A3 Method
The A3 system is a means of describing a business process in a compact form. It was originally created by the Toyota Motor Corporation and was named for the paper size on which it was printed: A3 (11” x 17”). Toyota used the A3 methodology to help develop its famed Toyota Production System (TPS).
The decision of a carrier to give up or to discontinue service over a route. Railroads must seek ICC permission to abandon routes.
As in the phrase "call abandonment". This refers to people who, being placed on hold in an incoming call, elect to hang up ("abandon") the call. Call centers monitor closely the "abandonment rate" as a measure of their inefficiency.
See: Activity Based Budgeting
See: Activity Based Costing
ABC Classification
A method of classifying inventory items relative to their impact on total control. ABC typically uses movement and cost data to calculate the value of stock usage over the prior period, and uses the result as an element in ranking items under an 80/20 Pareto rule for cycle counting purposes. The group is divided into classes called A, B, and C (and sometimes D) with The A group represents the highest value with 10 to 20% by number of items. The B, C and D (if used) groups are each lower values but typically higher populations. Items with higher usage value are (the 20%) are counted more frequently. Specific bars to be used in setting ABC levels will vary by organization as they will impact the financial control applied to inventory and the level of effort spent counting. See: Cycle Counting
ABC Costing
See: Activity Based Costing
ABC Frequency of Access
Location method where the determination of a product’s location within the warehouse, or distribution center, is based on 1) product’s ABC Classification and 2) the number of times or rate of which the product is accessed.
ABC Inventory Control
A method of inventory control which divides items into categories based on value of usage, something like a Pareto division where the items which constitute the highest dollar value are tracked more closely than those with lower value movement. In this method an item with high volumes of movement, but low cost, such as a small cheap fastener, would likely be counted less frequently than a slower mover which has a very high cost. Items are typically divided by a company defined set of values into “A”, “B” and “C” groups, and sometimes even a “D” group. The count frequencies are then applied to the groups. For example “A” class items may be counted weekly, “B” monthly, “C” quarterly, etc. as a part of a cycle counting program.
ABC Model
In cost management, a representation of resource costs during a time period that are consumed through activities and traced to products, services, and customers or to any other object that creates a demand for the activity to be performed.
ABC System
In cost management, a system that maintains financial and operating data on an organization’s resources, activities, drivers, objects and measures. ABC models are created and maintained within this system.
See: Activity Based Management
Abnormal Demand
Demand for a product which is either greater or lower than expected by a given percentage which is determined by the organization. When observed, it should be determined whether it may be a one-time spike, or if the effect is part of a trend which should be considered during future forecasts. Also see: Outlier.
See: Automated Broker Interface
See: Activity Based Planning
Absorption Costing
A cost accounting approach which captures overhead and other indirect costs as separate from unit costs for a given period, and then applies (absorbs) those costs into unit costs at the period end based on various factors such as movement and COGS elements. Synonym: Allocation Costing.
See: Acquisition Categories
Acceptable Quality Level (AQL)
In quality assessment, acceptable quality level, also known as assured quality level, describes the maximum number of defects acceptable during the random sampling of an inspection. Also see: Acceptance Sampling.
Acceptable Sampling Plan
A quality management procedure which defines the sample sizes and acceptable defect levels for validating quality of products.
Acceptance Number
See: Acceptable Quality Level
Acceptance Sampling
A statistical quality control method which tests samples of products at defined points as opposed to testing each product.
The ability of a carrier to provide service between an origin and a destination.
A choice or feature added to the good or service offered to the customer for customizing the end product. An accessory enhances the capabilities of the product but is not necessary for the basic function of the product. In many companies, an accessory means that the choice does not have to be specified before shipment but can be added at a later date. In other companies, this choice must be made before shipment.
Accessorial Charges
A carrier’s charge for accessorial services such as loading, unloading, pickup, and delivery. Also see: Upcharges.
Accessorial Fee
See: Accessorial Charges
The act of making a group or individual responsible for certain activities or outcomes. For example, managers and executives are accountable for business performance even though they may not actually perform the work.
Accounts Payable (A/P)
The value of goods and services acquired for which payment has not yet been made to the supplier.
Accounts Receivable (A/R)
On a company's balance sheet, accounts receivable is the amount that customers owe to that company. Sometimes called trade receivables, they are classified as current assets assuming that they are due within one year.
The process in which certification of competency, authority, or credibility is presented. An example of accreditation is the accreditation of testing laboratories and certification specialists that are permitted to issue official certificates of compliance with established standards.
