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Flashcards in APICS Study Terms Deck (4738):




demand manager

Person who assists sales and marketing in the development and maintenance of sales forecasts and reconciles volume and mix variations in the forecast.D


product audit

The reinspection of any product to verify the adequacy of acceptance or rejection decisions made by inspection and testing personnel.P


twenty-foot equivalent unit (TEU)

A measure of cargo capacity equivalent to a standard container (i.e., 20-feet long, 8-feet wide, and approximately 8-feet high).T


cash-to-cash cycle time

An indicator of how efficiently a company manages its assets to improve cash flow. Inventory days + accounts receivable days – accounts payable days = cash-to-cash cycle time. See: cash conversion cycle.C


process flexibility

The design of the manufacturing system, including operators and machinery, that allows quick changeovers to respond to near-term changes in product volume and mix. A necessary tool in lean and just in time.P


product engineering

The discipline of designing a product or product line to take advantage of process technology and improve quality, reliability, and so forth.P



A group of subassemblies and/or parts that are put together and that constitute a major subdivision for the final product. An assembly may be an end item or a component of a higher level assembly.A


net weight

The weight of an article exclusive of the weights of all packing materials and containers.N


growth rate; and (4) Question marks

low market share, high growth rate. Sometimes this same set of terms is used to categorize products by market share and profitability. See: cash cow, dog, question mark, star.G



1) A job or task, consisting of one or more work elements, usually done essentially in one location. 2) The performance of any planned work or method associated with an individual, machine, process, department, or inspection. 3) One or more elements that involve one of the following: the intentional changing of an object in any of its physical or chemical characteristics; the assembly or disassembly of parts or objects; the preparation of an object for another operation, transportation, inspection, or storage; planning, calculating, or giving or receiving information.O


multinational strategy

A strategy that focuses on opportunities to achieve cross-business and cross-country coordination, thereby enabling economies of scope and an improved competitive position with regard to reducing costs, cross-country subsidization, and so on, to outcompete rivals. See: global strategy. multiphase system Syn: multiple-phase queuing system.M


nonlinear programming

Programming similar to linear programming but incorporating a nonlinear objective function and linear constraints or a linear objective function and nonlinear constraints or both a nonlinear objective function and nonlinear constraints.N



The return of an empty transportation container to its point of origin. See: backhauling.D



Any transaction in which partial or full payment is made with goods instead of money. This often applies in international trade.C


production cycle elements

Elements of manufacturing strategy that define the span of an operation by addressing the following areas: (1) the established boundaries for the firm’s activities, (2) the construction of relationships outside the firm’s boundaries (i.e., suppliers, distributors, and customers), (3) circumstances under which changes in established boundaries or relationships are necessary, (4) the effect of such boundary or relationship changes on the firm’s competitive position. The production cycle elements must explicitly address the strategic implications of vertical integration in regard to (a) the direction of such expansion, (b) the extent of the process span desired, and (c) the balance among the resulting vertically linked activities.P


planned receipt

1) An anticipated receipt against an open purchase order or open production order. 2) Syn: planned order receipt.P



A group technique applied by a team leader to effectively manage a situation, discussion, or meeting. For example, in a situation where a dominant spokesperson or person of authority monopolizes a discussion, the gatekeeper will intervene by requesting additional group member’s input.G


idle inventory

The inventory generally not needed in a system of linked resources. From a theory of constraints perspective, idle inventory generally consists of protective inventory and excess inventory. See: excess inventory, productive inventory, protective inventory.I


plan make

Establishing plans for action over time that project appropriation of production resources to meet production requirements.P


material index

The total of raw material weights divided by final product weight.M


seven tools of quality

Syn: basic seven tools of quality.S



Any undertaking, venture, initiative, or business organization with a defined mission.E


cloud computing

An emerging way of computing where data is stored in massive data centers which can be accessed from any connected computers over the internet.C


decision theory

A systematic approach to making decisions, particularly when uncertainty is present.D


sampling distribution

The distribution of values of a statistic calculated from samples of a given size.S



An entity restricted to providing services such as settling accounts.C


forty-foot equivalent unit

A measure of container capacity that is equivalent to two 20-foot equivalency units; that is, a unit equivalent to 40-feet long, 8-feet wide, and approximately 8-feet high.F


equal employment opportunity (EEO)

In the United States, the laws prohibiting discrimination in employment because of race or color, sex, age, handicap status, religion, and national origin.E


any-quantity rate

A situation in which no quantity discount is available for large shipments.A


work sequence

Ordered activities performed to accomplish work.W


direct-deduct inventory transaction processing

A method of inventory bookkeeping that decreases the book (computer) inventory of an item as material is issued from stock, and increases the book inventory as transactions processed for each item. The key concept here is that the book record is updated coincidentally with the movement of material out of or into stock. As a result, the book record is a representation of what is physically in stock. Syn: discrete issue.D


funnel experiment

An experiment that demonstrates the effects of tampering. Marbles are dropped through a funnel in an attempt to hit a flat-surfaced target below. The experiment shows that adjusting a stable process to compensate for an undesirable result or an extraordinarily good result will produce output that is worse than if the process had been left alone. See: tampering.F


harmonic smoothing

An approach to forecasting based on fitting some set of sine and cosine functions to the historical pattern of a time series. Syn: seasonal harmonics.H



Contracts for the sale and delivery of commodities at a future time, made with the intention that no commodity be delivered or received immediately.F



In statistics, the spread in a series of observations. For example, the anticipated demand for a particular product might vary from a low of 10 to a high of 500 per week. The range would therefore be 500 – 10, or 490.R



Paying for materials before receipt to prepare for incoming products and goods.P



Delivery date minus due date. Lateness may be positive or, in the case of early jobs, negative. See: earliness, tardiness.L


order entry

The process of accepting and translating what a customer wants into terms used by the manufacturer or distributor. The commitment should be based on the available-to-promise (ATP) line in the master schedule. This can be as simple as creating shipping documents for finished goods in a make-to-stock environment, or it might be a more complicated series of activities, including design efforts for make-to-order products. See: master schedule, order service.O


electronic commerce application

A computer interface between two organizations that is used to carry out business transactions electronically.E


business process management (BPM)

A business discipline or function that uses business practices, techniques, and methods to create and improve business processes. BPM is a holistic approach to the use of appropriate process-related business disciplines to gain business performance improvements across the enterprise or supply chain. It promotes business effectiveness and efficiency while striving for innovation, flexibility, and integration with technology. Most process improvement disciplines or activities can be considered as BPM.B


priority control

The process of communicating start and completion dates to manufacturing departments in order to execute a plan. The dispatch list is the tool normally used to provide these dates and priorities based on the current plan and status of all open orders.P



1) A written document authorizing an agent to vote a shareholder’s stock at a shareholder meeting. 2) The agent designated in 1).P


organizational development (OD)

The process of building and strengthening core competencies and organizational capabilities that enable the execution of the business strategy and provide a sustainable competitive advantage over time. Organizational development includes staffing the organization, building core competencies and organizational capabilities, and continuous improvement initiatives in response to the changing business environment.O O


failure mode effects analysis (FMEA)

A procedure in which each potential failure mode in every sub-item of an item is analyzed to determine its effect on other subitems and on the required function of the item.F


bar code

A series of alternating bars and spaces printed or stamped on parts, containers, labels, or other media, representing encoded information that can be read by electronic readers. A bar code is used to facilibar B tate timely and accurate input of data to a computer system.B


contestable market

A market having low entry costs.C


open-end purchase order

A purchase agreement similar to a blanket purchase order that provides the added convenience of being able to negotiate additional items and expiration dates.O


MRP nervousness

See: nervousness.M


customer-defined attributes

The characteristics of a good or service that are viewed as being important in addressing the needs of the customer. See: house of quality.C


horizontal dependency

The relationship between the components at the same level in the bill of material, in which all must be available at the same time and in sufficient quantity to manufacture the parent assembly. See: vertical dependency.H


resource-constrained schedule

Syn: resource-limited schedule. See: drum-buffer-rope.R



Abbreviation for firm planned order.F


design for quality

A product design approach that uses quality measures to capture the extent to which the design meets the needs of the target market (customer attributes), as well as its actual performance, aesthetics, and cost. See: total quality engineering.D


parametric estimating

The use of statistical and historical data to estimate activity parameters such as time or budget.P


ISO certification

In quality management, denotes that a company has obtained an ISO9000 quality standard. Also, it is the process by which a firm achieves such certification. I


product differentiation

A strategy of making a product distinct from the competition on a nonprice basis such as availability, durability, quality, or reliability.P


backward integration

The process of buying or owning elements of the production cycle and channel of distribution back toward raw material suppliers. See: vertical integration.B



Abbreviation for quick-response manufacturing.Q


part type

A code for a component within a bill of material (e.g., regular, phantom, reference).P P


total cost of quality

A sum that includes costs associated with rework, scrap, warranty costs, and other costs associated with preventing or resolving quality problems.T


authorized deviation

Permission for a supplier or the plant to manufacture an item that is not in conformance with the applicable drawings or specifications.A


engineering drawings

A visual representation of the dimensional characteristics of a part or assembly at some stage of manufacture.E


weight confirmation

The process of confirming a shipment arrival only by confirming the correct weight has been delivered.W


supply chain risk

The variety of possible events and their outcomes that could have a negative effect on the flow of goods, services, funds, or information resulting in some level of quantitative or qualitative loss for the supply chain.S


order release

The activity of releasing materials to a production process to support a manufacturing order. See: planned order release.O



Organizations intermediate in the manufacturing and distribution process, such as wholesalers and retailers.R


aggregate lead time

Syn: cumulative lead time.A


tipping point

The moment when something unique becomes common. The term often refers to the popular acceptance of new technologies. The concept has been applied to any process in which beyond a certain point, the rate at which the process (chemical, sociological, environmental, etc.) proceeds increase dramatically.T



An easy-to-read management tool similar to an automobile’s dashboard designed to address a wide range of business objectives by combining business intelligence and data integration infrastructure. See: executive dashboard.D


base inventory level

The inventory level made up of aggregate lot-size inventory plus the aggregate safety stock inventory. It does not take into account the anticipation inventory that will result from the production plan. The base inventory level should be known before the production plan is made. Syn: basic stock. See: aggregate inventory.B


pallet ticket

A label to track pallet-sized quantities of end items produced to identify the specific sublot with specifications determined by periodic sampling and analysis during production.P


piece parts

Individual items in inventory at the simplest level in manufacturing (e.g., bolts and washers).P


repair bill of material

In remanufacturing, the bill of material defining the actual work required to return a product to service. This bill is constructed based on inspection and determination of actual requirements. See: disassembly bill of material.R



Abbreviation for failure mode effects and criticality analysis.F


project team directory

A list of team member names, roles, and communication information.P


put-away time

The lead time between when a raw material or component arrives and when the items are available in the store. Syn: dock-to-stock time.P



A worldwide network of computers belonging to businesses, governments, and universities that enables users to share information in the form of files and to send electronic messages and have access to a tremendous store of information.I


remedial maintenance

Unscheduled maintenance performed to return a product or process to a specified performance level after a failure or malfunction.R


proportional rate

A lower rate given to specific parts of a shipment, instead of the entire rate being charged for only one part of the shipment.P


cumulative receipts

A cumulative number, or running total, as a count of parts received in a series or sequence of shipments. The cumulative receipts provide a number that can be compared with the cumulative figures from a plan developed by cumulative MRP.C


traveling requisition

Syn: traveling purchase requisition.T



A plan that includes an estimate of future costs and revenues related to expected activities. The budget serves as a pattern for and a control over future operations.B


machine downtimes

Periods during which a machine is unavailable due to tool breakage, worker unavailability, machine breakdown, maintenance, teardown, setup, and other factors.M



Syn: profit.I



1) The classification of quantities of items that have been assigned to specific orders but have not yet been released from the stockroom to production. It is an “uncashed” stockroom requisition. 2) A process used to distribute material in short supply. Syn: assignment. See: reservation.A


product-based layout

A type of layout where resources are arranged sequentially according to the steps required to make a particular complex product.P



A measure of the design of a product or process in terms of its ability to be produced easily, consistently, and with high quality.M


full pegging

The ability of a system to automatically trace requirements for a given component all the way up to its ultimate end item, customer, or contract number. Syn: contract pegging.F


single-minute exchange of die (SMED)

The concept of setup times of less than 10 minutes, developed by Shigeo Shingo in 1970 at Toyota. See: single-digit setup.S


functional organizational structure

An organizational structure based on functional specialization, such as sales, engineering, manufacturing, finance, and accounting.F



The assigned location where a worker performs the job; it could be a machine or a workbench.W



See: blocking.B


lean manufacturing

Syn: lean production.L


cargo container capacity

The inside usable cubic volume of a container.C


linking tactical plans to strategic plans

production planning and sales and operations planning. See: operational planning, strategic planning, tactical plan.T



The process of designating stock for a specific order or schedule. See: allocation.R


direct loading

Syn: cross-docking.D D


contract labor

Self-employed individuals or firms contracted by an organization to perform specific services on an intermittent or short-term basis.C


location audit

A methodical verification of the location records for an item or group of items in inventory to ensure that when the record shows an item’s location, it is, in fact, in that location.L



Abbreviation for non-vessel-operating common carrier.N O



A custom-made product or service. The term originally was applied to clothing, but now applies to software as well.B


North American Free Trade Agreement (NAFTA)

An agreement among the United States, Canada, and Mexico to promote economic prosperity by reducing trade barriers.N


semifinished goods

Products that have been stored uncompleted awaiting final operations that adapt them to different uses or customer specifications.S


engineering change order

Syn: engineering change.E


final assembly

The highest level assembled product, as it is shipped to customers.F


part standardization

A program for planned elimination of superficial, accidental, and deliberate differences between similar parts in the interest of reducing part and supplier proliferation.P


strategic deployment

See hoshin planning.S


product velocity

Units sold per period.P



In project management, a network requirement that activity A must be finished before activity B can start. See: logical relationship.F



A choice or feature added to the good or service offered to the customer for customizing the end product. An accessory enhances the capabilities of the product but is not necessary for the basic function of the product. In many companies, an accessory means that the choice does not have to be specified before shipment but can be added at a later date. In other companies, this choice must be made before shipment. See: feature.A



The concept of packing products on the incoming shipments so they can be easily sorted at intermediate warehouses or for outgoing shipments based on final destination. The items are carried from the incoming vehicle docking point to the outgoing vehicle docking point without being stored in inventory at the warehouse. Cross-docking reduces inventory investment and storage space requirements. Syn: direct loading.C


commodity procurement strategy

The purchasing plan for a family of items. This would include the plan to manage the supplier base and solve problems.C



A six sigma improvement process comprised of five stages: (1) Determine the nature of the problem, (2) Measure existing performance and commence recording data and facts that offer information about the underlying causes of the problem, (3) Study the information to determine the root causes of the problem, (4) Improve the process by effecting solutions to the problem, and (5) Monitor the process until the solutions become ingrained.D


break-even analysis

A study of the number of units, or amount of time, required to recoup an investment.B


line efficiency

A measure of actual work content versus cycle time of the limiting operation in a production line. Line efficiency (percentage) is equal to the sum of all station task times divided by the longest task time multiplied by the number of stations. In an assembly line layout, the line efficiency is 100 percent minus the balance delay percentage.L


lot size

The amount of a particular item that is ordered from the plant or a supplier or issued as a standard quantity to the production process. Syn: order quantity.L


field finished goods

Finished goods kept in distribution centers or warehouses.F


intermediate part

Material processed beyond raw material and used in higher level items. See: component.I


capacity cushion

Extra capacity that is added to a system after capacity for expected demand is calculated. Syn: safety capacity. See: protective capacity.C


end-of-life management

Planning for the phase-out of one product and the phase-in of a new product to avoid both the excessive inventory of and an out-of-stock situation with the old product before the replacement product is available.E


count point

A point in a flow of material or sequence of operations at which parts, subassemblies, or assemblies are counted as being complete. Count points may be designated at the ends of lines or upon removal from a work center, but most often they are designated as the points at which material transfers from one department to another. Syn: pay point.C



Abbreviation for total quality engineering.T



Work beyond normal established working hours that usually requires that a premium be paid to the workers.O


blend formula

An ingredient list for a product in process industries. See: batch card, manufacturing order, mix ticket.B


supply chain visibility

The ability of supply chain partners to access demand and production information from trading partners.S



A term used to describe the process of designing a part or product to meet or exceed the performance requirements expected by customers.F


systems view

A holistic approach to management that considers how actions impact the production process. Included within the system are suppliers, product design, process design, the production process, distribution, and customers.S T


special warranty

An assurance that the product is fit for the specific purpose for which the product will be used. See: general warranty, warranty.S


program evaluation and review technique (PERT)

In project management, a network analysis technique in which each activity is assigned a pessimistic, most likely, and optimistic estimate of its duration. The critical path method is then applied using a weighted average of these times for each node. PERT computes a standard deviation of the estimate of project duration. See: critical path method, graphical evaluation and review technique, and network analysis.P


loss leader pricing

Pricing some products below cost to attract customers into the store, in the expectation that they will buy other items as well.L



A six sigma process that outlines the steps needed to create a completely new business process or product at six sigma quality levels.D


tactical planning

The process of developing a set of tactical plans (e.g., production plan, sales plan, marketing plan). Two approaches to tactical planning exist for


financial forecasting

Estimating a firm’s future financial statements.F


part master record

Syn: item record.P


multiple-factor productivity

A measure of the productivity of two or more inputs, especially labor, capital costs, energy, and material. See: single-factor productivity.M


hub-and-spoke systems

In warehousing, a system that has a hub (or center point) where sorting or transfers occur, and the spokes are outlets serving the destinations related to the hub.H


plan-do-check-action (PDCA)

A four-step process for quality improvement. In the first step (plan), a plan to effect improvement is developed. In the second step (do), the plan is carried out, preferably on a small scale. In the third step (check), the effects of the plan are observed. In the last step (action), the results are studied to determine what was learned and what can be predicted. The plan-do-check-¬action cycle is sometimes referred to as the Shewhart cycle (because Walter A. Shewhart discussed the concept in his book Statistical Method from the Viewpoint of Quality Control) and as the Deming circle (because W. Edwards Deming introduced the concept in Japan; the Japanese subsequently called it the Deming circle). Syn: plan-do-check-act cycle, Shewhart circle of quality, Shewhart cycle. See: Deming circle.P


incremental cost

1) Cost added in the process of finishing an item or assembling a group of items. If the cost of the components of a given assembly equals $5 and the additional cost of assembling the components is $1, the incremental assembly cost is $1, while the total cost of the finished assembly is $6. 2) Additional cost incurred as a result of a decision.I


black belt

In six sigma, team leader for process improvement. Responsibilities include defining, measuring, and controlling the improvement process.B



Abbreviation for efficient consumer response.E


Wagner-Whitin algorithm

A mathematically complex, dynamic lot-sizing technique that evaluates all possible ways of ordering to cover net requirements in each period of the planning horizon to arrive at the theoretically optimum ordering strategy for the entire net requirements schedule. See: discrete order quantity, dynamic lot sizing.W


auxiliary item

An item required to support the operation of another item.A


finite loading

Assigning no more work to a work center than the work center can be expected to execute in a given time period. The specific term usually refers to a computer technique that involves calculating shop priority revisions in order to level load operation by operation. Syn: finite scheduling. See: drum-buffer-rope.F



Abbreviation for employee assistance program.E


grievance procedures

Methods identified in a collective bargaining agreement to resolve problems that develop or to determine if a contract has been violated.G


process flow

The sequence of activities that when followed results in a product or service deliverable. See flow process chart, process chart.P


product data management (PDM)

A system that tracks the configurations of parts and bills of material and also the revisions and history of product designs. It facilities the design release, distributes the design data to multiple manufacturing sites, and manages changes to the design in a closed-loop fashion. It provides the infrastructure that controls the design cycle and manages change.P


distribution curve

A graphic display of numerous data points showing the mean and frequency of occurrences of observations on a chart. See: normal distribution curve.D



The income received by a company from sales or other sources, such as stock owned in other companies.R


labor ticket

Syn: labor claim.L


risk adjusted discount rate

A discount rate that is higher for more risky projects and lower for less risky projects.R


flow rack

A storage rack using metal shelves equipped with wheels or rollers allowing product to flow from the back to the front of the rack to make the product more accessible for order picking.F



A storage device for handling material in pallets. A rack usually provides storage for pallets arranged in vertical sections with one or more pallets to a tier. Some racks accommodate more than one-pallet-deep storage.R


lost sale

A potential sale that was not completed, usually due to lack of availability of the item in question.L


quality, cost, delivery (QCD)

Key measurements of customer satisfaction. Kaizen activity strives to improve these measurements.Q Q


intermediately positioned strategy

To position a warehouse halfway between the supplier and the customer.I


activity definition

The specific work to be performed that defines a project deliverable.A


uniform resource locator (URL)

