the performance, decisions, procedures, etc. of an organisation.

Standard Model Contracts
Standard Model Contracts are pre-written contracts designed to make the writing process easier. The usual terms and conditions that are offered must, of course, be carefully examined and tailored to your needs. They are offered for a wide range of industries, and many of them are available online through buying organisations and institutes. In actuality, the Standard Model Contract from a well-known business contracts book served as the basis for the privacy policy for this website.

Strategic Sourcing
By examining the company’s spending, matching a sourcing strategy with corporate goals, and concentrating on the total cost of ownership, it is possible to build long-term strategic relationships with the appropriate suppliers and, as a result, get greater value and results for the business.

Stock Valuation
It is the process of evaluating stocks based on the presumption that the oldest stock will be consumed first and that prices will fluctuate over time.

Stock Rotation
It is the process of delivering (selling) or consuming first the items that have been in stock the longest.

Subcontractor
A subcontractor is a company that fulfils all or a portion of a contract for another company.

Sustainable Procurement
Sustainable procurement entails taking into account external environmental, social, and economic parameters, such as the amount of energy used in product manufacturing and the environmental cost of disposal (eg: supporting local business economy; local job creation).

T

Terminal Delivery Allowance
If the shipper or consignee tenders or picks up the freight at the carrier’s terminal, they will receive a terminal delivery allowance at a discounted cost.

Third-Party Logistics (3PL)
Outsourcing all or most of a company’s logistical activities to a specialist organisation is known as third-party logistics (3PL).

Third Party Logistics Provider
A business that offers its clients a variety of logistics services. These services are ideally merged or “bundled” by the provider. These companies streamline the flow of components and raw materials from suppliers to manufacturers as well as finished goods from producers to distributors and retailers. They offer a variety of services, including shipping, warehousing, cross-docking, inventory control, packaging, and freight forwarding.

Throughput
A gauge measuring storage output volume (weight, number of units). Moreover, divide by two the sum of the units shipped plus the units received.

Total Average Inventory
Average stock for general use, average lead stock, and safety stock

Total Cost of Ownership (TCO)
Total cost of a computer asset throughout the duration of its life, from purchase to disposal. TCO is an acronym for total cost of ownership for networked information assets. The term “hard” costs refer to expenses like the asset’s purchase price, installation charges, upgrades, maintenance contracts, support contracts, disposal costs, and licence fees that may or may not be paid upfront or on an annual basis. Because they are observable and simple to account for, these expenses are referred to as “hard costs.”

Total Sourcing Lead Time
Cumulative lead time (total average combined inside-plant planning, supplier lead time [external or internal], receiving, handling, etc., from demand identification at the factory until the materials are available in the production facility

Total Cost of Supply Chain Management
Finance, planning, and IT costs for the total management of order processing, material acquisition, inventory management, and supply-chain management, expressed as a percentage of revenue. It might be difficult to assign costs for IT services accurately. It can be carried out through Activity-Based Costing techniques or based on more conventional methodologies.

Total Supply Chain Response Time
a period of time after a change in market demand has been identified that it takes to rebalance the whole supply chain. A supply chain’s capacity to adapt quickly to market changes is also measured.

Truckload Lot
A truck shipment that meets a minimum weight and/or volume requirement to be eligible for a discounted freight rate.

Two-Bin System
A method of organising inventory that signals when to order a certain item when the first bin is empty. There is enough stock in the second bin to last until the order is received.

Telex Release
When goods are delivered to the receiver at the discharge port without the requirement to provide an original Bill of Lading, the process is known as a “Telex Release” in international shipping.

Tendering
In the tendering process, a business issues an invited RFT (Request For Tender) for the goods or services they need. In an effort to be picked to provide their good or service, prospective suppliers submit their bids.

Third-Party Logistics
The outsourcing of all or a portion of a company’s supply chain operations is known as third-party logistics, or 3PL. Storage, order picking, inventory management, freighting, packing, etc. are some examples of outsourced tasks.

Total Quality Management
Ensuring that each step of a process is accurate before moving on to the next in procurement is known as Total Quality Management.

Transactional Purchasing
The administrative and processing side of purchasing, such as creating purchase orders and receiving invoices for payment, is known as transactional purchasing. This can be done manually by a purchasing officer or automatically, such as through an online catalogue ordering and invoicing system.

Transhipment
A Transhipment is the transfer of commodities from one vessel to another (under the same Bill of Lading) with the intention of going on to the final destination. In real life, this is comparable to having to change planes en route because you can’t get a direct flight to your destination.

U

Uniform Product Code (UPC)
The retail sector uses the Uniform Product Code (UPC), a standardised system for bar coding and product numbering. The Uniform Code Council oversees UPC codes, which are included on almost all retail packaging and serve to identify both the manufacturer and the product.

Unit Cost
The ratio of the overall cost of production to the final quantity of a good or service.

Upstream
Suppliers who supply the organisation with the goods and services it needs to meet demands that come from the point of demand or usage, as well as additional flows like product return movements and payments for purchases, are known as upstream partners.

Undue influence
It is the legal term for coercing someone into signing a contract. A court may nullify a contract if it determines that there was undue influence.

