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What is the definition of holding costs?

Holding costs - in business management, money spent to keep and maintain a stock of goods in storage.
Learn more about holding costs in the class "Industrial Distribution Functional Operations Overview" below.

Industrial Distribution Functional Operations Overview

Custom: PTDA Training

Class Information

ToolingU.com classes are offered at the beginner, intermediate, and advanced levels. The typical class consists of 12 to 25 lessons and will take approximately one hour to complete.

Class Name:	Industrial Distribution Functional Operations Overview
Description:	This class presents an overview of the operating and business components of industrial distribution, organizational structures, internal systems and quality control.
Prerequisites:	none
Difficulty:	Beginner
Number of Lessons:	21
Language:	English

Class Outline

Supply Chain Management and Logistics
Procurement, Purchasing and Products
Product Life Cycle (PLC)
Inventory
Inventory Control Systems
Locating Products – Barcodes, RFID, etc
Inventory Management
Warehousing, Storage and Material Handling
Shipping & Receiving for Effective Distribution
Transportation & Shipping
Sales & Order Entry – Internal vs. External
Information, Data, and Computer Technology Networks
Billing and Accounting
Information and Customer Service
Supply Chain Management and the Global Supply Chain
Lesson 16 – Quality Control & Assurance
Continuous Improvement and TQM
Continuous Improvement, Kaizen and Six Sigma
Introduction to Project Management
Gantt Charts and Flowcharting
Acknowledgements and Resources

Class Objectives

Explain the concepts of supply chain management, major activities being managed and the logistics function.
Define products, purchasing and procurement and outlines the eight steps in the procurement process.
Explain the product life cycle and describe the four major stages.
Define inventory and inventory turnover.
Explain the importance of minimizing inventory cost and the use of inventory control systems.
Describe several technologies important in inventory control.
Describe inventory management systems to coordinate movement of needed product to suppliers, presenting the concepts of just-in-time and Vendor Managed Inventory.
Explain the important warehousing functions related to storage, tracking and movement of products.
Describe the distribution functions of accepting products and delivering products to end users.
Describe the transportation system and shipping of products that often work with a logistics intermediary.
Explain the key function of sales in industrial distribution and the inside and outside sales roles.
Describe the information management systems common in industrial distribution including the, Enterprise Resources Planning system and warehouse management system.
Describe the connection between product management systems and the finance functions of billing and accounting.
Explain how the customer management system is an important tool for improving service and increasing efficiency.
Describe how globalization is a factor in today's supply chain management.
Explain quality control and quality assurance concepts.
Describe the important manufacturing concepts of continuous improvement and total quality management.
Describe the key concepts and systems for quality used in manufacturing and distribution.
Describe project management and the constraints of time, cost, scope and quality.
Identify several of the most used project management tools.