A means of locating web pages regardless of where they are on the internet.U


straight-line schedule

Syn: gapped schedule.S


spare parts

Syn: service parts.S


brand manager

The person in charge of the marketing program for a given brand. Syn: product manager.B


protective capacity

The resource capacity needed to



A data processing file-management approach designed to establish the independence of computer programs from data files. Redundancy is minimized, and data elements can be added to, or deleted from, the file structure without necessitating changes to existing computer programs.D


standard components

Components of a finished product that are easy to manufacture and are made by many suppliers, making them more of commodity to buy at low cost.S


calendar time

The passage of days or weeks as in the definition of lead time or scheduling rules, in contrast with running time.C


life cycle costing

In evaluating alternatives, the consideration


centralized authority

Limiting the ability to make decisions to a few managers.C


exponential smoothing forecast

A type of weighted moving average forecasting technique in which past observations are geometrically discounted according to their age. The heaviest weight is assigned to the most recent data. The smoothing is termed exponential because data points are weighted in accordance with an exponential function of their age. The technique makes use of a smoothing constant to apply to the difference between the most recent forecast and the critical sales data, thus avoiding the necessity of carrying historical sales data. The approach can be used for data that exhibit no trend or seasonal patterns. Higher order exponential smoothing models can be used for data with either (or both) trend and seasonality.E


zone of freedom

Legal authority for transportation companies to charge, within limits, more than their variable costs.Z


disbursement list

Syn: picking list.D


demand management process

A process that weighs both customer demand and a firm’s output capabilities, and tries to balance the two. Demand management is made up of planning demand, communicating demand, influencing demand, and prioritizing demand.D


pallet positions

A calculation that determines the space needed for the number of pallets for inventory storage or transportation based on a standard pallet size. Pallet dimensions vary around the globe, but are typically a constant in regional markets. The term is frequently used to quote storage and transportation rates.P


material specification

An explanation of the characteristics of material to be produced or purchased.M


worker productivity

The value of total goods and services produced by an employee divided by the labor hours required to produce those goods and services.W



Syn: phantom bill of material.B B


np chart

A control chart for evaluating the stability of a process in terms of the total number of units in a sample in which an event of a given classification occurs. Syn: number of affected units chart.N



Abbreviation for Environmental Protection Agency.E


first expiry first out (FEFO)

A picking methodology assuring that the usage shelf life of items is optimized. Years ago, first in, first out (FIFO) was satisfactory as the F shelf-life days for items often didn’t vary and FIFO often coincided with the expiry dates. However, re-testing is frequently done to extend shelf-life dates on some lots or batches, while other lots may have typical shelf-life dates shortened because of quality or processes. Thus, FEFO was introduced by software vendors to provide this picking methodology for use with shelf-life controlled items.F



An acronym for Supply Chain Operations Reference-model.S


central processing unit (CPU)

The electronic processing unit of a computer, where mathematical calculations are performed.C


average cost system

In cost accounting, a method of inventory valuation for accounting purposes. A weighted average (based on quantity) of item cost is used to determine the cost of goods sold (income statement) and inventory valuation (balance sheet). Average cost provides a valuation between last-in, first-out and first-in, first-out methods. See: first in, first out; last in, first out.A



The interdependence of economies globally that results from the growing volume and variety of international transactions in goods, services, and capital, and also from the spread of new technology.G



Abbreviation for equal employment opportunity.E


target market

1) A fairly homogeneous group of customers to whom a company wishes to appeal. 2) A definable group of buyers to which a marketer has decided to market.T


tank inventory

Goods stored in tanks. These goods may be raw materials, intermediates, or finished goods. The description of inventory as tank inventory indicates the necessity of calculating the quantity on hand from the levels within the tanks.T


marginal utility

The additional usefulness and enjoyment received from consuming one more unit of a good or service.M


graphical user interface (GUI)

A connection between the computer and the user employing a mouse and icons so that the user makes selections by pointing at icons and clicking the mouse.G


standing order

Syn: blanket purchase order.S



One of the four Ps (product, price, place, and promotion) that constitute the set of tools used to direct the business offering to the customer. Promotion is the mechanism whereby information about the product offering is communicated to the customer and includes public relations, advertising, sales promotions, and other tools used to persuade customers to purchase the product offering. See: four Ps.P


rush order

An order that for some reason must be fulfilled in less than normal lead time.R S


channel equity

Important affiliations between suppliers and purchasers that improve value for everyone.C


supplier-owned inventory

A system in which the supplier not only controls the inventory, but owns it and keeps in close to the consumer until it is purchased by the consumer. Falls within the supplier managed inventory umbrella.S



The acquisition of the assets and liabilities of one company by another.M


key supply chain processes

Important steps in producing, marketing, and servicing goods and services.K L



A condition occurring when more personnel are on the payroll than are required to produce the planned output.U



A large box in which commodities to be shipped are placed.C


dual sourcing

A method for sourcing requirements by using a few suppliers for the same products or services. See: multisourcing, multiple sourcing, single sourcing.D


product quality

Attribute that reflects the capability of a product to satisfy customers’ needs.P


strategic planning

The process of developing a strategic plan. See: operational planning, strategic plan, tactical planning.S



The function of planning, scheduling, and controlling activities related to mode, vendor, and movement of inventories into and out of an organization.T


statistical quality control (SQC)

The application of statistical techniques to control quality. Often the term statistical process control is used interchangeably with statistical quality control, although statistical quality control includes acceptance sampling as well as statistical process control.S


upper specification limit (USL)

In statistical process control, the line that defines the maximum acceptable level of random output. See: tolerance limits.U


time bucket

A number of days of data summarized into a columnar or row-wise display. A weekly time bucket would contain all of the relevant data for an entire week. Weekly time buckets are considered to be the largest possible (at least in the near and medium term) to permit effective MRP.T



Abbreviation for early start date.E


configuration audit

A review of the product against the engineering specifications to determine whether the engineering documentation is accurate, up-to-date, and representative of the components, subsystems, or systems being produced.C


unplanned issue

An issue transaction that updates the quantity on hand but for which no allocation exists.U


bin trips

Usually, the number of transactions per stockkeeping unit per unit of time.B


implied contract

A binding agreement inferred from the actions of the parties.I


hybrid strategy

Syn: hybrid production method.H


enterprise resources planning (ERP)

Framework for organizing, defining, and standardizing the business processes necessary to effectively plan and control an organization so the organization can use its internal knowledge to seek external advantage.E


integrated services digital network (ISDN)

Emerging international standard for using public phone lines to transmit voice and data over the same line.I


warranty costs

All of the costs associated with a warranty; these include shipping, receiving, repairing, replacement, and the materials needed for repair or replacement.W



A device used to control access to a company’s data from the internet or other outside sources.F


EOQ = 1

Reducing setup time and inventory to the point where it is economically sound to produce in batches with a size of one. Often EOQ = 1 is an ideal to strive for, like zero defects.E


fishbone diagram

Syn: cause-and-effect diagram.F


equal runout method

Syn: equal runout quantities.E


product number

Syn: item number.P


price elasticity

The degree of change in buyer demand in response to changes in product price. It is calculated by dividing the percentage of change in quantity bought by the percentage of change of price. Prices are considered elastic if demand varies with changes in price. If demand changes only slightly when the price changes, demand is said to be inelastic. For example, demand for most medical services is relatively inelastic, but demand for automobiles is generally elastic.P


unit-of-measure conversion

A standard conversion ratio that a company or its computer system uses to quickly enter in the amount delivered based on a known quantity within each unit of measure (e.g., a case of soda contains 24 cans).U


industrial market

A market where most or all customers are individuals or businesses that buy products to produce other goods and services. Syn: business market, producer market. See: consumer market, government market, institutional market.I



Abbreviation for capacity-constrained resource.C


order winners

Those competitive characteristics that cause a firm’s customers to choose that firm’s goods and services over those of its competitors. Order winners can be considered to be competitive advantages for the firm. Order winners usually focus on one (rarely more than two) of the following strategic initiatives: price/cost, quality, delivery speed, delivery reliability, product design, flexibility, after-market service, and image. See: order losers, order qualifiers.O


elasticity of demand (supply)

The ratio of the percentage change in quantity demanded (supplied) to the percentage change in price.E


manual rescheduling

The most common method of rescheduling open orders (scheduled receipts). Under this method, the MRP system provides information on the part numbers and order numbers that need to be rescheduled. Due dates and order quantity changes required are then analyzed and changed by material M planners or other authorized persons. Syn: planner intervention. Ant: automatic rescheduling.M


customer order servicing system

An automated system for order entry, where orders are keyed into a local terminal and a bill-of-material translator converts the catalog ordering numbers into required manufacturing part numbers and due dates for the MRP system. Advanced systems contain customer information, sales history, forecasting information, and product option compatibilicustomer C ty checks to facilitate order processing, “cleaning up” orders before placing a demand on the manufacturing system. Syn: configuration system, sales order - configuration.C


ISO 14000 Series Standards

A series of generic environmental management standards developed by the International Organization of Standardization, which provide structure and systems for managing environmental compliance with legislative and regulatory requirements and affect every aspect of a company’s environmental operations.I


right-to-work state

A state that allows workers to choose whether or not to join a union.R


cross plot

Syn: scatter chart.C


aggregate plan

A plan that includes budgeted levels of finished goods, inventory, production backlogs, and changes in the workforce to support the production strategy. Aggregated information (e.g., product line, family) rather than product information is used, hence the name aggregate plan.A


percent value-added time

The percentage of total cycle time that is spent on activities that provide value to the product or customer.P


systems concept

An attempt to create the most efficient complete system as opposed to the most efficient individual parts. A “whole process” or “whole company” operating system that is driven by cause and effect.S


turnaround time

Syn: setup.T


prime operations

Critical or most significant operations whose production rates must be closely planned.P


knowledge-based system

A computer program that employs knowledge of the structure of relations and reasoning rules to solve problems by generating new knowledge from the relationships about the subject.K


management by walking around (MBWA)

The management technique of managers touring a facility on a regular basis to talk with workers and staff about problems, trends, and potential solutions.M


consolidation warehouses

Collection points that receive less-than-truckload (LTL) shipments from regional sources and then ships in cargo load or truckload quantities to a manufacturing facility.C


activity driver

In activity-based cost accounting, a yardstick of demands placed on an activity by given cost objects. Its purpose is to assign activity costs to cost objects.A


sequential-sampling plan

Controlling quality by repeatedly sampling units and each time making a decision to accept or reject a batch or to continue sampling.S


financial management

The function concerned with ensuring the availability of funds for research and development, operations, and marketing.F


defects per million opportunities

The quantity of defects


system constraint

In supply chain management, the supply chain is viewed as the complete system. The system constraint is the resource at any one of the trading partners that is most limiting the end-to-end throughput of the supply chain.S


reasonable rate

A pricing strategy that allows a company to profit, but not to achieve monopolistic profits. Normally determined by industry pricing analysis.R R


performance measurement

Syn: performance measure.P


item number

A number that serves to uniquely identify an item. Syn: part number, product number, stock code, stock number.I


helper application

Software that assists the browser when audio, video, or large images are requested.H


surge tank

A container to hold output from one process and feed it to a subsequent process. It is used when line balancing is not possible or practical or only on a contingency basis when downstream equipment is nonoperational. S



The amount of good or acceptable material available after the completion of a process. Usually computed as the final amount divided by the initial amount converted to a decimal or percentage. In manufacturing planning and control systems, yield is usually related to specific routing steps or to the parent item to determine how many units should be scheduled to produce a specific number of finished goods. For example, if 50 units of a product are required by a customer and a yield of 70 percent is expected then 72 units (computed as 50 units divided by .7) should be started in the manufacturing process. Syn: material yield. See: scrap factor, yield factor.Y


bill-of-material accuracy

The degree to which a list of specified items conforms to administrative specifications and with correct quantities.B


single integrator solution

An enterprise resources planning implementation chosen entirely from one vendor.S


cost of poor quality

The cost associated with providing poor quality products or services. There are four categories of costs: (1) internal failure costs (costs associated with defects found before the customer receives the product or service); (2) external failure costs (costs associated with defects found after the customer receives the product or service); (3) appraisal costs (costs incurred to determine the degree of conformance to quality requirements); and (4) prevention costs (costs incurred to keep failure and appraisal costs to a minimum). Syn: cost of quality.C


authentication key

In information systems, a key that ensures that data in an electronic business transaction A are not changed. It can also be used as a form of digital signature.A



An unfilled customer order or commitment. A backorder is an immediate (or past due) demand against an item whose inventory is insufficient to satisfy the demand. See: stockout.B B


pilot test

1) In computer systems, a test before final acceptance of a new business system using a subset of data with engineered cases and documented results. 2) Generally, production of a quantity to verify manufacturability, customer acceptance, or other management P requirements before implementation of ongoing production. Syn: pilot, walkthrough.P


blanket order

Syn: blanket purchase order.B


packing list

A list showing merchandise packed, a copy of which is sent to the consignee to help verify the shipment.P


shop calendar

Syn: manufacturing calendar.S



The reprioritizing of jobs to a lower level of activity. All extraordinary actions involving these jobs stop.D


six sigma

A methodology that furnishes tools for the improvement of business processes. The intent is to decrease process variation and improve product quality.S


scenario planning

A planning process that identifies critical events before they occur and use this knowledge to determine effective alternatives.S


network logic

Activity dependencies that make up a project schedule network diagram.N



The further processing of a product to adjust specific physical and chemical properties to within specification ranges.D


future order

An order entered for shipment at some future date.F


long ton

Two thousand two hundred and forty pounds.L


outbound logistics

Every process that is involved in the shipping and holding of products after they are completed until they are received by the customer.O


design engineering

The discipline consisting of process engineering and product engineering.D


future reality tree (FRT)

In the theory of constraints, a logic-based tool for constructing and testing potential solutions before implementation. The objectives are to (1) develop, expand, and complete the solution and (2) identify and solve or prevent new problems created by implementing the solution.F


parent/child relationship

Refers to the logical linkage between higher and lower level items in the bill of material.P


date code

A label on products with the date of production. In food industries, it is often an integral part of the lot number.D


spend analysis

A purchasing activity in which a firm explores its spending patterns to identify opportunities to reduce costs or improve quality. This process is a part of value analysis as well as cost-benefit analysis.S


one-piece flow

A concept that items are processed directly from one step to the next, one unit at a time. This helps to shorten lead times and lines of communication, thus more quickly identifying problems.O


inventory investment

The dollars that are in all levels of inventory.I


integrated logistics service providers

Organizations that provide one or many logistics services to a customer for a fee.I


organizational breakdown structure

In project management, a representation of a project’s organization relating work packages to organizational units.O



A general term that may refer to such diverse items as a purchase order, shop order, customer order, planned order, or schedule.O



Abbreviation for EDI for administration, commerce, and transport.E EDI for administration, commerce, and transport


working capital

Syn: net working capital.W


return on assets (ROA)

Net income for the previous 12 months divided by total assets. See: return on owner’s equity (ROE).R


queuing theory

The collection of models dealing with waiting line problems; for example, problems for which customers or units arrive at some service facility at which waiting lines or queues may build. Syn: waiting line theory. See: queuing analysis.Q


cash budget

A budget based on planned cash receipts and disbursements of a plant, division, or firm.C


quotation expiration date

The date on which a quoted price is no longer valid.Q R



A group of end items whose similarity of design and manufacture facilitates their being planned in aggregate, whose sales performance is monitored together, and, occasionally, whose cost is aggregated at this level.F



Acronym for Occupational Safety and Health Act.O


period order quantity

A lot-sizing technique under which the lot size is equal to the net requirements for a given number of periods (e.g., weeks into the future). The number of periods to order is variable, each order size equalizing the holding costs and the ordering costs for the interval. See: discrete order quantity, dynamic lot sizing.P


production management

1) The planning, scheduling, execution, and control of the process of converting inproduction P puts into finished goods. 2) A field of study that focuses on the effective planning, scheduling, use, and control of a manufacturing organization through the study of concepts from design engineering, industrial engineering, management information systems, quality management, inventory management, accounting, and other functions as they affect the transformation process.P


bulk issue

Parts issued from stores to work-in-process inventory, but not based on a job order. They are issued in quantities estimated to cover requirements of individual work centers and production lines. The issue may be used to cover a period of time or to fill a fixed-size container.B


scatter diagram

Syn: scatter chart.S



Syn: effective date.E


integrated change control

In project management, a system under which any changes are coordinated across the entire project.I


proof of delivery

Carrier’s records indicating the person signing for delivery with the date, time, and other related information.P


distribution by value

Syn: ABC classification.D


order service

The function that encompasses receiving, entering, and promising orders from customers, distribution centers, and interplant operations. Order service is also typically responsible for responding to customer inquiries and interacting with the master scheduler on availability of products. In some companies, distribution and interplant requirements are handled separately. See: order entry, order promising.O


statistical process control (SPC)

The application of statistical techniques to monitor and adjust an operation. Often the term statistical process control is used interchangeably with statistical quality control.S


manufacturing planning and control system (MPC)

A closed-loop information system that includes the planning functions of production planning (sales and operations planning), master production scheduling, material requirements planning, and capacity requirements planning. Once the plan has been accepted as realistic, execution begins. The execution functions include inputoutput control, detailed scheduling, dispatching, anticipated delay reports (department and supplier), and supplier scheduling. A closed-loop MRP system is one example of a manufacturing planning and control system.M



Abbreviation for manufacturing resource planning.M



Abbreviation for plan for every part.P


cost engineer

An engineer whose judgment and experience are used in the application of scientific principles and techniques to problems of cost estimation and cost control in business planning, profitability analysis, project management and production planning, scheduling, and control.C


ISO/TS 16949

A standard written by the International Automotive Task Force that applies only to automotive companies. It includes quality management system; management responsibility; resource management; product realization; and measurement, analysis, and improvement. See: QS 9000.I



Packages and lots that move from suppliers to a carrier terminal and are sorted and then combined with similar shipments from another supplier’s container load or truckload for travel to a final destination. See: milk run.C



1) A person or organization receiving a good, service, or information. See: external customer, internal customer. 2) In project management, every project has a customer who may be internal or external to the organization and who is responsible for the final project acceptance.C



Abbreviation for national stock number.N


zero defects

A performance standard developed by Philip B. Crosby to address a dual attitude in the workplace: People are willing to accept imperfection in some areas, while in other areas, they expect the number of defects to be zero. This dual attitude has developed as a result of the conditioning that people are human and humans make mistakes. However, the zerodefects methodology states that if people commit themselves to watching details and avoiding errors, they can move closer to the goal of zero defects. The performance standard that must be set is “zero defects,” not “close enough.”Z


measures constraint

A common misnomer. Bad measures are not the constraint. Rather, bad measures hinder effective constraint management by inhibiting the ability to fully exploit and/or subordinate to the constraint.M


move time

The time that a job spends in transit from one operation to another in the plant.M


line of balance planning

A project planning technique using a lead-time offset chart and a chart of required final assembly completions to graph a third bar chart showing the number of each component that should be completed to date. This bar chart forms a descending line, and aggregate component completions are then plotted against this line of balance. This is a crude form of material planning.L



Authorization to accept an item that, during production or upon inspection, is found to depart from specified requirements, but nevertheless is considered suitable for use as is or after rework.W


value-driven enterprise

An organization that is designed and managed to add utility from the viewpoint of the customer in the transformation of raw materials into a finished good or service.V


performance measurement baseline

An approved plan used to compare against actual execution to identify variances for management control.P


make-or-buy decision

The act of deciding whether to produce an item internally or buy it from an outside supplier. Factors to consider in the decision include costs, capacity availability, proprietary and/or specialized knowledge, quality considerations, skill requirements, volume, and timing.M


quick-response program (QRP)

A system of linking final retail sales with production and shipping schedules back through the chain of supply; employs point-of-sale scanning and electronic data interchange, and may use direct shipment from a factory to a retailer.Q


inventory diversion

The shipment of parts against a project or contract other than the original project or contract for which the items were purchased.I


to its cause. In the second phase

the remedial journey the team journeys from the cause to its remedy.D



Abbreviation for total waste management.T


demand deposits

Deposits that can be withdrawn on demand or paid to a third party by check.D


pallet rack

A single- or multiple-level structure for storage used to support high stacking of palletized loads.P


order-to-delivery cycle

The period of time that starts when the customer places an order and ends when the customer receives the order.O


replacement cost

A method of setting the value of inventories based upon the cost of the next purchase.R



A tax levied by a government on the importation, exportation, or use and consumption of goods.D


process focused

A type of manufacturing organization in which both plant and staff management responsibilities are delineated by production process. A highly centralized staff coordinates plant activities and intracompany material movements. This type of organization is best suited to companies whose dominant orientation is to a technology or a material and whose manufacturing processes tend to be complex and capital intensive. See: product focused, process-focused organization.P



A production environment where a good or service can be assembled after receipt of a customer’s order. The key components (bulk, semi-finished, intermediate, subassembly, fabricated, purchased, packing, and so on) used in the assembly or finishing process are planned and usually stocked in anticipation of a customer order. Receipt of an order initiates assembly of the customized product. This strategy is useful where a large number of end products (based on the selection of options and accessories) can be assembled from common components. Syn: finish-to-order. See: make-to-order, make-to-stock.A


marginal analysis

A decision rule that optimality occurs where incremental revenue equals incremental cost.M


exempt positions

Positions that do not require the payment of overtime because they meet the tests of executive, supervisory, or administrative activity, as defined under the Fair Labor Standards Act.E


total cost of ownership (TCO)