Accredited Standards Committee (ASC)
A committee of the ANSI chartered in 1979 to develop uniform standards for the electronic interchange of business documents. The committee develops and maintains U.S. generic standards (X12) for Electronic Data Interchange.
Accumulation Bin
An area where item to be used in assembly of a product are staged prior to work being done. See: Staging
A value, usually expressed as a percentage, which expresses the level of precision incurred during transactions. An example would be seen when comparing actual inventory levels to what was expected from bookkeeping records.
See: Automated Call Distribution
See: Automated Commercial Environment
See: Automated Clearinghouse
Typically this is a response, either electronic or as a physical document, which confirms the receipt of an order from the supplier to the buyer.
Acquisition Categories (ACAT)
U.S. DoD ACAT 1 programs are Milestone Decision Authority Programs or programs designated ACAT 1 by the Milestone Decision Authority.
Acquisition Cost
The net price plus other costs needed to purchase the item and get it to the point of use. These other costs can include: the item's purchasing costs (closing, research, accounting, commissions, legal fees), transportation, preparation and installation costs.
Action Message
A system message usually created during MRP calculations to call attention to a current or potential problem and suggest corrective action.
Action Plan
A specific method or process to achieve the results called for by one or more objectives. An action plan may be a simpler version of a project plan.
Action Report
See: Action Message
TOC recognizes that it is possible to produce without contributing to throughput. TOC defines production that contributes to throughput as utilization. Production that does not contribute to throughput is known as activation. Activation is not desired because it not only fails to increase throughput, but it also increases inventory and operating expense. This is consistent with the Just-In-Time (JIT) philosophy.
Active Inventory
The raw materials, work in process, and finished goods that will be used or sold within a given period.
Active Stock
Goods in active pick locations and ready for order filling.
Work performed by people, equipment, technologies or facilities. Activities are usually described by the “action-verb-adjective-noun” grammar convention. Activities may occur in a linked sequence and activity-to-activity assignments may exist.
Activity Analysis
The process of identifying and cataloging activities for detailed understanding and documentation of their characteristics. An activity analysis is accomplished by means of interviews, group sessions, questionnaires, observations, and reviews of physical records of work.
Activity Based Budgeting (ABB)
An approach to budgeting where a company uses an understanding of its activities and driver relationships to quantitatively estimate workload and resource requirements as part of an ongoing business plan. Budgets show the types, number of and cost of resources that activities are expected to consume based on forecasted workloads. The budget is part of an organization’s activity-based planning process and can be used in evaluating its success in setting and pursuing strategic goals.
Activity Based Costing (ABC)
A methodology that measures the cost and performance of cost objects, activities and resources. Cost objects consume activities and activities consume resources. Resource costs are assigned to activities based on their use of those resources, and activity costs are reassigned to cost objects (outputs) based on the cost objects proportional use of those activities. Activity-based costing incorporates causal relationships between cost objects and activities and between activities and resources.
Activity Based Management (ABM)
A discipline focusing on the management of activities within business processes as the route to continuously improve both the value received by customers and the profit earned in providing that value. ABM uses activity-based cost information and performance measurements to influence management action. See: Activity-Based Costing
Activity Based Planning (ABP)
Activity-based planning (ABP) is an ongoing process to determine activity and resource requirements (both financial and operational) based on the ongoing demand of products or services by specific customer needs. Resource requirements are compared to resources available and capacity issues are identified and managed. Activity-based budgeting (ABB) is based on the outputs of activity-based planning.
Activity Dictionary
A listing and description of activities that provides a common/standard definition of activities across the organization. An activity dictionary can include information about an activity and/or its relationships, such as activity description, business process, function source, whether value-added, inputs, outputs, supplier, customer, output measures, cost drivers, attributes, tasks, and other information as desired to describe the activity.
Activity Driver
The best single quantitative measure of the frequency and intensity of the demands placed on an activity by cost objects or other activities. It is used to assign activity costs to cost objects or to other activities.
Activity Level
A description of types of activities dependent on the functional area. Product-related activity levels may include unit, batch, and product levels. Customer-related activity levels may include customer, market, channel, and project levels.
Activity Network Diagram
An arrow diagram used in planning and managing processes and projects.
Actual Cost System
A managerial accounting system that records and measures all cost elements at their actual acquisition value. Indirect costs are then applied as overhead using a cost allocation technique
Actual Costs
The actual labor, material, and allocated overhead costs incurred in the acquisition or production of a product.