V

Value Added Operations
Value-Added Operations: Tasks carried out at the warehouses in response to customer demand, such as labelling, packaging, folding, temperature measurement, transfer, mixing, combining, sorting, palletizing, light assembly, returns, destruction, adding user guides, barcode transactions, and so on.

Value Added
A value that a business adds to its input, such as labour, depreciation, profit, tax, and liability total. It can also refer to an expanded or improved value, functionality, or benefit.

Value Analysis
Using value analysis, one can ascertain how a product’s or service’s features relate to its price, functionality, appeal, and utility to a customer (i.e., engineering value analysis)

Value Based Return (VBR)
A measurement of the value created is Value Based Return (VBR). It is the distinction between an economic profit and an additional capital charge.

Value Chain
A set of actions that, when taken together, create a business process; the industrial supply chain is made up of the actions that producers do before selling their products to retailers.

Value Chain Analysis
It is a technique for determining all the components in the network of activities a business depends on to create, distribute, and procure the goods and services they need from their place of origin.

Value Stream
All tasks, both value-added and non-value-added, necessary to move a product from its raw material state to the customer’s hands, move a customer’s order from receipt to delivery, and move a design from conception to launch.

Vehicles with Pallet Jack
Pallet lifts on the back of these trucks allow them to move their loads independently without the use of a pallet crane or a forklift.

Vertical Conveyor System
When an inclined conveyor is unable to connect stations of different heights on floors, mezzanine floors, or on the same floors, a vertical conveyor system is utilised.

Vertical Storage System
A mechatronics system with trays in each module and an elevator layout. By arranging the goods or transportation cases (basket, parcel, etc.) on trays, it enables storage with vertical transportation on the elevator system. Because it uses internal sensors to gauge the height of the items placed on the trays, it minimises the space between the trays, enabling efficient vertical storage.

Volumetric Weight
The result of multiplying the width, length, and height of the cargosuch as a package, case, or parcelby three and dividing the result by three thousand. This figure is used to determine the cargo transportation charge.

Variation Clause
It is inevitable that parties to a contract may want to modify certain terms after reaching an agreement, thus it is crucial to establish the procedure of variation from the outset. Variations must be agreed upon by both parties and, in most cases, in writing. The contract should provide specific information on these requirements.

Vendor
A vendor is a business or individual that supplies goods or services to another company. Vendors can be manufacturers, wholesalers, or retailers and play a crucial role in the supply chain by providing the necessary products or services needed for a company to operate or sell to its customers.

Vertical Integration
the extent to which a business has chosen to create several value-adding steps directly, starting with the raw materials and ending with the sale of the product to the final customer. The vertical integration increases with the number of steps in the process.

W

Warehouse Management System (WMS)
The systems used to efficiently manage warehouse business processes and oversee warehouse activities, such as receiving, putting away, picking, shipping, and inventory cycle counts, are known as warehouse management systems (WMS). features support for radio-frequency communications, allowing the system and warehouse staff to exchange data in real-time. By automating put away procedures, they also maximise available space and save material handling.

Warranty Costs
For products returned for repair or refurbishment. Warranty costs include materials, labour, and issue diagnosis.

Waste
In lean and just-in-time, waste refers to any operation that does not increase the value of the product or service in the eyes of the customer. A process or task’s by-product that has distinct qualities and necessitates special managerial oversight. Usually, waste generation can be anticipated and managed. Typically, scrap is unplanned and can come from the same production run as waste.

Will Call
Collecting orders from customers who will pick them up at the selling facility. a location at the selling facility where customers can pick up their orders. The service parts industry frequently use this technique.

Waiver clause
A waiver clause in a contract affirms a party’s right to enforce obligations even if a breach has been waived or understood to have been accepted based on one party’s actions or verbal waiver.

X

X12
The ANSI standard for inter-industry electronic business transaction interchange is X12.

XML
It stands for Extensible Markup Language.

Y

Yard Management System
A yard management system (YMS) is a tool used to plan and coordinate the arrival, departure, and staging of trucks and trucks pulling trailers in a parking “yard” that serves a warehouse, a distribution centre, or a manufacturing facility.

Yield
The yield of a process is the proportion of its useful output to its input.

Yield management
Yield management is the practise of raising profits through effective methods.

Z

Zero Inventories
One of the just-in-time principles relates to the elimination of waste by having only the necessary materials when needed.

Zone of rate flexibility
Railroads are permitted to increase rates by a margin equivalent to the growth in the railroad cost index.

Zone of rate freedom
Motor carriers are permitted to raise or lower rates by 10% in a calendar year without ICC involvement; if the rate adjustment falls within the zone of freedom, the rate is judged to be reasonable.

Zone of Reasonableness
Air carriers are permitted to adjust their rates up to or within this range or boundary without triggering regulatory review; if the updated tariff falls within this range, it is presumed to be reasonable.

Zone picking
To pick orders more quickly and effectively, a storeroom can utilise the zone picking approach, which divides a picking list into various regions. A zone-picked order must either be sent to numerous locations, such as work centres, or it must be shipped to a single location where the individual pieces are assembled.

Zone Skipping
For shipments sent by the Postal Service, mail should be dropped at a location that is one or more zones closer to the final destination. Customers who export in large numbers to offset increased transportation costs or who operate close to a zone border may benefit from this choice.