In supply chain management, the total cost of ownership of the supply delivery system is the sum of all the costs associated with every activity of the supply stream. The main insight that TCO offers to the supply chain manager is the understanding that the acquisition cost is often a very small portion of the total cost of ownership.T T


base demand

The percentage of a company’s demand that derives from continuing contracts and/or existing customers. Because this demand is well known and recurring, it becomes the basis of management’s plans. Syn: baseload demand.B


nonevident failure

Failure occurring in either a product or a production process that is not immediately evident. This may be indicative of a faulty design.N


family contracts

A purchase order that groups families of similar parts together to obtain pricing advantages and a continuous supply of material.F


Fair Labor Standards Act (FLSA)

Federal law that governs the definitions of management and labor and establishes wage payment and hours worked and other employment practices.F



Abbreviation for one-touch exchange of die.O


inventory returns

Items returned to the manufacturer as defective, obsolete, overages, and so forth. An inventory item record transaction records the return or receipt into physical stores of materials from which the item may be scrapped.I



Syn: make-to-order.P


turnkey system

1) Computer packages that are already prepared by a hardware manufacturer or software house and are ready to run. 2) Any system of machines that is ready for immediate use.T


manufacturing strategy

A collective pattern of decisions that acts upon the formulation and deployment of manufacturing resources. To be most effective, the manufacturing strategy should act in support of the overall strategic direction of the business and provide for competitive advantages (edges).M


trend component

A component of demand, usually describing the impact of increasing or decreasing growth on demand. See: time series analysis.T


master file

A main reference file of information, such as the item master file or work center file. See: detail file, item master file.M


supply chain planning

The determination of a set of policies and procedures that govern the operation of a supply chain. Planning includes the determination of marketing channels, promotions, respective quantities and timing, inventory and replenishment policies, and production policies. Planning establishes the parameters within which the supply chain will operate.S


drop-dead date

The last possible date to apply influence to a future activity.D


phantom bill of material

A bill-of-material coding and structuring technique used primarily for transient (nonstocked) subassemblies. For the transient item, lead time is set to zero and the order quantity to lot-for-lot. A phantom bill of material represents an item that is physically built, but rarely stocked, before being used in the next step or level of manufacturing. This permits MRP logic to drive requirements straight through the phantom item to its components, but the MRP system usually retains its ability to net against any occasional inventories of the item. This technique also facilitates the use of common bills of material for engineering and manufacturing. Syn: blowthrough, transient bill of material. See: pseudo bill of material.P


relevant costs

Those costs incurred because of a decision. The costs would not have resulted unless the decision was made and implemented. They are relevant to the decision.R


hybrid purchasing organization

A mix of the centralized


innovative products

Products that tend to have a high profit margin, be unique, have less competition, and have dynamic demand.I


compensation laws

Laws designed to pay employees for injuries sustained on the job.C


in-transit lead time

The time between the date of shipment (at the shipping point) and the date of receipt (at the receiver’s dock). Orders normally specify the date by which goods should be at the dock. Consequently, this date should be offset by in-transit lead time for establishing a ship date for the supplier.I



A device connected to a bar-code reader to identify a bar code.W


arrival rate

In queuing theory, the value or distribution describing how often a person or thing arrives for service.A



In MRP and MPS, the capability to identify for a given item the sources of its gross requirements and/or allocations. Pegging can be thought of as active where-used information. See: requirements traceability.P



1) The interval of time during which a system or process, such as seasonal demand or a manufacturing operation, periodically returns to similar initial conditions. 2) The interval of time during which an event or set of events is completed.C


process benchmarking

Benchmarking focused on the target firm’s business processes, including process flows, operating systems, and process technologies. See: benchmarking.P



Abbreviation for customer relationship management and customer relations management.C


demand uncertainty

The uncertainty or variability in demand as measured by the standard deviation, mean absolute deviation (MAD), or variance of forecast errors.D


continuous flow (production)

Syn: continuous production.C


vendor scheduling

Syn: supplier scheduling.V


dispatch list

A listing of manufacturing orders in priority sequence. The dispatch list, which is usually communicated to the manufacturing floor via paper or electronic media, contains detailed information on priority, location, quantity, and the capacity requirements of the manufacturing order by operation. Dispatch lists are normally generated daily and oriented by work center. Syn: work center schedule, priority report.D



The scattering of the observations of a frequency distribution around its average.D



The group that produces the goods and/or services that a company sells.O


gravity models

An approach used for locating facilities at the “center of gravity.” Gravity is determined by the product of the masses of two bodies divided by the square of the distance between them. In gravity models, the population of each neighborhood in the region is used as the mass, and driving time is used as the distance.G



In contract law, an obligation that is to the detriment of one party (promisee) or to the benefit of the other party (promisor).C


final assembly department

The name for the manufacturing department where the product is assembled. See: blending department, pack-out department.F F


operation costing

A method of costing used in batch manufacturing environments when products produced have common, as well as distinguishing, characteristics; for example, suits. The products are identified and costed by batches or by production runs, based on the variations.O


differentiate its product; (3) Differentiated oligopoly

A few companies produce partially differentiated products or services that are marketed within a given area. Differentiation may be based on quality, features, styling, or services offered along with the product; (4)


electronic mail (email)

A technology for handling mail electronically.E


process chart

A chart that represents the sequence of work or the nature of events in process. It serves as a basis for examining and possibly improving the way the work is carried out. Syn: operations process chart. See: flow process chart, process flow.P


hybrid manufacturing process

Syn: hybrid production method.H



1) The ability of the manufacturing system to respond quickly, in terms of range and time, to external or internal changes. Six different categories of flexibility can be considered: mix flexibility, design changeover flexibility, modification flexibility, volume flexibility, rerouting flexibility, and material flexibility (see each term for a more detailed discussion). In addition, flexibility involves concerns of product flexibility. Flexibility can be useful in coping with various types of uncertainty (regarding mix, volume, and so on). 2) The ability of a supply chain to mitigate, or neutralize, the risks of demand forecast variability, supply continuity variability, cycle time plus lead-time uncertainty, and transit time plus customs-clearance time uncertainty during periods of increasing or diminishing volume.F


product segments

The shared information between a plan-of-resources and a production rule for a specific product. It is a logical grouping of personnel resources, equipment resources, and material specifications required to carry out the production step.P


hoshin kanri

See hoshin planning.H



In information systems, an internet document containing both text and hypertext links to other pages that are stored on the server.P


task interleaving

An attempt at reducing/eliminating “deadheading,” or driving an empty material handling vehicle. A warehouse management system directs a material carrying vehicle to put away materials as it goes to pick up other materials.T


strategic performance measurements

Measurements that relate to the long-term goals of a business. Examples include profitability, market share, growth, and productivity. See: global performance measurements, operational performance measurements.S S



1) The act of evenly distributing the work elements between the two hands performing an operation. 2) The state of having approximately equal working times among the various operations in a process, or the stations on an assembly line. See: balance delay.B



Abbreviation for transportation management system.T


manufacturing release

The issuance of a manufacturing order into the factory.M


mean absolute deviation (MAD)

The average of the absolute values of the deviations of observed values from some expected value. MAD can be calculated based on observations and the arithmetic mean of those observations. An alternative is to calculate absolute deviations of actual sales data minus forecast data. These data can be averaged in the usual arithmetic way or with exponential smoothing. See: forecast error, tracking signal.M



The predetermined arrangement of the characters of data for computer input, storage, or output.F



Determining the order in which a manufacturing facility is to process a number of different jobs in order to achieve certain objectives.S



An objective comparison of actions to policies and plans.A


market surveys

Questionnaires designed to get feedback from potential customers about demand for a product or service.M


process costing

A cost accounting system in which the costs are collected by time period and averaged over all the units produced during the period. This system can be used with either actual or standard costs in the manufacture of a large number of identical units.P


planning time fence

A point in time denoted in the planning horizon of the master scheduling process that marks a boundary inside of which changes to the schedule may adversely affect component schedules, capacity plans, customer deliveries, and cost. Outside the planning time fence, customer orders may be booked and changes to the master schedule can be made within the constraints of the production plan. Changes inside the planning time fence must be made manually by the master scheduler. Syn: planning fence. See: cumulative lead time, demand time fence, firm planned order, planned order, planning horizon, time fence.P


incremental utilization heuristic

Using a worker’s full capacity by adding one task at a time (in priority order) up to the maximum capacity, or waiting for the utilization to fall and then adding more tasks.I


intermittent production

A form of manufacturing in which the jobs pass through the functional departments in lots, and each lot may have a different routing. See: job shop.I I


custom product

A product that is made to meet the requirements of specific customers.C


fixed reorder cycle inventory model

A form of independent demand management model in which an order is placed every n time units. The order quantity is variable and essentially replaces the items consumed during the current time period. Let M be the maximum inventory desired at any time, and let x be the quantity on hand at the time the order is placed. Then, in the simplest model, the order quantity will be M – x. The quantity M must be large enough to cover the maximum expected demand during the lead time plus a review interval. The order quantity model becomes more complicated whenever the replenishment lead time exceeds the review interval, because outstanding orders then have to be factored into the equation. These reorder systems are sometimes called fixed-interval order systems, order level systems, or periodic review systems. Syn: fixedinterval order system, fixed order quantity system, order level system, periodic review system, time-based order system. See: fixed reorder quantity inventory model, hybrid inventory system, independent demand item management models, optional replenishment model.F


to become virtual organizations

reducing costs, improving quality, reducing delivery lead time, and improving due-date performance.B


standard output

An estimate of what should be produced, given a certain level of resources. Can be stated in units per hour or units per period (day, shift, etc.).S



Abbreviation for yard management system.Y


Southern Common Market (Mercosur)

A market/ customs alliance between Argentina, Brazil, Paraguay, and Uruguay created by the Treaty of Ascuncion (1991).S


gain sharing plans

Syn: gain sharing.G


master black belt

In six sigma, quality expert capable of implementing strategic quality efforts including teaching other facilitators (black belts) the quality applications within all levels of the organization.M


count frequency

The number of times an item in inventory is counted during a period of time. Generally, highvalue inventories are counted more frequently than lowvalue items, although properties other than value can influence the frequency.C


contract line items number (CLIN)

Specific items that are priced separately on a contract.C



The practice of removing a pallet of merchandise where the space is not exhausted in an orderly fashion, resulting in a vacant space not usable for storage of other items. This is one of the hidden costs of warehousing.H



A quantity that can assume any of a given set of values. Ant: constant.V



An amount owed to creditors. It is generally equal to the total assets in a company less the equity. See: liabilities.D



1) A warehouse location methodology that includes some of the characteristics of fixed and random location methods. Zone locations hold certain kinds of items, depending on physical characteristics or frequency of use. 2) The specific warehouse location assigned to an order picker. In picking items for an order, the stock picker gets only the items for each order that are within his/her zone. The picker then fills the next order for items from his/her zone.Z


unit of measure

The unit in which the quantity of an item is managed (e.g., pounds, each, box of 12, package of 20, case of 144).U


project plan

In project management, a document that has been approved by upper management that is to be used in executing and controlling a project. It documents assumptions, facilitates communication, and documents the approved budget and schedule. It may exist at a summary or a detailed level.P



An interactive combination of two or more of the following: text, graphics, video, audio, and animation all controlled by a personal computer.M



A production control person whose primary duty is expediting.E


where-used list

A listing of every parent item that calls for a given component, and the respective quantity required, from a bill-of-material file. See: implosion.W


batch number

Syn: lot number.B


rerouting flexibility

Accommodating unavailability of equipment by quickly and easily using alternate machines in the processing sequence.R R



1) A backup capability, coming either from extra machines or from extra components within a machine, to reduce the effects of breakdowns. 2) The use of one or more extra or duplicating components in a system or equipment (often to increase reliability).R


P chart

A control chart for evaluating the stability of a process in terms of the percentage of the total number of units in a sample in which an event of a given classification occurs over time. P charts are used where it is difficult or costly to make numerical measurements or where it is desired to combine multiple types of defects into one measurement. Syn: percent chart.P


time, all items in the order

in the correct quantity and


performance variance

The difference between a performance standard and actual performance.P


longest-task-time (LTT) heuristic

The method of attaching additional jobs to a workstation based on priority order, with the longest task scheduled first.L


trend control chart

A control chart in which the deviation of the subgroup average, X-bar, from an expected trend in the process level is used to evaluate the stability of a process.T



In inventory control, a raw material that is found at all locations.U


Shewhart cycle

Syn: plan-do-check-action.S


and decentralized purchasing format

usually decentralized at the corporate level and centralized at the business unit level.H


sub-tier supplier

A supplier who delivers a product to a direct supplier to the customer.S


optimization models

A class of mathematical models used when the modeler wishes to find the ideal (maximum or minimum) value of some objective function subject to a set of constraints.O


analysis of variance (ANOVA)

A statistical analysis system that estimates what portion of variation in a dependent variable is caused by variation in one or more independent variables. It also produces a number used to infer whether any or all of the independentdependent variable relationships have statistical significance (i.e., have not been caused by randomness in the data).A


product-market-focused organization

A firm in which individual plants are dedicated to manufacturing a specific product or product group.P


human relations movement

A movement started in the early 1900s among managers who believed that employees are humans who should be treated with respect in the workplace.H



1) An industrial process in which worn-out products are restored to like-new condition. In contrast, a repaired product normally retains its identity, and only those parts that have failed or are badly worn are replaced or serviced. 2) The manufacturing environment where worn-out products are restored to likenew condition.R


time and materials (T&M) contract

A type of contract that is a hybrid between cost-reimbursable and fixedtime contracts.T


foreign trade zone (FTZ)

Areas supervised by U.S. Customs and Border Protection that are considered to be outside U.S. territory. Material in the zone is not subject to duty taxes, which are payable when the material is moved outside the zone for consumption. There is no limit on the time material may remain in the zone. Internationally, similar areas are called free trade zones.F F


balancing the line

In repetitive manufacturing, regulating the assignments given to each workstation in order to ensure that all tasks at each workstation on the line are done in as close to the same time as possible.B


possession utility

Product desirability created by marketing efforts.P



Acronym for what you see is what you get.W X


marginal revenue

The incremental sales dollars received when the level of output of some operation is increased by one unit.M


loose standard

A standard time greater than that required by a qualified worker with normal skill and effort.L



Abbreviation for material review board.M


domestic corporation

A company incorporated in a particular state or country.D



Abbreviation for Institute of Industrial Engineers.I


recency, frequency, monetary (RFM)

Giving customers the highest rating who have bought recently, bought many times, and bought in large amounts.R



The function encompassing the physical receipt of material, the inspection of the shipment for conformance with the purchase order (quantity and damage), the identification and delivery to destination, and the preparation of receiving reports.R


service-oriented architecture (SOA)

A style of information technology (IT) design that guides all aspects of creating and using business services throughout their life cycles, as well as defining and provisioning the IT infrastructure that enables different computer applications to exchange data and participate in business processes, regardless of the operating systems or programming languages underlying those applications.S


depreciation of a currency

A decrease in the buying power of a country’s currency in terms of other countries’ goods and services.D


efficiency variance

In cost accounting, the difference between the actual volume of a resource used and the budgeted volume, multiplied by the budgeted or standard price.E


scan-based trading (SBT)

As an item is sold, scanned information is sent to the manufacturer and creates a replacement order of that item. Used often in large retail store chains as well as large volume product producers.S


master pack

A large, protective box used to contain smaller boxes. This reduces materials handling activities.M


mix ticket

A listing of all the raw materials, ingredients, components, and such that are required to perform a mixing, blending, or similar operation. This listing is often printed on a paper ticket, which also may be used as a turnaround document to report component quantities actually used, final quantity actually produced, etc. This term is often used in batch process or chemical industries. See: assembly parts list, batch card, blend formula, manufacturing order.M


automatic relief

A set of inventory bookkeeping methods that automatically adjusts computerized inventory records based on a production transaction. Examples of automatic relief methods are backflushing, directdeduct, and pre-deduct processing.A


network analysis

In project management, the calculation of early and late start and finish times for those activities not yet completed. See: critical path method, graphical evaluation and review technique, and program evaluation and review technique (PERT).N


quick asset ratio

A measure of a firm’s financial stability. It is defined as (current assets – inventory)/current liabilities. A value greater than one is desirable. Syn: quick ratio, acid test, acid test ratio.Q


rework lead time

The time required to rework material in-house or at a supplier’s location.R



A rental agreement lasting an extended period.L



A special vessel to contain a chemical reaction.R


support functions

Activities such as accounting and information systems that do not directly participate in production but that are nevertheless essential.S


lot tolerance percent defective (LTPD)

Expressed in percent defective, the poorest quality in an individual lot that should be accepted. Note: The LTPD is used as a basis for some inspection systems and is commonly associated with a value for a small consumer’s risk.L


reorder quantity

1) In a fixed-reorder quantity system of inventory control, the fixed quantity that should be ordered each time the available stock (on-hand plus onorder) falls to or below the reorder point. 2) In a variable reorder quantity system, the amount ordered from time period to time period will vary. Syn: replenishment order quantity.R


project production

Production in which each unit or small group of units is managed by a project team created especially for that purpose.P


out-of-pocket costs

Costs that involve direct payments such as labor, freight, or insurance, as opposed to depreciation, which does not.O


estimate at completion (EAC)

Estimated cost of an activity or project when the defined scope of work will be finished. It is the actual cost-to-date plus estimate-tocomplete for uncompleted activities.E


c chart

A control chart for evaluating the stability of a process in terms of the count of events of a given classification occurring in a sample. Syn: count chart, number defective chart.C


production planning

A process to develop tactical plans based on setting the overall level of manufacturing output (production plan) and other activities to best satisfy the current planned levels of sales (sales plan or forecasts), while meeting general business objectives of profitability, productivity, competitive customer lead times, and so on, as expressed in the overall business plan. The sales and production capabilities are compared, and a business strategy that includes a sales plan, a production plan, budgets, pro forma financial statements, and supporting plans for materials and workforce requirements, and so on, is developed. One of its primary purposes is to establish production rates that will achieve management’s objective of satisfying customer demand by maintaining, raising, or lowering inventories or backlogs, while usually attempting to keep the workforce relatively stable. Because this plan affects many company functions, it is normally prepared with information from marketing and coordinated with the functions of manufacturing, sales, engineering, finance, materials, and so on. See: aggregate planning, production plan, sales and operations planning, sales plan.P


job shop

1) An organization in which similar equipment is organized by function. Each job follows a distinct routing through the shop. 2) A type of manufacturing process used to produce items to each customer’s specifications. Production operations are designed to handle a wide range of product designs and are performed at fixed plant locations using general-purpose equipment. Syn: jobbing. See: intermittent production, project manufacturing.J


rate basis point

The center of shipping in a specific area; used to determine shipping rates.R


clean technology

A technical measure taken to reduce or eliminate at the source the production of any nuiscleanup ● collaborative planning C ance, pollution, or waste and to help save raw materials, natural resources, and energy.C


decoupling inventory

An amount of inventory kept between entities in a manufacturing or distribution network to create independence between processes or entities. The objective of decoupling inventory is to disconnect the rate of use from the rate of supply of the item. See: buffer.D


single exponential smoothing

Syn: first-order smoothing.S


sourcing decisions

High-level decisions regarding which products or services will be produced within a company and which will be purchased from external supply chain partners. These decisions normally are based on supplier cost and capability by comparison to producing the product in house.S



Abbreviation for flexible manufacturing system.F



The fact that an item has a limited shelf life and may be fragile and require special handling.P



One distinguishing feature of pure services. Pure services cannot be inventoried or carried in stock for long periods of time.I


first-piece inspection

Syn: first-article inspection.F


standard hours

Syn: standard time.S


workplace organization

The arrangement of tools, equipment, materials, and supplies according to their frequency of use. Those items that are never used are removed from the workplace, and those items that are used frequently are located for fast, easy access and Z replacement. This concept extends the idea of “a place for everything and everything in its place.”W


option overplanning

Typically, scheduling extra quantities of a master schedule option greater than the expected sales for that option to protect against unanticipated demand. This schedule quantity may only be planned in the period where new customer orders are currently being accepted, typically just after the demand time fence. This technique is usually used on the second level of a two-level master scheduling approach to create a situation where more of the individual options are available than of the overall family. The historical average of demand for an item is quantified in a planning bill of material. Option overplanning is accomplished by increasing this percentage to allow for demands greater than forecast. See: demand time fence, hedge, planning bill of material.O


private carrier

A group that provides transportation exclusively within an organization. Ant: common carrier.P


tender offer

An offer by an organization to buy a block of shares directly from shareholders of another organization.T



In statistics, values near the middle of results from a process.C



Abbreviation for intermodal marketing company.I


minimum weight

In transportation, the rate discount volume.M


avoidable delay

The delay controlled by a worker and therefore not allowed in the job standard.A


demand curve

A graphic description of the relationship between price and quantity demanded in a market, assuming that all other factors stay the same. Quantity demanded of a product is measured on the horizontal axis for an array of different prices measured on the vertical axis.D



