BSCM Flashcards
1
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2
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3PL
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Abbreviation for third-party logistics.
A buyer and supplier team with a third party that provides product delivery services. This third party may provide added supply chain expertise.
3
Q
ABC classification
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The classification of a group of items in decreasing order of annual dollar volume (price multiplied by projected volume) or other criteria. This array is then split into three classes, called A, B, and C. The A group usually represents 10% to 20% by number of items and 50% to 70% by projected dollar volume. The next grouping, B, usually represents about 20% of the items and about 20% of the dollar volume. The C class contains 60% to 70% of the items and represents about 10% to 30% of the dollar volume. The ABC principle states that effort and money can be saved through applying looser controls to the low-dollar-volume class items than will be applied to high-dollar-volume class items. The ABC principle is applicable to inventories, purchasing, sales, and so on. Syn: ABC analysis, distribution by value. See: 80-20, Pareto analysis, Pareto’s law.
4
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advance ship notice (ASN)
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An EDI notification of shipment of product.
5
Q
advanced planning and scheduling (APS)
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Techniques that deal with analysis and planning of logistics and manufacturing over the short, intermediate, and long-term 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-to-promise, and capable-to-promise capabilities. APS often generates and evaluates multiple scenarios. Management then selects one scenario to use as the “official plan.” The five main components of APS systems are demand planning, production planning, production scheduling, distribution planning, and transportation planning.
6
Q
andon
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A sign board with signal lights used to make workers and management aware of a quality, quality, or process problem.
7
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anticipation inventories
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Additional inventory above basic pipeline stock to cover projected trends of increasing sales, planned sales promotion programs, seasonal fluctuations, plant shutdowns, and vacations.
8
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APS
A
Abbreviation for advanced planning and scheduling, abbreviation for advanced planning system.
Techniques that deal with analysis and planning of logistics and manufacturing over the short, intermediate, and long-term 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-to-promise, and capable-to-promise capabilities. APS often generates and evaluates multiple scenarios. Management then selects one scenario to use as the “official plan.” The five main components of APS systems are demand planning, production planning, production scheduling, distribution planning, and transportation planning.
9
Q
ASN
A
Abbreviation for advance ship notice.
An EDI notification of shipment of product.
10
Q
assemble-to-order
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A production environment where a good or service can be assembled after receipt of a customer’s order. The key components (bulk, semifinished, 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.
11
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assembly line
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An assembly process in which equipment and work centers are laid out to follow the sequence in which raw materials and parts are assembled. See: line, production line.
12
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assignable cause
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A source of variation in a process that can be isolated, especially when its significantly larger magnitude or different origin readily distinguishes it from random causes of variation. Syn: special cause. See: common causes, assignable variation.
13
Q
available inventory
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The on-hand inventory balance minus allocations, reservations, backorders, and (usually) quantities held for quality problems. Often called beginning available balance. Syn: beginning available balance, net inventory.
14
Q
�available-to-promise (ATP)
A
The uncommitted portion of a company’s inventory and planned production maintained in the master schedule to support customer-order promising. The ATP quantity is the uncommitted inventory balance in the first period and is normally calculated for each period in which an MPS receipt is scheduled. In the first period, ATP includes on-hand inventory less customer orders that are due and overdue. Three methods of calculation are used: discrete ATP, cumulative ATP with lookahead, and cumulative ATP without lookahead. See: discrete available-to-promise, cumulative available-to-promise.
15
Q
average inventory
A
One-half the average lot size plus the safety stock, when demand and lot sizes are expected to be relatively uniform over time. The average can be calculated as an average of several inventory observations taken over several historical time periods; e.g., 12-month ending inventories may be averaged. When demand and lot sizes are not uniform, the stock level versus time can be graphed to determine the average.
16
Q
back scheduling
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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.
17
Q
backflush
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A method of inventory bookkeeping where the book (computer) inventory of components is automatically reduced by the computer after completion of activity on the component’s upper-level parent item based on what should have been used as specified on the bill of material and allocation records. This approach has the disadvantage of a built-in differential between the book record and what is physically in stock. Syn: explode-to-deduct, post-deduct inventory transaction processing. See: pre-deduct inventory transaction processing.
18
Q
backhauling
A
The process of a transportation vehicle returning from the original destination point to the point of origin. The 1980 Motor Carrier Act deregulated interstate commercial trucking and thereby allowed carriers to contract for the return trip. The backhaul can be with a full, partial, or empty load. An empty backhaul is called deadheading. See: deadhead.
19
Q
backlog
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All the customer orders received but not yet shipped. Sometimes referred to as open orders or the order board. See: order backlog, past due order.
20
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backorder
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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.
21
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balance sheet
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A financial statement showing the resources owned, the debts owed, and the owner’s share of a company at a given point in time. See: funds flow statement, income statement.
22
Q
bar code
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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 facilitate timely and accurate input of data to a computer system.
23
Q
batch
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1) A quantity scheduled to be produced or in production. See: process batch, transfer batch. 2) For discrete products, the batch is planned to be the standard batch quantity, but during production, the standard batch quantity may be broken into smaller lots. See: lot. 3) In nondiscrete products, the batch is a quantity that is planned to be produced in a given time period based on a formula or recipe that often is developed to produce a given number of end items. 4) A type of manufacturing process used to produce items with similar designs and that may cover a wide range of order volumes. Typically, items ordered are of a repeat nature, and production may be for a specific customer order or for stock replenishment. See: project manufacturing.
24
Q
batch picking
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A method of picking orders in which order requirements are aggregated by product across orders to reduce movement to and from product locations. The aggregated quantities of each product are then transported to a common area where the individual orders are constructed. See: discrete order picking, order picking, zone picking.
25
bias
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.
26
bill of lading (uniform)
A carrier's contract and receipt for goods the carrier agrees to transport from one place to another and to deliver to a designated person. In case of loss, damage, or delay, the bill of lading is the basis for filing freight claims.
27
bill of material (BOM)
1) A listing of all the subassemblies, intermediates, parts, and raw materials that go into a parent assembly showing the quantity of each required to make an assembly. It is used in conjunction with the master production schedule to determine the items for which purchase requisitions and production orders must be released. A variety of display formats exist for bills of material, including the single-level bill of material, indented bill of material, modular (planning) bill of material, transient bill of material, matrix bill of material, and costed bill of material. 2) A list of all the materials needed to make one production run of a product, by a contract manufacturer, of piece parts/components for its customers. The bill of material may also be called the formula, recipe, or ingredients list in certain process industries.
28
bonded warehouse
Buildings or parts of buildings designated by the U.S. Secretary of the Treasury for storing imported merchandise, operated under U.S. Customs supervision.
29
bottleneck
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.
30
break-bulk
Dividing truckloads of homogeneous items into smaller, more appropriate quantities for use.
31
break-even point
The level of production or the volume of sales at which operations are neither profitable nor unprofitable. The break-even point is the intersection of the total revenue and total cost curves. See: total cost curve.
32
buffer
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. Buffers can be maintained at the constraint, convergent points (with a constraint part), divergent points, and shipping points.
33
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.
34
bullwhip effect
An extreme change in the supply position upstream in a supply chain generated by a small change in demand downstream in the supply chain. Inventory can quickly move from being backordered to being excess. This is caused by the serial nature of communicating orders up the chain with the inherent transportation delays of moving product down the chain. The bullwhip effect can be eliminated by synchronizing the supply chain.
35
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 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.
36
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.
37
capacity available
The capability of a system or resource to produce a quantity of output in a particular time period. Syn: available capacity. See: capacity, available time.
38
capacity management
The function of establishing, measuring, monitoring, and adjusting limits or levels of capacity in order to execute all manufacturing schedules; i.e., the production plan, master production schedule, material requirements plan, and dispatch list. Capacity management is executed at four levels: resource requirements planning, rough-cut capacity planning, capacity requirements planning, and input/output control.
39
capacity planning
The process of determining the amount of capacity required to produce in the future. This process may be performed at an aggregate or product-line level (resource requirements planning), at the master-scheduling level (rough-cut capacity planning), and at the material requirements planning level (capacity requirements planning). See: capacity requirements planning, resource planning, rough-cut capacity planning.
40
capacity requirements planning (CRP)
The function of establishing, measuring, and adjusting limits or levels of capacity. The term capacity requirements planning in this context refers to the process of determining in detail the amount of labor and machine resources required to accomplish the tasks of production. Open shop orders and planned orders in the MRP system are input to CRP, which through the use of parts routings and time standards translates these orders into hours of work by work center by time period. Even though rough-cut capacity planning may indicate that sufficient capacity exists to execute the MPS, CRP may show that capacity is insufficient during specific time periods. See: capacity planning.
41
carrying cost
The cost of holding inventory, usually defined as a percentage of the dollar value of inventory per unit of time (generally one year). Carrying cost depends mainly on the cost of capital invested as well as such costs of maintaining the inventory as taxes and insurance, obsolescence, spoilage, and space occupied. Such costs vary from 10% to 35% annually, depending on type of industry. Carrying cost is ultimately a policy variable reflecting the opportunity cost of alternative uses for funds invested in inventory. Syn: holding costs.
42
cash flow
The net flow of dollars into or out of the proposed project. The algebraic sum, in any time period, of all cash receipts, expenses, and investments. Also called cash proceeds or cash generated.
43
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.
44
cellular manufacturing
A manufacturing process that produces families of parts within a single line or cell of machines controlled by operators who work only within the line or cell.
45
centralized inventory control
Inventory decision making (for all SKUs) exercised from one office or department for an entire company.
46
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.
47
chase production method
A production planning method that maintains a stable inventory level while varying production to meet demand. Companies may combine chase and level production schedule methods. Syn: chase strategy, chase-demand strategy.
48
closed-loop MRP
A system built around material requirements planning that includes the additional planning processes of production planning (sales and operations planning), master production scheduling, and capacity requirements planning. Once this planning phase is complete and the plans have been accepted as realistic and attainable, the execution processes come into play. These processes include the manufacturing control processes of input-output (capacity) measurement, detailed scheduling and dispatching, as well as anticipated delay reports from both the plant and suppliers, supplier scheduling, and so on. The term closed loop implies not only that each of these processes is included in the overall system, but also that feedback is provided by the execution processes so that the planning can be kept valid at all times.