Class Vocabulary
Accounts Payable		Accounts payable - the functional area of a business concerned with money owed by the company for purchased products or services.
Accounts Receivable		Accounts receivable – the functional area of a business concerned with money owed to the company for sales of products or services.
accuracy		Accuracy - the customer receives the right product in the right quantity.
added value		Added value – increased product value for the customer through provision of related services.
Auto ID Data Capture
auto-replenishment		Auto-replenishment – using a tracking system for inventory, the customer’s supply of products is replenished automatically when stocks run low.
bid		Bid – a proposal in response to a potential customer request to provide products or services at a specific price, usually presented in competition with one or more other bidders.
brand		brand - a collection of experiences and connections associated with a company, including concrete symbols such as name, logo, packaging or slogan that are shaped by advertising, media, and ways of doing business and that differentiate it from its competitors.
cause-and-effect diagram		Cause-and-effect diagram -diagrams that shows the causes of a certain event. A common use of the Ishikawa cause-and-effect diagram is in product design, to identify desirable factors leading to an overall effect.
chargeback		Chargeback - a reversal of a credit-card transaction, as viewed from the perspective of the merchant. It usually occurs when a consumer files a complaint with their bank or credit/debit card provider.
check sheet		check sheet - simple document used for collecting data in real-time and at the location where the data is generated. The document is typically a blank form designed for quick, easy, and efficient recording of desired information, which can be either quantitative or qualitative.
COGS		Cost of goods sold – the total costs of materials and production including labor and overhead to produce a finished product
competition		Competition - a business relationship in which two or more parties offering similar or related services or products compete to gain or retain customers.
competitive advantage		Competitive advantage - an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justify higher prices.
components		Components - the parts of a mechanical or electrical machine or tool.
continuous improvement		Continuous improvement – ongoing, systematized efforts to improve results, increase capabilities and eliminate waste.
control chart		control chart - a tool used to determine whether a manufacturing or business process is in a state of statistical control or not. If the chart indicates that the process is currently under control then it can be used with confidence to predict the future performance of the process. If the chart indicates that the process being monitored is not in control, the pattern it reveals can help determine the source of variation to be eliminated to bring the process back into control.
cost		Cost – the expense of acquiring a product or service, cost can be simply the specific price of a product or the total package of expenses including direct, indirect and operating expenses.
CRM		CRM – Customer Relationship Management systems to track key information about customers and make it available to those working with the customer.
Customer management systems		Customer management systems – the system to gather, maintain, track and use information about the customer to understand and serve them.
customer requirements		Customer requirements – the conditions established by the customer that must be met in providing a product or service in order to obtain or retain the customer’s business.
distribution center		Distribution center – a warehouse where products and materials are stored before being delivered to an end user.
DMAIC		DMAIC – a five step method of improving existing business processes including defining improvement goals, measuring the process, analyzing data on the process, improving the process based on the data and controlling for deviations from the desired process to eliminate defects.
downsizing		Downsizing - one of several similar terms (rightsize, smartsize, workforce reduction) that means a layoff or decrease in staffing, usually permanent, in response to business conditions, new technology or changes in the market.
EDI		EDI – Electronic data interchange allowing distributors and suppliers to communicate using a standardized set of electronic documents to order, acknowledge, ship, etc.
efficiencies		Efficiencies – methods of improving business operations and productivity and/or lowering costs.
Electronic Data Interchange		Electronic Data Interchange (EDI) – Electronic data interchange allowing distributors and suppliers to communicate using a standardized set of electronic documents to order, acknowledge, ship, etc.
end user		End user– the final customer for whom a product or service is intended.
Enterprise Resource Planning		Enterprise resource planning (ERP) - the planning of how business resources (materials, employees, customers etc.) are acquired and moved from one stage to another. An ERP system is a business support system that maintains in a single database the data needed for a variety of business functions such as Manufacturing, Supply Chain Management, Financials, Projects, Human Resources and Customer Relationship Management.
ERP		Enterprise resource planning (ERP) - the planning of how business resources (materials, employees, customers etc.) are acquired and moved from one stage to another. An ERP system is a business support system that maintains in a single database the data needed for a variety of business functions such as Manufacturing, Supply Chain Management, Financials, Projects, Human Resources and Customer Relationship Management.