Assigning multiple tasks to be performed concurrently, often the assignment of multiple picking orders to a single picker to pick concurrently.I



A product that is usually manufactured together or sequentially because of product or process similarities. See: by-product.C


life testing

The simulation of a product’s life under controlled real-world conditions to see if it holds up and performs as required.L


dispatch(ing) board

Syn: control board.D



1) The work required to change a specific machine, resource, work center, or line from making the last good piece of item A to making the first good piece of item B. 2) The refitting of equipment to neutralize the effects of the last lot produced (e.g., teardown of the just-completed production, preparation of the equipment for production of the next scheduled item). Syn: changeover, turnaround, turnaround time.S


future worth

1) The equivalent monetary value at a designated future date based on the time value of money. 2) The monetary sum, at a given future time, that is equivalent to one or more sums at given earlier times when interest is compounded at a given rate. See: time value of money.F


production lead time

Syn: manufacturing lead time.P


material usage variance

The difference between the planned or standard requirements for materials to produce a given item and the actual quantity used for a particular instance of manufacture.M


summarized where-used

A form of an indented whereused bill of material that shows all parents in which a given component is used, the required quantities, and all the next-level parents until the end item is reached. Unlike the indented where-used, it does not list the levels of manufacture.S


compound yield

The cumulative effect of yield loss at multiple operations within the manufacturing cycle.C


vision statement

An organization’s statement of its vision. See: vision.V


pattern recognition

Classifying raw data based on experience or statistical information.P


cash flow statement

Syn: funds flow statement.C C


process sheet

Detailed manufacturing instructions issued to the plant. The instructions may include specifications on speeds, feed, temperatures, tools, fixtures, and machines and sketches of setups and semifinished dimensions.P



Syn: parts requisition.R


market segment

A group of potential customers sharing some measurable characteristics based on demographics, psychographics, lifestyle, geography, benefits, and so forth.M


certificate of analysis

A certification of conformance to quality standards or specifications for products or materials. It may include a list or reference of analysis results and process information. It is often required for transfer of the custody of materials.C


procurement credit card

Credit cards with a predetermined credit limit issued to buyers. Syn: corporate purchasing cards.P


optional replenishment model

A form of independent demand item management model in which a review of inventory on hand plus on order is made at fixed intervals. If the actual quantity is lower than some predetermined threshold, a reorder is placed for a quantity M – x, where M is the maximum allowable inventory and x is the current inventory quantity. The reorder point, R, may be deterministic or stochastic, and in either instance is large enough to cover the maximum expected demand during the review interval plus the replenishment lead time. The optional replenishment model is sometimes called a hybrid system because it combines certain aspects of the fixed reorder cycle inventory model and the fixed reorder quantity inventory model. See: fixed reorder cycle inventory model, fixed reorder quantity inventory model, hybrid inventory system, independent demand item management models.O


warehouses (distribution centers)

Facilities used to store inventory. Decisions driving warehouse management include site selection, number of facilities in the system, layout, and methods of receiving, storing, and retrieving goods.W


order interval

The time period between the placement of orders.O


service factor

Syn: safety factor.S


production leveling

Syn: level production method.P


integrated enterprise

A business or organization made up of individuals who have acquired the knowledge and skills to work with others to make the organization a greater success than the sum of each individual’s output. Integration includes increased communication and coordination between individuals and within and across teams, functions, processes, and organizations over time. See: cross-functional integration.I



Pulling material for an order from inventory before the material is required. This action is often taken to identify shortages, but it can lead to increased problems in availability and inventory accuracy.S


order qualifiers

Those competitive characteristics that a firm must exhibit to be a viable competitor in the marketplace. For example, a firm may seek to compete on characteristics other than price, but in order to “qualify” to compete, its costs and the related price must be within a certain range to be considered by its customers. Syn: qualifiers. See: order losers, order winners.O


activity-based costing system

A set of activity-based cost accounting models that collectively define data on an organization’s resources, activities, drivers, objects, and measurements.A


indirect retail locations

A retailer who sells products to the public but who buys products indirectly through a third-party distributor, rather than directly from the seller.I


synthetic time standard

Syn: predetermined motion time.S


business cycle

A period of time marked by long-term fluctuations in the total level of economic activity. Measures of business cycle activity include the rate of unemployment and the level of gross domestic product.B


takt time

Sets the pace of production to match the rate of customer demand and becomes the heartbeat of any lean production system. It is computed as the available production time divided by the rate of customer demand. For example, assume demand is 10,000 units per month, or 500 units per day, and planned available capacity is 420 minutes per day. The takt time = 420 minutes per day/ 500 units per day = 0.84 minutes per unit. This takt time means that a unit should be planned to exit the production system on average every 0.84 minutes. Syn: tact time.T





research and development (R&D)

A function that performs basic and applied research and develops potential new products.R



An organized collection of records.F



A secondary market for parts and accessories used to repair or enhance an item.A


hybrid layout

This layout combines two or more layout types.H


sample standard deviation

A key measure that represents the spread or dispersion of a sample.S


extended enterprise

The notion that supply chain partners form a larger entity. See: supply chain community.E


output standard

The expected number of units from a process against which actual output will be measured.O


mean squared error (MSE)

A measure of statistical variation in a forecast. Computed by squaring the forecast errors and then taking the average of the sum of the squared errors.M



Acronym for first in, first out.F


modular design strategy

The strategy of planning and designing products so that components or subassemblies can be used in current and future products or assembled to produce multiple configurations of a M product. Automobiles and personal computers are examples of modular designs.M


company stock

generally tied into the compensation/ benefits package. The intention is to give workers a feeling of participation in the management and direction of the company.E


cold chain

A term referring to the storage, transfer, and supply chain of temperature-controlled products. Industries in the cold chain include food and agriculture, pharmaceuticals, and chemicals.C


normal and proper usage

Operation of the equipment with a program of regular maintenance in accordance with generally accepted practices and within the rated capacity and service classification for which it was specified and designed.N



Abbreviation for standard batch quantity.S



Abbreviation for Certified in Production and Inventory Management.C


effectivity date

Syn: effective date.E


standard service

Service that is the same for most customers.S


production reporting and status control

A vehicle to provide feedback to the production schedule and allow for corrective action and maintenance of valid on-hand and on-order balances. Production reporting and status control normally include manufacturing order authorization, release, acceptance, operation start, delay reporting, move reporting, scrap and rework reporting, order close-out, and payroll interface. Syn: manufacturing order reporting, shop order reporting.P


OC curve

Abbreviation for operating characteristic curve.O


economic value added

In managerial accounting, the net operating profit earned above the cost of capital for a profit center.E



1) A quantity of materials awaiting further processing. It can refer to raw materials, semifinished stores or hold points, or a work backlog that is purposely maintained behind a work center. 2) In the theory of constraints, buffers can be time or material and support throughput and/or due date performance. B Buffers can be maintained at the constraint, convergent points (with a constraint part), divergent points, and shipping points.B



Abbreviation for file transfer protocol.F


conference room pilot

Simulation of all business processes from end-to-end within the new information system in a controlled environment.C


attribute data

Go/no-go information. The control charts based on attribute data include percent chart, number of affected units chart, count chart, count-per-unit chart, quality score chart, and demerit chart. See: attribute, attribute inspection.A


critical path lead time

Syn: cumulative lead time.C


minimum order quantity

An order quantity modifier, applied after the lot size has been calculated, that increases the order quantity to a pre-established minimum.M


market research

Syn: marketing research.M



A payment to stockholders either in cash or stock.D


JIT supplier environment

To effectively participate as a supplier under just in time (JIT), a company must supply components and subassemblies in exact quantities, delivery time, and quality. Shipments are made within narrow time windows that are rigidly enforced. Virtually every component must be delivered on time and be within specifications.J


assignable cause

A source of variation in a process that can be isolated, especially when it’s significantly larger magnitude or different origin readily distinguishes it from random causes of variation. Syn: special cause. See: common causes, assignable variation.A



Abbreviation for drum-buffer-rope.D


indirect costs

Costs that are not directly incurred by a particular job or operation. Certain utility costs, such as plant heating, are often indirect. An indirect cost is typically distributed to the product through the overhead rates.I


category management

In marketing, an organizational structure giving managers responsibility for planning and implementing marketing systems for certain product lines.C


business service

The software aspect of electronic commerce. It performs activities, such as encryption, that are required to support business transactions.B


labor rate variance

Labor rate variance is the sum of the actual wage rate minus the standard wage rate multiplied by the actual number of labor hours. The variance is unfavorable if the actual rate is greater than the standard rate.L


mixed production strategy

Syn: hybrid production method. See: chase production method, level production method.M


unit load concept

Waiting for a container or pallet to be filled before the material is moved.U


pure services

Services that result in few or no tangible products to the customer (e.g., education).P


return material authorization (RMA)

1) A form that must be completed that describes the product returned and why it was returned. 2) A number given to authorize the acceptance of returned items. 3) Should require signatory authorization to return the goods.R


run size

Syn: standard batch quantity.R


short-term planning

The function of adjusting limits or levels of capacity within relatively short periods of time, such as parts of a day, a day, or a week.S


neural network

A software system loosely based on how the brain works. It tries to simulate the multiple layers of elements called neurons. Each neuron is tied to several neighbors with a value that signifies the strength of the connections. Learning is accomplished by changing the values to cause the network to report appropriate results. Neural networks have been used for market forecasts and other applications.N



To combine a number of packages into one unit by attaching them together.U



The process of comparing actual to planned progress.M



Any unique manufactured or purchased part, material, intermediate, subassembly, or product.I


purchasing lead time

The total lead time required to obtain a purchased item. Included here are order preparation and release time; supplier lead time; transportation time; and receiving, inspection, and put-away time. See: lead time, supplier lead time, time-to-product.P


shipping lead time

The number of working days normally required for goods to move between a shipping and receiving point, plus acceptance time in days at the receiving point.S


line item

One item on an order, regardless of quantity.L


Pareto chart

A bar graph that displays the results of a Pareto analysis. It may or may not display the 80-20 varPareto P iation, but it does show a distinct variation from the few compared to the many.P


Deming circle

The concept of a continuously rotating wheel of plan-do-check-action (PDCA) used to show the need for interaction among market research, design, production, and sales to improve quality. See: plan-docheck- action.D



Abbreviation for quality, cost, delivery.Q



A prescribed set of well-defined rules or processes for solving a problem in a finite number of steps (e.g., the full statement of the arithmetic procedure for calculating the reorder point).A


methods-time measurement (MTM)

A system of predetermined motion-time standards, a procedure that analyzes and classifies the movements of any operation into certain human motions and assigns to each motion a predetermined time standard selected by the nature of the motion and the conditions under which it will be made.M


material-dominated scheduling (MDS)

A technique that schedules materials before processors (equipment or capacity). This technique facilitates the efficient use of materials. MDS can be used to schedule each stage in a process flow scheduling system. MRP systems use material-dominated scheduling logic. See: processordominated scheduling.M


Pareto’s law

A concept developed by Vilfredo Pareto, an Italian economist, that states that a small percentage of a group accounts for the largest fraction of the impact, value, and so on. In an ABC classification, for example, 20 percent of the inventory items may constitute 80 percent of the inventory value. See: ABC classification, 80-20.P



Acronym for last in, first out.L


customer/order fulfillment process

A series of customers’ interactions with an organization through the order filling process, including product/service design, production and delivery, and order status reporting.C


customer partner

A customer organization with which a company has formed a customer-supplier partnership. See: outpartnering.C


industrial trucks

Vehicles powered by hand, electricity, or propane for material handling activities in a warehouse. More flexible but slower and less constant than conveyors, they are not in a fixed position. Industrial trucks are the most-common form of materials handling equipment.I


learning curve

A curve reflecting the rate of improvement in time per piece as more units of an item are made. A planning technique, the learning curve is particularly useful in project-oriented industries in which new products are frequently phased in. The basis for the learning curve calculation is that workers will be able to produce the product more quickly after they get used to making it. Syn: experience curve, manufacturing progress curve.L


feasibility study

An analysis designed to establish the practicality and cost justification of a given project and, if it appears to be advisable to do so, to determine the direction of subsequent project efforts.F



Variability of an action. Often measured by the range or standard deviation of a particular dimension.S


overstated master production schedule

A schedule that includes either past due quantities or quantities that are greater than the ability to produce, given current capacity and material availability. An overstated MPS should be made feasible before MRP is run.O


flexible automation

Automation that provides short setup times and the ability to switch quickly from one product to another.F


travel time

Syn: transit time.T


bona fide

Latin for “in good faith.”B


materials handling system

The system of transportation that receives, moves, and delivers materials during the production or distribution process.M


collaborative transportation management

A method of sharing information among suppliers, buyers, and transporters to add value to the service.C



Abbreviation for mean time to repair.M


export compliance

Cooperating with export rules regarding packaging and documentation.E


offset quantity

Syn: overlap quantity.O


functional test

Measure of a production component’s ability to work as designed to meet a level of performance.F



A copy of the manufacturing order that actually moves with the work through the shop. Syn: shop traveler.T


variable overhead

All manufacturing costs, other than direct labor and direct materials, that vary directly with production volume. Variable overhead is necessary to produce the product, but cannot be directly assigned to a specific product.V



Syn: assemble-to-order.F


hazardous waste

Waste, such as chemicals or nuclear material, that is hazardous to humans or animals and requires special handling.H


statistical thinking

The ability to draw conclusions based on data.S


prevention vs. detection

A term used to contrast two types of quality activities. Prevention refers to those activities designed to prevent nonconformances in goods and services. Detection refers to those activities designed to detect nonconformances already in goods and services. Syn: designing in quality vs. inspecting in quality.P



The procedure of making backup copies of computer files or disks and, in case of loss of or damage to the original, using the backups to restore the files or disks. In such a case, the only work lost is that done since the backup was made.B


trading company

A company that introduces foreign buyers and sellers and arranges all product export/import details, documentation, and transportation.T



A dimension of service quality referring to caring, individualized attention from a service firm.E


exchange rate

The rate at which one currency converts to another.E


inventory velocity

The speed with which inventory passes through an organization or supply chain at a given point in time as measured by inventory turnover. See: inventory turnover.I


process oriented

A characteristic in which the focus is on the interrelated processes in a business environment. It includes the activities to transform inputs into outputs that have value.P


remanufactured parts

Components or assemblies that are refurbished or rebuilt to perform the original function. Syn: refurbished goods, refurbished parts.R



The process of identifying and purchasing the support items and determining the quantity of each support item necessary to operate and maintain a system.P


container on a flatcar (COFC)

A specialized form of containerization in which rail, motor, and sea transport coordinate.C


decision variables

The variables that will be changed to find the optimal solution in an optimization problem.D



Abbreviation for computer numerical control.C


cost performance index (CPI)

A measure of project efficiency. Earned value over actual costs.C


disassembly bill of material

In remanufacturing, a bill of material used as a guide for the inspection in the teardown and inspection process. On the basis of inspection, this bill is modified to a bill of repair defining the actual repair materials and work required. Syn: teardown bill of material. See: repair bill of material.D


double smoothing

Syn: second-order smoothing.D



Abbreviation for business process management.B



The process of determining the where-used relationship for a given component. Implosion can be single-level (showing only the parents on the next higher level) or multilevel (showing the ultimate top-level parent). See: where-used list. Ant: explosion.I



A Japanese word meaning “big room," a command center.O


managerial accounting

A branch of accounting that uses techniques such as break-even analysis, costvolume- profit analysis, make-buy analysis, and others to provide information used in day-to-day decision making.M



Slang abbreviation for regeneration MRP. Pronounced “ree-jen.”R



A fiduciary relationship in which the trustee holds ownership for the benefit of another party (benefactor).T



Acronym for program evaluation and review technique.P


offshore factory

A plant that imports or acquires locally all components and then exports the finished product.O


chase-demand strategy

Syn: chase production method.C


setup costs

Costs such as scrap costs, calibration costs, downtime costs, and lost sales associated with preparing the resource for the next product. Syn: changeover costs, turnaround costs.S



Resiliency in the supply chain is the ability to return to a position of equilibrium after experiencing an event that causes operational results to deviate from expectations. Resiliency is increased by strategically increasing the number of response options and/or decreasing the time to execute those options. Resiliency is improved by risk monitoring and control.R


load projection

Syn: load profile.L


time-based competition (TBC)

A corporate strategy that emphasizes time as the vehicle for achieving and maintaining a sustainable competitive edge. Its characteristics are (1) it deals only with those lead times that are important to the customers; (2) the leadtime reductions must involve decreases in both the mean and the variance; and (3) the lead-time reductions must be achieved through system/process analysis (the processes must be changed to reduce lead times). TBC is a broad-based strategy. Reductions in lead times are achieved by changing the processes and the decision structures used to design, produce, and deliver products to the customers. TBC involves design, manufacturing, and logistical processes.T


local rate

A rate pertaining to two points served by a single carrier.L


standard industrial classification (SIC)

Classification codes that are used to categorize companies into industry groupings.S


hypertext transfer protocol (HTTP)

A protocol that tells computers how to communicate with each other. Most internet addresses begin with http://.H


business process reengineering (BPR)

A procedure that involves the fundamental rethinking and radical redesign of business processes to achieve dramatic organizational improvements in such critical measures of performance as cost, quality, service, and speed. Any BPR activity is distinguished by its emphasis on (1) process rather than functions and products and (2) the customers for the process.B


throughput time

Syn: cycle time (second definition).T


primary operation

A manufacturing step normally performed as part of a manufacturing part’s routing. Ant: alternate operation.P


top management commitment (quality)

In the total quality management philosophy, participation of the highest-level official in the organization’s quality improvement efforts. Participation includes establishing and serving on a quality committee, establishing quality policies and goals, deploying those goals to lower levels of the organization, providing the resources and training that the lower levels need to achieve the goals, participating in quality improvement teams, reviewing organization-wide progress, recognizing those who have performed well, and revising the current reward system to reflect the importance of achieving the quality goals.T


supplier partnership

The establishment of a working relationship with a supplier organization whereby two organizations act as one. Syn: collaborative supply relationship.S


scope change

In project management, a change to a project’s scope, usually requiring an adjustment to the project’s budget and schedule.S S


net present value

The present (discounted) value of future earnings (operating expenses have been deducted from net operating revenues) for a given number of time periods.N



A refund of customs duties paid on material imported and later exported.D


industry analysis

A major study of an industry; its major competitors, customers, and suppliers; and the focus and driving forces within that industry.I



Abbreviation for material safety data sheet.M


composite manufacturing lead time

Syn: cumulative manufacturing lead time.C



Abbreviation for product life cycle management.P


three-point estimate

A project management technique that uses three cost or duration estimates to stand for the optimistic (O), most likely (M), and pessimistic (P) situation. The mean value (MV) is often found using MV=(O+4M+P)/6. This technique can improve the accuracy of cost or duration estimates when underlying assumptions are uncertain.T


launch phase

In this last phase of product development, either the product is fed into the supply chain or the service is made available to consumers.L


secure server

In e-commerce, a web server that protects users’ messages from interception while being transmitted over the internet.S



If a job is finished before its due date, the difference between its completion date and the due date. See: lateness, tardiness.E


Pareto analysis

Use of the Pareto principle in prioritizing or ranking a range of items to separate the vital few from the trivial many.P



A complaint by an employee concerning alleged contract violations handled formally through contractually fixed procedures. If unsettled, a grievance may lead to arbitration.G



The arithmetic average of a group of values. Syn: arithmetic mean.M



A portion of a universe of data chosen to estimate some characteristics about the whole universe. The universe of data could consist of sizes of customer orders, number of units of inventory, number of lines on a purchase order, and so forth.S


control phase

One of the six sigma phases of quality. Process performance is observed, often with control charts, for steady results.C


experience curve

Syn: learning curve.E


scheduled downtime

Planned shutdown of equipment or plant to perform maintenance or to adjust to softening demand.S


channel conflict

Two or more agencies of one business competing for the same customer. For example, retail, catalog, or web sales.C


sales plan

A time-phased statement of expected customer orders anticipated to be received (incoming sales, not outgoing shipments) for each major product family or item. It represents sales and marketing management’s commitment to take all reasonable steps necessary to achieve this level of actual customer orders. The sales plan is a necessary input to the production planning process (or sales and operations planning process). It is expressed in units identical to those used for the production plan (as well as in sales dollars). See: aggregate planning, production plan, production planning, sales and operations planning.S


contributory negligence

A rule under which a defendant may escape liability if it can be shown that the plaintiff was negligent to some extent.C


private key

In information systems, an encryption key that is known only by the sender and receiver of the message. See: public key.P P


late order

Syn: past due order.L


demand shaping

The practice of using the four Ps (product, pricing, placement, and promotion) and other market variables to influence the demand of a product or service so that the demand better matches the available supply. See: four Ps.D



