APICS CPIM Exam 1 Key Terms

Logistics

The art and science of obtaining, producing, and distributing material and product in the proper place and in proper quantities

Cost of goods sold

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

Liabilities

Accounting/financial term representing debts or obligations owed by a company to creditors

Owner's equity

Accounting/financial term representing the residual claim by the company's owners or shareholders or both to the company's assets less liabilities

Average inventory

One-half the average lot size plus safety stock when demand and lot sizes are expected to be relatively uniform over time; when not uniform, stock level vs. time can be graphed to determine average

Freight forwarder

"middle man" between carrier and organization shipping the product. Often combines smaller shipments to take advantage of lower bulk costs

Time bucket

# of days of data summarized into columnar or row-wide display; contains all relevant data for entire week

Carrying cost

% of dollar value of inventory per unit of time (generally one year); 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; varies from 10% to 35% annually, depending on type of industry

On-hand balance

Qty shown in inventory records as being in stock

Delivery lead time

Time from receipt of a customer order to the delivery of the product

Capacity required

Capacity of a system or resource needed to produce a desired output in a particular time period

Distribution channel

Distribution route, from raw materials thru consumption, that products travel

Scrap

Material outside of specifications and possessing characteristics that make rework impractical

Direct material

Material that becomes a part of the final product in measurable qty's

Discrete manufacturing

Production of distinct items such as autos, appliances, or computers

Forecast error

The difference between actual demand and forecast demand, stated as an absolute value or as a percentage

Plan-do-check-action (PDCA)

4-step process for quality improvement; Step 1 - improvement plan is developed, step 2 - plan is carried out, step 3 - effects of plan are observed, step 4 - results are studied

Shingo's seven wastes

7 barriers to improving mfg; waste of (1) overproduction, (2) waiting, (3) transportation, (4) stocks, (5) motion, (6) making defects, (7) processing itself

Balance sheet

A financial statement showing the resources owned, the debts owed, and the owner's share of a company at a given point in time

Intrinsic forecast method

A forecast based on internal factors, such as an average of past sales

Customer service

Ability of a company to address the needs of and inquiries and requests from customers; measure of the delivery of a product to the customer at the time the customer specifies

Materials requirement 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

Nesting

Act of combining several small processes to form one larger process

Scheduling

Act of creating a schedule (shipping, MPS, maintenance, supplier)

Make-or-buy decision

Act of deciding whether to produce an item internally or buy it from an outside supplier; factors to consider include cost, available capacity, proprietary and/or specialized knowledge, quality, skill requirements, volume, timing

Preventive maintenance

Activities (incl adjustments, replacements, & basic cleanliness) that forestall machine breakdowns; purpose is to ensure production quality is maintained & delivery schedules are met

Inventory control

Activities and techniques of maintaining the desired level of items (RM, WIP or FGs)

Warehousing

Activities related to receiving, storing, and shipping materials to and from production or distribution locations

Sustainability

Activities that provide present benefit without compromising the needs of future generation

Distribution

Activity associated with movement of material (FG or parts) from the mfg to customer; encompass transportation, warehousing, inventory control, material handling, order administration, site & location analysis, industrial packaging, data processing, and communications necessary for effective mgmt; includes all activities related to physical distribution, as well as return of goods to mfg; systematic division of a whole into discrete parts with different characteristics

Waste

Activity that does not add value to the good or service in the eyes of the consumer; by-product of a process or task with unique characteristics requiring special management control; can be planned and somewhat controlled (except scrap - typically not planned and may result from the same production run)

Voice of the customer (VOC)

Actual customer descriptions in words for the functions and features customers desire for goods and services

Physical inventory

Actual inventory itself; determination of inventory qty by actual count; can be done on a continuous, periodic, or annual basis

Value added

Addition of DL, DM, and allocated OH at an operation; the cost roll-up as a part goes through a manufacturing process to finished inventory; actual increase of utility from the viewpoint of the customer as a part is transformed from raw material to finished inventory; the contribution made by an operation or a plant to the final usefulness and value of a product, as seen by customer; objective is to eliminate all non-value-added activities in producing and providing a good or service

Competitive advantage

Advantage a company has over its rivals in attracting customers and defending against competition; advantage include having characteristics that can't be duplicated without substantial cost and risk

Lot size

Amt of a particular item that is ordered from plant or supplier or issued as a standard qty to the production process

Production plan

Agreed-upon plan that comes from production planning (S&OP) process, specifically the overall level of manufacturing output planned to be produced, usually stated as a monthly rate for each product family; various UOM can be used to express plan: units, tonnage, standard hours, # of workers, etc.; managements authorization for the master scheduler to convert it into a more detailed plan

Total costs

All costs of operating a firm; total variable plus total fixed costs

Backlog

All customer orders received but not yet shipped (open orders or order board)

Fixed overhead

All mfg costs that continue even if products are not produced (except DL & DM); cannot be traced directly to the final product

Load

Amt of planned work scheduled for and actual work released to a facility, work center, or operation for a specific time period; usually expressed as standard work hours or units of production

Terms & conditions

All provisions and agreements of a contract

Tolerance

Allowable departure from nominal value established by design engineers that is deemed acceptable for the functioning of the good or service over its life cycle

Yield

Amount of good or acceptable material available after the completion of a process; usually computed as final amount divided by initial amount converted to decimal or %

Decoupling inventory

Amount of inventory kept between entities in a mfg or distribution network to create independence between processes or entities; objective is to disconnect the rate of use from the rate of supply of the item

Planning horizon

Amount of time a plan extends into the future; for master schedule, 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, must be long enough to permit any needed additions to capacity

Demand lead time

Amount of time potential customers are willing to wait for the delivery of a good or service

Supplier lead time

Amount of time that normally elapses between time an order is received by a supplier and the time order is shipped

Service industry

An organization that provides an intangible product (e.g., medical or legal advice); all organizations except farming, mining, and mfg; 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

Root cause analysis

Analytical method to determine core problem(s) of an organization, process, product, mkt, etc.

Anticipation inventories

Any additional inventory above basic pipeline stock to cover projected trends of increased sales, planned promo programs, seasonal fluctuation, plant shutdowns, and vacations

Statistical process control (SPC)

Application of statistical technique to monitor and adjust an operation

Planning Bill of Material

Artificial grouping of items or events in bill-of-material format used to facilitate master scheduling and material planning; may include historical average of demand expressed as a % 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 BOM

Assembly line

Assembly process in which equipment and work centers are laid out to follow the sequence in where raw materials and parts are assembled

Finite loading

Assigning no more work to a work center than the work center can be expected to execute in a given time period; usually refers to a computer technique that involves calculating shop priority revisions in order to level load operation by operation

Traceability

Attribute allowing the ongoing location of a shipment to be determined; registering and tracking of parts, processes, and materials used in production, by lot or serial #

Purchase requisition

Authorization to purchasing department to purchase specified materials in specified qty's within specified time

Idle capacity

Available capacity that exists on non-constraint resources beyond the capacity required to support the constraint

Mean absolute deviation (MAD)

Average of absolute values of deviation of observed values from expected values; can be calculated based on observations & arithmetic mean of those observations or can be calculated using absolute deviations of actual sales less forecast