Actual Demand
The known demand for a specific product based on customer orders and production orders which are open. Once an order is shipped or production is completed, specific demand quantity will become usage. Actual demand should be netted against any forecast for the same period, meaning that as orders are received the are considered to be part of an earlier forecast and forecasts should be considered as satisfied.
Actual to Target Gap Analysis
See: Gap Analysis
Actual to Theoretical Cycle Time
The ratio of the measured time required to produce a given output divided by the sum of the time required to produce a given output based on the rated efficiency of the machinery and labor operations.
Adaptive Smoothing
A special type of exponential smoothing that takes the success of previous forecasts into account when setting a value of ALPHA for the next period. In this manner, periods that experienced high error will cause ALPHA to be set high and, thus, adjust quickly. When error is low, AS assumes the technique is doing well and sets ALPHA at a low level. This makes ES much more responsive to changes in the level of the data and less reactive to noise. The advantage to adaptive smoothing is that the decision of what value of ALPHA to use in exponential smoothing is eliminated. A disadvantage to adaptive smoothing is that trend and seasonality are ignored.
See: Alternate Dispute Resolution
Advance Material Request
A request for materials which is created in advance of formal need due to long lead times for components, etc.
Advanced Planning and Scheduling (APS)
Refers to a manufacturing management process by which raw materials and production capacity are optimally allocated to meet demand. APS is especially well-suited to environments where simpler planning methods cannot adequately address complex trade-offs between competing priorities.
Advanced Shipping Notice (ASN)
Detailed shipment information transmitted to a customer or consignee in advance of delivery, designating the contents (individual products and quantities of each) and nature of the shipment. In EDI data standards it is referred to as an “856 transaction.” It may also include carrier and shipment specifics, including time of shipment and expected time of arrival. Also known as an Assumed Receipt
A market for parts and accessories used in the repair or enhancement of a product. A secondary market created after the original market sales are finished.
After-Sale Service
Services provided to the customer after products have been delivered. This can include repairs, maintenance and/or telephone support. Synonym: Field Service.
Agency Tariff
A publication of a rate bureau that contains rates for many carriers.
An enterprise authorized to transact business for, or in the name of, another enterprise.
Agile Manufacturing
Tools, techniques, and initiatives that enable a plant or company to thrive under conditions of unpredictable change. Agile manufacturing not only enables a plant to achieve rapid response to customer needs, but also includes the ability to quickly reconfigure operations—and strategic alliances—to respond rapidly to unforeseen shifts in the marketplace. In some instances, it also incorporates “mass customization” concepts to satisfy unique customer requirements. In broad terms, it includes the ability to react quickly to technical or environmental surprises.
A net advantage gained by a common location with other companies.
Aggregate Forecast
Forecasting of future demand for a family of products or for a single product across multiple dimensions of source - including planned production and customer orders.
Aggregate Inventory
The total inventory available for any given product across multiple locations and/or multiple stock-keeping units.
Aggregate Inventory Management
A method of managing inventory through the use of levels set against overall inventory or class value.
Aggregate Plan
A plan for the production process, 2 to 18 months in advance to give management an idea to of what quantity of materials and other resources are to be procured and when, so that the total cost of operations of the organization is kept to the minimum over that period.
Aggregate Planning
An operational activity which compiles an aggregate plan for the production process.
Aggregate Tender Rate
A reduced rate offered to a shipper who tenders two or more class-rated shipments at one time and one place.
The ability to rapidly and cost effectively adapt to market changes with no significant negative impact on quality or dependability.
See: Automated Guided Vehicle System
Air Cargo
Freight that is moved by air transportation.
Air Cargo Containers
Containers designed to conform to the inside of an aircraft. There are many shapes and sizes of containers. Air cargo containers fall into three categories: 1) air cargo pallets 2) lower deck containers 3) box type containers.
Airport and Airway Trust Fund
A federal fund that collects passenger ticket taxes and disburses those funds for airport facilities.
Air Taxi
An exempt for-hire air carrier that will fly anywhere on demand: air taxis are restricted to a maximum payload and passenger capacity per plane.
Air Transport Association of America
A U.S. airline industry association.
Air Waybill (AWB)
A bill of lading for air transport that serves as a receipt for the shipper, indicates that the carrier has accepted the goods listed, obligates the carrier to carry the consignment to the airport of destination according to specified conditions.
Alaskan Carrier
A for-hire air carrier that operates within the state of Alaska.