Abbreviation for schedule performance index.S


marketing mix

The concept that marketing strategy selects product, price, promotion, and channel targets in selected markets.M


project manufacturing

A type of manufacturing process used for large, often unique, items or structures that require a custom design capability (engineer-to-order). This type of process is highly flexible and can cope with a broad range of product designs and design changes. Product manufacturing usually uses a fixed-position type layout. See: batch (fourth definition), continuous production, job shop (second definition), process manufacturing, project, repetitive manufacturing.P


reconciling inventory

Comparing the physical inventory figures with the perpetual inventory record and making any necessary corrections.R


econometric model

A set of equations intended to be used simultaneously to capture the way in which dependent and independent variables are interrelated.E


quantity discount model

A variation of the economic order quantity model in which the assumption of a single price is relaxed and there is a schedule of prices based on specific volumes. Syn: price-break model.Q


order policy code

Syn: lot-size code.O



The receipt of an item as being complete and sound.A


return merchandise authorization

Syn: return material authorization.R


online processing

A method of computer processing in which data are processed immediately on entry into the computer.O


treasury stock

Common stock that has been repurchased by the issuing company.T



Materials used in manufacturing that are not normally charged to finished production, such as cutting and lubricating oils, machine repair parts, glue, or tape. Syn: general stores, indirect materials.S


end product

Syn: end item.E


international standards

Standards established by international standards-setting organizations to promote interoperability among operating environments.I


discrete variable

A variable, such as number of defects, that can take on only certain values (such as integers). See: continuous variable.D


inventory planner

Syn: material planner (first definition).I


software as a service

Computer services are provided by a third party that keeps all of the software and hardware in its place of business and the company using the services accesses them via the internet. A very common technique used to outsource technological state-of-theart costs that can be avoided.S


broadcast system

A sequence of specific units to be assembled and completed at a given rate. This sequence is communicated to supply and assembly activities to perform operations and position material so that it merges with the correct assembled unit.B


3D printing

The process of layering materials to make products and components using computer data. Syn: additive manufacturing. See: rapid prototyping.3



The determination of the location of a failure through the use of accessory support and diagnostic equipment.I


executive information system

A software application used by top managers, without assistance, to access information on the current organizational status.E E


post deduct

In a JIT system, work in process materials used to build finished goods are relieved from inventory by multiplying the number of units completed by the number of parts in the bill of material. Effective only if the bill of material is accurate and manufacturing lead times are short. See: backflushing.P


machine hours

The amount of time, in hours, that a machine is actually running. Machine hours, rather than labor hours, may be used for planning capacity for scheduling, and for allocating costs.M


production level

Syn: production rate.P


form utility

The value created by changing a good’s form through a production process.F


motion study

A type of methods study focused on therbligs, basic hand and body movements. See: therblig.M


internal rate of return

The rate of compound interest at which the company’s outstanding investment is repaid by proceeds from the project.I


actual demand

Actual demand is composed of customer orders (and often allocations of items, ingredients, or raw materials to production or distribution). Actual demand nets against or “consumes” the forecast, depending upon the rules chosen over a time horizon. For example, actual demand will totally replace forecast inside the sold-out customer order backlog horizon (often called the demand time fence) but will net against the forecast outside this horizon based on the chosen forecast consumption rule.A


value index

A measure that uses the performance and importance scores for various dimensions of performance for an item or service to calculate a score that indicates the overall value of an item or service to a customer.V


central limit theorem

A theorem that states that a distribution consisting of sample means can be assumed to be normally distributed, even if the population from C which the samples are drawn is not normally distributed.C


spoiled work order

Syn: rework order.S


engineering order

Syn: experimental order.E


electronic commerce (e-commerce)

The use of computer and telecommunication technologies to conduct business via electronic transfer of data and documents.E


expert system

A type of artificial intelligence computer system that mimics human experts by using rules and heuristics rather than deterministic algorithms.E


quick changeover

The ability to shorten machine setups between different machine operation requirements to increase process flexibility. Most concentration is on reducing external setup time first, then on internal setup issues. This reduces economic order quantity, queue and manufacturing lead times, and work in process inventory; it improves quality, process, and material flows.Q


root cause analysis

Analytical methods to determine the core problem(s) of an organization, process, product, market, and so forth. See: current reality tree, five whys, stratification analysis.R


cycle stock

One of the two main conceptual components of any item inventory, the cycle stock is the most active component; the cycle stock depletes gradually as customer orders are received and is replenished cyclically when supplier orders are received. The other conceptual component of the item inventory is the safety stock, which is a cushion of protection against uncertainty in the demand or in the replenishment lead time. Syn: cycle inventory.C



One who appeals a court decision to higher authority.A


double-declining-balance depreciation

A type of accelerated depreciation. See: depreciation.D


design review

A technique for evaluating a proposed design to ensure that the design (1) is supported by adequate materials and materials that are available on a timely basis, (2) will perform successfully during use, (3) can be manufactured at low cost, and (4) is suitable for prompt field maintenance.D


customer acquisition

In marketing, the rate at which new customers are switching to an organization’s brand.C



Reductions of actual quantities of items in stock, in process, or in transit. The loss may be caused by scrap, theft, deterioration, evaporation, and so forth.S



A set of United Nations rules for electronic data interchange. These are international guidelines and standards for the electronic exchange of data regarding trade.E


economic lot size

Syn: economic order quantity.E


Toyota Production System (TPS)

A manufacturing methodology developed at Toyota that has evolved into the concepts of just in time and lean manufacturing.T


long-term planning

Business planning that addresses the strategic needs of the organization. See: business plan, resource planning.L


order promising

The process of making a delivery commitment (i.e., answering the question “When can you ship?”). For make-to-order products, this usually involves a check of uncommitted material and availability of capacity, often as represented by the master schedule available-to-promise. Syn: customer order promising, order dating. See: available-to-promise, order service.O


standard error

A measurement of the variability of statistics such as the sample mean. See: estimate of error.S



A person who purchases a good or service for his or her own use (not for resale). See: customer.C


forward flow scheduling

A procedure for building process train schedules that starts with the first stage and proceeds sequentially through the process structure until the last stage is scheduled.F



The process of recovering (via expensing) a capital investment over a period of time. See: capital recovery.A


transfer pricing

The pricing of goods or services transferred from one segment of a business to another. See: interplant transfer.T


assembly bin

Syn: accumulation bin.A


process capability analysis

A procedure to estimate the parameters defining a process. The mean and standard deviation of the process are estimated and compared to the specifications, if known. This comparison is the basis for calculating capability indexes. In addition, the form of the relative frequency distribution of the characteristic of interest may be estimated. Syn: capability study. See: process capability.P


distribution cost

Those items of cost related to the activities associated with the movement and storage of finished products. Distribution costs can include invendistribution D tory costs, transportation costs, and order processing costs.D


anticipation order

An order placed before an item has been made available for delivery.A


forward integration

Process of buying or owning elements of the production cycle and the channel of distribution forward toward the final customer. See: vertical integration.F



The business function that attempts to predict sales and use of products so they can be purchased or manufactured in appropriate quantities in advance.F


planning horizon

The amount of time a plan extends into the future. For a master schedule, this is normally set to cover a minimum of cumulative lead time plus time for lot sizing low-level components and for capacity changes of primary work centers or of key suppliers. For longer term plans the planning horizon must be long enough to permit any needed additions to capacity. See: cumulative lead time, planning time fence.P


gross margin

The difference between total revenue and the cost of goods sold. Syn: gross profit margin.G


churn reduction

Not losing as many customers to the competition.C


three-bin kanban

Simple kanban structure that focuses on cycling three bins of material continually and provides a visible method to align replenishment with consumption. One bin is ready to ship from the supplier at all times, while two are back to back in manufacturing/production at or near point of use. As the front bin empties, a signal is sent to the supplier to send a full bin and the back bin is issued forward into production. See: kanban.T


theory of constraints accounting

A cost and managerial accounting system that accumulates costs and revenues


synchronous scheduling

Scheduling processes (kanban in just in time and drum-buffer-rope in theory of constraints environments) that focus on synchronizing all operations to the constraint of the system. See: synchronized production.S


material sublot

A uniquely identifiable subset of a material lot containing quantity and location. A sublot may be a single item.M


planned load

The standard hours of work required by the planned production orders.P



A term denoting that transportation charges have been or are to be paid at the point of shipment by the sender.P


on-time in full (OTIF)

A delivery scoring system that sets a target goal, usually in percent, and the deliverer tries to meet that goal of full deliveries and by the delivery date.O


mean absolute percent error (MAPE)

A measure of statistical variation in a forecast. Computed by dividing each absolute forecast error by the actual demand, multiplying that by 100 to get the absolute percentage error, and computing the average.M


backward pass

In the critical path method of project planning, working from the finish node backward through the network logic to the start node to determine the various late start dates and late finish dates. See: critical path method, forward pass.B


time utility

When a delivery gets to a customer at exactly the right time (not early, not late).T T


reorder point

Syn: order point.R


retention efficiency

In marketing, a measurement of how well a company creates repeat customers.R


parts requisition

An authorization that identifies the item and quantity required to be withdrawn from an inventory. Syn: requisition. See: purchase requisition.P



The arrangement of components as specified to produce an assembly.C


coefficient of correlation

A value used to express the relationship between two variables, whether there is a strong or weak correlation. The coefficient of correlation varies from 0 to 1 with values close to 0 indicating no relationship, or a weak relationship, and values close to 1 indicating a strong relationship. The existence of a relationship does not prove causality.C


frequently asked questions (FAQs)

A list of commonly asked questions pertaining to a website (or perhaps software, hardware, and so on) along with the answers to these questions.F


joint venture

An agreement between two or more firms to risk equity capital to attempt a specific business objective.J


risk management planning

The process of defining how to identify and minimize risk factors for a project.R



An organization, often from another industry, recognized for excellence in a specific process area. See: process benchmarking.B



A control technique used in aggregate inventory management in which authorizations to purchase are made without being committed to specific suppliers. These authorizations are often reviewed by management using such measures as commodity in dollars and by time period.O


purchase price variance

The difference in price between the amount paid to the supplier and the planned or standard cost of that item.P


average forecast error

1) The arithmetic mean of the forecast errors. 2) The exponentially smoothed forecast error. See: bias, forecast error.A


intermodal marketing companies (IMCs)

Organizations that are the intermediary for shippers and intermodal rail carriers.I


real time

The technique of coordinating data processing with external related physical events as they occur, thereby permitting prompt reporting of conditions. See: online service.R


requirements traceability

The capability to determine the source of demand requirements through record linkages. It is used in analyzing requirements to make adjustments to plans for material or capacity. See: pegging.R



Abbreviation for electronic product code.E



In queuing theory, a unit that arrives for service, such as a person or part.A


single-channel, single-phase system

A queuing system that has only one channel for arrivals to enter and only one phase to completely service the arrival.S


point reporting

The recording and reporting of milestone manufacturing order occurrences, typically done at checkpoint locations rather than operations and easily controlled from a reporting standpoint.P



Abbreviation for database management system.D


multinational corporation

A company with capital investments in more than a single country.M


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. See: backward integration, forward integration.V


multilevel bill of material

A display of all the components directly or indirectly used in a parent, together with the quantity required of each component. If a component is a subassembly, blend, intermediate, etc., all its components and all their components also will be exhibited, down to purchased parts and raw materials.M


electronic form

An electronic version of a paper form. These forms eliminate the cost of printing, storing, and distributing paper forms.E


Fourier series

A form of analysis useful for forecasting. The model is based on fitting sine waves with increasing frequencies and phase angles to a time series.F


five Ss

Five terms beginning with “S” used to create a workplace suitable for lean production. Sort means to separate needed items from unneeded ones and remove the latter. Simplify means to neatly arrange items for use. Scrub means clean up the work area. Standardize means to sort, simplify, and scrub daily. Sustain means to always follow the first four Ss. Sometimes referred to by the Japanese equivalents: seiri, seiton, seiso, seiketsu, and shitsuke.F



A statement of ingredient requirements. A formula may also include processing instructions and ingredient sequencing directions. Syn: formulation, recipe.F


firm master production schedule

A part of the master production schedule in which changes can occur only rarely.F


scatter chart

A graphical technique to analyze the relationship between two variables. Two sets of data are plotted on a graph, with the y axis used for the variable to be predicted and the x axis used for the variable to make the prediction. The graph will show possible relationships (although two variables might appear to be



The originator of a shipment of freight.C


steady state

Waiting lines are subject to wide fluctuations when they first are created in a simulation model. A less variable (steady) state emerges after the line has existed for some time. Usually data are not collected from the simulation until after steady state is reached. See: transient state.S


union shop

A facility in which all hourly employees are unionized, or more formally a clause in a collective bargaining agreement under which membership in the union is required as a condition of employment. Union shops are illegal in some regions.U


permission marketing

Syn: relationship marketing.P


quality policy

A top-management statement of the overall quality direction of an organization as required by ISO 9001.Q


resource breakdown structure

A hierarchical structure that breaks resources into categories and types; can be useful for plan resource schedules, including human resources.R


radio frequency identification (RFID)

A system using electronic tags to store data about items. Accessing these data is accomplished through a specific radio frequency and does not require close proximity or line-ofsight access for data retrieval. See: active tag, passive tag, semi-passive tag.R


compound interest

1) The type of interest that is periodically added to the amount of investment (or loan) so that subsequent interest is based on the cumulative amount. 2) The interest charges under the condition that interest is charged on any previous interest earned in any time period, as well as on the principal.C


express warranty

A positive representation, made by a seller, concerning the nature, character, use, and purpose of goods, that induces the buyer to buy and on which the seller intends the buyer to depend.E


scheduled finish date

In project management, an activity’s planned finish time, normally between the early finish time and the late finish time. It may reflect resource limitations. Syn: planned finish date.S


synchronized production

A manufacturing management philosophy that includes a consistent set of principles, procedures, and techniques where every action is evaluated in terms of the global goal of the system. Both kanban, which is a part of the JIT philosophy, and drum-buffer-rope, which is a part of the theory of constraints philosophy, represent synchronized production control approaches. Syn: synchronous manufacturing. See: drum-buffer-rope, kanban, synchronous scheduling.S


earned value method

In project management, a comparison of planned activity time and cost to actual activity time and cost to see if a project is on schedule by time and by budget.E E



1) Production at a constant quantity. 2) Use of resources at a level rate, typically measured daily or more frequently.L


fixed-cost contribution per unit

An allocation process where total fixed cost for a period is divided by total units produced in that given time period.F


project scope

In project management, the work required to create a product with given features and options.P


rescheduling assumption

A fundamental assumption of MRP logic that existing open orders can be rescheduled in nearer time periods far more easily than new orders can be released and received. As a result, planned order receipts are not created until all scheduled receipts have been applied to cover gross requirements.R


project calendar

A calendar of working days and nonworking days that shows when scheduled activities are idle. Typically, it includes holidays and weekends. See: resource calendar.P



A consistent deviation from the mean in one direction (high or low). A normal property of a good forecast is that it is not biased. See: average forecast error.B


equal runout quantities

Order quantities for items in a group that result in a supply that covers an equal time for all items. Syn: equal runout method. See: fair-share quantity logic.E


operation time

The total of setup and run time for a specific task. Syn: operation duration.O


operational performance measurements

1) In traditional management, performance measurements related to machine, worker, or department efficiency or utilization. These performance measurements are usually poorly correlated with organizational performance. 2) In theory of constraints, performance measurements that link causally to organizational performance measurements. Throughput, inventory, and operating expense are examples. See: global performance measurements, local performance measurements, strategic performance measurements.O


bilateral contract

An agreement wherein each party makes a promise to the other party.B


economic order quantity (EOQ)

A type of fixed order quantity model that determines the amount of an item to be purchased or manufactured at one time. The intent is to minimize the combined costs of acquiring and carrying inventory. The basic formula is: quantity


separable cost

A cost that is assignable to a given portion of a business.S



1) Quality control value that is either a yes/no value or is counted rather than being measured on a continuous scale. See: variable, attribute data. 2) A description of an item or service that specifies either a presence or an absence, such as “on-time” versus “late.”A


external failure costs

The costs related to problems found after the product reaches the customer. This usually includes such costs as warranty and returns.E



Abbreviation for International Organization for Standardization.I


statistical inventory control

The use of statistical methods to model the demands and lead times experienced by an inventory item or group of items. Demand during lead time and between reviews can be modeled, and reorder points, safety stocks, and maximum inventory levels can be defined to strive for desired customer service levels, inventory investments, manufacturing and distribution efficiency, and targeted returns on investments. Syn: scientific inventory control. See: fixed reorder quantity inventory model.S



To rush or chase production or purchase orders that are needed in less than the normal lead time; to take extraordinary action because of an increase in relative priority. Syn: stockchase.E


bill-of-material explosion

The process of determining component identities, quantities per assembly, and other parent/component relationship data for a parent item. Explosion may be single level, indented, or summarized.B


make-or-buy cost analysis

A comparison of all of the costs associated with making an item versus the cost of buying the item.M


due date

The date when purchased material or production material is due to be available for use. Syn: expected receipt date. See: arrival date.D



In project management, a coordinated set of related projects usually including ongoing work.P



A term, used more frequently in nonmanufacturing organizations, to refer to the equipment, apparatus, and supplies used by an organization.M


first-article inspection

A quality check on the first component run after a new setup has been completed. Syn: first-piece inspection.F



The transportation method used in a logistics system to connect the nodes of the system.L


manufacturing cycle efficiency

The ratio of value-added time to manufacturing lead time or cycle time. Manufacturing cycle time can be improved by the reduction of manufacturing lead time by eliminating nonvalue- added activities such as inspecting, moving, and queuing.M


centralized marketing system

An organizational structure in which a central marketing group manages functionally divided areas, such as advertising, sales, and marketing research.C


small group improvement activity

An organizational technique for involving employees in continuous improvement activities. See: quality circle.S


differentiation strategy

A business strategy that focuses on setting a product or service apart from the competition focusing on making a product or service unique.D


load-distance analysis

In layout analysis, a method of choosing a facility layout based on selecting the layout with the shortest product or material travel per time period.L


brand plan

Syn: market plan.B


market hedge

Scheduling or holding an inventory quantity greater than the expected demand because of expected inaccuracy or volatility in the forecasted demand. See: hedge.M


cross-functional team

A set of individuals from various departments assigned a specific task such as implementing new computer software. See: core team.C


customer tolerance time

Syn: demand lead time.C


inventory usage

The value or the number of units of an inventory item consumed over a period of time.I


bond (performance)

A guarantee of satisfactory work completion that is executed in connection with a contract and that secures the performance and fulfillment of all the undertakings, covenants, terms, conditions, and agreements contained in the contract.B



In project management, a point connected by arrows in a network.N


graphical forecasting methods

The use of visual information to predict sales patterns, it typically involves plotting information in a graphical form. It is relatively easy to convert a spreadsheet into a graph that conveys the information visually. Trends and patterns of data are easier to spot, and extrapolation of previous demand can be used to predict future demands.G



A repetitive pattern of demand from year to year (or other repeating time interval) with some periods considerably higher than others. Syn: seasonal variation. See: base series.S


linear layout

A layout of various machines in one straight line. This type of layout makes it difficult to reallocate operations among workers and machinery.L


continuous process control

The use of transducers (sensors) to monitor a process and make automatic changes in operations through the design of appropriate feedback control loops. Although such devices have historically been mechanical or electromechanical, there is now widespread use of microcomputers and centralized control.C



1) Abbreviation for final assembly schedule. 2) Abbreviation for free alongside ship.F


bench stocks

Syn: floor stocks.B


order dating

Syn: order promising.O


loss to society

According to Genichi Taguchi, a loss to society occurs whenever a dimension of a product differs from its target value. This loss increases with the square of the deviation from the target. According to this concept, a loss to society occurs even though a dimension



A promotional device offering special savings when a product is purchased.C



In engineering, a line drawing showing the physical characteristics of a part.B


customer contact centers

Centers that combine phone centers and web contact services to enable customers to contact the center 24 hours a day via phone, web, or email.C


marketing channel

That set of organizations through which a good or service passes in going from a raw state to the final consumer. See: channels of distribution, distribution channel.M



The process of involving the supplier in a close partnership with the firm and its operations management system. Outpartnering is characterized by close working relationships between buyers and suppliers, high levels of trust, mutual respect, and emphasis on joint problem solving and cooperation. With outpartnering, the supplier is viewed not as an alternative source of goods and services (as observed under outsourcing) but rather as a source of knowledge, expertise, and complementary core competencies. Outpartnering is typically found during the early stages of the product life cycle when dealing with products that are viewed as critical to the strategic survival of the firm. See: customer-supplier partnership, supplier partner, and customer partner.O


finish date

The time of completion of a project or activity. It may be planned, actual, early, late, baseline, or target.F


primary demand

The demand for a category of products rather than for a specific brand.P


plan deliver

Establishing plans for action over time that project appropriation of supply resources to meet delivery requirements.P



A Japanese word meaning hall.D


data mining

The process of studying data to search for previously unknown relationships. This knowledge is then applied to achieving specific business goals.D


maximum order quantity

An order quantity modifier, applied after the lot size has been calculated, that limits the order quantity to a pre-established maximum.M



A technique that teams use to generate ideas on a particular subject. Each person on the team is asked to think creatively and write down as many ideas as possible. The ideas are not discussed or reviewed until after the brainstorming session.B