Marketing strategy

Basic plan mktg expects to use to achieve its business and mktg objectives in a particular mkt; includes mktg expenditures, mix, and allocation

Hoshin planning

Breakthrough planning where a company develops up to 4 vision statements that indicate where company should be in next 5 years; goals and work plans are developed based on the vision statements; periodic audits are conducted to monitor progress

Bonded warehouse

Buildings or parts of a building designated by Sec of Treasury for storing imported goods, operated under supervision of US Customs

Procurement

Business functions of procurement planning, purchasing, inventory control, traffic, receiving, incoming inspection, and salvage operations

Third-party logistics (3PL)

Buyer and supplier team with 3rd party that provides product delivery services and added SC expertise

Manufacturing calendar

Calendar used in inventory and production planning functions that consecutively numbers only the work days so that the component and work order schedule may be done on the actual # of workdays available

Capacity available

Capability of a system or resource to produce a qty of output in a particular time period

Infinite loading

Calculation of capacity required at work centers in time periods required regardless of capacity available to perform work

Pallet positions

Calculation of space needed to store certain # of pallets

Pegging

Capability to identify for a given item the sources of its gross requirements and/or allocations

Resource planning

Capacity planning conducted at the business plan level; process of establishing, measuring, and adjusting limits or levels of long-range capacity; based on production plan but may be driven by higher level plans beyond time horizon for production plan

Demurrage

Carrier charges and fees applied when rail freight and ships are retained beyond a specified loading or unloading time

Detention

Carrier charges and fees applied when truck trailers are retained beyond a specified loading and unloading time

Contract carrier

Carrier that does not serve the general public but provides transportation for hire for one or limited # of shippers under a contract

Bill of lading

Carrier's contract and receipt for goods carrier agrees to transport from one place to another and deliver to designated person; basis for filing freight claims

Truckload carriers

Carriers that deliver/charge only for full truckload shipments

G&A

Category of expenses on income statement that includes cost of general mgrs, computer systems, R&D, etc

Supplier certification

Certification procedures verifying that a supplier operates, maintains, improves, and documents effective procedures that relate to the customer's requirements; can include cost, quality, delivery, flexibility, maintenance, safety, and ISO quality and environmental standards

Inventory adjustment

Change made to an inventory record to correct the balance, to bring it in line with actual physical balances; can increase or decrease item record OH balance

Terminal-handling costs

Charges based on # of times a package is loaded or unloaded

Five why's

Common practice in TQM to ask "why" 5 times when confronted with a problem knowing that by the time the 5th "why" is answered the root cause of problem is found

Participative design/engineering

Concept that refers to the simultaneous participation of all the functional areas of the firm in the product design activity, often including suppliers and customers; intent is to enhance the design with inputs of all key stakeholders to ensure final design meets all needs of stakeholders and should ensure a product that can be brought to market quickly while maximizing quality and minimizing costs

Quality

Conformance to requirements or fitness for use; 2 major components: (1) conformance - absence of defects, (2) design - degree of customer satisfaction with product characteristics & features

Single-source supplier

Company that is selected to have 100% of the business for a part although alternate suppliers are available

Reverse logistics

Complete supply chain dedicated to the reverse flow of products and materials for the purpose of returns, repair, remanufacture, and/or recycling

Supplier relationship management (SRM)

Comprehensive approach to managing an enterprise's interactions with the organizations that supply the goods and services the enterprise uses; goal is to streamline and make more effective the processes between an enterprise and its suppliers; often associated with automating procure-to-pay business processes, evaluating supplier performance, exchanging information with suppliers, and e-procurement systems

Perpetual inventory record

Computer record or manual doc where each inventory transaction is posted so a current record of inventory is maintained

Pareto's law

Concept developed by Vilfredo Pareto, Italian economist, that states a small % of a group accounts for the largest fraction of the impact, value, etc. (20% = 80% of inventory value)

Cross-docking

Concept of packing products on the incoming shipments so they can be easily sorted at intermediate warehouses or for outgoing shipments based on final destinations; items are carried from incoming vehicle docking point to outgoing vehicle docking point without being stored in inventory in the warehouse

Employee involvement (EI)

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; focuses on quality and productivity improvements

Bias

Consistent deviation from the mean in one direction (high or low)

Unitization

Consolidation of several units into larger units for fewer handlings

Theory of constraints accounting

Cost & managerial accounting system that accumulates costs and revenues into 3 areas - thruput, inventory, and operating expense; provides a simplified and more accurate form of direct costing that subtracts variable costs; focus it to exploit constraint to make more $ for firm

Job costing

Cost accounting system where costs are assigned to specific jobs; can be used with either actual or standard costs in mfg of distinguishable units or lots of products

Product cost

Cost allocated by some method to the products being produced; initially recorded in asset accounts (inv) but become expense (cost of sales) when sold

Stockout costs

Costs associated with a stock-out; may include lost sales, backorder costs, expediting, and additional manufacturing and purchasing costs

Cost of poor quality

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

Prevention costs

Costs caused by improvement activities that focus on reduction of failure and appraisal costs; include education, quality training, & supplier certification

Overhead

Costs incurred in operation of a business that cannot be directly related to the individual goods or services produced; costs are grouped into pools and distributed to goods and services via allocation method of DL hours, DL $, or DM $

Internal failure costs

Costs of things that go wrong before the product reaches the customer, usually includes rework, scrap, downgrades, re-inspection, retest, and process losses

External failure costs

Costs related to problems found after the product reaches the customer. Includes such costs as warranty and returns

Mass customization

Creation of high-volume product with large variety so that a customer may specify an exact model out of a large volume of possible end items while mfg cost is low due to large volume (PC assembly)

Multilevel bill of material

Display of all components directly or indirectly used in parent, together with qty required of each component; if component is subassembly, blend, intermediate, etc. all its components & all their components will be shown own to purchased parts and RM

Single-level bill of material

Display of components that are directly used in parent item; shows only relationship one level down

Work cell

Dissimilar machines grouped together into a production unit to produce a family of parts having similar routings

Transaction channel

Distribution network that deals with change of ownership of goods and services including activities of negotiation, selling, and contracting

Independent demand

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

Dependent demand

Demand that is directly related to or derived from the bill of material structure for other items or end products; it is calculated and need not and should not be forecasted

Traffic

Department or function charged with responsibility for arranging the most economic classification and method of shipment for both incoming and outgoing materials and products

Supply chain management

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; integrates supply, distribution, and production linked in a relationship

Drum schedule

Detailed production schedule for a resource that sets the pace for the entire system; must reconcile the customer requirements with system constraint(s)

Profit margin

Difference between sales and cost of goods sold for an organization; product selling price less DM, DL, and allocated OH for the product

Variance

Difference between the expected (budgeted or planned) value and the actual; measurement of dispersion of data

Gross margin

Difference between total revenue and the cost of goods sold

Ordering costs

Direct labor cost incurred when a purchaser places an order

Uniform plant loading

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

Break-bulk

Dividing truckloads of homogenous items into smaller, more appropriate qty's for use

Picking list

Doc that lists the material to be picked for mfg or shipping orders

Waybill

Document containing list of goods with shipping instructions related to a shipment

