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Supply Chain and Operations Management Glossary (R)

R2 (R squared): A measure, between 0 and 1, of how well a forecast or regression line fits a set of data. An R2 of 1 means a perfect fit. Numerically, it is 1 – (sum of squared errors about the forecast line)/(sum of squared errors about the mean).

Rain-check: A form of backlog in which the seller, in the event of a stock-out, gives a ticket to a customer wishing to purchase the product, guaranteeing that the seller will order more of the product and sell it to the customer at the original price.

Ramsey prices: A form of cost allocation that may be of interest when there is a high fixed cost of producing, but a low marginal cost per unit produced. If you want users to make optimal use of goods, you want to charge them the marginal cost. If this were done, however, then the producer would show a loss. If a producer can charge different prices to different markets or departments, and we have the demand curve for each market as well as the production cost function, then Ramsey prices are the solution to the problem:

Maximize the value of the goods delivered minus the cost of producing them, Subject to: Revenue from the ods sold ≥cost of producing them.

Reefer: Refrigerated container, trailer, or truck.

Reneging: The action of a customer in a waiting queue to depart prematurely resulting in a lost sale. Contrast this with balking.

Revenue management: a collection of techniques for increasing the revenue from the sale of a product. The most notable technique is to charge more to customers who are willing to pay more. For products that “expire” such as airline tickets for a particular flight or hotel reservations for a particular night, typical method is to sell a restricted number of units at a low price and the remaining units at a high price. Customers who are willing to pay more are typically the ones who realize only at the last minute, when all the cheap units are sold out, that they have a need for the product. For a product that does not expire, but has a well defined “birth”, price might be changed in reverse fashion. Start with a high price, which will be paid by customers who urgently need the product, and then gradually lower the price for less urgent customers. See also: yield management, value based pricing, discriminatory pricing.

Reverse auction: An RFQ process in which prospective suppliers submit their quotes, typically via the internet, to the buyer. The process may be open, so that all suppliers can see what is the current winning (lowest) quote.

Reverse logistics: the management of product and packing materials when the customer no longer needs them. For a retailer, it may mean how to handle returns when the customer fairly quickly discovers he bought the wrong product. For a manufacturer, it may mean figuring out how to reuse a product, or else how best to dispose of the product if it is not reusable.

RF (Radio Frequency): In warehouse operations a system that uses a portable, typically hand held, device that is in radio communication with a central computer. The portable device has a scanner, a multi-line display and some memory. For example, the computer can transmit pick instructions to the display. The scanner can transmit data back to the computer regarding the item picked. In the U.S., the transmission is typically at either 900 MHz or 2.4 GHz.

RFID (Radio Frequency IDentification): A type of label or badge that is read electronically rather than optically. The reader need not touch the label in order to read it. Typical storage content is 126 bits of information. Some RFID labels are re-writeable. That is, new information can be inserted. The cost/label is higher than that of a printed bar code label. Some tags contain their own battery power, whereas more commonly they are simply transponders. That is, they return a signal after being energized by a reader. In the U.S., the communication with the tag tends to be in the 915 MHz band. Outside the U.S., it is typically in the 13.56 MHz band.

RFM (Recency, Frequency, and Monetary value) model: A scoring system for customers that gives a
high score to a customer who bought something recently, or who bought a large number of times over
a sample period (e.g., the last two years), or whose average purchase amount was high. A simple
assumption is that a customer with a high RFM score is a good candidate to receive further
solicitations. See also, CRM.

RFQ (Request For Quote): A document that a prospective buyer sends to prospective suppliers asking them to submit a quote for how much they will charge the buyer for a specified good or service. The RFQ may specify several different quantities that might be purchased, and a due date by which the quotes or bids must arrive at the buyer. A supplier is expected to submit a price/unit for each quantity. See also: Reverse auction.

Right-to-work law: Law in some states allowing a worker at a unionized plant to work permanently at the plant without belonging to the union.

RO-RO (Roll On Roll Off): Ship on which cargo vehicles can be driven on or off.

Routing: the process of deciding the sequence of stops to be made by a vehicle.

RSA: a public key encryption system developed by Rivest, Shamir, and Adleman and marketed by RSA, Inc. It is based on the fact that there is no known fast way of finding the factors of a large integer (e.g., one with several hundred digits).

About the Author: AJ Amjad Khanmohamed

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