Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

1.1.1b Value-Added, Business Process, Material, Product, etc. — Important Terms of Business Life

Intended learning outcomes: Produce an overview on terms of business life, such as value-added, business process, business method, business object, goods, item, part, component, material, product, artifact, management, etc.



Figure 1.1.1.2 presents additional basic terms that are used in business life. The first four (composed) terms have been defined by the author, as [MeWe18] does not give a definition.

TermDefinition
value-added
(or value creation)
(1): a company’s own output, including overhead; purchased products or services may complement this
(2): value and usefulness of design and production as seen by the customer
business process process of a company, performed to achieve a potentially tradable outcome that is value added as seen by the customer — internal or external — and that the customer is willing to pay for
business method an important method in connection with business
business object an important thing, or a content of thought, in connection with business
good something that has economic utility or satisfies an economic want
goods something manufactured or produced (or bought and sold in business)
investment goods machinery, tools, factories and commodities used in the production of goods (also called capital goods)
consumer goods goods that directly satisfy human needs
item a separate particular in a list, account, or series
part a division or portion of a whole
component one of the parts that make up a whole
material (1): the elements or substance of which something is composed or made
(2, usually plural): items needed for the performance of a task or activity
productsomething produced by physical or intellectual effort of humans
artifact something made or modified by humans usually for a purpose
management(1): the act or art of managing: the conducting or supervising of something
(2): judicious use of means to accomplish an end

Fig. 1.1.1.2         Additional basic terms used in business life.

Value added varies in meaning according to the standpoint of either pro­ducer or customer. From the traditional perspective, that of the manufacturer, for example, the expense of keeping inventory or work in process is always value-adding. The customer, however, does not normally view such processes as value-adding. With the trend toward customer orientation, it has become increasingly important to take the customer’s point of view.

Linked with a business process is its order processing. The order fulfilling unit carries responsi­bility for and performs not only the value-adding process itself, but also the necessary planning & control of the process. Business methods — e.g., methods of order processing — describe how tasks are performed or functions within the company can be achieved. Familiar business objects are, for example, customers, employees, products, equipment, and — particularly — orders.

In general, the term material is not perceived synonymous to component. Material generally refers to rather simple initial resources, such as raw material, or information such as documents, evidence, certificates, or similar things, whereas component as a business object can also refer to semi­finished products.

For the matters covered in this book, the nuances of meaning between the terms product and artifact are of minor importance. We thus use both terms synonymously.




Course section 1.1: Subsections and their intended learning outcomes