Shipping manifest

Document that lists the pieces in a shipment; usually covers an entire load regardless of whether the load is to be delivered to one or many destinations; lists items, qty, weight, destination name & address for each destination in load

Request for quote (RFQ)

Document used to solicit vendor responses when a product has been selected and price quotes are needed from several vendors

Manufacturing order

Document, group of documents, or schedule conveying authority for the mfg of specific parts or products in specified qty's

Value stream mapping

Drawing the current production process/flow and then attempting to draw the most effective production process/flow

Gantt chart

Earliest and best known type of planning & control chart designed to show graphically the relationship between planed performance and actual performance over time; used for machine loading (one horizontal line is capacity and other is load against that capacity) or monitoring job progress (one horizontal line is production schedule and other is actual progress of job against schedule in time)

Andon

Electronic board that provides visibility of floor status and gives info to help coordinate efforts linked to work centers; green light = running, red light = stop, yellow light = needs attention

Advance ship notice (ASN)

Electronic data interchange (EDI) notification of shipment of goods

Constraint

Element or factor that prevents a system from achieving a higher level of performance with respect to its goal; can be physical, such as a machine center or lack of material, but can also be managerial, such as a policy or procedure; one of a set of equations that cannot be violated in an optimization procedure

Finite forward schedule

Equipment scheduling technique that builds a schedule by proceeding sequentially from the initial period to the final period while observing capacity limits; uses Gantt chart

Total line-haul cost

Essential costs to move freight cargo including driver's wages and depreciation of vehicle

Supplier partnership

Establishment of a working relationship with a supplier organization whereby two organizations act as one

Forecast

Estimate of future demand; can be constructed using quantitative, qualitative, or both methods and can be based on extrinsic (external) or intrinsic (internal) factors

Value chain analysis

Examination of all links a company uses to produce and deliver its products and services starting from origination point thru delivery to final customer

Rated capacity

Expected output capability of a resource or system; capacity is traditionally calculated from such data as planned hours, efficiency, and utilization

Bullwhip effect

Extreme change in supply upstream in a SC caused by small change in demand downstream in the SC; caused by lack of communicating orders up the SC with the inherent delays in getting goods down the SC

Enterprise resource 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

Functional layout

Facility configuration where operations of a similar nature or function are grouped together; organizational structure based on departmental specialties

Distribution warehouse

Facility that receives items in large lots, stores them temporarily, and breaks them into smaller lots destined for a variety of locations

Bottleneck

Facility, function, department, or resource whose capacity is less than the demand placed upon it; machine or work center

United Nations Compact Management Model

Framework for guiding companies thru the process of formally committing to, assessing, defining, implementing, measuring, and communicating the UN Global Compact and its principles

Key performance indicator (KPI)

Financial or nonfinancial measure, either tactical or strategic, that is linked to specific strategic goals and objectives

Income statement

Financial statement showing the net income for a business over a given period of time

Random variation

Fluctuation in data caused by uncertain or random occurrences

Extrinsic forecasting method

Forecast method on a correlated leading indicator, such as estimating furniture sales based on housing starts; tends to be more useful for large aggregations, such as total company sales, than for individual product sales

Hedge inventory

Form of inventory buildup to buffer against some event that may not happen; involves speculation related to potential labor strikes, price increases, unsettled governments, and events that could severely impact a company's strategic initiatives

Flow shop

Form of mfg organization where machines and operators handle a standard uninterrupted material flow; operators perform same operations for each production run

Intermittent production

Form of mfg where jobs pass thru functional departments in lots, and each lot may have a different routing

Summarized Bill of Material

Form of multi-level BOM that lists all the parts and their quantities required in a given product structure. Unlike the indented BOM, it does not list the levels of manufacture and lists a component only once for the total quantity used

Indented Bill of Material

Form of multi-level bill of material that 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 further 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

Master schedule

Format that includes time periods (dates), forecast, customer orders, projected available balance, available-2-promise, and MPS; takes into account forecast, production plan, & other important considerations like backlog, material availability, available capacity, & mgmt goals

Receiving

Function encompassing physical receipt of material, inspection of shipment for conformance with purchase order (qty & damage), the identification and delivery to destination, & prep of receiving reports

Distribution requirements planning (DRP)

Function of determining the need to replenish inventory at branch warehouses; 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 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; replenishment inventory calculations, 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

Priority planning

Function of determining what material is needed and when; MPS and MRP are elements used for planning and re-planning process to maintain proper due dates on required materials

Capacity management

Function of establishing, measuring, monitoring, and adjusting limits of capacity in order to execute all mfg schedules; executed at 4 levels: resource requirements planning, rough-cut capacity planning, capacity requirements planning, and input/output control

Transportation

Function of planning, scheduling, and controlling activities related to mode, vendor, and movement of inventories into and out of an organization

Demand management

Function of recognizing all demands for goods and services to support the marketplace; involves prioritizing it when supply is lacking; if done properly, it facilitates the planning and use of resources for profitable business results; 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

Production activity control (PAC)

Function of routing and dispatching work to be accomplished thru production facility and of performing supplier control; encompasses principles, approaches, and techniques needed to schedule, control, measure, and evaluate effectiveness of operations

Field service

Functions of installing and maintaining a product for a customer after the sale or during the lease; may also include training and implementation assistance

Trend

General upward or downward movement of a variable over time (e.g., demand, process attribute)

GAAP

Generally Accepted Accounting Principles

Supply chain

Global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash; made up of a network of both entities and processes. Entities include: (1) supplier (provides good or service) upstream, (2) producer (manufacturer) in the middle, (3) customer (retailer) downstream

Work in process (WIP)

Good or goods in various stages of completion thruout the plant including all material from raw material released for initial processing to completely processed material awaiting final inspection and acceptance as FG inventory

Product

Good or service produced for sale, barter, or internal use

Histogram

Graph of contiguous vertical bars representing frequency distribution where groups or classes of items are marked on X axis and # of items in each class are marked on Y axis; one of 7 tools of quality

Control chart

Graphic comparison of process performance data with predetermined computed control limits; primary use is to detect assignable causes of variation in the process (as opposed to random ones)

Process Flow Diagram

Graphical and progressive representation of the various steps, events, and tasks that make up an operations process. Diagram provides the viewer with a picture of what actually occurs when a product is manufactured or a service is performed

Scatter chart

Graphical technique to analyze relationship between 2 variables; y-axis is for variable to be predicted and x-axis is for variable to make predictions; 1 of 7 tools of quality

Master planning

Group of business processes that includes demand management (forecasting and order servicing); production and resource planning; and master scheduling (master schedule and rough-cut capacity plan)

Product family

Group of products with similar characteristics, often used in production planning (or sales and operations planning)

Private carrier

Group that provides transportation exclusively within an organization

Materials management

Grouping of management functions supporting the complete cycle of material flow, from purchase and internal control of production materials to planning and control of WIP to the warehousing, shipping, and distribution of the finished product

Freight consolidation

Groupings of shipments to obtain reduced costs or improved utilization of transportation function; can occur by mkt area grouping, groupings on scheduled deliveries, or using 3rd party pooling services (public warehouses or freight forwarders)

Dojo

Hall

Quick changeover

Having small setup time in order to have small production batches and small WIP inventory