49
common carrier
Transportation available to the public that does not provide special treatment to any one party and is regulated as to the rates charged, the liability assumed, and the service provided. A common carrier must obtain a certificate of public convenience and necessity from the Federal Trade Commission for interstate traffic. Ant: private carrier.
50
component
The raw material, part, or subassembly that goes into a higher level assembly, compound, or other item. This term may also include packaging materials for finished items. See: ingredient, intermediate part.
51
consignment
1) A shipment that is handled by a common carrier. 2) The process of a supplier placing goods at a customer location without receiving payment until after the goods are used or sold. See: consigned stocks.
52
constraint
Any element or factor that prevents a system from achieving a higher level of performance with respect to its goal. Constraints can be physical, such as a machine center or lack of material, but they can also be managerial, such as a policy or procedure.
53
continuous process improvement (CPI)
A never-ending effort to expose and eliminate root causes of problems; small-step improvement as opposed to big-step improvement. Syn: continuous improvement. See: kaizen.
54
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.
55
continuous replenishment
A process by which a supplier is notified daily of actual sales or warehouse shipments and commits to replenishing these sales (by size, color, and so on) without stockouts and without receiving replenishment orders. The result is a lowering of associated costs and an improvement in inventory turnover. See: rapid replenishment, vendor-managed inventory.
56
contract carrier
A carrier that does not serve the general public, but provides transportation for hire for one or a limited number of shippers under a specific contract.
57
control chart
A graphic comparison of process performance data with predetermined computed control limits. The process performance data usually consist of groups of measurements selected in regular sequence of production that preserve the order. The primary use of control charts is to detect assignable causes of variation in the process as opposed to random variations. The control chart is one of the seven tools of quality. Syn: process control chart.
58
control limit
A statistically determined line on a control chart (upper control limit or lower control limit). If a value occurs outside of this limit, the process is deemed to be out of control.
59
cost of goods sold
An accounting classification useful for determining the amount of direct materials, direct labor, and allocated overhead associated with the products sold during a given period of time. See: cost of sales.
60
cost of poor quality
The cost associated with providing poor-quality products or services. There are four categories of costs: internal failure costs (costs associated with defects found before the customer receives the product or service), external failure costs (costs associated with defects found after the customer receives the product or service), appraisal costs (costs incurred to determine the degree of conformance to quality requirements), and prevention costs (costs incurred to keep failure and appraisal costs to a minimum). Syn: cost of quality.
61
CPI
1) Abbreviation for continuous process improvement. 2) Abbreviation for cost performance index.
A never-ending effort to expose and eliminate root causes of problems; small-step improvement as opposed to big-step improvement. Syn: continuous improvement. See: kaizen.
62
CPM
1) Abbreviation for critical path method. 2) Abbreviation for Certified Purchasing Manager.
A network planning technique for the analysis of a project's completion time used for planning and controlling the activities in a project. By showing each of these activities and their associated times, the critical path, which identifies those elements that actually constrain the total time for the project, can be determined. See: critical chain method, network analysis, critical activity, critical path.
63
critical chain method
In the theory of constraints, a network planning technique for the analysis of a project's completion time, used for planning and controlling project activities. The critical chain, which determines project duration, is based on technological and resource constraints. Strategic buffering of paths and resources is used to increase project completion success. See: critical chain, critical path method.
64
critical path method (CPM)
A network planning technique for the analysis of a project's completion time used for planning and controlling the activities in a project. By showing each of these activities and their associated times, the critical path, which identifies those elements that actually constrain the total time for the project, can be determined. See: critical chain method, network analysis, critical activity, critical path.
65
customer service
1) The ability of a company to address the needs, inquiries, and requests from customers. 2) A measure of the delivery of a product to the customer at the time the customer specified.
66
customs broker
A person who manages the paperwork required for international shipping and tracks and moves the shipments through the proper channels.
67
cycle counting
An inventory accuracy audit technique where inventory is counted on a cyclic schedule rather than once a year. A cycle inventory count is usually taken on a regular, defined basis (often more frequently for high-value or fast-moving items and less frequently for low-value or slow-moving items). Most effective cycle counting systems require the counting of a certain number of items every workday with each item counted at a prescribed frequency. The key purpose of cycle counting is to identify items in error, thus triggering research, identification, and elimination of the cause of the errors.
68
cycle stock
One of the two main conceptual components of any item inventory, the cycle stock is the most active component, i.e., that which 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.
69
cycle time
1) In industrial engineering, the time between completion of two discrete units of production. For example, the cycle time of motors assembled at a rate of 120 per hour would be 30 seconds. 2) In materials management, it refers to the length of time from when material enters a production facility until it exits. Syn: throughput time.
70
days of supply
Inventory-on-hand metric converted from units to how long the units will last. For example if there are 2,000 units on hand and the company is using 200 per day then there are 10 days of supply.
71
DBR
Abbreviation for drum-buffer-rope.
The theory of constraints method for scheduling and managing operations that have an internal constraint or capacity-constrained resource.
72
decentralized inventory control
Inventory decision making exercised at each stocking location for SKUs at that location.
73
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.
74
delivery lead time
The time from the receipt of a customer order to the delivery of the product. Syn: delivery cycle.
75
demand lead time
The amount of time potential customers are willing to wait for the delivery of a good or a service. Syn: customer tolerance time.
76
demand management
1) The function of recognizing all demands for goods and services to support the market place. It involves prioritizing demand when supply is lacking. Proper demand management facilitates the planning and use of resources for profitable business results. 2) In marketing, the process of planning, executing, controlling, and monitoring the design, pricing, promotion, and distribution of products and services to bring about transactions that meet organizational and individual needs. Syn: marketing management. See: demand planning.
77
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.
78
demonstrated capacity
Proven capacity calculated from actual performance data, usually expressed as the average number of items produced multiplied by the standard hours per item. See: maximum demonstrated capacity.
79
demurrage
The carrier charges and fees applied when rail freight cars and ships are retained beyond a specified loading or unloading time. See: detention, express.
80
dependent demand
Demand that is directly related to or derived from the bill of material structure for other items or end products. Such demands are therefore calculated and need not and should not be forecast. A given inventory item may have both dependent and independent demand at any given time. For example, a part may simultaneously be the component of an assembly and sold as a service part. See: independent demand.
81
detention
Carrier charges and fees applied when truck trailers are retained beyond a specified loading or unloading time. See: demurrage, express.
82
direct labor
Labor that is specifically applied to the good being manufactured or used in the performance of the service. Syn: touch labor.
83
direct material
Material that becomes a part of the final product in measurable quantities.
84
discrete manufacturing
The production of distinct items such as automobiles, appliances, or computers.
85
discrete order picking
A method of picking orders in which the items on one order are picked before the next order is picked. See: batch picking, order picking, zone picking.
86
dispatching
The selecting and sequencing of available jobs to be run at individual workstations and the assignment of those jobs to workers.
87
distribution
1) The activities associated with the movement of material, usually finished goods or service parts, from the manufacturer to the customer. These activities encompass the functions of transportation, warehousing, inventory control, material handling, order administration, site and location analysis, industrial packaging, data processing, and the communications network necessary for effective management. It includes all activities related to physical distribution, as well as the return of goods to the manufacturer. In many cases, this movement is made through one or more levels of field warehouses. Syn: physical distribution. 2) The systematic division of a whole into discrete parts having distinctive -characteristics.
88
distribution center
A location 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.
89
distribution channel
The distribution route, from raw materials through consumption, along which products travel. See: channels of distribution, marketing channel.
90
distribution inventory
Inventory, usually spare parts and finished goods, located in the distribution system (e.g., in warehouses and in-transit between warehouses and the consumer).
91
distribution requirements planning (DRP)
1) The function of determining the need to replenish inventory at branch warehouses. A time-phased order point approach is used where the planned orders at the branch warehouse level are "exploded" via MRP logic to become gross requirements on the supplying source. In the case of multilevel distribution networks, this explosion process can continue down through the various levels of regional warehouses (master warehouse, factory warehouse, etc.) and become input to the master production schedule. Demand on the supplying sources is recognized as dependent, and standard MRP logic applies. 2) More generally, replenishment inventory calculations, which may be based on other planning approaches such as period order quantities or "replace exactly what was used," rather than being limited to the time-phased order point approach.
92
distribution warehouse
A facility where goods are received in large-volume uniform lots, stored briefly, and then broken down into smaller orders of different items required by the customer. Emphasis is on expeditious movement and handling.
93
dock-to-stock
A program by which specific quality and packaging requirements are met before the product is released. Prequalified product is shipped directly into the customer's inventory. Dock-to-stock eliminates the costly handling of components, specifically in receiving and inspection and enables product to move directly into production.
94
drop ship
To take the title of the product but not actually handle, stock, or deliver it, e.g., to have one supplier ship directly to another or to have a supplier ship directly to the buyer's customer.
95
DRP
Abbreviation for distribution requirements planning.
1) The function of determining the need to replenish inventory at branch warehouses. A time-phased order point approach is used where the planned orders at the branch warehouse level are "exploded" via MRP logic to become gross requirements on the supplying source. In the case of multilevel distribution networks, this explosion process can continue down through the various levels of regional warehouses (master warehouse, factory warehouse, etc.) and become input to the master production schedule. Demand on the supplying sources is recognized as dependent, and standard MRP logic applies. 2) More generally, replenishment inventory calculations, which may be based on other planning approaches such as period order quantities or "replace exactly what was used," rather than being limited to the time-phased order point approach.
96
drum schedule
The detailed production schedule for a resource that sets the pace for the entire system. The drum schedule must reconcile the customer requirements wiht the system's constraint(s).
97
drum-buffer-rope (DBR)
The theory of constraints method for scheduling and managing operations that have an internal constraint or capacity-constrained resource.
98
duty
A tax levied by a government on the importation, exportation, or use and consumption of goods.
99
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:
where A = annual usage in units, S = ordering costs in dollars, i = annual inventory carrying cost rate as a decimal, and C = unit cost.
Syn: economic lot size, minimum cost order quantity. See: total cost curve.
100
EDI
Abbreviation for electronic data interchange.
The paperless (electronic) exchange of trading documents, such as purchase orders, shipment authorizations, advanced shipment notices, and invoices, using standardized document formats.