See: Action Message
A clearly specified mathematical process for computation; a set of rules, which, if followed, give a prescribed result.
All-Cargo Carrier
An air carrier that transports cargo only.
Allocated item
A feature of an inventory control and order management system which allows for quantities available in inventory to be associated with a customer or production order so that the quantity cannot otherwise be used.
In cost accounting, a distribution of costs using calculations that may be unrelated to physical observations or direct or repeatable cause-and-effect relationships. Because of the arbitrary nature of allocations, costs based on cost causal assignment are viewed as more relevant for management decision-making.
In order management, allocation of available inventory to customer and production orders.
Allocation Costing
A method of allocating indirect / overhead costs to inventory items and costs of sales. See Absorption Costing
Alpha Release
A very early release of a product to get preliminary feedback about the feature set and usability.
Alternate Routing
A routing, usually less preferred than the primary routing, but resulting in an identical item. Alternate routings may be maintained in the computer or off-line via manual methods, but the computer software must be able to accept alternate routings for specific jobs.
Alternate Dispute Resolution (ADR)
Any of a number of methods (such as mediation, arbitration, mock trials, etc) used to resolve disputes outside of litigation.
American Customer Satisfaction Index (ACSI)
Released for the first time in October 1994, an economic indicator and cross industry measure of the satisfaction of U.S. household customers with the quality of the goods and services available to them—both those goods and services produced within the United States and those provided as imports from foreign firms that have substantial market shares or dollar sales. The ACSI is co-sponsored by the University of Michigan Business School, ASQ and the CFI Group.
American National Standards Institute (ANSI)
A non-profit organization chartered to develop, maintain, and promulgate voluntary U.S. national standards in a number of areas, especially with regards to setting EDI standards. ANSI is the U.S. representative to the International Standards Organization (ISO).
American Society for Quality (ASQ)
A professional organization with more than 100,000 members which advances learning, quality improvement, and knowledge exchange to improve business results, and to create better workplaces and communities worldwide.
American Society for Testing and Materials (ASTM)
Not-for-profit organization that provides a forum for the development and publication of voluntary consensus standards for materials, products, systems and services.
American Society for Training and Development (ASTD)
A membership organization providing materials, education and support related to workplace learning and performance.
American Society of Transportation and Logistics
A professional organization in the field of logistics.
American Standard Code for Information Interchange (ASCII)
ASCII format - simple text based data with no formatting. The standard code for information exchange among data processing systems. Uses a coded character set consisting of 7-bit coded characters (8 bits including parity check).
American Trucking Association, Inc.
A motor carrier industry association that is made up of subconferences representing various sectors of the motor carrier industry.
American Waterway Operators
A domestic water carrier industry association representing barge operators on the inland waterways.
The USAF Air Mobility Command's mission is to provide global air mobility. The command also plays a crucial role in providing humanitarian support at home and around the world. AMC Airmen--active duty, Air National Guard, Air Force Reserve and Civil Reserve Air Fleet
Air Force Materiel Command conducts research, development, testing and evaluation, and provides the acquisition management services and logistics support necessary to keep Air Force weapon systems ready for war. The command develops, acquires and sustains the aerospace power needed to defend the United States and its interests for today and tomorrow.
The National Railroad Passenger Corporation, a federally created corporation that operates most of the United States’ intercity passenger rail service.
Animated GIF
A file containing a series of GIF (Graphics Interchange Format) images that are displayed in rapid sequence by some Web browsers, giving an animated effect. Also See: GIF
See: Automated Manifest System
Analysis of Variance (ANOVA)
A statistical term that refers to a collection of statistical models which test the means of several groups to determine if the means are equal.
A manufacturing term referring to a signboard incorporating signal lights, audio alarms, and text or other displays installed at a workstation to notify management and other workers of a quality or process problem.
See: American National Standards Institute
American National Standards Institute Accredited Standards Committee X12. The committee of ANSI that is charted with setting EDI standards.
ANSI Standard
A published transaction set approved by ANSI. The standards are reviewed every six months.
Anti-Deficiency Act [Title 31, U.S. Code, Sec1341 and 1517]
Prohibits making or authorizing an obligation in excess of the amount available; forbids obligation to pay money from the US Treasury in advance of the appropriation; requires agency to fix responsibility for violations of the Act.
Anticipated Delay Report
A report, normally handwritten, which is created by the procurement and production areas to advise management regarding orders which are not expected to be completed on time.
Anticipation Inventories
Extra stocks of inventory which are being held above known requirement is order to accommodate trends or promotions. May also be used to hedge against risk of supply problems.