flowchart		Flow chart – a schematic representation of step-by-step procedures for solving a problem.
fulfillment		Fulfillment – completion of shipping, delivery and payment for ordered products or services based on contract terms.
Gantt chart		Gantt chart – a project scheduling tool.
General Ledger		General Ledger – a list of all the credits and debits for all the accounts within a business.
histogram		Histogram - a graphical display of tabulated frequencies. It shows what proportion of cases fall into each of several categories. A histogram differs from a bar chart in that it is the area of the bar that denotes the value, not the height, a crucial distinction when the categories are not of uniform width.
holding costs		Holding costs - in business management, money spent to keep and maintain a stock of goods in storage.
Inside sales		Inside Sales – also called Distribution Sales Specialists, these employees typically work with customers and potential customers by phone or e-mail to generate sales and be a point of contact for requests and information.
inventory		Inventory – items stocked (on-hand) and available to customers.
inventory control		Inventory control – minimizing the cost of inventory through monitoring status and processes for procuring, stocking and moving inventory.
inventory turns		Inventory turns– number of times stocked products are sold and reordered in a year, with high turnover rates being desirable
Job Costing		Job costing – tracking and recording costs associated with completing a job - typically direct material and direct labor - at their actual values until the job is completed. One of several ways of calculating overhead to determine total cost for the job.
just-in-time		Just-in-time – an inventory strategy in which products are delivered at the time they are needed rather than on a set delivery schedule.
Kaizen		Kaizen - a Japanese philosophy that focuses on continuous improvement throughout all aspects of life. When applied to the workplace, Kaizen activities continually improve all functions of a business, from manufacturing to management and from the CEO to the assembly line workers.
LAN		LAN – Local Area Network, an internal networked computer system.
Lean manufacturing		Lean manufacturing - often known simply as "Lean", is the optimal way of producing goods through the removal of waste and implementing flow. Lean manufacturing is a generic process management philosophy derived mostly from the Toyota Production System (TPS).
logistics		Logistics - planning, management, and movement of people, materials, and goods by road, pipeline, air, rail and water and related professional and technical support services such as transportation infrastructure planning and management, logistics services
logistics automation software		Logistics automation software - the application of computer software and/or automated machinery to improve the efficiency of logistics operations. Typically this refers to operations within a warehouse or distribution center, with broader tasks undertaken by supply chain management systems and enterprise resource planning systems.
manufacturers		Manufacturers – organizations that design, produce and supply products for other companies to use in another stage of manufacturing, end use, resale or incorporation in another product.
margin		Margin – 1) a measure or degree of difference, 2) the difference between net sales and the costs of goods sold from which expenses are usually met and profit derived.
Market share		Market share – the percentage of the total available demand or potential demand for products or services in a category that is being met by a company.
organizational culture		Organizational culture - the mix of attitudes, values, beliefs, and typical patterns of relationships, behavior and performance that characterize an organization.
Outside sales		outside sales - acquisition of new customers, managing relationships with key customers, understanding the customer’s business and demonstrating distributor value, and completing sales are among the key roles of the outside sales staff which does most of its work away from the distributor’s office.
palletized		Palletized - banding or shrink-wrapping cartons on a pallet (a wooden platform).
PDCA		PDCA - Plan-Do-Check-Act is an iterative four-step problem-solving process typically used in quality control. It is also known as the Deming Cycle, Shewhart cycle, Deming Wheel, or Plan-Do-Study-Act.
procurement		Procurement - the process of acquiring a product or service from defining a need, seeking bids, awarding contracts, taking delivery and paying the supplier.
product life cycle stage		Product Life Cycle stage – stages of product development, demand, costs and profit from introduction, growth, maturity and decline.
profitability		Profitability - ability of a firm to generate net income on a consistent basis.
project management		Project management – managing activities and resources efficiently to meet project goals within the constraints of scope, time, cost and quality.
purchasing		Purchasing - a major function of an organization that is responsible for acquisition of required materials, services and equipment.
Quality assurance		Quality assurance – setting standards to regulate the quality of materials, assembly processes, products and components.
quality control		Quality control – systems to ensure products or services are designed and produced or provided to meet or exceed customer requirements.
quote		Quote – a formal, written offer to provide a product, service or bundle of products or services at a specific cost on a specific schedule.
raw materials		Raw materials – unprocessed natural products used in manufacturing.