101
efficiency
A measurement (usually expressed as a percentage) of the actual output to the standard output expected. Efficiency measures how well something is performing relative to existing standards; in contrast, productivity measures output relative to a specific input, e.g., tons/labor hour. Efficiency is the ratio of (1) actual units produced to the standard rate of production expected in a time period or (2) standard hours produced to actual hours worked (taking longer means less efficiency) or (3) actual dollar volume of output to a standard dollar volume in a time period. Illustrations of these calculations follow. (1) There is a standard of 100 pieces per hour and 780 units are produced in one eight-hour shift; the efficiency is 780/800 converted to a percentage, or 97.5%. (2) The work is measured in hours and took 8.21 hours to produce 8 standard hours; the efficiency is 8/8.21 converted to a percentage or 97.5 percent. (3) The work is measured in dollars and produces $780 with a standard of $800; the efficiency is $780/$800 converted to a percentage, or 97.5 percent.
102
EI
Abbreviation for employee involvement.
The concept of using the experience, creative energy, and intelligence of all employees by treating them with respect, keeping them informed, and including them and their ideas in decision-making processes appropriate to their areas of expertise. Employee involvement focuses on quality and productivity improvements. Syn: people involvement.
103
employee empowerment
The practice of giving nonmanagerial employees the responsibility and the power to make decisions regarding their jobs or tasks. It is associated with the practice of transfer of managerial responsibility to the employee. Empowerment allows the employee to take on responsibility for tasks normally associated with staff specialists. Examples include allowing the employee to make scheduling, quality, process design, or purchasing decisions.
104
engineer-to-order
Products whose customer specifications require unique engineering design, significant customization, or new purchased materials. Each customer order results in a unique set of part numbers, bills of material, and routings. Syn: design-to-order.
105
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.
106
explode
To perform a bill-of-material explosion.
107
external failure costs
The cost related to problems found after the product reaches the customer. This usually includes such costs as warranty and returns.
108
external setup time
The time associated with elements of a setup procedure performed while the process or machine is running. Ant: internal setup time.
109
extrinsic forecasting method
A forecast method on a correlated leading indicator, such as estimating furniture sales based on housing starts. Extrinsic forecasts tend to be more useful for large aggregations, such as total company sales, than for individual product sales. Ant: intrinsic forecast method. See: quantitative forecasting technique.
110
FAS
1) Abbreviation for final assembly schedule. 2) Abbreviation for free alongside ship.
A schedule of end items to finish the product for specific customers' orders in a make-to-order or assemble-to-order environment. It is also referred to as the finishing schedule because it may involve operations other than just the final assembly; also, it may not involve assembly, but simply final mixing, cutting, packaging, etc. The FAS is prepared after receipt of a customer order as constrained by the availability of material and capacity, and it schedules the operations required to complete the product from the level where it is stocked (or master scheduled) to the end-item level.
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field service
The functions of installing and maintaining a product for a customer after the sale or during the lease. Field service may also include training and implementation assistance. Syn: after-sale service.
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finished goods inventory
Those items on which all manufacturing operations, including final test, have been completed. These products are available for shipment to the customer as either end items or repair parts. Syn: finished products inventory. See: goods.
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finite forward scheduling
A 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.
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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.
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firm planned order (FPO)
A planned order that can be frozen in quantity and time. The computer is not allowed to change it automatically; this is the responsibility of the planner in charge of the item that is being planned. This technique can aid planners working with MRP systems to respond to material and capacity problems by firming up selected planned orders. In addition, firm planned orders are the normal method of stating the master production schedule. See: planning time fence.
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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.
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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.
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five why's
The common practice in TQM 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 W's. See: root cause analysis.
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fixed order quantity
A lot-sizing technique in MRP or inventory management that will always cause planned or actual orders to be generated for a predetermined fixed quantity, or multiples thereof, if net requirements for the period exceed the fixed order quantity.
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fixed overhead
Traditionally, all manufacturing costs, other than direct labor and direct materials, that continue even if products are not produced. Although fixed overhead is necessary to produce the product, it cannot be directly traced to the final product.
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fixed position manufacturing
Similar to project manufacturing, this type of manufacturing is mostly used for large, complex projects, where the product remains in one locations for its full assembly period or may move from location to location after considerable work and time are spent on it. Examples of fixed position manufacuring include shipbuilding or aircraft assembly, where the costs of frequent movement of the product are very high.
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fixed-location storage
A method of storage in which a relatively permanent location is assigned for the storage of each item in a storeroom or warehouse. Although more space is needed to store parts than in a random-location storage system, fixed locations become familiar, and therefore a locator file may not be needed. See: random-location storage.
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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.
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flow shop
A form of manufacturing organization in which machines and operators handle a standard, usually uninterrupted, material flow. The operators generally perform the same operations for each production run. A flow shop is often referred to as a mass production shop or is said to have a continuous manufacturing layout. The plant layout (arrangement of machines, benches, assembly lines, etc.) is designed to facilitate a product "flow." Some process industries (chemicals, oil, paint, etc.) are extreme examples of flow shops. Each product, though variable in material specifications, uses the same flow pattern through the shop. Production is set at a given rate, and the products are generally manufactured in bulk. Syn: flow line, flow manufacturing, flow plant.
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flowchart
The output of a flowcharting process, a chart that shows the operations, transportation, storages, delays, inspections, and so on related to a process. Flowcharts are drawn to better understand processes. The flowchart is one of the seven tools of quality. Syn: flow diagram. See: block diagram, flow process chart.
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fluctuation inventory
Inventory that is carried as a cushion to protect against forecast error. Syn: fluctuation stock. See: inventory buffer.
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forecast
An estimate of future demand. A forecast can be constructed using quantitative methods, qualitative methods, or a combination of methods, and it can be based on extrinsic (external) or intrinsic (internal) factors. Various forecasting techniques attempt to predict one or more of the four components of demand: cyclical, random, seasonal, and trend. Syn: sales forecast. See: Box-Jenkins model, exponential smoothing forecast, extrinsic forecasting method, intrinsic forecasting method, moving average forecast, qualitative forecasting method, quantitative forecasting method.
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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.
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forward scheduling
A scheduling technique where the scheduler proceeds from a known start date and computes the completion date for an order, usually proceeding from the first operation to the last. Dates generated by this technique are generally the earliest start dates for operations. See: forward pass. Ant: back scheduling.
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four P's
A set of marketing tools to direct the business offering to the customer. The four P's are product, price, place, and promotion.
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freight consolidation
The grouping of shipments to obtain reduced costs or improved utilization of the transportation function. Consolidation can occur by market area grouping, grouping according to scheduled deliveries, or using third-party pooling services such as public warehouses and freight forwarders.
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freight forwarder
The "middle man" between the carrier and the organization shipping the product. Often combines smaller shipments to take advantage of lower bulk costs.
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functional layout
A facility configuration in which operations of a similar nature or function are grouped together; an organizational structure based on departmental specialty (e.g., saw, lathe, mill, heat treat, and press). Syn: job shop layout, process layout.
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G&A
Abbreviation for general and administrative expenses.
The category of expenses on the income statement that includes the costs of general managers, computer systems, research and development, and others.
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GAAP
Acronym for generally accepted accounting principles.
Accounting practices that conform to conventions, rules, and procedures that have general acceptability by the accounting profession.
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Gantt chart
The earliest and best-known type of planning and control chart, especially designed to show graphically the relationship between planned performance and actual performance over time. Named after its originator, Henry L. Gantt, the chart is used (1) for machine loading, in which one horizontal line is used to represent capacity and another to represent load against that capacity; or (2) for monitoring job progress, in which one horizontal line represents the production schedule and another parallel line represents the actual progress of the job against the schedule in time. Syn: job progress chart, milestone chart.
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gemba
A Japanese word meaning the shop floor.
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genchi genbutsu
A Japanese phrase meaning visit the shop floor to observe what is occurring.
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general and administrative expenses (G&A)
The category of expenses on the income statement that includes the costs of general managers, computer systems, research and development, and others.
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green reverse logistics
The responsibility of the supplier to dispose of packaging materials or environmentally sensitive materials such as heavy metals.
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gross margin
The difference between total revenue and the cost of goods sold. Syn: gross profit margin.
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gross requirement
The total of independent and dependent demand for a component before the netting of on-hand inventory and scheduled receipts.
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hansei
A Japanese word meaning reflection.
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hedge inventory
A form of inventory buildup to buffer against some event that may not happen. Hedge inventory planning involves speculation related to potential labor strikes, price increases, unsettled governments, and events that could severely impair a company's strategic initiatives. Risk and consequences are unusually high, and top management approval is often required.
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heijunka
In just-in-time philosophy, an approach to level production throughout the supply chain to match the planned rate of end product sales.
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histogram
A graph of contiguous vertical bars representing a frequency distribution in which the groups or classes of items are marked on the x axis and the number of items in each class is indicated on the y axis. The pictorial nature of the histogram lets people see patterns that are difficult to see in a simple table of numbers. The histogram is one of the seven tools of quality.
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hoshin
A Japanese word meaning statement of objectives.
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hoshin planning
Breakthrough planning. A Japanese strategic planning process in which a company develops up to four vision statements that indicate where the company should be in the next five years. Company goals and work plans are developed based on the vision statements. Periodic audits are then conducted to monitor progress.
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I/O
Abbreviation for input/output control.
A technique for capacity control where planned and actual inputs and planned and actual outputs of a work center are monitored. Planned inputs and outputs for each work center are developed by capacity requirements planning and approved by manufacturing management. Actual input is compared to planned input to identify when work center output might vary from the plan because work is not available at the work center. Actual output is also compared to planned output to identify problems within the work center. Syn: input/output analysis. See: capacity control.
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idle capacity
The available capacity that exits on nonconstraint resources beyond the capacity required to support the constraint. Idle capacity has two components: protective capacity and excess capacity.
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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.
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income statement
A financial statement showing the net income for a business over a given period of time. See: balance sheet, funds flow statement.
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incoterms
Short for International Commercial Terms; created to simplify international transactions.
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indented bill of material
A form of multilevel bill of material. It exhibits the highest level parents closest to the left margin, and all the components going into these parents are shown indented toward the right. All subsequent levels of components are indented farther to the right. If a component is used in more than one parent within a given product structure, it will appear more than once, under every subassembly in which it is used.