Anticipation Order
An order placed in advance of the availability of a product for delivery at a future date. Anticipation orders are frequently used in the retail environment where suppliers are previewing new products at trade shows and want to get a commitment from their retail customers prior to production of seasonal items.
Any-Quantity Rate (AQ)
The same rate applies to any size shipment tendered to a carrier; no discount rate is available for large shipments.
Anti-Dumping Duty
An additional import duty imposed in instances where imported goods are priced at less than the normal price charged in the exporter's domestic market and cause material injury to domestic industry in the importing country
See: Accounts Payable
Applicability Statement 2 (AS2)
A specification for Electronic Data Interchange between businesses using the Internet's Web page protocol, the Hypertext Transfer Protocol (HTTP). The specification is an extension of the earlier version, Applicability Statement 1 (AS1). Both specifications were created by EDI over the Internet (EDIINT), a working group of the Internet Engineering Task Force (IETF) that develops secure and reliable business communications standards.
Application Service Provider (ASP)
A company that offers access over the Internet to application (examples of applications include word processors, database programs, Web browsers, development tools, communication programs) and related services that would otherwise have to be located in their own computers. Sometimes referred to as “apps-on-tap", ASP services are expected to become an important alternative, especially for smaller companies with low budgets for information technology. The purpose is to try to reduce a company's burden by installing, managing, and maintaining software.
The direct interchange of data between computers, without re-keying.
Approved Vendor List (AVL)
List of the suppliers approved for doing business. The AVL is usually created by procurement or sourcing and engineering personnel using a variety of criteria such as technology, functional fit of the product, financial stability, and past performance of the supplier.
See: Advanced Planning and Scheduling
See: Any quantity rate
See: Acceptable Quality Level
See: Accounts Receivable
Army Corps of Engineers
A federal agency responsible for the construction and maintenance or waterways.
Arrival Notice
A notice from the delivering carrier to the Notify Party indicating the shipment's arrival date at a specific location (normally the destination).
Arrow Diagram
A planning tool to diagram a sequence of events or activities (nodes) and the interconnectivity of such nodes. It is used for scheduling and especially for determining the critical path through nodes.
Artificial Intelligence
Understanding and computerizing the human thought process.
See: Accredited Standards Committee of ANSI.
Accredited Standards Committee X12. A committee of ANSI chartered in 1979 to develop uniform standards for the electronic interchange of business documents.
See: American Standard Code for Information Interchange
See: Advanced Shipping Notice
See: Application Service Provider
See: American Society for Quality
See: Automated Storage and Retrieval System
Association of American Railroads
A railroad industry association that represents the larger U.S. railroads.
See: American Society for Testing and Materials
See: American Society for Training and Development
See: Applicability Statement 2
A strategy employed in production and light manufacturing environments where complete subassemblies and components are assembled into a finished product just prior to customer shipment. Synonym: Finish to Order. Also see: Make to Order, Make to Stock.
A collection of components which have been put together into a unit, or the activity involved with putting components together to form a unit
Assembly Line
A manufacturing process where products are completed from components as a result of a series of continuous activities. Henry Ford is widely recognized as the father of the assembly line.
A distribution of costs using causal relationships. Because cost causal relationships are viewed as more relevant for management decision-making, assignment of costs is generally preferable to allocation techniques. (Synonymous with Tracing. Contrast with Allocation.)
Assumed Receipt
The principle of assuming that the contents of a shipment are the same as those presented on a shipping or delivery note. Shipping and receiving personnel do not check the delivery quantity. This practice is used in conjunction with bar codes and an EDI-delivered ASN to eliminate invoices and facilitate rapid receiving.
Assured Source of Supply
A guaranteed supply source usually designated by a contractual agreement. Also known as a certified supplier.
Asynchronous Process
A situation where two related processes are started and run concurrently without waiting for the other to complete.
Refers to the lowest level of division for a process, product structure, network, etc. Atomic elements cannot typically be sub-divided. In a process this refers to a unique activity, in a product structure this would be a single part component, in a network this could represent a single warehouse or location.
See: Available to Promise
See: Available to Sell
A piece of equipment which is typically sold as a optional separate unit and may be combined with the main product at the factory or in the field.
A label used to provide additional classification or information about a resource, activity, or cost object. Used for focusing attention and may be subjective. Examples are a characteristic, a score or grade of product or activity, or groupings of these items, and performance measures.