Outsourcing involves substitution

the replacement of internal capacity and production by that of the supplier. See: subcontracting.O


departmental stocks

An informal system of holding some stock in a production department. This action is taken as a protection from stockouts in the stockroom or for convenience; however, it results in increased inventory investment and possible degradation of the accuracy of the inventory records.D


certificate of origin

A document attesting to a shipment’s country of origin.C


penetration pricing

Introducing a product below its long-run price to secure entry into a market.P


production rate

The rate of production usually expressed in units, cases, or some other broad measure, expressed by a period of time (e.g., per hour, shift, day, or week). Syn: production level.P


terminal-handling costs

Carrier charges dependent on the number of times a shipment must be loaded, handled and unloaded. Cost can be reduced by consolidating shipments into fewer parcels or by shipping in truckload quantities.T


fitness for use

A term used to indicate that a good or service fits the customer’s defined purpose for that good or service.F



Transformation of encrypted text into a readable format.D


returns inventory costs

All of the costs associated with handling returned inventory.R R


inventory turns

Syn: inventory turnover.I


risk mitigation

Reducing the exposure to risk, either by its likelihood or its impact.R


logistics management

The part of supply chain management that oversees the planning and execution of forward and reverse flow of goods and related information between points in the supply chain to meet customer requirements.L


performance and event management systems

Systems that record and measure the performance of key supply chain processes. With these data, employees can deperformance P termine when the key processes have changed and why they have changed. These data then are utilized to adjust the existent data.P


market plan

The output of the market planning process. The market plan includes the current market position, opportunity and issue analysis, marketing objectives and strategies, action plans, programs, projects, budgets, and pro forma profit and loss statement and management controls. Syn: brand plan, product plan.M


data dictionary

1) A catalog of requirements and specifications for an information system. 2) A file that stores facts about the files and databases for all systems that are currently being used or for the software involved.D


human-machine interface

The location where data is transferred from a worker to a computer, or vice-versa.H


leading indicator

A specific business activity index that indicates future trends. For example, housing starts is a leading indicator for the industry that supplies builders’ hardware.L


global sourcing

Using international sources for supplies.G



Abbreviation for Equal Employment Opportunity Commission.E


external customer

A person or organization that receives a good, a service, or information but is not part of the organization supplying it. See: customer, internal customer.E


calibration frequency

The interval in days between tooling calibrations.C


progress payments

Payments arranged in connection with purchase transactions requiring periodic payments in advance of delivery for certain amounts or for certain percentages of the purchase price.P


work ticket

Syn: work order.W


data file

A collection of related data records organized in a specific manner (e.g., one record for each inventory item showing product code, unit of measure, production costs, transactions, selling price, and production lead time).D



Paths over which a carrier operates, including right-of-way, roadbed, tracks, and other physical facilities. May be owned by the government or privately held by the carrier or provided by nature.W



In project management, a set of serially related activities in a network diagram.P


dynamic lot sizing

Any lot-sizing technique that creates an order quantity subject to continuous recomputation. See: least total cost, least unit cost, part period balancing, period order quantity, Wagner-Whitin algorithm.D


fringe benefits

Employer-granted compensations that are not directly tied to salary.F


into three areas

throughput, inventory, and operating expense. It does not create incentives (through allocation of overhead) to build up inventory. The system is considered to provide a truer reflection of actual revenues and costs than traditional cost accounting. It is closer to a cash flow concept of income than is traditional accounting. The theory of constraints (TOC) accounting provides a simplified and more accurate form of direct costing that subtracts true variable costs (those costs that vary with throughput quantity). Unlike traditional cost accounting systems in which the focus is generally placed on reducing costs in all the various accounts, the primary focus of TOC accounting is on aggressively exploiting the constraint(s) to make more money for the firm. Syn: constraint accounting, throughput accounting.T


replenishment period

The time between successive replenishment orders. Syn: replenishment interval. See: review period.R


allocated item

In an MRP system, an item for which a picking order has been released to the stockroom but not yet sent from the stockroom.A


competitive benchmarking

Benchmarking a product or service against competitors. Syn: performance benchmarking. See: benchmarking.C



An assembly that is used at the next level of the bill of material to build another assembly.S


micro-land-bridge traffic

A multimodal transportation solution that moves goods over water and then land, with the final destination inland. See: mini-land-bridge traffic.M


trigger level

Syn: order point.T


process control

1) The function of maintaining a process within a given range of capability by feedback, correction, and so forth. 2) The monitoring of instrumentation attached to equipment (valves, meters, mixers, liquid, temperature, time, etc.) from a control room to ensure that a high-quality product is being produced to specification.P


performance measure

In a performance measurement system, the actual value measured for the criterion. Syn: performance measurement. See: performance criterion, performance measurement system, performance standard.P



In numeric sequence, normally in ascending order.S


stores ledger card

A card on which records of the items on hand and on order are maintained.S



Abbreviation for capacity planning using overall factors.C


quality at the source

A producer’s responsibility to provide 100 percent acceptable quality material to the consumer of the material. The objective is to reduce or eliminate shipping or receiving quality inspections and line stoppages as a result of supplier defects.Q


manufacturing resource planning (MRP II)

A method for the effective planning of all resources of a manufacturing company. Ideally, it addresses operational planning in units, financial planning in dollars, and has a simulation capability to answer what-if questions. It is made up of a variety of processes, each linked together: business planning, production planning (sales and operations planning), master production scheduling, material requirements planning, capacity requirements planning, and the execution support systems for capacity and material. Output from these systems is integrated with financial reports such as the business plan, purchase commitment report, shipping budget, and inventory projections in dollars. Manufacturing resource planning is a direct outgrowth and extension of closed-loop MRP.M


frequency of repair

Syn: repair factor.F


service parts revenue

The value of sales of replacement parts to external and internal customers, net of discounts and coupons.S



The situation wherein a principal, failing to repudiate an agent’s unauthorized conduct, is bound by the conduct.R


group technology (GT)

An engineering and manufacturing philosophy that identifies the physical similarity of parts (common routing) and establishes their effective production. It provides for rapid retrieval of existing designs and facilitates a cellular layout.G


maintenance, repair, and overhaul (MRO)

An item for reprocessing in the remanufacturing industry.M


normal distribution

A particular statistical distribution where most of the observations fall fairly close to one mean, and a deviation from the mean is as likely to be plus as it is to be minus. When graphed, the normal distribution takes the form of a bell-shaped curve.N



Abbreviation for electronic commerce.E



The conversion of a need or innovation into a product, process, or service that meets both the enterprise and customer expectations. The design process consists of translating a set of functional requirements into an operational product, process, or service.D



Abbreviation for activity-on-node network.A


convertible security

An asset (stock or bond) that may be changed for another asset at the owner’s request.C


transient state

In waiting line models, early behavior of a characteristic of the model, such as line length, is more erratic than eventual performance of the line. Data are usually not collected from the model until less erratic behavior emerges. See: steady state.T


project costing

An accounting method of assigning valuations that is generally used in industries where services are performed on a project basis. Each assignment is unique and costed without regard to other assignments. Examples are shipbuilding, construction projects, and public accounting firms. Project costing is opposed to process costing, where products to be valued are homogeneous.P


single-source supplier

A company that is selected to have 100 percent of the business for a part although S alternate suppliers are available. See: sole-source supplier.S


awareness efficiency

In e-commerce, a measurement of how well an organization informs people who have access to the web that the organization’s website exists.A B


knowledge management

Concept of information being used by executives, managers, and employees to more effectively produce product, interface with customers, and navigate through competitive markets.K


continuous production

A production system in which the productive equipment is organized and sequenced according to the steps involved to produce the product. This term denotes that material flow is continuous during the production process. The routing of the jobs is fixed and setups are seldom changed. Syn: continuous flow (production), continuous process, continuous manufacturing. See: mass production, project manufacturing.C


replacement parts

Parts that can be used as substitutes that differ from completely interchangeable service parts in that they require some physical modification (e.g., boring, cutting, drilling) before they can replace the original part.R


time-definite services

Delivery of goods and services where an agreement has been reached on the day and time of the delivery.T



Abbreviation for mean absolute percent error.M



(1) In quality control, sponsor of a six sigma implementation project. (2) In general, sponsor of an improvement effort.C


content management applications

Supports the evolutionary life cycle of digital-based information and makes information dynamically updatable online; includes the ability to publish content to a repository and support access to digital-based content.C


blocking bug

A defect that prevents a thorough investigation as to the cause, or that prevents shipment of a product.B


consuming the forecast

The process of reducing the forecast by customer orders or other types of actual demands as they are received. The adjustments yield the value of the remaining forecast for each period. Syn: forecast consumption.C


earned value

In project management, the total value, including overhead, of approved estimates for completed activities or portions thereof.E



A slang term used to refer to a low-growth, lowmarket- share product. See: growth-share matrix.D


single-digit setup (SDS)

The idea of performing setups in less than 10 minutes. See: single-minute exchange of die.S


activity network diagram

One of the seven new tools of quality. A drawing including nodes that represent operations to be performed and arrows representing precedence relationships. This drawing represents all of the activities to be finished to complete a project. Also known as a critical path diagram or PERT chart.A


lumpy demand

Syn: discontinuous demand.L M


periodic replenishment

A method of aggregating requirements to place deliveries of varying quantities at evenly spaced time intervals, rather than variably spaced deliveries of equal quantities.P


resource planning

Capacity planning conducted at the business plan level. The process of establishing, measuring, and adjusting limits or levels of long-range capacity. Resource planning is normally based on the production plan but may be driven by higher level plans beyond the time horizon for the production plan (e.g., the business plan). It addresses those resources that take long periods of time to acquire. Resource planning decisions always require top management approval. Syn: resource requirements planning. See: capacity planning, long-term planning.R


stock split

The issuance of new shares to stockholders without requiring additional equity.S


safety factor

1) The ratio of average strength to the worst stress expected. It is essential that the variation, in addition to the average value, be considered in design. 2) The numerical value used in the service function (based on the standard deviation or mean absolute deviation of the forecast) to provide a given level of customer service. For example, if the item MAD is 100 and a .95 customer service level (safety factor of 2.06) is desired, then a safety stock of 206 units should be carried. This safety stock must be adjusted if the forecast interval and item lead times differ. Syn: service factor. See: service function.S


specification limits

Syn: tolerance limits.S



Placing manufacturer-or customer-requested stickers on the boxes of the product being sent to them. These are typically done so that the customer, typically a retailer, can more effectively track its inventory. Bar coding is commonly a part of the stickering process.S


operation setback chart

A graphical display of the bill of materials and lead-time information provided by the routing for each part. The horizontal axis provides the lead time from raw materials purchase to component manufacture to assembly of the finished product.O


container design

The characteristics of the product that make it transportable with ease of handling and stowability. Container concepts include packaging, monetary density, and physical density.C


operations finite loading

A finite loading technique that aims to minimize possible delays to individual operations and, thus, the potential delay of each scheduled order. Eligible operations from an order or a group of orders are loaded period by period onto a work center or a group of work centers, according to operation-level priority rules. Syn: operations sequencing. See: constraint-oriented finite loading, drum-buffer-rope, order-oriented finite loading.O


current finish time

In project management, the present estimate of an activity’s finish time.C


cost allocation

The assignment of costs that cannot be directly related to production activities via more measurable means (e.g., assigning corporate expenses to different products via direct labor costs or hours).C


manufacturing layout strategies

An element of manufacturing strategy. It is the analysis of physical capacity, geography, functional needs, corporate philosophy, and product-market/process focus to systematically respond to required facility changes driven by organizational, strategic, and environmental considerations.M


planned value

In project management, the total value (including overhead) of approved estimates for planned activities.P


cooperative training

An educational process in which students alternate formal studies with actual on-the-job experience. Successful completion of the off-campus experience may be a prerequisite for graduation from the program of study.C


dock receipt

A receipt recorded for a shipment received or delivered at a pier or dock.D



A facility, function, department, or resource whose capacity is less than the demand placed upon it. For example, a bottleneck machine or work center exists where jobs are processed at a slower rate than they are demanded. Syn: bottleneck operation.B


materials management

The grouping of management functions supporting the complete cycle of material flow, from the purchase and internal control of production materials to the planning and control of work in process to the warehousing, shipping, and distribution of the finished product.M


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.V



Acronym for generally accepted manufacturing practices.G


hybrid organizational structure

An organizational structure that embodies multiple organizational forms (functional, product, or geographical) simultaneously. For example, some functions may be centralized (such as finance and accounting), whereas others may be duplicated geographically (such as sales).H


net operating income

The income before interest and taxes are subtracted. Syn: earnings before interest and taxes.N


product load profile

A listing of the required capacity and key resources needed to manufacture one unit of a selected item or family. The resource requirements are further defined by a lead-time offset to predict the impact of the product on the load of the key resources by specific time period. The product load profile can be used for rough-cut capacity planning to calculate the approximate capacity requirements of the master production schedule. See: bill of resources, resource profile, rough-cut capacity planning.P



A set of companies providing a product or service where each company’s offering is a close substitute for its competitors’ offerings.I


resource leveling

The process of scheduling (and rescheduling) the start and finish dates of operations (or activities) to achieve a consistent rate of resource usage so that resource requirements do not exceed resource availability for a given time period. Syn: leveling.R


in-process inventory

Syn: work in process.I


material planner

1) The person normally responsible for managing the inventory levels, schedules, and availability of selected items, either manufactured or purchased. Syn: inventory planner. 2) In an MRP system, the person responsible for reviewing and acting on order release, action, and exception messages from the system. Syn: parts planner, planner.M


full cost pricing

Establishing price at some markup over the full cost (absorption costing). Full costing includes direct manufacturing as well as applied overhead.F


activity-based planning (ABP)

In activity-based cost accounting, a continuing definition of activity and resource requirements (for both financial and operational systems) based on future demand for products or services by specific customer needs. Demand for resources is related to resource availability; capacity overages and shortfalls are corrected. Activity-based budgeting derives from the outputs of ABP.A


process capability index

The value of the tolerance specified for the characteristic divided by the process capability. There are several types of process capability indices, including the widely used Cpk and Cp.P P


retirement of debt

The termination of a debt obligation by appropriate settlement with the lender. Understood to be in full amount unless partial settlement is specified.R


total procurement lead time

Syn: procurement lead time.T



A term that states that a productive workplace is found through cleanliness. See: five Ss.S



A need for a particular product or component. The demand could come from any number of sources (e.g., a customer order or forecast, an interplant requirement, a branch warehouse request for a service part or the manufacturing of another product). At the finished goods level, demand data are usually different from sales data because demand does not necessarily result in sales (i.e., if there is no stock, there will be no sale). There are generally up to four components of demand: cyclical component, random component, seasonal component, and trend component. See: booked orders.D


free alongside ship (FAS)

A term of sale indicating the seller is liable for all changes and risks until the goods sold are delivered to the port on a dock that will be used F by the vessel. Title passes to the buyer when the seller has secured a clean dock or ship’s receipt of goods.F


manufacturing representative

Syn: manufacturer’s representative. M



A charge made against a company because of loss or damage.C


inbound stockpoint

A defined location next to the place of use on a production floor. Materials are brought to the stockpoint as needed and taken from it for immediate use. Inbound stockpoints are used with a pull system of material control.I


calculated usage

The determination of usage of components or ingredients in a manufacturing process by multiplying the receipt quantity of a parent by the quantity per of each component or ingredient in the bill or recipe, accommodating standard yields.C


five whys

The common practice in total quality management is to ask “why” five times when confronted with a problem. By the time the answer to the fifth “why” is found, the ultimate cause of the problem is identified. Syn: five Ws. See: root cause analysis.F



The costs incurred in the operation of a business that cannot be directly related to the individual goods or services produced. These costs, such as light, heat, supervision, and maintenance, are grouped in several pools (e.g., department overhead, factory overhead, general overhead) and distributed to units of goods or services by some standard allocation method such as direct labor hours, direct labor dollars, or direct materials dollars. Syn: burden. See: expense.O


original equipment manufacturer (OEM)

A manufacturer that buys and incorporates another supplier’s products into its own products. Also, products supplied to the original equipment manufacturer or sold as part of an assembly. For example, an engine may be sold to an OEM for use as that company’s power source for its generator units.O


operation splitting

Syn: lot splitting.O


strict performance

The performance of a contract good enough for the contractor to be paid full price less the other party’s losses.S


discount period

The time allowed a customer to receive a cash discount for timely payment of an invoice.D


break-bulk warehousing

A form of cross-docking in which the incoming shipments are from a single source or manufacturer.B


waiting line theory

Syn: queuing theory.W


level production method

A production planning method that maintains a stable production rate while varying inventory levels to meet demand. Syn: level strategy, production leveling. See: level schedule.L


plant finished goods

Finished goods inventory held in plant rather than being shipped to a customer.P


bill of labor

A structured listing of all labor requirements for the fabrication, assembly, and testing of a parent item. See: bill of resources, capacity bill procedure, routing.B


adjustable capacity

Capacity, such as labor or tools, that can be changed in the short term.A


total cost analysis

In purchasing, a process by which a firm seeks to identify and quantify all of the major costs associated with various sourcing options.T


data acquisition

Obtaining data from a source, such as a database, and communicating that data to another database or a data warehouse.D


labor efficiency

1) Syn: worker efficiency. 2) The average of worker efficiency for all direct workers in a department or facility.L


run chart

A graphical technique that illustrates how a process is performing over time. By statistically analyzing a run chart, a process can be determined to be under or out of control. The most common types of data used to construct the charts are ranges, averages, percentages/counts, and individual process attributes (e.g., temperature). Syn. run diagram. See: C chart, P chart, R chart, U chart, X-bar chart.R


performance criterion

The characteristic to be measured (e.g., parts per million defective, business profit). See: performance measure, performance measurement system, performance standard.P



A device following a fixed route that has the capability of moving material between points in a facility. This device commonly is used when there is a high volume of flow along the route.C


automatic identification system (AIS)

A system that can use various means, including bar code scanning and radio frequencies, to sense and load data in a computer.A


flow processing

In process systems development, work flows from one workstation to another at a nearly constant rate and with no delays. When producing discrete (geometric) units, the process is called repetitive manufacturing; when producing non-geometric units over time, the process is called continuous manufacturing. A physical-chemical reaction takes place in the continuous flow process.F


parallel implementation strategy

A system implementation technique whereby the current system and the new system are both executed for some period of time. The results of the two systems are compared to ensure that the new system is executing properly. When a level of confidence is built that the new system is executing properly, the old system is turned off and the new system becomes the designated business system.P


log normal distribution

A continuous probability distribution where the logarithms of the variable are normally distributed.L


positioning strategy

Within manufacturing, a plan for inventory, product design, and production process.P


independent action

In transportation, the publication of a freight rate that differs from that of the rate bureau to which the publisher is a member. This is a permitted action.I


protection time

Syn: safety lead time.P P


base series

A standard succession of values of demand-over-time data used in forecasting seasonal items. This series of factors is usually based on the relative level of demand during the corresponding period of previous years. The average value of the base series over a seasonal cycle will be 1.0. A figure higher than 1.0 indicates that the demand for that period is more than the average; a figure less than 1.0 indicates less than the average. For forecasting purposes, the base series is superimposed upon the average demand and trend in demand for the item in question. Syn: base index. See: seasonal index, seasonality.B


bill-of-material structuring

The process of organizing bills of material to perform specific functions.B


parts bank

1) In the narrow sense, an accumulation of inventory between operations that serves to keep a subsequent operation running although there are interruptions in the preceding operations. See: buffer. 2) In the larger sense, a stockroom or warehouse. The implication is that the contents of these areas should be controlled like the contents of a bank.P



The manufacturing activity of identifying and maintaining an orderly environment for preventing errors and contamination in the manufacturing process.H


work rules

1) Compensation rules concerning such issues as overtime, vacation, and shift premiums. 2) Employee and employer job rights and obligation rules, such as performance standards, promotion procedures, job descriptions, and layoff rules. Work rules are usually a part of a union contract and may include a code of conduct for workers and language to ensure decent conditions and health standards.W


tare weight

The weight of a substance, obtained by deducting the weight of the empty container from the gross weight of the full container.T


lower specification limit (LSL)

In statistical process control, charting the line that defines the minimum acceptable level of random output. See: tolerance limits.L



A common name encompassing both the internet and other forms of electronic communication.C


interactive customer care

A generic term for a variety of services provided over the internet. These services include customer service and technical support.I



Abbreviation for return on owner’s equity.R


manufacturing order reporting

Syn: production reporting and status control.M


process flow scheduling

A generalized method for planning equipment usage and material requirements that uses the process structure to guide scheduling calculations. It is used in flow environments common in process industries.P


cost reduction

The act of lowering the cost of goods or services by securing a lower price, reducing labor costs, and so forth. In cost reduction, the item usually is not changed, but the circumstances around which the item


five focusing steps

In the theory of constraints, a process to continuously improve organizational profit by evaluating the production system and market mix to determine how to make the most profit using the system constraint. The steps consist of (1) identifying the constraint to the system, (2) deciding how to exploit the constraint to the system, (3) subordinating all nonconstraints to the constraint, (4) elevating the constraint to the system, (5) returning to step 1 if the constraint is broken in any previous step, while not allowing inertia to set in.F


batch sensitivity factor

A multiplier that is used for the rounding rules in determining the number of batches required to produce a given amount of product.B


dividend yield

The ratio of dividends per share over stock price.D


manufacturing data sheet

Syn: routing.M


action message

An output of a system that identifies the need for, and the type of action to be taken to correct, a current or potential problem. Examples of action messages in an MRP system include release order, reschedule in, reschedule out, and cancel. Syn: exception message, action report.A


work in process (WIP)