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independent demand
The demand for an item that is unrelated to the demand for other items. Demand for finished goods, parts required for destructive testing, and service parts requirements are examples of independent demand. See: dependent demand.
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infinite loading
Calculation of the capacity required at work centers in the time periods required regardless of the capacity available to perform this work. Syn: infinite scheduling.
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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.
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intermodal transport
1) Shipments moved by different types of equipment combining the best features of each mode. 2) The use of two or more different carrier modes in the through movement of a shipment.
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internal failure costs
The cost of things that go wrong before the product reaches the customer. Internal failure costs usually include rework, scrap, downgrades, reinspection, retest, and process losses.
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internal setup time
The time associated with elements of a setup procedure performed while the process or machine is not running. Ant: external setup time.
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interplant demand
One plant's need for a part or product that is produced by another plant or division within the same organization. Although it is not a customer order, it is usually handled by the master production scheduling system in a similar manner. See: interplant transfer.
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intrinsic forecast method
A forecast based on internal factors, such as an average of past sales. Ant: extrinsic forecast.
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inventory accuracy
When the on-hand quantity is within an allowed tolerance of the recorded balance. This important metric is usually measured as the percent of items whose inventory fall within tolerance. Target values are usually 95% to 99% depending on the value of the item.
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inventory adjustment
A change made to an inventory record to correct the balance, to bring it in line with actual physical inventory balances. The adjustment either increases or decreases the item record on-hand balance.
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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.
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inventory control
The activities and techniques of maintaining the desired levels of items, whether raw materials, work in process, or finished products. Syn: material control.
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inventory management
The branch of business management concerned with planning and controlling -inventories.
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inventory ordering system
Inventory models for the replenishment of inventory. Independent demand inventory ordering models include but are not limited to fixed reorder cycle, fixed reorder quantity, optional replenishment, and hybrid models. Dependent demand inventory ordering models include material requirements planning, kanban, and drum-buffer-rope.
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inventory turnover
The number of times that an inventory cycles, or "turns over," during the year. A frequently used method to compute inventory turnover is to divide the average inventory level into the annual cost of sales. For example, an average inventory of $3 million divided into an annual cost of sales of $21 million means that inventory turned over seven times. Syn: inventory turns, turnover. See: inventory velocity.
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jidoka
The Japanese term for the practice of stopping the production line when a defect occurs.
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jishuken
A Japanese word meaning voluntary study groups.
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job costing
A cost accounting system in which costs are assigned to specific jobs. This system can be used with either actual or standard costs in the manufacturing of distinguishable units or lots of products. Syn: job order costing.
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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.
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job shop scheduling
The production planning and control techniques used to sequence and prioritize production quantities across operations in a job shop.
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kaizen
The Japanese term for improvement; continuing improvement involving everyone-managers and workers. In manufacturing, kaizen relates to finding and eliminating waste in machinery, labor, or production methods. See: continuous process improvement.
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kanban
A method of just-in-time production that uses standard containers or lot sizes with a single card attached to each. It is a pull system in which work centers signal with a card that they wish to withdraw parts from feeding operations or suppliers. The Japanese word kanban, loosely translated, means card, billboard, or sign but other signaling devices such as colored golf balls have also been used. The term is often used synonymously for the specific scheduling system developed and used by the Toyota Corporation in Japan. See: move card, production card, synchronized production.
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key performance indicator (KPI)
A financial or nonfinancial measure that is used to define and assess progress toward specific organizational goals and typically is tied to an organization's strategy and business stakeholders. A KPI should not be contradictory to other departmental or strategic business unit performance measures.
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landed cost
This cost includes the product cost plus the costs of logistics, such as warehousing, transportation, and handling fees.
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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.
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lead-time offset
A technique used in MRP where a planned order receipt in one time period will require the release of that order in an earlier time period based on the lead time for the item. Syn: component lead-time offset, offsetting.
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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.
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lean production
A philosophy of production that emphasizes the minimization of the amount of all the resources (including time) used in the various activities of the enterprise. It involves identifying and eliminating non-value-adding activities in design, production, supply chain management, and dealing with the customers. Lean producers employ teams of multiskilled workers at all levels of the organization and use highly flexible, increasingly automated machines to produce volumes of products in potentially enormous variety. It contains a set of principles and practices to reduce cost through the relentless removal of waste and through the simplification of all manufacturing and support processes. Syn: lean, lean manufacturing.
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level of service
A measure (usually expressed as a percentage) of satisfying demand through inventory or by the current production schedule in time to satisfy the customers' requested delivery dates and quantities. In a make-to-stock environment, level of service is sometimes calculated as the percentage of orders picked complete from stock upon receipt of the customer order, the percentage of line items picked complete, or the percentage of total dollar demand picked complete. In make-to-order and -design-to-order environments, level of service is the percentage of times the customer-requested or acknowledged date was met by shipping complete product quantities. Syn: measure of service, service level. See: cycle service level.
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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.
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level schedule
1) In traditional management, a production schedule or master production schedule that generates material and labor requirements that are as evenly spread over time as possible. Finished goods inventories buffer the production system against seasonal demand. See: level production method. 2) In JIT, a level schedule (usually constructed monthly) in which each day's customer demand is scheduled to be built on the day it will be shipped. A level schedule is the output of the load-leveling process. Syn: JIT master schedule, level production schedule. See: load leveling.
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liabilities
An accounting/financial term (balance sheet classification of accounts) representing debts or obligations owed by a company to creditors. Liabilities may have a short-term time horizon, such as accounts payable, or a longer-term obligation, such as mortgage payable or bonds payable. See: assets, balance sheet, debt, owner's equity.
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line haul costs
Basic costs of carrier operation to move a container of freight, including driver's wages and usage depreciation. These vary with the cost per mile, the distance shipped, and the weight moved.
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load
The amount of planned work scheduled for and actual work released to a facility, work center, or operation for a specific span of time. Usually expressed in terms of standard hours of work or, when items consume similar resources at the same rate, units of production. Syn: workload.
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load leveling
Spreading orders out in time or rescheduling operations so that the amount of work to be done in sequential time periods tends to be distributed evenly and is achievable. Although both material and labor are ideally level loaded, specific businesses and industries may load to one or the other exclusively (e.g., service industries). Syn: capacity smoothing, level loading. See: level schedule.
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logistics
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.
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lot
A quantity produced together and sharing the same production costs and specifications. See: batch.
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lot control
A set of procedures (e.g., assigning unique batch numbers and tracking each batch) used to maintain lot integrity from raw materials, from the supplier through manufacturing to consumers.
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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.
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lot-for-lot
A lot-sizing technique that generates planned orders in quantities equal to the net requirements in each period. See: discrete order quantity.
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lot-size inventory
Inventory that results whenever quantity price discounts, shipping costs, setup costs, or similar considerations make it more economical to purchase or produce in larger lots than are needed for immediate purposes.
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MAD
Acronym for mean absolute deviation.
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.
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maintenance, repair, and operating (MRO) supplies
Items used in support of general operations and maintenance such as maintenance supplies, spare parts, and consumables used in the manufacturing process and supporting operations.
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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.
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make-to-order
A production environment where a good or service can be made after receipt of a customer's order. The final product is usually a combination of standard items and items custom-designed to meet the special needs of the customer. Where options or accessories are stocked before customer orders arrive, the term assemble-to-order is frequently used. Syn: produce-to-order. See: assemble-to-order, make-to-stock.
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make-to-stock
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.
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manufacturing calendar
A calendar used in inventory and production planning functions that consecutively numbers only the working days so that the component and work order scheduling may be done based on the actual number of workdays available. Syn: M-day calendar, planning calendar, production calendar, shop calendar.
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manufacturing lead time
The total time required to manufacture an item, exclusive of lower level purchasing lead time. For make-to-order products, it is the length of time between the release of an order to the production process and shipment to the final customer. For make-to-stock products, it is the length of time between the release of an order to the production process and receipt into inventory. Included here are order preparation time, queue time, setup time, run time, move time, inspection time, and put-away time. Syn: manufacturing cycle, production cycle, production lead time. See: lead time.
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manufacturing order
A document, group of documents, or schedule conveying authority for the manufacture of specified parts or products in specified quantities. Syn: job order, manufacturing authorization, production order, production release, run order, shop order, work order. See: assembly parts list, batch card, blend order, fabrication order, mix ticket, work order.
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manufacturing philosophy
The set of guiding principles, driving forces, and ingrained attitudes that helps communicate goals, plans, and policies to all employees and that is reinforced through conscious and subconscious behavior within the manufacturing organization.
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manufacturing process
The series of operations performed upon material to convert it from the raw material or a semifinished state to a state of further completion. Manufacturing processes can be arranged in a process layout, product layout, cellular layout, or fixed-position layout. Manufacturing processes can be planned to support make-to-stock, make-to-order, assemble-to-order, etc., based on the strategic use and placement of inventories. See: production process, transformation process.
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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.
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market driven
Responding to customers' needs.
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market strategy
The marketing plan to support the business strategy.
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mass customization
The creation of a high-volume product with large variety so that a customer may specify his or her exact model out of a large volume of possible end items while manufacturing cost is low because of the large volume. An example is a personal computer order in which the customer may specify processor speed, memory size, hard disk size and speed, removable storage device characteristics, and many other options when PCs are assembled on one line and at low cost.
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master planning
A group of business processes that includes the following activities: demand management (which includes forecasting and order servicing); production and resource planning; and master scheduling (which includes the master schedule and the rough-cut capacity plan).
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master production schedule (MPS)
The master production schedule is a line on the master schedule grid that reflects the anticipated build schedule for those items assigned to the master scheduler. The master scheduler maintains this schedule, and in turn, it becomes a set of planning numbers that drives material requirements planning. It represents what the company plans to produce expressed in specific configurations, quantities, and dates. The master production schedule is not a sales item forecast that represents a statement of demand. The master production schedule must take into account the forecast, the production plan, and other important considerations such as backlog, availability of material, availability of capacity, and management policies and goals. See: master schedule.