The inspection and examination of a process or quality system to ensure compliance to requirements. An audit can apply to an entire organization or may be specific to a function, process or production step.
Audit Trail
Manual or computerized tracing of the transactions affecting the contents or origin of a record.
Determining the correct transportation charges due the carrier: auditing involves checking the accuracy of the freight bill for errors, correct rate, and weight.
A characteristic of modern information systems, gauged by the ease with which data can be substantiated by trading it to source documents and the extent to which auditors can rely on pre-verified and monitored control processes.
The process of verifying the eligibility of a device, originator, or individual to access specific categories of information or to enter specific areas of a facility. This process involves matching machine-readable code with a predetermined list of authorized end users.
A practice of establishing the validity of a transmission, message, device, or originator, which was designed to provide protection against fraudulent transmissions.
Authentication Key
A short string of characters used to authenticate transactions between trading partners.
The functionality of a bar code reader to recognize the bar code symbology being scanned thus allowing a reader to read several different symbologies consecutively
An automated identification system. This includes technology such as bar coding and radio frequency tagging (RFID).
Automated Broker Interface (ABI)
The U.S. Customs program to automate the flow of customs-related information among customs brokers, importers, and carriers.
Automated Call Distribution (ACD)
A feature of large call center or “Customer Interaction Center” telephone switches that routes calls by rules such as next available employee, skill-set etc.
Automated Clearinghouse (ACH)
Automated Clearinghouse. A nationwide electronic payments system, which more than 15,000 financial institutions use, on behalf of 100,000 corporations and millions of consumer in the U.S. The funds transfer system of choice among businesses that make electronic payments to vendors, it is economical and can carry remittance information in standardized, computer processable data formats.
Automated Commercial Environment (ACE)
Update of outmoded Automated Commercial System (ACS). It is intended to provide automated information system to enable the collection, processing and analysis of commercial import and export data, allowing for moving goods through the ports faster and at lower cost, as well as detection of terrorist threats.
Automated Guided Vehicle System (AGVS)
A system for material handling equipment which uses wired or wireless guidance to move materials around facilities based on system commands
Automated Manifest System (AMS)
A multi-modular cargo inventory control and release notification system through which carriers submit their electronic cargo declaration 24 hours before loading. See: 24-hour Rule
Automated Storage / Retrieval System (AS/RS)
An inventory storage system which uses un-manned vehicles to automatically perform stock put-away and picking actions.
Automatic Relief
An accounting method where bookkeeping is performed either as a result of completed or pending activities. See: Backflush
Available Inventory
Also called net inventory, this is the quantity of stock which is available to use after considering allocations, reservations, backorders, and quantities set aside to compensate for quality problems. Also known as net inventory. Synonyms: Available-to-Promise.
Available to Promise (ATP)
The quantity of a product which is or will be available to promise to a customer based on their required shipment date. ATP is typically ‘time phased’ to allow for promising delivery at a future date based on anticipated purchase or production receipts.
Available to Sell (ATS)
Total quantity of goods committed to the pipeline for a ship to or selling location. This includes the current inventory at a location and any open purchase orders.
Average Annual Production Materials Related A/P (Accounts Payable)
The value of direct materials acquired in that year for which payment has not yet been made. Production-related materials are those items classified as material purchases and included in the Cost of Goods Sold (COGS) as raw material purchases. Calculate using the 5-Point Annual Average.
Average Cost Per Unit
The average cost of stock of any given item based on having incurred different costs for each time a receipt was processed. Usually calculated at the time of a new receipt by multiplying old inventory quantity by old avg. cost, then adding the received count and total cost, then dividing the new total cost by the new inventory quantity.
Average Inventory
The average inventory level over a period of time. Implicit in this definition is a “sampling period” which is the amount of time between inventory measurements. For example, daily inventory levels over a two-week period of time, hourly inventory levels over one day, etc. The average inventory for the same total period of time can fluctuate widely depending upon the sampling period used.
Average Payment Period (for materials)
The average time from receipt of production-related materials and payment for those materials. Production-related materials are those items classified as material purchases and included in the Cost of Goods Sold (COGS) as raw material purchases. (An element of Cash-to-Cash Cycle Time)
Calculation: [Five point annual average production-related material accounts payable] / [Annual production-related material receipts/365]
See: Approved Vendor List
Avoidable Cost
That part of the cost of any activity associated with an output,that could be saved by not performing that activity.
Award Fee
Based on subjective assessment by Government on how well contractor meets/exceeds performance standards.