Definitions

Definitions

Advanced Planning and Scheduling (APS) – use of mathematical algorithms or logic to optimise finite capacity, rostering, scheduling, sourcing, capital & resource planning, forecasting & demand management

Agreement – agreed terms and conditions of purchase and supply

As Is – agreement on the current value stream including quality, quantity, waste, errors, and variance

Baseline –  current measurement taken before any action is taken to adjust it e.g. improve or reduce

Benchmark –  a standard or point of reference or measurement for comparison or as a target

Best Practice – commercial procedures judged by peers as the most effective in that industry or market segment

Best Value – evaluation of tenders to deliver an outcome with clearly identifiable cost-benefit including quality, service, price, expertise, integration, innovation, and ‘fit’ criteria

Bidder / Tenderee – qualified supplier invited to submit a response to tender (EOI/RFT/RFQ/RFP)

Budget forecast of demand, revenue, and expenses over a specified period. A budget based on assumptions made before the financial year or before the pandemic becomes an Anchor if incorrectly assuming the past reflects future demand, revenue and expenses.

Cancer of Silos – individuals, departments, or divisions failure to share information or reconcile different views undermining customer value, reducing efficiency and adding unnecessary cost

Cashflow – net cash and cash equivalents transferred into and out of a business enabling a company’s to create shareholder value and meet its financial obligations (debts) as and when they fall due

Constraints Management – methodology to identify and manage the major constraint (i.e. bottleneck) to achieving a goal to match throughput to demand (the goal)

Coronavirus Economy – economic impact of pandemic reducing employment, activity, supply and travel

Cost-Benefit – comparative measure of the benefits of a decision/action minus the associated costs

Critical Success Factor – specific indicators essential to a positive outcome (business, role, project)

Cross-Functional Collaboration – diverse functional expertise working in partnership to achieve common goals across a business value stream e.g. problem-solving

Customer Experience (CX) – product of customers perception of the quality & value of transactions over time

Debtor Days – number of days customers take to pay compared with agreed credit terms (Debtor Days Ratio) 

Demand Planning – forecasting demand for a product or service so it can be produced and delivered profitably to customer’s satisfaction. Answers the WHY in:

– workforce planning and labour management,    – revenue /effective full-time staff member

– revenue targets by customer and by-product,     – revenue management/risk

– production capacity and utilisation                       – costing, pricing, and profitability

Economies of Scale – unit cost advantages from spreading cost over a large number of goods.                          Scale does not deliver economies. Productivity, efficiency and effectiveness do!

EOI – Expression of Interest. Invitation to the market to respond. Procurement may result but is not a firm intent

Enterprise Project – a project across the entire value stream to deliver value and improve cashflow, ROI & profit

Evaluation Criteria – specific criteria with weighting to reflect the importance of criteria relative to each other

Forecasting – use of historical data, plus known variance, to inform estimates of the future. A budget is a forecast of demand for goods and services and estimated revenue and expenses over a period of time

FTE – Full time equivalent staff. Labour hours expressed in units of 38 hours in Australia

Incumbent Supplier – current supplier of goods or services that are the subject of the Tender

Inventory – goods in various stages of development prior to sale including Finished goods (ready for sale), Work-in-progress (in the process of being made) Raw materials (used to produce more finished goods)

IOT – Internet of Things. System of interrelated computing devices, mechanical and digital machines with unique identifiers (UIDs) capable of transferring data without human-to-human or human-to-computer interaction

Key Performance Indicator – specific and timely performance measures (organisation, employee, project) 

Lean Thinking – adding value, minimising waste, reducing error and managing variance 

Market Testing – identifying suppliers who can deliver Tender objectives based on defined evaluation criteria

Operations – tasks and processes transforming inputs into goods or services which deliver customer value

Part Order – only part of what was ordered is provided with the balance is on backorder or was cancelled

PAR Levels – Periodic Automatic Replacement (PAR) of inventory levels

Predictive Analysis – forecasting at a more detailed level of granularity

Process Excellence -process design/improvement/re-engineering/transformation along the value stream to deliver a consistent quality customer experience with minimum waste, reduced error and managed variance

Quality – fitness for purpose in meeting or exceeding customer requirements 

Ratio – quantitative relationship between 2 numbers indicating the number of times 1 value contains or is contained within the other

Reverse Supply Chain – return by a customer of goods to a supplier. Reverse of the traditional supply chain.

Rework – Correcting of defective, failed, or non-conforming items which are not fit for purpose

ROI – a measure of return – how well an investment is performing based on a formula, baseline or benchmark 

RFT/RFP/RFQ – Request for Tender/Proposal/Quote. Invitation to the market to respond. Intent is to procure

Selective Tender – closed, not a public, process where the Tenderer determines who is invited to Bid/Tender

Service Level Agreement (SLA) – documentation of the level of service required, metrics by which the service is measured and remedies or penalties when agreed service levels are not achieved

Strategy – a plan of action chosen from various options to achieve a desired outcome e,g, a goal or solution

Stock Turnover – ratio showing how many times stock has been sold and replaced during a given period.

Streamline – improve flow by removing non-value adding parts and managing constraints to goal achievement.

Supplier – bidder whose Tender represents ‘best value’ under a Service Level Agreement

Systems Thinking – holistic analysis of how a system’s constituent parts work overtime within larger systems and the behaviour resulting from reinforcing and balancing processes

Target Costing – defining product life-cycle cost based on functionality, quality, and profit. Target cost achieved by subtracting profit from a competitive market price

Tender – process (public or selective) inviting bids for the supply of goods or services                                                     – agreement – quantification – documentation – issue – Q&A – recommendation – decision –  implementation

Tenderer – organisation on whose behalf the tender for goods or services is conducted

To Be – agreement on the change required to achieve a specific outcome based on qualitative and quantitative objectives incl. customer experience, cashflow, ROI and profit

Trend – general direction of results over a period of time. A pattern is a set of data in a recognisable form

Value Stream – process flow to create value from order to fulfilment to payment

Value Stream Map – map from order to payment including process steps and time to create value

For further information, contact Cost Management Specialists       on +61 411 522 521 or                                                            email roi1@costmanagementspecialists.com.au