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master schedule
The master schedule is a format that includes time periods (dates), the forecast, customer orders, projected available balance, available-to-promise, and the master production schedule. The master schedule takes into account the forecast; the production plan; and other important considerations such as backlog, availability of material, availability of capacity, and management policies and goals. See: master production schedule.
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material requirements planning (MRP)
A set of techniques that uses bill of material data, inventory data, and the master production schedule to calculate requirements for materials. It makes recommendations to release replenishment orders for material. Further, because it is time-phased, it makes recommendations to reschedule open orders when due dates and need dates are not in phase. Time-phased MRP begins with the items listed on the MPS and determines (1) the quantity of all components and materials required to fabricate those items and (2) the date that the components and material are required. Time-phased MRP is accomplished by exploding the bill of material, adjusting for inventory quantities on hand or on order, and offsetting the net requirements by the appropriate lead times.
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materials handling
Movement and storage of goods inside the distribution center. This represents a capital cost and is balanced against the operating costs of the facility.
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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.
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milk run
A regular route for pickup of mixed loads from several suppliers. For example, instead of each of five suppliers sending a truckload per week to meet the weekly needs of the customer, one truck visits each of the suppliers on a daily basis before delivering to the customer's plant. Five truckloads per week are still shipped, but each truckload contains the daily requirement from each supplier. See: consolidation.
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min-max system
A type of order point replenishment system where the "min" (minimum) is the order point, and the "max" (maximum) is the "order up to" inventory level. The order quantity is variable and is the result of the max minus available and on-order inventory. An order is recommended when the sum of the available and on-order inventory is at or below the min.
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mixed-model production
Making several different parts or products in varying lot sizes so that a factory produces close to the same mix of products that will be sold that day. The mixed-model schedule governs the making and the delivery of component parts, including those provided by outside suppliers. The goal is to build every model every day, according to daily demand.
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mixed-model scheduling
The process of developing one or more schedules to enable mixed-model production. The goal is to achieve a day's production each day. See: mixed-model production.
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modularization
In product development, the use of standardized parts for flexibility and variety. Permits product development cost reductions by using the same item(s) to build a variety of finished goods. This is the first step in developing a planning bill of material process.
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move time
The time that a job spends in transit from one operation to another in the plant.
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MRO
1) Abbreviation for maintenance, repair, and operating. 2) Abbreviation for maintenance, repair, and overhaul.
Items used in support of general operations and maintenance such as maintenance supplies, spare parts, and consumables used in the manufacturing process and supporting operations.
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MRP
Abbreviation for material requirements planning.
A set of techniques that uses bill of material data, inventory data, and the master production schedule to calculate requirements for materials. It makes recommendations to release replenishment orders for material. Further, because it is time-phased, it makes recommendations to reschedule open orders when due dates and need dates are not in phase. Time-phased MRP begins with the items listed on the MPS and determines (1) the quantity of all components and materials required to fabricate those items and (2) the date that the components and material are required. Time-phased MRP is accomplished by exploding the bill of material, adjusting for inventory quantities on hand or on order, and offsetting the net requirements by the appropriate lead times.
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MRP II
Abbreviation for manufacturing resource planning.
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.
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muda (waste)
In lean manufacturing, costs are reduced by reducing waste within a system. There are seven categories of waste: (1) overproduction - excess or too early, (2) waiting - queuing delays, (3) transportation - unneeded movements, (4) processing - poor process design, (5) motion - activities that do not add value, (6) inventory - stock that is sitting is accumulating cost without necessarily providing value, (7) defective units - scrap or rework.
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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.
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multisourcing
Procurement of a good or service from more than one independent supplier. Syn: multiple sourcing. Ant: single sourcing. See: dual sourcing.
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mura
A Japanese word meaning unevenness or variability.
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muri
A Japanese word meaning strain or overburden.
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nesting
The act of combining several small processes to form one larger process.
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net requirements
In MRP, the net requirements for a part or an assembly are derived as a result of applying gross requirements and allocations against inventory on hand, scheduled receipts, and safety stock. Net requirements, lot-sized and offset for lead time, become planned orders.
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on-hand balance
The quantity shown in the inventory records as being physically in stock.
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on-time schedule performance
A measure (percentage) of meeting the customer's originally negotiated delivery request date. Performance can be expressed as a percentage based on the number of orders, line items, or dollar value shipped on time.
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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 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.
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open order
1) A released manufacturing order or purchase order. Syn: released order. See: scheduled receipt. 2) An unfilled customer order.
236
operating expense
All the money as organization spends in generating "goal units."
237
operations management
1) The planning, scheduling, and control of the activities that transform inputs into finished goods and services. 2) A field of study that focuses on the effective planning, scheduling, use, and control of a manufacturing or service organization through the study of concepts from design engineering, industrial engineering, management information systems, quality management, production management, inventory management, accounting, and other functions as they affect the operation.
238
operator flexibility
Training machine workers to perform tasks outside their immediate jobs and in problem-solving techniques to improve process flexibility. This is a necessary process in developing a fully cross-trained workforce.
239
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 line (ATP) 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.
240
order picking
Selecting or "picking" the required quantity of specific products for movement to a packaging area (usually in response to one or more shipping orders) and documenting that the material was moved from one location to shipping. Syn: order selection. See: batch picking, discrete order picking, zone picking.
241
order point
A set inventory level where, if the total stock on hand plus on order falls to or below that point, action is taken to replenish the stock. The order point is normally calculated as forecasted usage during the replenishment lead time plus safety stock. Syn: reorder point, statistical order point, trigger level. See: fixed reorder quantity inventory model.
242
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.
243
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.
244
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.
245
ordering cost
Used in calculating order quantities, the costs that increase as the number of orders placed increases. It includes costs related to the clerical work of preparing, releasing, monitoring, and receiving orders, the physical handling of goods, inspections, and setup costs, as applicable. See: acquisition cost, inventory costs.
246
outsourcing
The process of having suppliers provide goods and services that were previously provided internally. Outsourcing involves substitution-the replacement of internal capacity and production by that of the supplier. See: subcontracting.
247
overhead
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.
248
overlapped schedule
A manufacturing schedule that "overlaps" successive operations. Overlapping occurs when the completed portion of an order at one work center is processed at one or more succeeding work centers before the pieces left behind are finished at the preceding work centers. Syn: lap phasing, operation overlapping, telescoping. See: send ahead. Ant: gapped schedule, overlapped production.
249
owner's equity
An accounting/financial term (balance sheet classification of accounts) representing the residual claim by the company's owners or shareholders, or both, to the company's assets less its liabilities. See: assets, balance sheet, liabilities.
250
PAC
Acronym for production activity control.
The function of routing and dispatching the work to be accomplished through the production facility and of performing supplier control. PAC encompasses the principles, approaches, and techniques needed to schedule, control, measure, and evaluate the effectiveness of production operations. See: shop floor control.
251
pacemaker
In lean, the resource that is scheduled based on the customer demand rate for that specific value stream. It is that resource which performs an operation or process that governs the flow of materials along the value stream. Its purpose is to maintain a smooth flow through the manufacturing plant; a larger buffer is provided for the pacemaker than other resources so that it can maintain continuous operation. See: constraint.
252
package to order
A production environment in which a good or service can be packaged after receipt of a customer order. The item is common across many different customers; packaging determines the end product.
253
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.
254
parent item
The item produced from one or more components. Syn: parent.
255
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, etc. In an ABC classification, for example, 20% of the inventory items may constitute 80% of the inventory value. See: ABC classification.
256
participative design/engineering
A concept that refers to simultaneous participation of all the functional areas of the firm in the product design activity. Suppliers and customers are often also included. The intent is to enhance the design with the inputs of all the key stakeholders. Such a process should ensure that the final design meets all the needs of the stakeholders and should ensure a product that can be quickly brought to the marketplace while maximizing quality and minimizing costs. Syn: co-design, concurrent design, concurrent engineering, new product development team, parallel engineering, simultaneous design/engineering, simultaneous engineering, team design/engineering. See: early manufacturing involvement.
257
PDCA
Abbreviation for plan-do-check-action.
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-act 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.
258
pegging
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.
259
performance standard
In a performance measurement system, the accepted, targeted, or expected value for the criterion. See: performance criterion, performance measure, performance measurement system.
260
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.
261
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.
262
perpetual inventory record
A computer record or manual document on which each inventory transaction is posted so that a current record of the inventory is maintained.
263
physical inventory
1) The actual inventory itself. 2) The determination of inventory quantity by actual count. Physical inventories can be taken on a continuous, periodic, or annual basis. Syn: annual inventory count, annual physical inventory. See: periodic inventory.
264
physical supply
The movement and storage of goods from suppliers to manufacturing. The cost of physical supply is ultimately passed on to the customer.
265
picking list
A document that lists the material to be picked for manufacturing or shipping orders. Syn: disbursement list, material list, stores issue order, stores requisition.
266
pickup and delivery costs
Carrier charges for each shipment pickup and the weight of that shipment. Costs can be reduced if several smaller shipments are consolidated and picked up in one trip.
267
pipeline stock
Inventory in the transportation network and the distribution system, including the flow through intermediate stocking points. The flow time through the pipeline has a major effect on the amount of inventory required in the pipeline. Time factors involve order transmission, order processing, scheduling, shipping, transportation, receiving, stocking, review time, etc. Syn: pipeline inventory. See: distribution system, transportation inventory.
268
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-act 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.
269
planned order
A suggested order quantity, release date, and due date created by the planning system's logic when it encounters net requirements in processing MRP. In some cases, it can also be created by a master scheduling module. Planned orders are created by the computer, exist only within the computer, and may be changed or deleted by the computer during subsequent processing if conditions change. Planned orders at one level will be exploded into gross requirements for components at the next level. Planned orders, along with released orders, serve as input to capacity requirements planning to show the total capacity requirements by work center in future time periods. See: planning time fence.
270
planned order receipt
The quantity planned to be received at a future date as a result of a planned order release. Planned order receipts differ from scheduled receipts in that they have not been released. Syn: planned receipt.
271
planned order release
A row on an MRP table that is derived from planned order receipts by taking the planned receipt quantity and offsetting to the left by the appropriate lead time. See: order release.