A good or goods in various stages of completion throughout the plant, including all material from raw material that has been released for initial processing up to completely processed material awaiting final inspection and acceptance as finished goods inventory. Many accounting systems also include the value of semifinished stock and components in this category. Syn: in-process inventory.W


finite forward scheduling

An equipment scheduling technique that builds a schedule by proceeding sequentially from the initial period to the final period while observing capacity limits. A Gantt chart may be used with this technique. See: finite loading.F



Abbreviation for Certified Supply Chain Professional.C


lead time

1) A span of time required to perform a process (or series of operations). 2) In a logistics context, the time between recognition of the need for an order and the receipt of goods. Individual components of lead time can include order preparation time, queue time, processing time, move or transportation time, and receiving and inspection time. Syn: total lead time. See: manufacturing lead time, purchasing lead time.L



Abbreviation for quality function deployment.Q



In warehousing, the consolidation of several units into larger units for fewer handlings.U



A Japanese word meaning getting a group to agree on a strategy before beginning to implement it.N



A way to measure the transportation of freight. It is the multiplication of weight being transported (in tons) by the distance it is being transported (in miles). Heavily used in rail and ship transportation mode.T


punitive damages

The money awarded a plaintiff, not as payment for the plaintiff ’s losses, but as punishment for the defendant’s conduct.P



The ability to successfully manufacture and market a broad range of low-cost, high-quality products and services with short lead times and varying volumes that provide enhanced value to customers through cusAGVS ● analog A tomization. Agility merges the four distinctive competencies of cost, quality, dependability, and flexibility.A



Abbreviation for annual percentage rate.A



Abbreviation for accredited standards committee.A



Abbreviation for accidental death and disability.A


labor voucher

Syn: labor claim.L


open office

An office, with moveable partitions and furniture, that deemphasizes the compartmentalization of people.O


group layout

A layout in which machine groups are arranged to process families of parts with similar characteristics. G


electronic funds transfer (EFT)

A computerized system that processes financial transactions and information about these transactions or performs the exchange of value between two parties.E electronic invoice presentment and payment (EIPP) Accepting and sending invoices and payments over the internet.E


variable costing

An inventory valuation method in which only variable production costs are applied to the product; fixed factory overhead is not assigned to the product. Traditionally, variable production costs are direct labor, direct material, and variable overhead costs. Variable costing can be helpful for internal management analysis but is not widely accepted for external financial reporting. For inventory order quantity purposes, however, the unit costs must include both the variable and allocated fixed costs to be compatible with the other terms in the order quantity formula. For make-orbuy decisions, variable costing should be used rather than full absorption costing. Syn: direct costing.V


hard automation

Use of specialized machines to manufacture and assemble products. Each machine is normally dedicated to one function, such as milling.H H


transformation system

Syn: transformation process.T


total quality management (TQM)

A term coined to describe Japanese-style management approaches to quality improvement. Since then, total quality management (TQM) has taken on many meanings. Simply put, TQM is a management approach to long-term success through customer satisfaction. TQM is based on the participation of all members of an organization in improving processes, goods, services, and the culture in which they work. The methods for implementing this approach are found in teachings of such quality leaders as Philip B. Crosby, W. Edwards Deming, Armand V. Feigenbaum, Kaoru Ishikawa, J.M. Juran, and Genichi Taguchi.T


optical character recognition (OCR)

A mechanized method of collecting data involving the reading of handprinted material or special character fonts. If handwritten, the information must adhere to predefined rules of size, format, and locations on the form.O


static budget

Syn: master budget.S


third-party registration system

Using an outside party (rather than the buyer) to determine the adequacy of a seller’s product quality. If several buyers use the same third party system, such as ISO9000, the seller avoids having multiple audits.T


common law

Law flowing from judicial decisions over the years rather than from legislative action.C


formal culture

The visible segment of the organizational culture, such as policies and procedures, mission statement, and dress codes. See: informal culture.F


bar coding

A method of encoding data using bar code for fast and accurate readability.B


input/output analysis

Syn: input/output control.I


Dodge-Romig tables

Information about the correct sample size and maximum defective quantity in a sample to satisfy lot acceptance; a quality control measurement.D


nondurable goods

Goods whose serviceability is generally limited to a period of less than three years (such as perishable goods and semidurable goods).N



The physical issuance and reporting of the movement of raw material, components, or other items from a stores room or warehouse. Taking a part out of inventory. See: issue.D


project-based layout

A type of layout where the good or product is stationary and the workers come to the site to work on it.P



A large manufacturer or retailer doing business with many trading partners.H


alternate operation

Replacement for a normal step in the manufacturing process. Ant: primary operation.A


diagnostic journey and remedial journey

A two-phase investigation used by teams to solve chronic quality



Abbreviation for return material authorization.R


gross sales

The total amount charged to all customers during the accounting time period.G


merge in transit

Combining shipments from several vendors at an intermediate point of shipment and delivering the combined load to the customer.M


back scheduling

A technique for calculating operation start dates and due dates. The schedule is computed starting with the due date for the order and working backward to determine the required start date and/or due dates for each operation. Syn: backward scheduling. Ant: forward scheduling.B


cycle counter

An individual who is assigned to do cycle counting.C



An allowance or deduction granted by the seller to the buyer, usually when the buyer meets certain stipulated conditions that reduce the price of the products purchased. A quantity discount is an allowance determined by the quantity or value of the purchase. A cash discount is an allowance extended to encourage payment of an invoice on or before a stated date. A trade discount is a deduction from an established price for goods or services made by the seller to those engaged in certain businesses. See: price break.D



A device to hold and locate a work piece during inspection or production operations. See: jig.F F






The entire set of items from which a sample is drawn.P


time and attendance

A collection of data relating to an employee’s record of absences and hours worked.T


bill of activities

In activity-based cost accounting, a summary of activities needed by a product or other cost object. The bill of activities includes volume and cost of each activity.B



Abbreviation for the Malcolm Baldrige National Quality Award.M


material requisition

This is the first step to placing a replenishment order; initiated by the material user.M


confidence limit

The bounds of an interval. A probability can be given for the likelihood that the true value will lie between the confidence limits.C


equivalent unit cost

A method of costing that uses the total cost incurred for all like units for a period of time divided by the equivalent units completed during the same time period.E E


channel integration

Strengthening relationships up and down the supply chain from suppliers’ suppliers to customers’ customers.C


special-purpose machinery

Machines that are designed to perform a small number of activities. They are not as flexible as general purpose machinery but they may be faster and more accurate.S


blocked operation

An upstream work center that is not permitted to produce because of a full queue at a downstream work center or because no kanban authorizes production.B


black box design

When suppliers or company functions are given general design guidelines and are requested to complete the technical details.B


denied party list

A list of organizations that are unauthorized to submit a bid for an activity.D


bleeding edge

An innovative process that may be unusual enough to pose a risk to the customer or client.B


materials system

Connecting material flows contained in a production system.M


storage costs

A subset of inventory carrying costs, including the cost of warehouse utilities, material handling personnel, equipment maintenance, building maintenance, and security personnel.S


focus strategy

Targeting a narrow market with specialized goods or services.F



Abbreviation for shortest processing time rule.S


lot number control

Assignment of unique numbers to each instance of receipt and carrying forth that number into subsequent manufacturing processes so that, in review of an end item, each lot consumed from raw materials through end item can be identified as having been used for the manufacture of this specific end item lot.L


number of affected units chart

Syn: np chart.N


replacement cost systems

A method of inventory valuation that assigns an item cost based on the next item price incurred.R


parallel conversion

A method of system implementation in which the operation of the new system overlaps with the operation of the system being replaced. The old system is discontinued only when the new system is shown to be working properly, thus minimizing the risk and negative consequences of a poor system implementation.P


manufacturing process development

The definition and implementation of an execution system for making a part, good, or service that is consistent with the objectives of the firm.M


poka-yoke (mistake-proof)

Mistake-proofing techniques, such as manufacturing or setup activity designed in a way to prevent an error from resulting in a product defect. For example, in an assembly operation, if each correct part is not used, a sensing device detects that a part was unused and shuts down the operation, thereby preventing the assembler from moving the incomplete part to the next station or beginning another operation. Sometimes spelled poke-yoke. Syn: failsafe techniques, failsafe work methods, mistake-proofing.P


fixed-position layout

A factory layout that plans for the product to be in a set place; the people, machines, and tools are brought to and from the product.F



One having the duty to act on another’s behalf in a trustworthy and confidential fashion.F


overlapped production

A method of production in which completed pieces of a production lot are processed at one or more succeeding stations while remaining pieces continue to be processed at the original workstation. See: overlapped schedule.O



An allocation of the original value of an asset against current income to represent the declining value of the asset as a cost of that time period. Depreciation does not involve a cash payment. It acts as a tax shield and thereby reduces the tax payment. See: capital recovery, depletion, double-decliningbalance depreciation, straight line depreciation, unitsof- production depreciation.D


certified supplier

A status awarded to a supplier who consistently meets predetermined quality, cost, delivery, financial, and count objectives. Incoming inspection may not be required.C


point of sale (POS)

The relief of inventory and computation of sales data at the time and place of sale, generally through the use of bar coding or magnetic media and equipment.P


seasonal adjustment

Syn: seasonal index.S


production validation

Demonstrating that a production process will consistently lead to the expected results.P



Schedules that are organized by starting location/destination and show the times for departures and arrivals.T


smallest processing time rule

Syn: shortest processing time rule.S


seasonal variation

See: seasonality.S


production material

Any material used in the manufacturing process.P


process design

The design of the manufacturing method.P



Abbreviation for acceptable quality level.A


order quantity

Syn: lot size.O


sustaining activity

In activity-based cost accounting, an activity that is not directly beneficial to any specific cost object but does benefit the organization as a whole.S


time standard

The predetermined times allowed for the performance of a specific job. The standard will often consist of two parts, that for machine setup and that for actual running. The standard can be developed through observation of the actual work (time study), summation of standard micromotion times (predetermined or synthetic time standards), or approximation (historical job times).T


return goods handling

The work a company puts into accepting returned goods from their customers.R


forecast accuracy

A measurement of forecast usefulness, often defined as the average difference between the forecast value to the actual value. Syn: sales forecast. See: forecast error.F



A document containing hypertext links to certain other documents including multimedia documents.W


internet operations

Operations performed over the internet encompassing such things as email, telnet, newsgroups, file transfer protocol, and the World Wide Web.I


average chart

A control chart in which the subgroup average, X-bar, is used to evaluate the stability of the process level. Syn: X-bar chart.A


A3 method

A means of compactly describing a business process.A



The study of control processes in mechanical, biological, electrical, and information systems.C


end user

1) The final consumer of a product. 2) The recipient of an output from a computer system.E



Abbreviation for capable-to-promise.C


production time

Setup time plus total processing time, where total processing time is processing time per piece multiplied by the number of pieces.P



Giving up a route by a carrier. For example, a railroad.A


linear regression

A statistical data technique that expresses a variable as a linear function of an independent variable. Linear regression can be used to develop forecasting models.L


active inventory

The raw materials, work in process, and finished goods that will be used or sold within a given period.A


flexible budget

A budget showing the costs and revenues expected to be incurred or realized over a period of time at different levels of activity, measured in terms of some activity base such as direct labor hours, direct labor costs, or machine hours. A flexible manufacturing overhead budget gives the product costs of various manufacturing overhead items at different levels of activity. See: step budget.F



Acronym for net operating profit after taxes.N



The act of installing a system into operation. It concludes the system project with the exception of appropriate follow-up or post-installation review.I


capable-to-promise (CTP)

The process of committing orders against available capacity as well as inventory. This process may involve multiple manufacturing or distribution sites. Capable-to-promise is used to determine when a new or unscheduled customer order can be delivered. Capable-to-promise employs a finite-scheduling model of the manufacturing system to determine when an item can be delivered. It includes any constraints that might restrict the production, such as availability of resources, lead times for raw materials or purchased parts, and requirements for lower-level components or subassemblies. The resulting delivery date takes into consideration production capacity, the current manufacturing environment, and future order commitments. The objective is to reduce the time spent by production planners in expediting orders and adjusting plans because of inaccurate delivery-date promises.C


personal discrimination

In transportation, charging different companies with similar deliveries different rates for shipping. This is a policy decision, probably based on importance of the customer.P personal fatigue and unavoidable delay allowance Factor by which the motion study term “normal time” is increased to allow for personal needs and unavoidable delays.P


location grid

A layout of a warehouse used to improve inventory management and cycle counting.L


balance of trade

A plus or minus amount found by comparing a country’s exports of merchandise to its imports.B


export license

A document received from a governmental agency authorizing a certain quantity of an export to be sent to a given country.E


model number

An item number for a finished good. This number may encompass other parts, such as a user’s manual.M



Abbreviation for undesirable effect. Pronounced“oodee.”U



The design, pricing, promotion, and distribution of goods to create transactions with businesses and consumers.M


project management team

In project management, the personnel assigned to a project who are directly involved in management activities.P


private label

Also known as store or dealer brands, these are products that are designed and produced by one company, but carry the name of the store that sells them. Oftentimes called generic to the purchaser.P


cause-and-effect diagram

A tool for analyzing process dispersion. It is also referred to as the Ishikawa diagram (because Kaoru Ishikawa developed it) and the fishbone diagram (because the complete diagram resembles a fish skeleton). The diagram illustrates the main causes and subcauses leading to an effect (symptom). The cause-and-effect diagram is one of the seven tools of quality. Syn: fishbone chart, Ishikawa diagram.C


dynamic programming

A method of sequential decision making in which the result of the decision at each stage affords the best possible means to exploit the expected range of likely (yet unpredictable) outcomes in the following decision-making stages.D E


data date

The date through which a report has provided actual accomplishment. Syn: time-now date.D D



Abbreviation for earnings before taxes.E


dynamic kanban

An electronic signal using kanban to create an automatic purchase order to a supplier or a manufacturing order to a shop. Dynamic kanban is one of the elements of a manufacturing execution system that enables just-in-time deliveries to production. See: kanban.D


intelligent agent

A program that regularly gathers information without the owner being present.I


flag of convenience

A ship registered in a nation with low taxes and lax safety regulations. Liberia and Panama are two favorite flags of convenience.F


demand planning

The process of combining statistical forecasting techniques and judgment to construct demand estimates for products or services (both high and low volume; lumpy and continuous) across the supply chain from the suppliers' raw materials to the consumer's needs. Items can be aggregated by product family, geographical location, product life cycle, and so forth, to determine an estimate of consumer demand for finished products, service parts, and services. Numerous forecasting models are tested and combined with judgment from marketing, sales, distributors, warehousing, service parts, and other functions. Actual sales are compared with forecasts provided by various models and judgments to determine the best integration of techniques and judgment to minimize forecast error. See: demand management.D



The reduction in the value of a capital asset (usually a natural resource) in the balance sheet and charging this amount as an expense against income for the period. See: capital recovery.D


capacity required

The capacity of a system or resource needed to produce a desired output in a particular time period. Syn: required capacity. See: capacity.C


aggregate unit of capacity

Combined capacity unit of measure when a variety of outputs exist.A


fixed reorder quantity inventory model

A form of independent demand item management model in expected demand during the replenishment lead time. Fixed reorder quantity models assume the existence of some form of a perpetual inventory record or some form of physical tracking (e.g., a two-bin system that is able to determine when the reorder point is reached). These reorder systems are sometimes called fixed order quantity systems, lot-size systems, or order point-order quantity systems. Syn: fixed order quantity system, lot-size system, order point-order quantity system, quantitybased order system. See: fixed reorder cycle inventory model, hybrid inventory system, independent demand item management models, optional replenishment model, order point, order point system, statistical inventory control, time-phased order point.F


speed of design process

The time frame that a product or service is designed to satisfy customer needs and regulations and be field-tested before entering a market.S


build-up forecasts

A qualitative forecasting technique in which individuals who are familiar with specific market segments estimate the demand within these segments. The overall forecast then is obtained by calculating the sum of the forecasts for these segments.B


spot stock warehousing

Positioning seasonal items in proximity to the market. When the season ends, these items are either disposed or relocated to a more centralized location.S


pure oligopoly

A market in which a few companies produce essentially the same product or service and market it within a given area. A company is forced to price its product at the going rate unless it can differentiate its product. See: industry structure types.P


central point scheduling

A variant of scheduling that employs both forward and backward scheduling, starting from the scheduled start date of a particular operation.C


critical failure

The malfunction of those parts that are essential for continual operation or the safety of the user.C


product liability

The responsibility a producer bears when someone is injured during the use of his or her product.P


delivery lead time

The time from the receipt of a customer order to the delivery of the product. Syn: delivery cycle.D


risk avoidance

Changing a plan to eliminate a risk or to protect plan objectives from its impact.R


business planning

The process of constructing the business plan. See: business plan.B


parent item

The item produced from one or more components. Syn: parent.P


forward buying

The practice of buying materials in a quantity exceeding current requirements but not beyond the point that the long-term need exists.F


brand loyalty

The tendency of some consumers to stay with a preferred product in spite of a competitor’s advantages.B


activity attributes

Multiple features associated with each activity to be performed. These include predecessor activities, successor activities, and resource requirements.A


corrective maintenance

The maintenance required to restore an item to a satisfactory condition.C


prime rate

The interest rate charged by banks to their most preferred customers.P



The period after the product design has been released to manufacturing when the product has ongoing support and product enhancement.P


Institute for Supply Management (ISM)

A nonprofit society for purchasing managers and others, formerly the National Association of Purchasing Management (NAPM).I



The product being completed by a process or facility.O


protective packaging

Wrapping or covering of material that provides containment, protection, and identification of inventory in a warehouse. The material must be contained in such a way that will support movement and storage and will fit into the dimension of storage space and transportation vehicles.P


one-touch exchange of die (OTED)

The ideal of reducing or eliminating the setup effort required between operations on the same equipment.O


zero-based budgeting

A budget procedure used primarily by governmental agencies, in which managers are required to justify each budgetary expenditure anew, as if the budget were being initiated for the first time rather than being based on an adjustment of prior-year data.Z



Matching like operations and running them together sequentially, thereby taking advantage of a common setup.G



1) Compression of detailed data in a summary-level record or report. 2) Tracing a usage and/or cost impact from the bottom to the top (end product) of a bill of material using where-used logic.I


split lot

A manufacturing order quantity that has been divided into two or more smaller quantities, usually after the order has been released. The quantities of a split lot may be worked on in parallel, or a portion of the original quantity may be sent ahead to a subsequent operation to be worked on while work on the remainder of the quantity is being completed at the current operation. The purpose of splitting a lot is to reduce the lead time of the order.S


environmentally responsible business

A firm that operates in such a way as to minimize deleterious impacts to society. See: green manufacturing, green supply chain.E


proprietary data

Any financial, technical, or other information developed at the expense of the person or other entity submitting it, deemed to be of strategic or tactical importance to the company. It may be offered to customers on a restricted-use basis.P


bad-debt loan ratio

In financial management, the fraction of accounts receivable that is never recovered.B


generic processing

A means of developing routings or processes for the manufacture of products through a family relationship, usually accomplished by means of tabular data to establish interrelationships. It is especially prevalent in the manufacture of raw material such as steel, aluminum, or chemicals.G



Software that interconnects incompatible applications software and databases from various trading partners into decision-support tools such as ERP.M



Abbreviation for vendor-managed inventory.V


flow time

The time between the release of a job to a work center or shop until the job is finished.F


receivables conversion period

The length of time required to collect sales receipts. Syn: average collection period.R


call center

A facility housing personnel who respond to customer phone queries. These personnel may provide customer service or technical support. Call center services may be in-house or outsourced.C


reverse logistics

A complete supply chain dedicated to the reverse flow of products and materials for the purpose of returns, repair, remanufacture, and/or recycling.R



A function performed by a rack-jobber, a fullfunction intermediary who performs all regular warehousing functions and some retail functions, typically stocking a display rack.R


interrelationship digraph

A technique used to define how factors relate to one another. Complex multivariable problems or desired outcomes can be displayed with their interrelated factors. The logical and often causal relationships between the factors can be illustrated.I I


part period balancing (PPB)

A dynamic lot-sizing technique that uses the same logic as the least total cost method, but adds a routine called look ahead/look back. When the look ahead/look back feature is used, a lot quantity is calculated, and before it is firmed up, the next or the previous period’s demands are evaluated to determine whether it would be economical to include them in the current lot. See: discrete order quantity, dynamic lot sizing.P


decentralized computer network

A network where there is no central computer or computers linked to all other computers in the group.D