rebates		Rebates – form of payment allowances to distributors or retailers at given times during the year based on purchase level or other agreed upon activity.
reliability		Reliability – the distributor meets product and service promises consistently.
RFI		RFI – Request for Information.
RFID		RFID tags– automatic identification method using radio waves to store and retrieve product data from tags applied to or incorporated into a product.
RFQ		RFQ – Request for Quote.
sales counter		Sales counter – distributor location where stocked products are available to walk-in customers or orders can be picked up, often with a showroom.
scatter diagram		Scatter diagram - a type of display using Cartesian coordinates to display values for two variables for a set of data. The data is displayed as a collection of points, each having the value of one variable determining the position on the horizontal axis and the value of the other variable determining the position on the vertical axis that can suggest various kinds of correlations between variables with a certain confidence level.
scope		Scope - common understanding as to what is included in, or excluded from, a project, proposal or plan.
Shewhart cycle		Shewhart Cycle - PDCA - Plan-Do-Check-Act is an iterative four-step problem-solving process typically used in quality control. It is also known as the Deming Cycle, Shewhart cycle, Deming Wheel, or Plan-Do-Study-Act.
shipping clerk		Shipping clerk - employee with responsibility for accepting products from suppliers and preparing products from inventory to be delivered to customers.
shrinkage		Shrinkage - loss of inventory through theft, damage or error.
Six Sigma		Six Sigma - a business management strategy, originally developed by Motorola, which has wide-spread application in many sectors of industry. Six Sigma seeks to identify and remove the causes of defects and errors in manufacturing and business processes. It uses a set of quality management methods, including statistical methods, and creates a special infrastructure of people within the organization ("Black Belts" etc.) who are experts in these methods.
sourcing		Sourcing - procurement practices, aimed at finding, evaluating and engaging suppliers of goods and services.
supplier		Suppliers – those who have products to be used or consumed.
supply chain		Supply chain – the path along which goods move from raw materials through production to end user made up of all the participants and resources involved in generating and moving products and services to end users
supply chain management		Supply chain management – the process of planning, implementing and controlling the operations of the supply chain to maximize efficiency.
technology		Technology - the practical application of science to commerce or industry. Technology often refers to useful material objects such as machines, hardware or utensils, but can also encompass broader themes, including systems, methods of organization, and techniques.
Time Billing		Time billing - tracking the time spent for doing a job, then billing the customer for that time multiplied by the hourly rate agreed upon in the contract.
timeliness		Timeliness – products are made available to the customer when needed.
Total Quality Management		Total Quality Management (TQM) – a management approach that integrates all organizational functions to focus on meeting customer needs and organizational objectives.
TQM		Total Quality Management (TQM) – a management approach that integrates all organizational functions to focus on meeting customer needs and organizational objectives.
transport		Transport – the physical movement of products.
value		Value - 1) monetary worth of an asset, business entity, good sold or service rendered; 2) extent to which a good or service is perceived by the customer to meet his or her needs or wants, measured by the customer’s willingness to pay for it.
vendor		Vendor– a company that sells goods or services to another company.
Vendor Managed Inventory		Vendor Managed Inventory (VMI) – an added-value service in which a supplier or distributor assumes responsibility for maintaining an agreed upon inventory of a product and providing the product efficiently and as needed to the customer.
VMI		Vendor Managed Inventory (VMI) – an added-value service in which a supplier or distributor assumes responsibility for maintaining an agreed upon inventory of a product and providing the product efficiently and as needed to the customer.
W. Edwards Deming's		W. Edwards Deming - an American statistician whose work in the 1950s helped generate new principles of management focusing on quality and productivity.
warehouse management system		Warehouse management system (WMS) – software and processes used to coordinate incoming products, movement, storage, tracking and delivery of products.
Warehousing		Warehousing – the storage of products and materials for profit.
WBS		Work Breakdown Structure (WBS) - a fundamental tool commonly used in project management and systems engineering. It is a tree-like structure that permits summing of subordinate costs for tasks, materials, etc., into their successively higher level “parent
wholesalers		Wholesalers – organizations that purchase products from a variety of suppliers and sell these products to other resellers, such as distributors or retailers or to installers.
WMS		Work Breakdown Structure (WBS) - a fundamental tool commonly used in project management and systems engineering. It is a tree-like structure that permits summing of subordinate costs for tasks, materials, etc., into their successively higher level “parent” tasks, materials, etc. For each element of the work breakdown structure, a description of the task to be performed is generated.