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Supply Chain and Logistics Terms and Glossary
Validation: To check whether a document is the correct type for a particular EDI system, as agreed upon by the trading partners, in order to determine whether the document is going to or coming from an authorized EDI user.
Value Added: Increased or improved value, worth, functionality or usefulness.
Value-Added Network (VAN): A company that acts as a clearing-house for electronic transactions between trading partners. A third-party supplier that receives EDI transmissions from sending trading partners and holds them in a “mailbox” until retrieved by the receiving partners.
Value-Added Productivity Per Employee: Contribution made by employees to total product revenue minus the material purchases divided by total employment. Total employment is total employment for the entity being surveyed. This is the average full-time equivalent employee in all functions, including sales and marketing, distribution, manufacturing, engineering, customer service, finance, general and administrative, and other. Total employment should include contract and temporary employees on a full-time equivalent (FTE) basis.
Calculation: Total Product Revenue-External Direct Material / [FTE's]
Value-Adding/Nonvalue-Adding: Assessing the relative value of activities according to how they contribute to customer value or to meeting an organization’s needs. The degree of contribution reflects the influence of an activity’s cost driver(s).
Value Analysis: A method to determine how features of a product or service relate to cost, functionality, appeal and utility to a customer (i.e., engineering value analysis). Also see: Target Costing
Value Based Return (VBR): A measure of the creation of value. It is the difference between economic profit and capital charge.
Value Chain: A series of activities, which combined, define a business process; the series of activities from manufacturers to the retail stores that define the industry supply chain.
Value Chain Analysis: A method to identify all the elements in the linkage of activities a firm relies on to secure the necessary materials and services, starting from their point of origin, to manufacture, and to distribute their products and services to an end user.
Value Engineering Change Proposal (VECP): A change proposal resulting from an organized effort directed at analyzing the function of Department of Defense systems, equipment, facilities, procedures, and supplies for the purpose of achieving the required function at the lowest total cost of effective ownership, consistent with requirements for performance, reliability, quality, and maintainability
Value-of-service pricing: Pricing according to the value of the product being transported; third-degree price discrimination; demand-oriented pricing; charging what the traffic will bear.
Value of Transfers: The total dollar value (for the calendar year) associated with movement of inventory from one “bucket” into another, such as raw material to work-in-process, work-in-process to finished goods, plant finished goods to field finished goods or customers, and field finished goods to customers. Value of Transfers is based on the value of inventory withdrawn from a certain category and is often approached from a costing perspective, using cost accounts. For example, Raw Materials Value of Transfers is the value of transfers out of the raw material cost accounts (you may have cost centers associated with inventory locations, but all "raw ingredients" usually share common cost accounts or can be rolled up into one financial view). The same goes for WIP. Take the manufacturing cost centers and look at the total value of withdrawals from those cost centers. While Average Gross Inventory represents the value of the inventory in the cost center at any given time, the Value of Transfers is the total value of inventory leaving the cost center during the year. The value of transfers for Finished Goods is, in theory, equivalent to COGS.
Value Proposition: What the supply chain member offers to other members. To be truly effective, the value proposition has to be two-sided; a benefit to both buyers and sellers.
Value stream: All activities, both value added and non-value added, required to bring a product from raw material state into the hands of the customer, bring a customer requirement from order to delivery and bring a design from concept to launch.
Value stream mapping: A pencil and paper tool used in two stages: 1. Follow a product's production path from beginning to end and draw a visual representation of every process in the material and information flows. 2. Then draw a future state map of how value should flow. The most important map is the future state map.
VAN: See Value-Added Network
Variable Cost: A cost that fluctuates with the volume or activity level of business.
