Supply Chain and Operations Management Glossary (S)

Safety stock: Inventory carried to protect against running out during a lead time due to the uncertainty in either: the length of the lead time, the amount delivered, amount demanded, or time of occurrence of demand during a lead time.

Same store sales: sales this year in stores that were open last year.

Say’s Law: In simplest form, this is the “build it and they will come” philosophy—the belief that supply creates demand (e.g., if we produce a product, people will realize that they would like to buy it). If we build a sports stadium, sports teams and spectators will come. Attributed to Jean Baptiste Say, circa 1800.

SCADA (Supervisory Control and Data Acquisition): A system, and to some extent standards, for monitoring and controlling remote equipment, such as a manufacturing plant, a pipeline network, or an electric power distribution system. Remote meters can be read electronically, and then commands can be sent to various machines (e.g., switches) to tell the machines to do some action.

Scanner: a device for reading a product label such as a bar code.

SEC (Securities and Exchange Commission). A U.S. agency that has five Commissioners appointed by the President, with the advice and consent of the Senate. The official mission of the SEC is to protect investors and maintain the integrity and honesty of the securities markets. See Shadow price: see dual price.

Shapley value: A method of cost allocation that is useful when the total cost of providing some service to a group of players or firms is less if the players cooperate. Suppose customers A, B, and C, are each to receive a delivery from a single truck that makes one trip to serve the three. How should the cost of the trip be allocated? The Shapley value allocates cost to a given customer based upon the average marginal cost of adding that customer to the trip/coalition, where the average is taken over all possible permutations of how customers/players could be added to the trip/coalition. Suppose the cost of delivering to any combination of the three is as follows: {A}:$88, {B}: $91, {C}: $90, {A,B}: $150, {A,C}: $148, {B,C}: $151, {A,B,C}: $180. E.g., making a single trip to just A and C costs $148.
Making one trip that serves all three costs $180. The six possible permutations and the marginal cost of

each customer are:
Permutation A B C
A, B, C $88 150-88 =$62 180-150=$30
A, C, B $88 180-148=$32 148-88 =$60
B, A, C 150- 91=$59 $91 180-150=$30
B, C, A 180-151=$29 $91 151-91 =$60
C, A, B 148- 90=$58 180-148=$32 $90
C, B, A 180-151=$29 151- 90=$61 $90
Shapley value (average) $58.5 $61.5 $60

See also: core of a game.

Shipper: The firm or person who needs to have material shipped (e.g., a manufacturer). In contrast, see carrier.

Shrink wrap: A plastic wrap that tends to shrink after stretching, and adheres to itself, that is wrapped around a skid to keep it intact during shipment.

Shrinkage: catch-all term for the common situation whereby the physical inventory is less than what inventory records claim. Most common causes are theft, loss, storage in the wrong location, delivery to the wrong store, breakage, etc.

SI units: An internationally agreed upon system (Systeme International d’Unites) for measuring physical quantities. There are seven base units: meter(m) for length, kilogram(kg) for mass, second(s) for time, ampere(A) for electric current, kelvin(K) for temperature, mole(mol) for amount of substance, and candela(cd) for luminous intensity. There are 21 derived units, such as newton(N) for force(kg*m/s2), joule(J) for work(kg* m2/s2), and watt(W) for power(m2*kg/s3). Standard prefixes for successively larger/smaller units are: deka(10), hecto(102), kilo(103), mega(106), giga(109), tera(1012), peta(1015), exa(1018), deci(10-1), centi(10-2), milli(10-3), micro(10-6), nano(10-9), pico(10-12), femto(10-15), and atto(10-18). For more information, see

SIC code: Standard Industrial Classification. A six digit code used for classifying industry in the U.S. For example, 484xxx is trucking in general; 484121 is long distance FTL; and 484122 is long distance FTL. SIC is being replaced by a common North American code, NAICS, which will be applicable to Canada, the U.S., and Mexico. See

Six Sigma: A quality management approach that concentrates on keeping the percentage of defectives low. Numerically, the six sigma standard is frequently stated as a fraction defective of about 3.4 defects per million. This sounds low, but note that for some industries, such as airline travel, this level of quality would still be unacceptable (e.g., contemplate an airline that has almost four crashes per million flights). W.r.t. the Normal distribution, 3.4 defects per million in fact corresponds to only 4.5 sigma or standard deviations. That is, quality control of the process should be so precise, so the upper and lower limits for acceptable values fall at 4.5 sigma of the production process. Thus, there is a 1.5 sigma shift in the mean allowed.