Theory of constraints (TOC)

Holistic mgmt philosophy based on principle that complex systems exhibit inherent simplicity; idea that very complex systems have small # of variables (perhaps only 1) that act as constraint

Reorder quantity

If fixed, qty to be ordered each time available stock falls at or below reorder point (OH + OO); if variable, qty to be ordered from time period to time period will vary

Centralized inventory control

Inventory decision making for all SKUs are exercised from one office or department for an entire company

Kaizen

Improvement; continuing improvement involving everyone: managers and workers; in mfg, relates to finding and eliminating waste in machinery, labor, or production methods

Net requirements

In MRP, derived from applying gross requirements and allocations against OH inventory, scheduled receipts, and safety stock

Protective inventory

In TOC, amt of inventory required relative to the protective capacity in the system to achieve a specific thruput rate at the constraint

Productive capacity

In TOC, max output capabilities of a resource (or series of resources) or the mkt demand for that output for a given period of time

Critical chain method

In TOC, network planning technique for analysis of project's completion time used for planning & controlling project activities; based on technological & resource constraints; strategic buffering of paths & resources is used to increase project completion

VATI Analysis

In TOC, procedure for determining the general flow of parts and products from raw materials to finished products (logical product structure). (1) V logical structure - starts with one or few raw materials, and the product expands into a number of different products as it flows thru divergent points in its routings; (2) A logical structure - dominated by converging points. Many raw materials are fabricated and assembled into a few finished goods; (3) T logical structure - consists of numerous similar finished products assembled from common assemblies, subassemblies, and parts; (4) I logical structure - 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 general parts flow is determined, the system control points (gating operations, convergent points, divergent points, constraints, and shipping points) can be identified and managed

Five focusing steps

In TOC, process to continuously improve organizational profit by evaluating the production system and market matrix to determine how to make the most profit using the system constraint; consist of (1) identifying the system constraint, (2) deciding how to exploit the system constraint, (3) subordinate all non-constraints to the constraint, (4) elevate the system constraint, (5) return to step 1 if constraint is broken in any previous step (don't allow inertia to set in)

Buffer management

In TOC, process where all expediting in a shop is driven by what is scheduled to be in the buffers (constraint, shipping, or assembly); by expediting into buffers, system avoids idleness at the constraint and prevents missed due date

Total cost curve

In breakeven analysis, composed of total fixed and variable costs per unit multiplied by # of units provided

Cycle time

In materials management, it refers to the length of time from when material enters a production facility until it exits; in industrial engineering, the time between completions of two discrete units of production.

Remanufacturing

Industrial process where worn-out products are restored to like-new condition

Routing

Info detailing method of mfg of a particular item; includes operations to be performed, their sequence, various work centers involved, & standards for setup and run

Incoterms

International Commercial Terms; created to simplify international transactions

Reverse auction

Internet auction in which suppliers attempt to underbid their competitors; company identities are known only by the buyer

Cycle counting

Inventory accuracy audit technique where inventory is counted on a cyclic schedule rather than once a year; 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 systems require the counting of a certain number of items every workday with each item counted at a prescribed frequency; key purpose is to identify items in error, thus triggering research, identification, and elimination of the cause of the errors

Projected available balance (PAB)

Inventory balance projected into future; running sum of OH minus requirements plus scheduled receipts and planned orders

Seasonal inventory

Inventory built up to smooth production in anticipation of peak seasonal demand

Decentralized inventory control

Inventory decision making exercised at each stocking location for SKUs at that location

Pipeline stock

Inventory in the transportation network and the distribution system, including the flow-thru intermediate stocking points; flow time thru the pipeline has major effect on amount of inventory required in pipeline; time factors involve order transmission, order processing, scheduling, shipping, transportation, receiving, stocking, review time, etc

Transit inventory

Inventory in transit between mfg and stocking locations

Stockkeeping unit (SKU)

Inventory item; an item at a particular geographic location

Wall-2-wall inventory

Inventory management technique where material enters a plant and is processed thru the plant into FGs without ever entering a formal stock area

Inventory ordering system

Inventory models for the replenishment of inventory; independent demand ordering models = fixed reorder cycle, fixed reorder qty, optional replenishment, hybrid models; dependent demand ordering models = MRP, kanban, drum-buffer-rope

Days of supply

Inventory on-hand metric converted from units to how long the units will last. Ex: 2000 units on-hand and company uses 200 units/day, then there are 10 days of supply

Fluctuation inventory

Inventory that is carried as a cushion to protect against forecast error

Transportation inventory

Inventory that is in transit between locations

Lot-size inventory

Inventory that results whenever qty 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

Inventory buffer

Inventory used to protect the thruput of an operation or the schedule against the negative effects caused by delays in delivery, quality problems, delivery of incorrect qty, etc.

Distribution inventory

Inventory, usually spare parts and finished goods, located in the distribution system (e.g., in warehouses, in transit between warehouses and the consumer)

Parent item

Item produced from one or more components

MRO supplies

Items used in support of general operations and maintenance (maintenance supplies, spare parts, consumables used in mfg process and supporting operations)

Finished goods inventory

Items where all mfg operations, including final tests, have been completed; products are available for shipment to the customer as either end items or repair parts

Heijunka

JIT philosophy where level production thruout SC matches planned rate of end product sales

Two-card kanban system

Kanban system where move card and production card are used; move card authorizes movement of specific # of parts from source to point of use (move card is attached to container moving) and production card authorizes production of a given # of parts for use or replenishment

One-card kanban system

Kanban system where only a move card is used; work centers are adjacent so no production card is needed

Direct labor

Labor applied to the good being manufactured or used in performance of service

Product layout

Layout of resources arranged sequentially based on product's routing

Standard time

Length of time that should be required to set up a given machine or operation and to run one batch or one or more parts, assemblies, or end products thru that operation; time is used to determine machine requirements and labor requirements

Break-even point

Level of production or volume of sales at which operations are neither profitable nor unprofitable; intersection of total revenue and total cost curves

Master production schedule (MPS)

Line on the master schedule grid that reflects the anticipated build schedule for those items assigned to the master scheduler; master scheduler maintains schedule, and it becomes a set of planning numbers that drives MRP; represents what the company plans to produce expressed in specific configurations, quantities, and dates

Bill of material (BOM)

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; used in conjunction with the master production schedule to determine the items for which purchase requisitions and production orders must be released; 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

Where-used list

Listing of every parent item that calls for a given component and the respective qty required from BOM file

Cumulative lead time

Longest planned length of time to accomplish the activity in question; found by reviewing the lead time for each bill of material path below the item and whichever path adds up to the greatest number defines it

Fixed order quantity

Lot-sizing technique in MRP or inventory mgmt that will always cause planned or actual orders to be generated for a predetermined fixed qty or multiples thereof, if net requirements for the period exceed it

Lot-4-lot

Lot-sizing technique that generates planned orders in qty's equal to net requirements in each period

Period order quantity

Lot-sizing technique under which the lot size is equal to the net requirements for a given # of periods; # of periods to order is variable with each order size equaling the holding cost and the ordering cost for the interval

Time-phased order point (TPOP)