Abbreviation for forecast mean absolute percentage of error.F



The physiological, emotional, and behavioral adjustment to changes in the environment. Proper performance depends on adequate acclimatization to the workplace, including significant mechanical features such as seat height and lighting. Heat, cold, humidity, and light are important physiologically.A


dark factory

A completely automated production facility with no labor. Syn: lightless plant.D


reference capacity model

A simulation model with accurate operational details and demand forecasts that can provide practical capacity utilization predictions. Various alternatives for system operation can be evaluated effectively.R


queuing analysis

The study of waiting lines. See: queuing theory.Q


conversion efficiency

In e-commerce, a measure of how well an organization transforms visits to its website into customer orders. See: attractability efficiency.C


bracketed recall

Recall from customers of suspect lot numbers plus a specified number of lots produced before and after the suspect ones.B



Abbreviation for mean squared error.M M


fixed-price contract

Syn: firm fixed-price contract.F


labor standard

Under normal conditions, the quantity of worker minutes necessary to finish a product or process.L


cost-volume-profit analysis

The study of how profits change with various levels of output and selling price.C



Work done on a piece rate.P


data normalization

A database maintenance term used in the context of relational databases, which helps to minimize the duplication of information or safeguard the database against certain types of logical or structural data anomalies. It is often used when merging data from one or more databases.D



Abbreviation for return on investment.R


total factor productivity

A measure of productivity (of a department, plant, strategic business unit, firm, etc.) that combines the individual productivities of all its resources, including labor, capital, energy, material, and equipment. These individual factor productivities are often combined by weighting each according to its monetary value and then adding them. For example, if material accounts for 40 percent of the total cost of sales and labor 10 percent of the total cost of sales, etc., total factor productivity = .4 (material productivity) + .1 (labor productivity) + etc.T


slot based production

A term used in lean manufacturing that describes a production schedule that is held level, but leaves some openings to meet unexpectedly high levels of demand. This is a part of the “extra capacity” planning process.S


inventory shrinkage

Losses of inventory resulting from scrap, deterioration, pilferage, and so forth.I


capacity bill procedure

A rough-cut capacity planning method that takes into account any shifts in product mix. Bill of material and routing information are required with direct labor-hour or machine-hour data available for each operation. See: bill of labor.C


job progress chart

Syn: Gantt chart.J


in-transit inventory

Material moving between two or more locations, usually separated geographically; for example, finished goods being shipped from a plant to a distribution center.I


market planning

The process of developing market plans for products and services. This process is composed


repetitive industries

The group of manufacturers that produce high-volume, low-variety products such as R spark plugs, lawn mowers, and paper clips. See: repetitive manufacturing.R


procurement services provider

A company that has product, sourcing, and supply management knowledge and acts as an outsourced process by other companies and provides procurement help. They are most often used by companies where procurement is a significant part of business, but the company lacks the expertise to effectively manage the process. This is a third-party process.P


least changeover cost

Determining the lowest cost of making machine changeovers between jobs by sequencing the jobs accordingly.L



Abbreviation for strategic business unit.S


inefficiency risk

The risk of losing customers because another firm has lower unit costs.I


critical path

The longest sequence of activities through a network. The critical path defines the planned project duration. See: critical activity, critical path method.C


ISO 9000

A set of international standards on quality management and quality assurance developed to help companies effectively document the quality system elements to be implemented to maintain an efficient quality system. The standards, initially published in 1987, are not specific to any particular industry, product, or service. The standards were developed by the International Organization for Standardization, known as ISO, a specialized international agency for standardization composed of the national standards bodies of 91 countries. The standards underwent major revision in 2008 and now include ISO 9000:2008 (definitions), ISO 9001:2008 (requirements), and ISO 9004:2008 (continuous improvement). See: ISO/TS 16949, QS 9000.I


market strategy

The marketing plan to support the business strategy.M


order processing

The activity required to administratively process a customer’s order and make it ready for shipment or production.O


transit privilege

A service provided by a shipper that allows the purchasing company to stop a shipment midroute to allow changes to the delivery, but pay the nonstop rate.T



Abbreviation for trailer on a flatcar.T



Abbreviation for public-private partnering.P


electronic publishing

Representation of text and multimedia documents electronically.E


order preparation lead time

The time needed to analyze requirements and open order status and to create the paperwork necessary to release a purchase order or a production order.O


process manufacturing

Production that adds value by mixing, separating, forming, and/or performing chemical reactions. It may be done in either batch or continuous mode. See: project manufacturing.P


lot-size code

A code that indicates the lot-sizing technique selected for a given item. Syn: order policy code.L


14 Points

W. Edwards Deming’s 14 management practices to help companies increase their quality and productivity: (1) create constancy of purpose for improving products and services; (2) adopt the new philosophy; (3) cease dependence on inspection to achieve quality; (4) end the practice of awarding business on price alone; instead, minimize total cost by working with a single supplier; (5) improve constantly and forever every process for planning, production, and service; (6) institute training on the job; (7) adopt and institute leadership; (8) drive out fear; (9) break down barriers between staff areas; (10) eliminate slogans, exhortations, and targets for the workforce; (11) eliminate numerical quotas for the workforce and numerical goals for management; (12) remove barriers that rob people of pride of workmanship and eliminate the annual rating or merit system; (13) institute a vigorous program of education and self-improvement for everyone; and (14) put everybody in the company to work to accomplish the transformation. Syn: Deming’s 14 Points.F


buyer behavior

The way individuals or organizations behave in a purchasing situation. The customeroriented concept finds out the wants, needs, and desires of customers and adapts resources of the organization to deliver need-satisfying goods and services.B



In telecommunications, a measurement of how much data can be moved along a communications channel per unit of time, usually measured in bits per second.B


standardized ingredient

A raw ingredient that has been preprocessed to bring all its specifications within standard ranges before it is introduced to the main process. This preprocessing minimizes variability in the production process.S


master route sheet

The authoritative route process sheet from which all other format variations and copies are derived.M


sales and operations planning (S&OP)

A process to develop tactical plans that provide management the ability to strategically direct its businesses to achieve competitive advantage on a continuous basis by integrating customer-focused marketing plans for new and existing products with the management of the supply chain. The process brings together all the plans for the business (sales, marketing, development, manufacturing, sourcing, and financial) into one integrated set of plans. It is performed at least once a month and is reviewed by management at an aggregate (product family) level. The process must reconcile all supply, demand, and newproduct plans at both the detail and aggregate levels and tie to the business plan. It is the definitive statement of the company’s plans for the near to intermediate term, covering a horizon sufficient to plan for resources and to support the annual business planning process. Executed properly, the sales and operation planning process links the strategic plans for the business with its execution and reviews performance measurements for continuous improvement. See: aggregate planning, executive sales and operations planning, production plan, production planning, sales plan, tactical planning.S


open order

1) A released manufacturing order or purchase order. Syn: released order. See: scheduled receipt. 2) An unfilled customer order.O



The introduction of a neutral third party who attempts to provide alternatives to issues causing conflict that have not been put forth by either party or to M change the way the parties perceive the situation. It is often used in collective bargaining to reach an agreement.M


inventory buffer

Inventory used to protect the throughput of an operation or the schedule against the negative effects caused by delays in delivery, quality problems, delivery of incorrect quantity, and so on. Syn: inventory cushion. See: fluctuation inventory, safety stock.I


average outgoing quality (AOQ)

The expected average quality level of outgoing product for a given value of incoming product quality.A


export broker

A party that introduces the buyer to the seller and eventually withdraws, getting a fee for services rendered.E


conflict of interest

Any business activity, personal or company-related, that interferes with a company’s goals or that entails unethical or illegal actions.C


purchasing agent

A person authorized by the company to purchase goods and services for the company.P


move signal

Syn: move card.M



A communication by a supplier to advise a purchaser that a purchase order has been received. It usually implies acceptance of the order by the supplier.A


beta release

A version of a product sent to certain customers prior to general release in order to receive feedback on product performance.B



Providing training or experience in several different areas (e.g., training an employee on several machines). Cross-training provides backup workers in case the primary operator is unavailable.C


distressed goods

Products that are damaged or close to their expiration date and cannot be sold at full price.D


one-card kanban system

A kanban system where only a move card is employed. Typically, the work centers are adjacent, therefore no production card is required. In many cases, squares located between work centers are O used as the kanban system. An empty square signals the supplying work center to produce a standard container of the item. Syn: single-card kanban system. See: two-card kanban system.O


primary location

The designation of a certain storage location as the standard, preferred location for an item.P


bulk packing

Placing several small packages in a larger container to prevent damage or theft.B



The act of combining several small processes to form one larger process.N



The process of transferring data or programs from one computer to another (and usually saving to a disk).D


priority planning

The function of determining what material is needed and when. Master production scheduling and material requirements planning are the elements used for the planning and replanning process to maintain proper due dates on required materials.


dedicated capacity

A work center that is designated to produce a single item or a limited number of similar items. Equipment that is dedicated may be special equipment or may be grouped general-purpose equipment committed to a composite part.D


instruction sheet

Syn: routing.I


paired-cell overlapping loops of cards (POLCA)

A special material control and replenishment system developed to be used with quick-response manufacturing in cellular manufacturing environments. It is a hybrid push-pull system where the push authority to proceed is generated by high-level manufacturing resources planning. See: quick-response manufacturing.P



A sworn written statement.A


disciplinary action

An action taken to enforce compliance with organizational rules and policies.D


scope definition

In project management, subdividing a project into smaller components to facilitate management.S



Abbreviation for time-phased order point.T


computer-aided manufacturing (CAM)

The use of computers to program, direct, and control production equipment in the fabrication of manufactured items.C


risk pooling

A method often associated with the management of inventory risk. Manufacturers and retailers that experience high variability in demand for their products can pool together common inventory components associated with a broad family of products to buffer the overall burden of having to deploy inventory for each discrete product.R R


shrinkage rate

Syn: shrinkage factor.S


downstream operation

The tasks subsequent to the task currently being planned or executed.D


seasonal inventory

Inventory built up to smooth production in anticipation of a peak seasonal demand. Syn: seasonal stock.S


material analyst

The person assigned responsibility for and identification of the planning requirements for specific items and responsibility for each order.M


nongovernmental organization (NGO)

A legally constituted organization that operates independently from any government. The term is usually applied only to organizations that pursue some wider social aim with political aspects, but that are not overtly political organizations such as political parties. These types of organizations are called civil society organizations and other names in some jurisdictions.N


total line-haul cost

Basic costs of carrier operation to move a container of freight, including driver's wages and usage depreciation, which vary with the distance shipped and the cost per mile.T


critical characteristics

The attributes of a product that must function properly to avoid the failure of the product. Syn: functional requirements.C



Acronym for computer-aided design.C C


buffer management

In the theory of constraints, a process in which all expediting in a shop is driven by what is scheduled to be in the buffers (constraint, shipping, and assembly buffers). By expediting this material into the buffers, the system helps avoid idleness at the constraint and missed customer due dates. In addition, the causes of items missing from the buffer are identified, and the frequency of occurrence is used to prioritize improvement activities.B


buying down

Given a product that historically experienced price swings, attempting to buy when the price is low or down. See: hedging, speculative buying.B


flexible capability

Machinery’s ability to be readily adapted to processing different components on an ongoing basis.F


from gross profit. 3) Net profit

earnings or income after adjusting for miscellaneous income and expenses (patent royalties, interest, capital gains) and tax from operating profit. Syn: income.P


bid proposal

The response to the written request from a potential customer asking for the submission of a quotation or proposal to provide goods or services. The bid proposal is in response to a request for proposal (RFP) or request for quote (RFQ).B



An official schedule of taxes and fees imposed by a country on imports or exports.T


business plan

1) A statement of long-range strategy and revenue, cost, and profit objectives usually accompanied by budgets, a projected balance sheet, and a cash flow (source and application of funds) statement. A business plan is usually stated in terms of dollars and grouped by product family. The business plan is then translated into synchronized tactical functional plans through the production planning process (or the sales and operations planning process). Although frequently C stated in different terms (dollars versus units), these tactical plans should agree with each other and with the business plan. See: long-term planning, strategic plan. 2) A document consisting of the business details (organization, strategy, and financing tactics) prepared by an entrepreneur to plan for a new business.B


award audits

Site visits associated with award programs such as the Malcolm Baldrige National Quality Award or similar state-sponsored award programs.A


traffic department

The area of an organization that plans and executes shipping requirements.T


objective function

The goal or function that is to be optimized in a model. Most often it is a cost function that should be minimized subject to some restrictions or a profit function that should be maximized subject to some restrictions.O



A production environment where products can be and usually are finished before receipt of a customer order. Customer orders are typically filled from existing stocks, and production orders are used to replenish those stocks. Syn: produce-to-stock. See: assemble-to-order, make-to-order.M


bin tag

1) A type of perpetual inventory record, designed for storekeeping purposes, maintained at the storage area for each inventory item. 2) An identifying marking on a storage location.B


service parts demand

The need or requirement for a component to be sold by itself, as opposed to being used in production to make a higher level product. Syn: repair parts demand, spare parts demand.S


general merchandise warehouse

A warehouse for the storage of goods that require no special handling.G


vertical marketing

A coordinated product marketing system, with activities undertaken by one company, for a supply chain.V


operations sequence analysis

Method of planning a facility layout by using graphics to determine the placement of departments.O


noncurrent assets

An accounting/financial term (balance sheet classification of accounts) representing the long-term resources owned by a company, including property, plant, and equipment.N


marginal cost of capital

The cost of the next dollar, after taxes, that a firm expects to raise for investment.M


interoperation time

The time between the completion of one operation and the start of the next.I


active tag

A radio frequency identification tag that broadcasts information and contains its own power source. See: radio frequency identification (RFID).A


green field

The initiation of a new process where no similar initiatives have previously existed.G


cube utilization

In warehousing, a measurement of the utilization of the total storage capacity of a vehicle or warehouse.C


inventory accounting

The branch of accounting dealing with valuing inventory. Inventory may be recorded or valued using either a perpetual or a periodic system. A perpetual inventory record is updated frequently or in real time, while a periodic inventory record is counted or measured at fixed time intervals (e.g., every two weeks or monthly). Inventory valuation methods of LIFO, FIFO, or average costs are used with either recording system.I



In information systems, a set of rules for defining the format and relationships for sharing information between devices. These rules govern the transmission of data across a network and serve as the grammar of data communication languages.P



Abbreviation for open systems interconnection.O


optimal order period

Within a fixed order period inventory system, the time between a status check on the material that balances ordering costs with carrying costs.O


statement of cash flows

Syn: funds flow statement.S


packing and marking

The activities of packing for safe shipping and unitizing one or more items of an order, placing them into an appropriate container, and marking and labeling the container with customer shipping P destination data, as well as other information that may be required.P



Continually balancing the number of workers in a work center to meet demand with a minimum number of workers. It requires a line design, such as Ushaped, that supports varying the number of workers.S


spare parts demand

Syn: service parts demand.S



Acronym for employee stock ownership plan.E



Abbreviation for late start date.L


general stores

Syn: supplies.G


Institute of Industrial Engineers (IIE)

A nonprofit educational organization with members interested in the field of industrial engineering.I


delinquent order

Syn: past due order.D


consigned stocks

Inventories, generally of finished goods, that are in the possession of customers, dealers, agents, and so on, but remain the property of the manufacturer by agreement with those in possession. Syn: consignment inventory, vendor-owned inventory. See: consignment.C


advanced planning and scheduling (APS)

Techniques that deal with analysis and planning of logistics and manufacturing during short, intermediate, and longterm time periods. APS describes any computer program that uses advanced mathematical algorithms or logic to perform optimization or simulation on finite capacity scheduling, sourcing, capital planning, resource planning, forecasting, demand management, and others. These techniques simultaneously consider a range of constraints and business rules to provide real-time planning and scheduling, decision support, available-topromise, and capable-to-promise capabilities. APS often generates and evaluates multiple scenarios. Management then selects one scenario to use as the A “official plan.” The five main components of APS systems are (1) demand planning, (2) production planning, (3) production scheduling, (4) distribution planning, and (5) transportation planning.A



A dimension of service quality referring to the promptness and helpfulness in providing a service.R



A written document that bears witness to, or “vouches” for, something. A voucher generally is an instrument showing services performed or goods purchased and authorizing payment to the supplier.V W


straight-line depreciation

A method of depreciation whereby the amount to be recovered (written off as an expense) is spread uniformly over the estimated life of the asset in terms of time periods. See: depreciation.S


allocation costing

Syn: absorption costing.A


design for six sigma

An approach to designing products and processes that attempts to ensure the firm can provide products or services that meet six sigma quality levels. These quality levels correspond to approximately 3.4 defects per million opportunities.D



Acronym for American National Standards Institute.A



Abbreviation for distribution requirements planning.D


transformation process

The process of converting inputs into finished goods or services. In a service firm, the input may be a customer. Syn: transformation system. See: manufacturing process, production process.T T


forecast error

The difference between actual demand and forecast demand, stated as an absolute value or as a percentage. See: average forecast error, forecast accuracy, mean absolute deviation, tracking signal.F


limited liability company

In the United States, a business organization that, as with a corporation, enjoys limited liability yet is not a taxable entity.L


message distribution

The software component of electronic commerce that enables the sending and receiving of messages.M



This is a performance measurement tool used by a company that summarizes its key performance indicators. Another use of scorecard is to measure the supply chain members and ensure that their performance is meeting company standards.S


critical value analysis

A modified ABC analysis where a subjective metric of the criticality of an item is assigned to each item.C



A general-purpose computer language created by Sun Microsystems.J


Full-Baldrige approach

A quality award program modeled after the Malcolm Baldrige National Quality Award and using the same criteria.F


operator flexibility

Training machine workers to perform tasks outside their immediate jobs and in problemsolving techniques to improve process flexibility. This is a necessary process in developing a fully cross-trained workforce.O



1) In an industrial context, the art and science of obtaining, producing, and distributing material and product in the proper place and in proper quantities. 2) In a military sense (where it has greater usage), its meaning can also include the movement of personnel.L



A strategy of anticipating issues and presenting beneficial solutions to the customer.P



Abbreviation for statistical process control.S


significant variances

Those differences between planned and actual performance that exceed established thresholds and that require further review, analysis, and action.S


check digit

A digit added to each number in a coding system that allows for detection of errors in the recording of the code numbers. Through the use of the check digit and a predetermined mathematical formula, recording errors such as digit reversal or omission can be discovered.C


piece rate pay system

A compensation system based upon volume of output of an individual worker.P


cost tradeoff

Considering the advantages and disadvantages of one method to another, such as different avenues of distribution or providing customer service.C


job ticket

Syn: time ticket.J


order cost

A direct labor cost incurred when a purchaser places an order.O


shareholder wealth

The present value of all anticipated payments to the shareholders of a firm.S


unfair labor practice

Activities by management or labor that violate the National Labor Relations Act. Failure to bargain in good faith is an example.U



1) In activity-based cost accounting, a task or activity, performed by or at a resource, required in producing the organization’s output of goods and services. A resource may be a person, machine, or facility. A Activities are grouped into pools by type of activity and allocated to products. 2) In project management, an element of work on a project. It usually has an anticipated duration, anticipated cost, and expected resource requirements. Sometimes “major activity” is used for larger bodies of work.A


process selection

An economic analysis used to decide which process should be used when operations can be performed by more than one process.P



Abbreviation for business process reengineering.B


environmental scanning

Process used to expose an organization’s potential strengths, weaknesses, opportunities, and threats. Many experts emphasize opportunities and threats because the tool is primarily external.E


actual costs

The labor, material, and associated overhead costs that are charged against a job as it moves through the production process.A


executing processes

The processes performed to complete a project plan to accomplish the objectives set forth in the project scope.E


process improvement

The activities designed to identify and eliminate causes of poor quality, process variation, and non-value-added activities.P P



Improving quality and cutting costs by removing complexity from a product or service.S


trading bloc

Syn: trade bloc.T


teardown time

The time needed to remove a setup from a machine or facility. Teardown is an element of manufacturing lead time, but it is often allowed for in setup or run time rather than separately. See: teardown.T


end item

A product sold as a completed item or repair part; any item subject to a customer order or sales forecast. Syn: end product, finished good, finished product. See: good.E


semivariable costs

Costs that change in increments. They remain fixed over a given range, and outside that range, the cost changes to a new level.S


green marketing

In advertising, promoting products because of their environmental sensitivity.G



The Japanese term for the practice of stopping the production line when a defect occurs.J


material lot

A uniquely identifiable amount of a material. This describes the actual quantity or amount of material available, its current state, and its specific property values.M


expected receipt date

Syn: due date.E


operations strategy

The total pattern of decisions that shape the long-term capabilities of an operation and O their contribution to overall strategy. Operations strategy should be consistent with overall strategy. See: strategic plan.O


theory of constraints (TOC)

A holistic management philosophy developed by Dr. Eliyahu M. Goldratt that is based on the principle that complex systems exhibit inherent simplicity. Even a very complex system comprising thousands of people and pieces of equipment can have, at any given time, only a very, very small number


multiple regression models

A form of regression analysis where the model involves more than one independent variable, such as developing a forecast of dishwasher sales based upon housing starts, gross national product, and disposable income.M


quantitative forecasting techniques

An approach to forecasting where historical demand data a