272
planning bill of material
An artificial grouping of items or events in bill-of-material format used to facilitate master scheduling and material planning. It may include the historical average of demand expressed as a percentage of total demand for all options within a feature or for a specific end item within a product family and is used as the quantity per in the planning bill of material. Syn: planning bill. See: hedge, option overplanning, production forecast, pseudo bill of material.
273
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.
274
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.
275
postponement
A product design strategy that shifts product differentiation closer to the consumer by postponing identity changes, such as assembly or packaging, to the last possible supply chain location.
276
prevention costs
The costs caused by improvement activities that focus on the reduction of failure and appraisal costs. Typical costs include education, quality training, and supplier certification. Prevention costs are one of four categories of quality costs.
277
preventive maintenance
The activities, including adjustments, replacements, and basic cleanliness, that forestall machine breakdowns. The purpose is to ensure that production quality is maintained and that delivery schedules are met. In addition, a machine that is well cared for will last longer and cause fewer problems. Syn: periodic maintenance.
278
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.
279
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. priority report�Syn: dispatch list.
280
private carrier
A group that provides transportation exclusively within an organization. Ant: common carrier.
281
process batch
The quantity or volume of output that is to be completed at a workstation before switching to a different type of work or changing an equipment setup.
282
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.
283
process flow diagram
A graphical and progressive representation of the various steps, events, and tasks that make up an operations process. This diagram provides the viewer with a picture of what actually occurs when a product is manufactured or a service is performed.
284
procurement
The business functions of procurement planning, purchasing, inventory control, traffic, receiving, incoming inspection, and salvage operations.
285
procurement lead time
The time required to design a product, modify or design equipment, conduct market research, and obtain all necessary materials. Lead time begins when a decision has been made to accept an order to produce a new product and ends when production commences. Syn: procurement cycle, total procurement lead time. See: time-to-market.
286
product cost
Cost allocated by some method to the products being produced. Initially recorded in asset (inventory) accounts, product costs become an expense (cost of sales) when the product is sold.
287
product differentiation
A strategy of making a product distinct from the competition on a nonprice basis such as availability, durability, quality, or reliability.
288
product family
A group of products with similar characteristics, often used in production planning (or sales and operations planning). Syn: product line.
289
product layout
Another name for flow process layout. The system is set up for a limited range of similar products. Focused-factory production would also be considered in this category. See: flow processing, focused factory.
290
product life cycle
1) The stages a new product goes through from beginning to end, i.e., the stages that a product passes through from introduction through growth, maturity, and decline. 2) The time from initial research and development to the time at which sales and support of the product to customers are withdrawn. 3) The period of time during which a product can be produced and marketed profitably.
291
product mix
The proportion of individual products that make up the total production or sales volume. Changes in the product mix can mean drastic changes in the manufacturing requirements for certain types of labor and material.
292
production activity control (PAC)
The function of routing and dispatching the work to be accomplished through the production facility and of performing supplier control. PAC encompasses the principles, approaches, and techniques needed to schedule, control, measure, and evaluate the effectiveness of production operations. See: shop floor control.
293
production line
A series of pieces of equipment dedicated to the manufacture of a specific number of products or families.
294
production plan
The agreed-upon plan that comes from the production planning (sales and operations planning) process, specifically the overall level of manufacturing output planned to be produced, usually stated as a monthly rate for each product family (group of products, items, options, features, and so on). Various units of measurement can be used to express the plan: units, tonnage, standard hours, number of workers, and so on. The production plan is management's authorization for the master scheduler to convert it into a more detailed plan, that is, the master production schedule. See: sales and operations planning, sales plan.
295
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.
296
productive capacity
In the theory of constraints: The maximum of the output capabilities of a resource (or series of resources) or the market demand for that output for a given time period. See: excess capacity, idle capacity, protective capacity.
297
productivity
1) An overall measure of the ability to produce a good or a service. It is the actual output of production compared to the actual input of resources. Productivity is a relative measure across time or against common entities (labor, capital, etc.). In the production literature, attempts have been made to define total productivity where the effects of labor and capital are combined and divided into the output. One example is a ratio that is calculated by adding the dollar value of labor, capital equipment, energy, and material, etc., and dividing it into the dollar value of output in a given time period. This is one measure of total factor productivity. See: efficiency, labor productivity, machine productivity, utilization. 2) In economics, the ratio of output in terms of dollars of sales to an input such as direct labor in terms of the total wages. This is called single factor productivity or partial factor productivity.
298
profit margin
1) The difference between the sales and cost of goods sold for an organization, sometimes expressed as a percentage of sales. 2) In traditional accounting, the product profit margin being the product selling price minus the direct material, direct labor, and allocated overhead for the product, sometimes expressed as a percentage of selling price.
299
project management
The use of skills and knowledge in coordinating the organizing, planning, scheduling, directing, controlling, monitoring, and evaluating of prescribed activities to ensure that the stated objectives of a project, manufactured good, or service are achieved. See: project.
300
projected available balance
An inventory balance projected into the future. It is the running sum of on-hand inventory minus requirements plus scheduled receipts and planned orders. Syn: projected available inventory.
301
protective capacity
The resource capacity needed to protect system throughput-ensuring that some capacity above the capacity required to exploit the constraint is available to catch up when disruptions inevitably occur. Nonconstraint resources need protective capacity to rebuild the bank in front of the constraint or capacity-constrained resource (CCR) and/or on the shipping dock before throughput is lost and to empty the space buffer when it fills.
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protective inventory
In the theory of constraints: The amount of inventory required relative to the protective capacity in the system to achieve a specific throughput rate at the constraint. See: limiting operation.
303
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.
304
pull system
1) In production, the production of items only as demanded for use or to replace those taken for use. See: pull signal. 2) In material control, the withdrawal of inventory as demanded by the using operations. Material is not issued until a signal comes from the user. 3) In distribution, a system for replenishing field warehouse inventories where replenishment decisions are made at the field warehouse itself, not at the central warehouse or plant.
305
purchase order
The purchaser's authorization used to formalize a purchase transaction with a supplier. A purchase order, when given to a supplier, should contain statements of the name, part number, quantity, description, and price of the goods or services ordered; agreed-to terms as to payment, discounts, date of performance, and transportation; and all other agreements pertinent to the purchase and its execution by the supplier.
306
purchase requisition
An authorization to the purchasing department to purchase specified materials in specified quantities within a specified time. See: parts requisition.
307
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.
308
push system
1) In production, the production of items at times required by a given schedule planned in advance. 2) In material control, the issuing of material according to a given schedule or issuing material to a job order at its start time. 3) In distribution, a system for replenishing field warehouse inventories where replenishment decision making is centralized, usually at the manufacturing site or central supply facility. See: pull system.
309
QFD
Abbreviation for quality function deployment.
A methodology designed to ensure that all the major requirements of the customer are identified and subsequently met or exceeded through the resulting product design process and the design and operation of the supporting production management system. QFD can be viewed as a set of communication and translation tools. QFD tries to eliminate the gap between what the customer wants in a new product and what the product is capable of delivering. QFD often leads to a clear identification of the major requirements of the customers. These expectations are referred to as the voice of the customer (VOC). See: house of quality.
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quality
Conformance to requirements or fitness for use. Quality can be defined through five principal approaches: (1) Transcendent quality is an ideal, a condition of excellence. (2) Product-based quality is based on a product attribute. (3) User-based quality is fitness for use. (4) Manufacturing-based quality is conformance to requirements. (5) Value-based quality is the degree of excellence at an acceptable price. Also, quality has two major components: (1) quality of conformance-quality is defined by the absence of defects, and (2) quality of design-quality is measured by the degree of customer satisfaction with a product's characteristics and features.
311
quality at the source
A producer's responsibility to provide 100% 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.
312
quality control
The process of measuring quality conformance by comparing the actual with a standard for the characteristic and acting on the difference. See: quality assurance/control.
313
quality costs
The overall costs associated with prevention activities and the improvement of quality throughout the firm before, during, and after production of a product. These costs fall into four recognized categories: internal failures, external failures, appraisal costs, and prevention costs. Internal failure costs relate to problems before the product reaches the customer. These usually include rework, scrap, downgrades, reinspection, retest, and process losses. External failure costs relate to problems found after the product reaches the customer. These usually include such costs as warranty and returns. Appraisal costs are associated with the formal evaluation and audit of quality in the firm. Typical costs include inspection, quality audits, testing, calibration, and checking time. Prevention costs are those caused by improvement activities that focus on reducing failure and appraisal costs. Typical costs include education, quality training, and supplier certification.
314
quality function deployment (QFD)
A methodology designed to ensure that all the major requirements of the customer are identified and subsequently met or exceeded through the resulting product design process and the design and operation of the supporting production management system. QFD can be viewed as a set of communication and translation tools. QFD tries to eliminate the gap between what the customer wants in a new product and what the product is capable of delivering. QFD often leads to a clear identification of the major requirements of the customers. These expectations are referred to as the voice of the customer (VOC). See: house of quality.
315
quantity discount
A price reduction allowance determined by the quantity or value of a purchase.
316
queue
A waiting line. In manufacturing, the jobs at a given work center waiting to be processed. As queues increase, so do average queue time and work-in-process inventory.
317
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.
318
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-of-sight access for data retrieval.
319
random variation
A fluctuation in data that is caused by uncertain or random occurrences. See: random events.
320
random-location storage
A storage technique in which parts are placed in any space that is empty when they arrive at the storeroom. Although this random method requires the use of a locator file to identify part locations, it often requires less storage space than a fixed-location storage method. Syn: floating inventory location system, floating storage location. See: fixed-location storage.
321
rated capacity
The expected output capability of a resource or system. Capacity is traditionally calculated from such data as planned hours, efficiency, and utilization. The rated capacity is equal to hours available x efficiency x utilization. Syn: calculated capacity, effective capacity, nominal capacity, standing capacity.
322
raw material
Purchased items or extracted materials that are converted via the manufacturing process into components and products.
323
RCCP
Abbreviation for rough-cut capacity planning.
The process of converting the master production schedule into requirements for key resources, often including labor, machinery, warehouse space, suppliers' capabilities, and, in some cases, money. Comparison to available or demonstrated capacity is usually done for each key resource. This comparison assists the master scheduler in establishing a feasible master production schedule. Three approaches to performing RCCP are the bill of labor (resources, capacity) approach, the capacity planning using overall factors approach, and the resource profile approach. See: bill of resources, capacity planning, capacity planning using overall factors, product load profile, resource profile.