MRP-like time planning for independent demand items where gross requirements come from a forecast not from BOM explosion; can be used to plan distribution center inventories as well as service parts since MRP logic can plan items with dependent, independent, or both demand

Operator flexibility

Machine operators having flexibility to solve problems and do other tasks beyond immediate responsibilities

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; governs the making and delivery of component parts, including those provided by outside suppliers; goal is to build every model every day based on demand

Overlapped schedule

Manufacturing schedule that "overlaps" successive operations; 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 center

Customer relationship management (CRM)

Marketing philosophy based on putting the customer first; collection and analysis of information designed for sales and marketing decision support (as contrasted to enterprise resources planning information) to understand and support existing and potential customer needs; includes account management, catalog and order entry, payment processing, credits and adjustments, and other functions

Industrial trucks

Material handling devices used in warehouses; not confined to fixed route

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

Vendor-managed inventory (VMI)

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 customer; accomplished by process in which resupply is done by the vendor through regularly scheduled reviews of on-site inventory; on-site inventory is counted, damaged or outdated goods are removed, and the inventory is restocked to predefined levels

Utilization

Measure (%) of how intensively a resource is being used to produce a good or service; compares actual time used to available time

On-time schedule performance

Measure (%) of meeting the customer's originally negotiated delivery request date; performance can be expressed as % of # of orders, line items, or $ value shipped

Level of service

Measure (usually %) 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-2-stock, 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-2-order and design-2-order, level of service is the percentage of times the customer-requested or acknowledged date was met by shipping complete product quantities

Record accuracy

Measure of conformity of recorded values in bookkeeping system to actual value

Stockout percentage

Measure of effectiveness where a company responds to actual demand or requirements

Density

Measure of weight of an item compared to its volume; can influence the # of units that can be carried by a particular truck (impacts transportation charges)

Efficiency

Measurement of actual output to the standard output expected (usually a %); measures how well something is performing relative to existing standards

Manufacturing resource planning (MRP2)

Method for the effective planning of all resources of a manufacturing company; addresses operational planning in units, financial planning in dollars, and has a simulation capability to answer what-if questions; made up of a variety of processes, each linked together: business planning, production planning (sales and operations planning), MPS, MRP, CRP, and the execution support systems for capacity and material; output is integrated with financial reports such as the business plan, purchase commitment report, shipping budget, and inventory projections in dollars

Kanban

Method of Just-in-Time production that uses standard containers or lot sizes with a single card attached to each; a pull system in which work centers signal with a card that they wish to withdraw parts from feeding operations or suppliers; loosely translated, means card, billboard, or sign, but other signaling devices such as colored golf balls have also been used; often used synonymously for the specific scheduling system developed and used by Toyota

Periodic replenishment

Method of aggregating requirements to place deliveries of varying qty at evenly spaced time intervals, rather than variable spaced deliveries of equal qty

Backflush

Method of inventory bookkeeping where the book inventory is automatically reduced after completion of activity on component's upper-level parent item based on what should have been used as specified on the BOM and allocation records; disadvantage is difference between book inventory and physical OH inventory

Discrete order picking

Method of picking orders in which items on one order are picked before items on next order is picked

Batch picking

Method of picking orders where order requirements are aggregated by product across orders to reduce movement to & from product locations; aggregated qty's are transported to common area where individual orders are made

Wave picking

Method of selecting and sequencing picking lists to minimize waiting time of delivered material; shipping orders in waves of common carrier or destination with mfg orders related to work centers

Fixed-location storage

Method of storage where a relatively permanent location is assigned for storage of each item in a storeroom or warehouse; more space is needed than in a random-location storage system, locations become familiar and therefore a locator file becomes unnecessary

Zone picking

Method of subdividing a picking list by areas within a storeroom for more efficient and rapid order picking; must be grouped to a single location before delivery or must be delivered to different locations such as work centers

Split lot

Mfg order qty that has been divided into two or more smaller qty's after order has been released; qty's may be worked on in parallel or portion sent ahead while remaining qty worked on in current operation; purpose is to reduce lead time

Cellular manufacturing

Mfg 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

Total quality management (TQM)

Mgmt approach to long-term success thru customer satisfaction; based on participation of all members of an organization on improving processes, goods, services, and culture in which they work

Service parts

Modules, components, and elements planned to be used without modification to replace an original part

Operating expense

Money an organization spends on generating "goal units"

Materials handling

Movement of items from one point to another inside a facility or between facilities

Demand

Need for a particular product or component; can come from any number of sources (e.g., a customer order or forecast, an interplant requirement, a branch warehouse request for a service part or the manufacturing of another product); at the finished goods level, it is different from sales data because it does not necessarily result in a sale; there are up to four components of demand: cyclical component, random component, seasonal component, and trend component

Cash flow

Net flow of dollars into or out of the proposed project; algebraic sum, in any time period, of all cash receipts, expenses, and investments

Critical path method (CPM)

Network planning technique for analysis of project's completion time used for planning & controlling the activities in the project; by showing each activity and associated time to complete identifies those elements that actually constrain the total project time, determining the critical path

Continuous Process Improvement (CPI)

Never-ending effort to expose and eliminate root causes of problems: small-step improvements as opposed to big-step improvements

Inventory turnover

Number of times that an inventory cycles during the year; frequently computed by dividing the average inventory level into the annual cost of sales

Tariff

Official schedule of taxes and fees imposed by a country on imports or exports

Available inventory

On-hand inventory balance minus allocations, reservations, backorders, and quantities held for quality problems

Flowchart

One of 7 tools of quality that shows the operations, transportation, storages, delays, inspections, and so on related to a process; drawn to better understand the process

Cycle stock

One of the two main conceptual components of any item inventory, it is the most active component; it depletes gradually as customer orders are received and is replenished cyclically when supplier orders are received

Interplant demand

One plant's need for a part or product that is produced by another plant or division within the same organization; although not a customer order, it is usually handled by the MPS system in a similar manner

Sawtooth diagram

Qty vs. time graphic representation of the order point/order qty inventory system showing inventory being received and then used

Scheduled receipt

Open order that has an assigned due date

Variable cost

Operating cost that varies directly with a change of one unit in production volume

Work order

Order to machine shop for tool manufacture or equipment maintenance; authorization to start work on an order

Job shop

Organization where similar equipment is organized by function; each job follows distinct route thru shop; type of mfg process used to produce items to a 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

Quality costs

Overall costs associated with prevention activities and the improvement of quality thruout the firm before, during, and after production; can fall into 4 categories: (1) internal failure costs (before product reaches customer), (2) external failure costs (after product reaches customer), (3) appraisal costs (formal eval & audit of quality in firm ), (4) prevention costs (improvement activities that focus on reducing failures & appraisal costs)

Productivity

Overall measure of ability to produce a good or service; actual output of production compared to actual input of resources; a relative measure across time or against common entities

Electronic data interchange (EDI)

Paperless (electronic) exchange of trading documents, such as purchase orders, shipment authorizations, advanced shipment notices, and invoices, using standardized document formats

Mental model

Paradigm of how the world works formed by a person's experiences & assumptions

Ways

Paths over which transportation company moves cargo, including right-of-way, roadbed, and RR tracks