SKU (Stock Keeping Unit): A distinguishable product. E.g., mushroom soup/10 oz., mushroom soup/20 oz., and tomato soup/20 oz., constitute three different SKU’s.

Skid: A pallet with product stacked on it, for a specific customer or from a specific supplier.

Slip sheet: a sheet of heavy plastic or fiberboard placed under a bundle of material such as cases of grocery items. A slip sheet may be used to separate layers on a pallet, or may be used as an alternative to a pallet. As an alternative, its major advantage is that it saves space, approximately 15 cm (6 in.) of vertical space. Its disadvantage is that it is not as easy to handle by a standard forklift as a standard pallet load.

Slip streaming: The practice of making unannounced product changes, especially in software. The typical setting is that a small bug or design flaw is discovered and then corrected while production continues. This introduces possible maintenance problems, in that if repairs are required, the repair person must be able to identify which version of the product is involved (e.g., by serial number). There may also be customer discontent if early customers feel that the differences between the different versions are noticeable. The advantage of slipstreaming is that new customers immediately benefit from the improvement.

Slotting: The processing of deciding where each product gets stored in a warehouse. For example, high volume SKU’s should be close to the shipping door. SKU’s that tend to get demanded together might be stored near each other. See also, Planogram.

Slotting fee/allowance: A fee charged by some retailers to suppliers who wish to have their product carried on the retailer’s shelves. This is typically used when the retailer feels that the probability of low demand for the product (typically a new one) might cause the product to be less profitable than other products the retailer carries. A powerful retailer might also use it as a means for trying to get a discount from a supplier who does not want to, at least officially, give selective discounts. 

Slurry: a suspension of a solid, such as pulverized coal, in a liquid such as water so that the solid may be shipped by pipeline.

SMED (Single Minute Exchange of Die): A philosophy and methodology developed by Shigeo Shingo for Toyota for the fast changeover of a machine from production of one product to the production of another. The phrase “single minute” is slightly misleading because Shingo really meant “single digit” (i.e., he interpreted any changeover of 9 minutes or less as a single minute exchange). Changeover times that once were several hours were reduced to minutes. The benefits of short changeovers are numerous. The most immediate benefits are that short production runs become more economic, and thus inventories are lower, and one can respond more rapidly to changing customer demands. The methods include: a) offlining: converting steps of the change-over offline, so that the production process can continue running while preparations for the changeover are made, b) quick connectors: rather than laboriously unscrewing and tightening bolts, quick fasteners such cams and “slip on and tighten” key-hole connectors are used.

Sortation system: an important device in an automated distribution or baggage system. It typically consists of a long conveyor belt with a scanner at the front end. As packages enter the front end, a scanner reads a destination label on the package. The system then pushes the package off the conveyor at an off ramp appropriate for the package’s destination.

Sorting: A major function provided by a DC, specifically, collect all the items destined for a particular customer and group them together for shipment.

SPC (Statistical Process Control): See Control chart.

Split sourcing: Serving a customer or need from two or more sources, usually because of limited capacity at one of the sources. Might also be used for reliability reasons in case one source is unreliable. Administrative costs tend to be higher with split sourcing. With single-sourcing, a customer can contact his supplier directly for replenishments. Under split sourcing there must be a higher coordinating authority to decide which orders are satisfied from which source.

Stackelberg equilibrium: if there are multiple Nash equilibria, one in which the utility of one of the players, the “most powerful” or leader, is maximized.

STB (Surface Transportation Board): U.S. federal agency that has replaced some of the regulatory functions of the former ICC. It is responsible for the economic regulation of interstate surface transportation, primarily railroads. See

Sunk cost: a cost which is no longer avoidable.

Supply Chain: see channel.

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