324
receiving
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.
325
record accuracy
A measure of the conformity of recorded values in a bookkeeping system to the actual values, e.g., the on-hand balance of an item maintained in a computer record relative to the actual on-hand balance of the items in the stockroom.
326
remanufacturing
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 like-new condition.
327
replenishment lead time
The total period of time that elapses from the moment it is determined that a product should be reordered until the product is back on the shelf available for use. Syn: reorder cycle.
328
request for quote (RFQ)
A document used to solicit vendor responses when a product has been selected and price quotations are needed from several vendors.
329
requirements explosion
The process of calculating the demand for the components of a parent item by multiplying the parent item requirements by the component usage quantity specified in the bill of material. Syn: explosion.
330
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.
331
reverse auction
An Internet auction, in which suppliers attempt to underbid their competitors. Company identities are known only by the buyer.
332
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.
333
root cause analysis
Analytical methods to determine the core problem(s) of an organization, process, product, market, etc. See: current reality tree, five why's, stratification analysis.
334
routing
1) Information detailing the method of manufacture of a particular item. It includes the operations to be performed, their sequence, the various work centers involved, and the standards for setup and run. In some companies, the routing also includes information on tooling, operator skill levels, inspection operations and testing requirements, and so on. Syn: bill of operations, instruction sheet, manufacturing data sheet, operation chart, operation list, operation sheet, route sheet, routing sheet. See: bill of labor, bill of resources. 2) In information systems, the process of defining the path a message will take from one computer to another computer.
335
run time
The time required to process a piece or lot at a specific operation. Run time does not include setup time. Syn: run standards.
336
safety stock
1) In general, a quantity of stock planned to be in inventory to protect against fluctuations in demand or supply. 2) In the context of master production scheduling, the additional inventory and capacity planned as protection against forecast errors and short-term changes in the backlog. Overplanning can be used to create safety stock. Syn: buffer stock, reserve stock. See: hedge, inventory buffer.
337
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 new-product 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, production plan, production planning, sales plan, tactical planning.
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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.
339
sawtooth diagram
A quantity-versus-time graphic representation of the order point/order quantity inventory system showing inventory being received and then used up and reordered.
340
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 related, they might not be�those who know most about the variables must make that evaluation). The scatter chart is one of the seven tools of quality. Syn: cross plot, scatter diagram, scatterplot.
Syn: scatter chart.
341
scatterplot
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 related, they might not be�those who know most about the variables must make that evaluation). The scatter chart is one of the seven tools of quality. Syn: cross plot, scatter diagram, scatterplot.
Syn: Scatter Chart
342
scheduled receipt
An open order that has an assigned due date. See: open order.
343
scheduling
The act of creating a schedule, such as a shipping schedule, master production schedule, maintenance schedule, or supplier schedule.
344
scrap
Material outside of specifications and possessing characteristics that make rework impractical.
345
seasonal inventory
Inventory built up to smooth production in anticipation of a peak seasonal demand. Syn: seasonal stock.
346
seasonality
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.
347
sensei
A Japanese word meaning teacher or one with experience.
348
service
Sometimes used to describe those activities that support the production or distribution functions in any organization, such as customer service and field service.
349
service industry
1) In its narrowest sense, an organization that provides an intangible product, e.g., medical or legal advice. 2) In its broadest sense, all organizations except farming, mining, and manufacturing. This definition of service industry includes retail trade; wholesale trade; transportation and utilities; finance, insurance, and real estate; construction; professional, personal, and social services; and local, state, and federal governments.
350
service parts
Those modules, components, and elements that are planned to be used without modification to replace an original part. Syn: repair parts, spare parts.
351
setup
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 and preparation of the equipment for production of the next scheduled item). Syn: changeover, turnaround, turnaround time.
352
setup time
The time required for a specific machine, resource, work center, process, or line to convert from the production of the last good piece of item A to the first good piece of item B. Syn: setup lead time.
353
Shingo's seven wastes
Shigeo Shingo, a pioneer in the Japanese just-in-time philosophy, identified seven barriers to improving manufacturing. They are the waste of overproduction, waste of waiting, waste of transportation, waste of stocks, waste of motion, waste of making defects, and waste of the processing itself.
354
shipping manifest
A document that lists the pieces in a shipment. A manifest usually covers an entire load regardless of whether the load is to be delivered to a single destination or to many destinations. Manifests usually list the items, piece count, total weight, and the destination name and address for each destination in the load.
355
single-level bill of material
A display of components that are directly used in a parent item. It shows only the relationships one level down.
356
single-source supplier
A company that is selected to have 100% of the business for a part although alternate suppliers are available. See: sole-source supplier.
357
six-sigma
A methodology that furnishes tools for the improvement of business processes. The intent is to decrease process variation and improve product quality.
358
SKU
Abbreviation for stockkeeping unit. Pronounced as "skew."
1)An inventory item. For example, a shirt in six colors and five sizes would represent 30 different SKUs. 2) In a distribution system, an item at a particular geographic location. For example, one product stocked at the plant and at six different distribution centers would represent seven SKUs.
359
SMART
Abbreviation for simple, measurable, achievable, reasonable, and trackable.
360
SPC
Abbreviation for statistical process control.
The application of statistical techniques to monitor and adjust an operation. Often the term statistical process control is used interchangeably with statistical quality control.
361
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.
362
spread
Variability of an action. Often measured by the range or standard deviation of a particular dimenstion.
363
SRM
Abbreviation for supplier relationship management.
A comprehensive approach to managing an enterprise's interactions with the organizations that supply the goods and services the enterprise uses. The goal of SRM is to streamline and make more effective the processes between an enterprise and its suppliers. SRM is often associated with automating procure-to-pay business processes, evaluating supplier performance, and exchanging information with suppliers. An e-procurement system often comes under the umbrella of a supplier relationship management family of applications.
364
standard costs
The target costs of an operation, process, or product including direct material, direct labor, and overhead charges.
365
standard time
The length of time that should be required to (1) set up a given machine or operation and (2) run one batch or one or more parts, assemblies, or end products through that operation. This time is used in determining machine requirements and labor requirements. Standard time assumes an average worker following prescribed methods and allows time for personal rest to overcome fatigue and unavoidable delays. It is also frequently used as a basis for incentive pay systems and as a basis of allocating overhead in cost accounting systems. Syn: standard hours. See: standard.
366
start date
In project management, the time an activity begins; this may be defined as an actual start date or a planned start date.
367
stockout costs
The costs associated with a stockout. Those costs may include lost sales, backorder costs, expediting, and additional manufacturing and purchasing costs.
368
stockout percentage
A measure of the effectiveness with which a company responds to actual demand or requirements. The stockout percentage can be a measurement of total orders containing a stockout to total orders, or of line items incurring stockouts to total line items ordered during a period. One formula is: stockout percentage = (1 - customer service ratio) x 100%. Ant: customer service ratio.
369
store
A storage point located upstream of a work station intended to make it easier to see customer requirements.
370
strategic plan
The plan for how to marshal and determine actions to support the mission, goals, and objectives of an organization. Generally includes an organization's explicit mission, goals, and objectives and the specific actions needed to achieve those goals and objectives. See: business plan, operational plan, strategic planning, strategy, tactical plan.
371
subcontracting
Sending production work outside to another manufacturer. See: outsourcing.
372
summarized bill of material
A form of multilevel bill of material that lists all the parts and their quantities required in a given product structure. Unlike the indented bill of material, it does not list the levels of manufacture and lists a component only once for the total quantity used.
373
supplier
1) Provider of goods or services. See: vendor. 2) Seller with whom the buyer does business, as opposed to vendor, which is a generic term referring to all sellers in the marketplace.
374
supplier certification
Certification procedures verifying that a supplier operates, maintains, improves, and documents effective procedures that relate to the customer's requirements. Such requirements can include cost, quality, delivery, flexibility, maintenance, safety, and ISO quality and environmental standards.
375
supplier lead time
The amount of time that normally elapses between the time an order is received by a supplier and the time the order is shipped. Syn: vendor lead time. See: purchasing lead time.
376
supplier partnership
The establishment of a working relationship with a supplier organization whereby two organizations act as one. Syn: collaborative supply relationship.
377
supplier relatioinship management (SRM)
A comprehensive approach to managing an enterprise's interactions with the organizations that supply the goods and services the enterprise uses. The goal of SRM is to streamline and make more effective the processes between an enterprise and its suppliers. SRM is often associated with automating procure-to-pay business processes, evaluating supplier performance, and exchanging information with suppliers. An e-procurement system often comes under the umbrella of a supplier relationship management family of applications.
378
supply chain
The global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash.
379
supply chain management
The design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally.
380
sustainability
Activities that provide present benefit without compromising the needs of future generations.
381
tactical plan(s)
The set of functional plans (e.g., production plan, sales plan, marketing plan) synchronizing activities across functions that specify production levels, capacity levels, staffing levels, funding levels, and so on, for achieving the intermediate goals and objectives to support the organization's strategic plan. See: aggregate planning, operational plan, production planning, sales and operations planning, strategic plan, tactical planning.
382
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.
383
tariff
An official schedule of taxes and fees imposed by a country on imports or exports.
384
TCO
Abbreviation for total cost of ownership.
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.
385
theory of constraints accounting
A cost and managerial accounting system that accumulates costs and revenues 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.
386
third-party logistics (3PL)
A buyer and supplier team with a third party that provides product delivery services. This third party may provide added supply chain expertise.
387
throughput
The rate at which the system generates "goal units." Because throughput is a rate, it is always expressed for a given time period-such as, per month, week, day, or even minute). If the goal units are money, throughput will be an amount of money per time period. In that case, throughput is calculated as revenues received minus totally variable costs divided for the chosen time period.
388
time bucket
A number of days of data summarized into a columnar or rowwise 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.
389
time buffer
Protection against uncertainty that takes the form of time.
390
time fence
A policy or guideline established to note where various restrictions or changes in operating procedures take place. For example, changes to the master production schedule can be accomplished easily beyond the cumulative lead time, while changes inside the cumulative lead time become increasingly more difficult to a point where changes should be resisted. Time fences can be used to define these points. See: demand time fence, hedge, planning time fence.