Explode

Perform BOM explosion

Throughput

Rate at which system generates "goal units"; always expressed for a given period of time (month, day, week)

Lean production

Philosophy of production that emphasizes the minimization of the amount of all the resources (incl time) used in the various activities of the enterprise; involves identifying and eliminating non-value-adding activities in design, production, supply chain management, and dealing with customers; contains a set of principles and practices to reduce cost through the relentless removal of waste and through the simplification of all mfg and support processes

Terminals

Place where vehicles are loaded and unloaded; also weighs and re-routes cargo

Strategic plan

Plan for how to marshal and determine actions to support missions, goals, and objectives of an organization

Firm planned order (FPO)

Planned order that can be frozen in time and qty; computer isn't allowed to change it automatically, must be done by planner in charge of item; this technique can aid planners working with MRP systems to respond to material and capacity issues

Process

Planned series of actions or operations that advances a material or procedure from one stage of completion to another

Operations management

Planning, scheduling, & control of activities that transform inputs into FGs and services; field of study that focuses on effective planning, scheduling, use, & control of mfg or service organization thru study of concepts from design engineering, MIS, QA, production mgmt, inventory mgmt, & other functions affecting operations

Time fence

Policy or guideline established to note where various restrictions or changes in operating procedures take place

Employee empowerment

Practice of giving non-managerial employees the responsibility and the power to make decisions regarding their tasks or jobs; associated with the practice of transfer of managerial responsibility to employees

Jidoka

Practice of stopping the production line when a defect occurs

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; operator-oriented maintenance with involvement of all qualified employees in maintenance activities

Quantity discount

Price reduction allowance determined by the qty or value of a purchase

Continuous replenishment

Process by which supplier is notified daily of actual sales or warehouse shipments and commits to replenish without OOS and without receiving replenishment orders; result is lower costs and improved turns

Order entry

Process of accepting & translating what a customer wants into terms used by mfger or distributor; commitment based on ATP line in master schedule; can be as simple as creating shipping docs for FGs in make-2-stock or as complicated as series of activities for make-2-order

Requirements explosion

Process of calculating demand for components of a parent item by multiplying the parent item requirements by the component usage qty specified in the BOM

ABC classification

Process of classifying items in descending order based on annual dollar volume or some other criteria. The list is then split into 3 classes - A, B, and C. A represents 10-20% of items but 50-70% of dollar volume; B represents 20% of items and 20% of dollar volume; C represents 60-70% of items but 10-30% of dollar volume. This principle states that effort and money can be saved by applying looser controls to the low dollar volume items (C class) than the higher dollar volume items (A & B classes) and applies to inventory, purchasing, sales, etc.

Batch

Qty scheduled to be produced or in production; type of mfg process used to produce items with similar designs & cover wide range of order volumes; items ordered are of a repeat nature

Capable-2-promise

Process of committing orders against available capacity as well as inventory. May involve multiple manufacturing or distribution sites. Used to determine when a new or unscheduled customer order can be delivered. Employs a finite-scheduling model of manufacturing system to determine when an item can be delivered. Includes any constraints that might restrict 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, current manufacturing environment, and future order commitments. Objective is to reduce time spent by planners in expediting orders and adjusting plans because of inaccurate delivery-date promises

Priority control

Process of communicating start and end dates to mfg departments in order to execute a plan; dispatch list is tool used to provide dates and priorities based on current plan and status of open orders

Rough-cut capacity planning (RCCP)

Process of converting MPS into requirements for key resources (labor, machinery, WH space, supplier capability, $); comparison to available or demonstrated capacity is done to assist master scheduler in establishing feasible MPS; 3 approaches: (1) bill of labor, (2) capacity planning using overall factors, (3) resource profile

Capacity planning

Process of determining amount of capacity required to produce in the future; may be performed at aggregate or product-line (RRP), master-schedule level (R-CCP), and materials requirements planning (CRP)

Capacity requirements planning (CRP)

Process of determining in detail amount of labor and machine resources required to complete task of production; inputs are open orders and planned orders; checks against all time periods

Mixed-model scheduling

Process of developing one or more schedules to enable mixed-model production; goal is to achieve a day's production each day

What-if analysis

Process of evaluating alternate strategies by answering the consequences of changes to forecasts, mfg plans, inventory levels, etc.

Outsourcing

Process of having suppliers provide goods and services that were previously provided internally; involves substitution (replacement of internal capacity and production by that of the supplier)

Order promising

Process of making a delivery commitment; for make-2-order involves check of uncommitted material and available capacity (also master schedule available-2-promise)

Capacity control

Process of measuring production output and comparing it with the capacity plan to determine if variance exceeds pre-established limits and taking action to get back on plan if limits are exceeded

Quality control

Process of measuring quality conformance by comparing actual with standard for the characteristic and acting on difference

Backhauling

Process of transportation returning from original destination point to point of origin; can be full, partial, or empty load

Production planning

Process to develop tactical plans based on setting overall level of mfg output (prod plan) & other activities to best satisfy current planned level of sales (forecast) while meeting business objectives stated in business plan (profit, productivity, competitive customer lead times, etc); used to establish production rates that achieve mgmt objective of satisfying customer demand by maintaining, raising, or lowering inventories/backlogs while keeping workforce stable

Sales & operations planning (S&OP)

Process to develop tactical plans that provide mgmt 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 mgmt of the SC; process brings together all the plans for the business (sales, marketing, development, manufacturing, sourcing, and financial) into one integrated set of plans performed at least once a month and is reviewed by mgt at an aggregate (product family) level

Value stream

Processes of creating, producing, and delivering a good or service to market; may be controlled by single business or network of several businesses

Multi-sourcing

Procurement of a good or service from more than one independent supplier

Quality at the source

Producer's responsibility to provide 100 % acceptable quality material to consumer of material; objective is to reduce or eliminate shipping or receiving quality inspections and line stoppages as a result of supplier defects

Landed cost

Product cost plus the costs of logistics, such as warehousing, transportation, handling fees, duty, taxes, and tariffs

Postponement

Product design strategy that shifts product differentiation closer to consumer by post-poning identity changes (assembly or packaging) to last possible SC location

Package-2-order

Production environment in which a good or service can be packaged after receipt of a customer order; item is common across many different customers; packaging determines the end product

Assemble-2-order

Production environment where a good or service can be assembled after receipt of a customer's order. The key components (or ingredients) used in assembly or finishing process are planned and stocked in anticipation of a customer order. Receipt of order initiates assembly of the customized product. Useful strategy when a large number of end products can be assembled from common components

Make-2-order

Production environment where a good or service can be made after receipt of a customer's order; final product is usually a combination of standard items and items custom-designed to meet the special needs of the customer

Make-2-stock

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

U-lines

Production lines shaped like letter "u" to allow workers to easily perform several non-sequential tasks without much walk time; # of workstations is usually determined by line balancing

Push system

Production of items at times required by a given schedule planned in advance; in material control, issuing of material according to a given schedule or issuing material to a job order at its start time; in distribution, system for replenishing field warehouse inventories where replenishment decision making is centralized, usually at the mfg site or central supply facility