VBR: See Value Based Return
VECP: See Value Engineering Change Proposal
Velocity: Rate of product movement through a warehouse
Vendor: The manufacturer or distributor of an item or product line. Also see: Supplier
Vendor Code: A unique identifier, usually a number and sometimes the company's DUNS number, assigned by a Customer for the Vendor it buys from. Example; a Grocery Store Chain buys Oreo's from Nabisco. The Grocery Store Chain , for accounting purposes, identifies Nabisco as Vendor #76091. One company can have multiple vendor codes. Example; Welch's Foods sells many different products. Frozen grape juice concentrate, chilled grape juice, bottled grape juice, and grape jelly. Because each of these items is a different type of product, frozen food, chilled food, beverages, dry food, they may have a different buyer at the Grocery Store Chain , requiring a different vendor code for each product line.
Vendor-Managed Inventory (VMI): The practice of retailers making suppliers responsible for determining order size and timing, usually based on receipt of retail POS and inventory data. Its goal is to increase retail inventory turns and reduce stock outs. Its goal is to increase retail inventory turns and reduce stock outs. It may or may not involve consignment of inventory (supplier ownership of the inventory located at the customer).
Vendor Owned Inventory (VOI): See Consignment Inventory
Vertical Hub/Vertical Portal: Serving one specific industry. Vertical portal websites that cater to consumers within a particular industry. Similar to the term "vertical industry", these websites are industry specific, and like a portal, they make use of Internet technology by using the same kind of personalization technology. In addition to industry specific vertical portals that cater to consumers, another definition of a vertical portal is one that caters solely to other businesses.
Vertical Integration: The degree to which a firm has decided to directly produce multiple value-adding stages from raw material to the sale of the product to the ultimate consumer. The more steps in the sequence, the greater the vertical integration. A manufacturer that decides to begin producing parts, components, and materials that it normally purchases is said to be backward integrated. Likewise, a manufacturer that decides to take over distribution and perhaps sale to the ultimate consumer is said to be forward integrated.
Vessel: A floating structure designed for transport.
VICS: Voluntary Inter-industry Commerce Standards. The retail industry standards body responsible for the CPFR standard, among other things, VICS is a not-for-profit association whose mission is to take a global leadership role in the development of business guidelines & specifications; facilitating implementation through education and measurement, resulting in the improvement of the retail supply chain efficiency and effectiveness, which meet or exceed customer and consumer expectations.
Viral Marketing: The concept of embedding advertising into web portals, pop-ups and as e-mail attachments to spread the word about products or services that the target audience may not otherwise have been interested in.
Virtual Corporation: The logical extension of outpartnering. With the virtual corporation, the capabilities and systems of the firm are merged with those of the suppliers, resulting in a new type of corporation where the boundaries between the suppliers’ systems and those of the firm seem to disappear. The virtual corporation is dynamic in that the relationships and structures formed change according to the changing needs of the customer.
Virtual Factory: A changed transformation process most frequently found under the virtual corporation. It is a transformation process that involves merging the capabilities and capacities of the firm with those of its suppliers. Typically, the components provided by the suppliers are those that are not related to a core competency of the firm, while the components managed by the firm are related to core competencies. One advantage found in the virtual factory is that it can be restructured quickly in response to changing customer demands and needs.
Visibility: The ability to access or view pertinent data or information as it relates to logistics and the supply chain, regardless of the point in the chain where the data exists.
Vision: The shared perception of the organization’s future—what the organization will achieve and a supporting philosophy. This shared vision must be supported by strategic objectives, strategies, and action plans to move it in the desired direction. Syn: vision statement.
VMI: See Vendor Managed Inventory
VOI: See Vendor Owned Inventory
Voice Activated or Voice Directed: Systems which guide users such as warehouse personnel via voice commands
Voice of the customer: The expressed requirements and expectations of customers relative to products or services, as documented and disseminated to the members of the providing organization.
Download the entire glossary in pdf format (1.2MB).
Definitions compiled by Supply Chain Visions, Bellevue, WA, www.scvisions.com. Updated May 2009.
Please note: The Center for Value Chain Research (CVCR) does not take responsibility for the content of these definitions, nor does the CVCR endorse these as official definitions except as noted.