391
time-phased order point (TPOP)
MRP-like time planning logic for independent demand items, where gross requirements come from a forecast, not via explosion. This technique can be used to plan distribution center inventories as well as to plan for service (repair) parts, because MRP logic can readily handle items with dependent demand, independent demand, or a combination of both. Time-phased order point is an approach that uses time periods, thus allowing for lumpy withdrawals instead of average demand. When used in distribution environments, the planned order releases are input to the master schedule dependent demands. See: fixed reorder quantity inventory model.
392
tolerance
Allowable departure from a nominal value established by design engineers that is deemed acceptable for the functioning of the good or service over its life cycle.
393
total cost curve
1) In cost-volume-profit (breakeven) analysis, the total cost curve is composed of total fixed and variable costs per unit multiplied by the number of units provided. Breakeven quantity occurs where the total cost curve and total sales revenue curve intersect. See: break-even chart, break-even point. 2) In inventory theory, the total cost curve for an inventory item is the sum of the costs of acquiring and carrying the item. See: economic order quantity.
394
total costs
Considering all cost impacts, rather than just one cost impact, on customer service improvement.
395
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.
396
total productive maintenance (TPM)
Preventive maintenance plus continuing efforts to adapt, modify, and refine equipment to increase flexibility, reduce material handling, and promote continuous flows. It is operator-oriented maintenance with the involvement of all qualified employees in all maintenance activities. Syn: total preventive maintenance.
397
�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.
398
TQC
Abbreviation for total quality control.
The process of creating and producing the total composite good and service characteristics by marketing, engineering, manufacturing, purchasing, etc., through which the good and service will meet the expectations of customers.
399
traceability
1) The attribute allowing the ongoing location of a shipment to be determined. 2) The registering and tracking of parts, processes, and materials used in production, by lot or serial number.
400
tracking signal
The ratio of the cumulative algebraic sum of the deviations between the forecasts and the actual values to the mean absolute deviation. Used to signal when the validity of the forecasting model might be in doubt. See: forecast error, mean absolute deviation.
401
traffic
A department or function charged with the responsibility for arranging the most economic classification and method of shipment for both incoming and outgoing materials and products.
402
transaction channel
A distribution network that deals with change of ownership of goods and services including the activities of negotiation, selling, and contracting.
403
transit inventory
Inventory in transit between manufacturing and stocking locations. See: transportation inventory.
404
transit time
A standard allowance that is assumed on any given order for the movement of items from one operation to the next. Syn: travel time.
405
transportation
The function of planning, scheduling, and controlling activities related to mode, vendor, and movement of inventories into and out of an organization.
406
transportation inventory
Inventory that is in transit between locations. See: pipeline stock, transit inventory.
407
trend
General upward or downward movement of a variable over time, e.g., demand, process attribute.
408
truckload carriers
Carriers that deliver/charge only for full truckload shipments.
409
two-bin inventory system
A type of fixed-order system in which inventory is carried in two bins. A replenishment quantity is ordered when the first bin (working) is empty. During the replenishment lead time, material is used from the second bin. When the material is received, the second bin (which contains a quantity to cover demand during lead time plus some safety stock) is refilled and the excess is put into the working bin. At this time, stock is drawn from the first bin until it is again exhausted. This term is also used loosely to describe any fixed-order system even when physical "bins" do not exist. Syn: bin reserve system. See: visual review system.
410
two-card kanban system
A kanban system where a move card and production card are employed. The move card authorizes the movement of a specific number of parts from a source to a point of use. The move card is attached to the standard container of parts during movement to the point of use of the parts. The production card authorizes the production of a given number of parts for use or replenishment. Syn: dual-card kanban system. See: one-card kanban system.
411
U-lines
Production lines shaped like the letter "U." The shape allows workers to easily perform several nonsequential tasks without much walk time. The number of workstations in a U-line is usually determined by line balancing. U-lines promote communication.
412
UN Global Compact Management Model
A framework for guiding companies through the process of formally committing to, assessing, defining, implementing, measuring, and communicating the United Nations Global Compact and its principles.
413
uniform plant loading
In Lean, the distribution of work between work stations so that the time required for each station to complete all tasks is as close to equal as possible. See: line balancing.
414
unit cost
Total labor, material, and overhead cost for one unit of production, e.g., one part, one gallon, one pound.
415
unit load
A shipping unit made up of a number of items, or bulky material, arranged or constrained so the mass can be picked up or moved as a single unit. Reduces material handling costs. Often shrink-packed on a pallet before shipment.
416
unit of measure
The unit in which the quantity of an item is managed, e.g., pounds, each, box of 12, package of 20, or case of 144.
417
United Nations Global Compact
A voluntary initiative whereby companies embrace, support, and enact, within their sphere of influence, a set of core values in the areas of human rights, labor standards, the environment, and anticorruption.
418
unitization
In warehousing, the consolidation of several units into larger units for fewer handlings.
419
value added
1) In accounting, the addition of direct labor, direct material, and allocated overhead assigned at an operation. It is the cost roll-up as a part goes through a manufacturing process to finished inventory. 2) In current manufacturing terms, the actual increase of utility from the viewpoint of the customer as a part is transformed from raw material to finished inventory. It is the contribution made by an operation or a plant to the final usefulness and value of a product, as seen by the customer. The objective is to eliminate all non-value-added activities in producing and providing a good or service.
420
value analysis
The systematic use of techniques that identify a required function, establish a value for that function, and finally provide that function at the lowest overall cost. This approach focuses on the functions of an item rather than the methods of producing the present product design.
421
value chain analysis
An examination of all links a company uses to produce and deliver its products and services starting from the origination point and continuing through delivery to the final customer.
422
value stream
The processes of creating, producing, and delivering a good or service to the market. For a good, the value stream encompasses the raw material supplier, the manufacture and assembly of the good, and the distribution network. For a service, the value stream consists of suppliers, support personnel and technology, the service "producer," and the distribution channel. The value stream may be controlled by a single business or a network of several businesses.
423
value stream mapping
A lean production tool to visually understand the flow of materials from supplier to customer that includes the current process and flow as well as the value-added and non-value-added time of all the process steps. Used to lead to reduction of waste, decrease flow time, and make the process flow more efficient and effective.
424
variable cost
An operating cost that varies directly with a change of one unit in the production volume, e.g., direct materials consumed, sales commissions.
425
variance
1) The difference between the expected (budgeted or planned) value and the actual. 2) In statistics, a measurement of dispersion of data. See: estimate of error.
426
VATI Analysis
In the theory of constraints, a procedure for determining the general flow of parts and products from raw materials to finished products (logical product structure). A V logical structure starts with one or a few raw materials, and the product expands into a number of different products as it flows through divergent points in its routings. The shape of an A logical structure is dominated by converging points. Many raw materials are fabricated and assembled into a few finished products. A T logical structure consists of numerous similar finished products assembled from common assemblies, subassemblies, and parts. An I logical structure is the simplest of production flows, where resources are shared between different products and the flow is in a straight line sequence, such as an assembly line. Once the general parts flow is determined, the system control points (gating operations, convergent points, divergent points, constraints, and shipping points) can be identified and managed.
427
velocity
1) The rate of change of an item with respect to time. See: inventory turnover, lead time. 2) In supply chain management, a term used to indicate the relative speed of all transactions, collectively, within a supply chain community. A maximum velocity is most desirable because it indicates higher asset turnover for stockholders and faster order-to-delivery response for customers.
428
vendor-managed inventory (VMI)
A means of optimizing supply chain performance in which the supplier has access to the customer's inventory data and is responsible for maintaining the inventory level required by the customer. This activity is accomplished by a process in which resupply is done by the vendor through regularly scheduled reviews of the on-site inventory. The on-site inventory is counted, damaged or outdated goods are removed, and the inventory is restocked to predefined levels. The vendor obtains a receipt for the restocked inventory and accordingly invoices the customer. See: continuous replenishment.
429
visual review system
A simple inventory control system where the inventory reordering is based on actually looking at the amount of inventory on hand. Usually used for low-value items, such as nuts and bolts. See: two bin inventory system.
430
VOC
Abbreviation for voice of the customer.
Actual customer descriptions in words for the functions and features customers desire for goods and services. In the strict definition, as relates to quality function deployment (QFD), the term customer indicates the external customer of the supplying entity.
431
wait time
The time a job remains at a work center after an operation is completed until it is moved to the next operation. It is often expressed as a part of move time.
432
wall-to-wall inventory
An inventory management technique in which material enters a plant and is processed through the plant into finished goods without ever having entered a formal stock area. Syn: four-wall inventory.
433
warehousing
The activities related to receiving, storing, and shipping materials to and from production or distribution locations.
434
waste
1) Any activity that does not add value to the good or service in the eyes of the consumer. 2) A by-product of a process or task with unique characteristics requiring special management control. Waste production can usually be planned and somewhat controlled. Scrap is typically not planned and may result from the same production run as waste. See: hazardous waste.
435
wave picking
A method of selecting and sequencing picking lists to minimize the waiting time of the delivered material. Shipping orders may be picked in waves combined by common carrier or destination, and manufacturing orders in waves related to work centers.
436
waybill
A document containing a list of goods with shipping instructions related to a shipment.
437
ways
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.
438
what-if analysis
The process of evaluating alternate strategies by answering the consequences of changes to forecasts, manufacturing plans, inventory levels, etc. See: simulation.
439
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.
440
WIP
Acronym for work in process.
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.
441
work cell
Dissimilar machines grouped together into a production unit to produce a family of parts having similar routings.
442
work center
A specific production area, consisting of one or more people and/or machines with similiar capabilities, that can be considered as one unit for purposes of capacity requirements planning and detailed scheduling. Syn: load center.
443
work order
1) An order to the machine shop for tool manufacture or equipment maintenance; not to be confused with a manufacturing order. Syn: manufacturing order, work ticket. 2) An authorization to start work on an activity (e.g., maintenance) or product.
444
yield
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% 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.
445
zone
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.
446
zone picking
A method of subdividing a picking list by areas within a storeroom for more efficient and rapid order picking. A zone-picked order must be grouped to a single location before delivery or must be delivered to different locations, such as work centers. See: batch picking, discrete order picking, order picking.