Pull system

Production of items only as demanded for use or to replace those taken for use; in material control, withdrawal of inventory as demanded by the using operations (material is not issued until a signal comes from the user); in distribution, system for replenishing field warehouse inventories where replenishment decisions are made at the field warehouse itself, not at the central warehouse or plant

Job shop scheduling

Production planning and control technique used to sequence and prioritize production qty's across operations in a job shop

Level production method

Production planning method that maintains a stable production rate while varying inventory levels to meet demand

Chase production method

Production planning method that maintains stable inventory level while varying production to meet demand

Level schedule

Production schedule or MPS that generates material and labor requirements that are as evenly spread over time as possible; FG inventory buffers production system against seasonality; in JIT each day's customer demand is scheduled to be built on the day it will be shipped (output of load leveling process)

Continuous production

Production system where productive equipment is organized and sequenced according to steps involved to produce product; term denotes material flow is continuous during production process; routing of jobs is fixed and seldom changed

Engineer-2-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

Dock-2-stock

Program where specific quality and packaging requirements are met before the product is released; prequalified goods are shipped directly into the customer's inventory; eliminates costly handling of components (receiving & inspection) and enables them to move into production

Product mix

Proportion of individual products that make up total production or sales volume; changes can mean drastic changes in mfg requirements for certain labor & materials

Protective packaging

Protecting items by surrounding them with impact absorbing materials

Time buffer

Protection against uncertainty that takes form of time

Demonstrated capacity

Proven capacity calculated from actual performance data, usually expressed as the average # of items produced multiplied by standard hours per item

Supplier

Provider of goods or services; seller with whom the buyer does business, as opposed to vendor, which is a generic term referring to all sellers in the marketplace

Raw material

Purchased items or extracted materials that are converted via the mfg process into components and products

Purchase order

Purchaser's authorization used to formalize a purchase transaction with a supplier; should contain statements of name, part #, qty, description, price, pmt terms, discounts, dates, and transportation

Buffer

Qty of materials awaiting further processing; can refer to raw materials, semi-finished stores or hold points, or a work backlog that is purposely maintained behind a work center; in TOC, it can be time or material and support thruput and/or due date performance maintained at the constraint, convergent points (with a constraint part), divergent points, and shipping points

Safety stock

Qty of stock planned to be in inventory to protect against fluctuations in demand or supply; additional inventory and capacity planned as protection against forecast errors and short-term changes in the backlog

Process batch

Qty 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

Planned order receipt

Qty planned to be received as a future date as a result of a planned order release

Lot

Qty produced together and sharing the same production costs and specifications

Velocity

Rate of change of an item with respect to time; speed of all transactions, collectively, within SC community; faster is better because it indicates higher asset turnover for stockholders and faster order-2-delivery response for customers

Tracking signal

Ratio of cumulative algebraic sum of deviations between forecasts and actual values to the mean absolute deviation; used to signal when validity of forecasting model might be in doubt

Component

Raw material, part, or subassembly that goes into a higher level assembly, compound, or other item; may include packaging materials for finished goods

Hansei

Reflection

Milk run

Regular route for pickup of mixed loads from several suppliers; one truck makes multiple stops at suppliers before delivering one load to customer's plant

Upstream

Relative reference within a firm or SC to indicate moving in the direction of the raw material supplier

Open order

Released mfg or purchase order

Point of sale (POS)

Relief of inventory and computation of sales data at time and place of sale, thru use of bar coding or magnetic media and equipment

Repetitive manufacturing

Repeated production of same discrete products or families of products; minimizes setups, inventory, & mfg lead times by using production lines, assembly lines, or cells; work orders not needed; production scheduling and control are based on production rates

Seasonality

Repetitive pattern of demand from year to year (or other repeating time interval) with some periods considerably higher than others

Protective capacity

Resource capacity needed to protect system thruput, ensuring some capacity above capacity required to exploit the constraint is available to catch up when disruptions inevitable occur; needed for non-constraint resources to rebuild the bank in front of the constraint or capacity-constrained resource and/or on shipping dock before thruput is lost and to empty space buffer when it fills

Pacemaker

Resource requiring longest time to produce among the set of activities in a line or cell; determines the flow thru the line or cell at mkt rate

Market driven

Responding to customer's needs

Green reverse logistics

Responsibility of supplier to dispose of packaging materials or environmentally sensitive materials such as heavy metals

Planned order release

Row on MRP table that is derived from planned order receipts by taking planned receipt qty and offsetting to the left by appropriate lead time

Scatterplot

Same as scatter chart

Final assembly schedule (FAS)

Schedule of end items to finish the product for specific customers' orders in a make-2-order or assemble-2-order environment; also referred to as finishing schedule because it may include operations other than final assembly (may exclude final assembly); prepared after receipt of customer order as constrained by availability of material and/or capacity and schedules operations required to complete the product from level where it's stocked to end-item level

Forward scheduling

Scheduling technique where scheduler proceeds from known start date and computes completion date for an order proceeding from first operation to last; dates generated are earliest start dates for operations

Dispatching

Selecting and sequencing of available jobs to be run at individual workstations and the assignment of those jobs to workers

Order picking

Selecting the required qty of specific products for movement to a pkg area & documenting that the material was moved from one location to shipping

Subcontracting

Sending production work outside to another manufacturer

Bar code

Series of alternating bars and spaces printed or stamped on parts, containers, labels, or other media representing encoded info that can be read by electronic readers; used to facilitate timely and accurate input of data to a computer system

Manufacturing process

Series of operations performed upon material to convert it from raw or semi-finished state to state of further completion; can be arranged in process layout, cellular layout, fixed-position layout & can be planned to support make-2-stock, assemble-2-order, make-2-order, etc.

Production line

Series of pieces of equipment dedicated to mfg of specific # of products or families

Order point

Set inventory level where, if total stock OH plus on order falls to or below that level, action is taken to replenish; calculated as forecasted usage during replenishment lead time plus safety stock

Six sigma quality

Set of concepts and practices that key on reducing variability in processes and reducing deficiencies in product; 3.4 defects per 1 million opportunities or operations

Tactical plan

Set of functional plans synchronizing activities across functions that specify production levels, capacity levels, staffing levels, funding levels, etc. for achieving intermediate goals & objectives to support organization's strategic plan

Manufacturing philosophy

Set of guiding principles, driving forces, and ingrained attitudes that help communicate goals, plans, and policies to all employees and that is reinforced thru conscious and subconscious behavior within the mfg organization

Four P's

Set of marketing tools to direct business offerings to customer; product, price, place, promotion

Lot control

Set of procedures (ie assigning unique batch #s and tracking each batch) used to maintain lot integrity from raw materials, from the supplier thru manufacturing to consumers

Takt time

Sets pace of production to match rate of customer demand and becomes heartbeat of any lean production system; computed as available production time divided by rate of customer demand

Yokoten

Sharing information

Consignment

Shipment that is handled by a common carrier; process of a supplier placing goods at a customer location without receiving payment until after the goods are used or sold

Intermodal transport

Shipments moved by different types of equipment combining the best features of each mode; use of two or more carrier modes in the thru movement of a shipment

Gemba

Shop floor

Visual review system

Simple inventory control system where inventory reordering is based on actually looking at amount of inventory OH; used for low-value items

SMART

Simple, measurable, achievable, reasonable, trackable

Assignable cause

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

Lead time

Span of time required to perform a process (or series of operations); in logistics, the time between recognition of the need for an order and the receipt of goods; individual components can include order preparation time, queue time, processing time, move or transportation time, and receiving and inspection time

Leading indicator

Specific business activity index that indicates future trends, such as housing starts being leading indicator for industry that supplies builders' hardware

Work center

Specific production area, consisting of one or more people and/or machines with similar capabilities, that can be considered as one unit for purposes of capacity requirements planning and detailed scheduling

Process flexibility

Speed and ease with which the mfg transformation can respond to internal or external changes

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 material and labor are ideally level loaded, specific businesses and industries may load to one or the other exclusively

Product lifecycle

Stages a new product goes through from beginning to end, (i.e., from introduction thru growth, maturity, and decline); time from initial R&D to time at which sales and support of the product to customers are withdrawn; period of time when a product can be produced and marketed profitably

Transit time

Standard allowance that is assumed on any given order for the movement of items from one operation to the next

Business plan

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; document consisting of the business details (organization, strategy, and financing tactics) prepared by an entrepreneur to plan for a new business

Hoshin

Statement of objectives

Control limit

Statistically determined line on a control chart (upper control limit or lower control limit); if value occurs outside this limit, process is deemed to be out of control

Certified supplier

Status awarded to a supplier who consistently meets predetermined quality, cost, delivery, financial, and count objectives

Store

Storage point located upstream of a work station intended to make it easier to see customer requirements

Random-location storage

Storage technique where parts are placed in any space that is empty when they arrive at storeroom; requires use of locator file to identify part locations and uses less storage space than alternative

Muri

Strain or overburden

Product differentiation

Strategy of making a product distinct from the competition on a non-price basis such as availability, durability, quality, or reliability

Planned order

Suggested order qty, release date, and due date created by planning system logic when it encounters net requirements in processing MRP; are created by the computer, exist only within the computer, and may be changed or deleted by computer during subsequent processing if conditions change; with released orders, serve as input to CRP to show total capacity requirements by work center in future time periods

Total cost of ownership

Sum of all the costs associated with every activity of the supply stream; main insight it offers to SC Mgr is understanding that acquisition cost is often a very small portion of total cost of ownership

Closed-loop MRP

System built around MRP that includes additional planning processes of production planning (S&OP), MPS, and CRP; term implies each process is included in overall system and feedback is provided by execution process so planning is kept up-to-date at all times

Flow processing

System in which work flows over a stationary path with little variance in the rate of flow; known as repetitive mfg if discrete units are produced (otherwise continuous mfg)

Radio frequency identification tag (RFID)

System using electronic tags to store data about items; accessing data is accomplished through a specific radio frequency and does not require close proximity or line-of-sight access for data retrieval

Drum-buffer-rope (DBR)

TOC method for scheduling and managing operations that have an internal constraint or capacity-constrained resource

Drop ship

Take title of goods but not actually handle, stock, or deliver it (supplier ships directly to another supplier or supplier ships directly to buyer's customer)

Standard costs

Target costs of an operation, process, or product including direct material, direct labor, and overhead charges

Sensei

Teacher, or one with experience

Back scheduling

Technique for calculating operation start dates and due dates; start with order due date and work backwards to calculate required start date and/or due dates for each operation

Input/output control (I/O)

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 CRP and approved by mfg management; actual input is compared to planned input to identify when work center output might vary from plan because work is not available at the work center

Lead-time offset

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 lead time for item

Performance standard

The accepted, targeted, or expected value for the criterion in a performance measurement system

Inventory management

The branch of business management concerned with planning and controlling inventories

Start date

Time an activity begins

External setup time

Time associated with elements of a setup procedure performed while process or machine is running

Internal setup time

Time associated with elements of a setup procedure performed while process or machine isn't running

Service

Those activities that support the production or distribution functions in any organization (customer svc or field svc)

Order qualifiers

Those competitive characteristics that a firm must exhibit to be a viable competitor in the marketplace

Order winners

Those competitive characteristics that causes a firm's customers to choose that firm's goods and services over those of its competitors; competitive advantage for firm

Wait time

Time a job remains at a work center after an operation is completed until it is moved to the next operation

Move time

Time a job spends in transit from one operation to another in a plant

Sales plan

Time phased statement of expected customer orders anticipated to be received for each major product family or item; represents ales & mktg's commitment to take all reasonable steps necessary to achieve level of actual customer orders

Setup time

Time required for a specific machine, resource, work center, process, or line to convert from production of the last good piece of A to the first good piece of B

Procurement lead time

Time required to design a product, modify or design equipment, conduct mkt research, and obtain all necessary materials; begins when decision has been made to accept an order to produce new product and ends when production begins

Run time

Time required to process a piece or lot at a specific operation

Cause-and-effect diagram

Tool for analyzing process dispersion (Ishikawa diagram/fishbone diagram)

Unit cost

Total labor, material, and OH cost for one unit of production

Purchasing lead time

Total lead time required to obtain purchased item; includes order prep and release time, supplier lead time, transportation time, receiving, inspection, and put away time

Gross requirement

Total of independent and dependent demand for a component before netting OH inventory and scheduled receipts

Replenishment lead time

Total period of time that elapses from moment it is determined that a product should be reordered until product is back on shelf available

Manufacturing lead time

Total time required to mfg an item, exclusive of lower level purchasing lead time; for make-2-order, length of time between release of order to production process & shipment to final customer; for make-2-stock, length of time between release of order to production process & receipt into inventory

Common carrier

Transportation available to public that does not provide special treatment to any one party and is regulated as to rates charged, liability assumed, and services provided; must obtain certificate of public convenience and necessity from FTC for interstate traffic

Pickup & delivery costs

Transportation costs based on # of pickups and weight of cargo

Physical supply

Transportation of goods from supplier to buyer

Demand pull

Triggering of material movement to a work center only when that work center is ready to begin the next job; in effect eliminates the queue from in front of a work center, but it can cause a queue at the end of a previous work center

Economic order quantity (EOQ)

Type of fixed order qty model that determines amt of item to be purchased or manufactured at one time; intent is to minimize combined costs of acquiring and carrying inventory

Two-bin inventory system

Type of fixed-order system where inventory is carried in two bins; replenishment qty is ordered when 1st bin is empty and during replenishment lead time the 2nd bin is used; when material is received the 2nd bin is refilled and excess is put into 1st bin to repeat

Fixed position manufacturing

Type of mfg mostly used for large, complex projects where product remains in one location for its full assembly period or may move from location to location after considerable work and time are spent on it (aircraft assembly)

Min-max system

Type of order point replenishment system where min is order point and max is order-up-to point; order qty is variable and the result of max less available & on-order inventory; order is recommended when sum of available and on-order falls at or below the min

Mura

Unevenness or variability

Backorder

Unfulfilled customer order or commitment. An immediate (or past due) demand against an item whose inventory is insufficient to satisfy the demand

Unit of measure

Unit in which the qty of an item is managed

Unit loads

Unit to be transported that consists of several items arranged so the pkg can be moved as a single unit

Five S's

Used to create workplace suitable for lean production; consist of (1) sort (separate needed from un-needed items), (2) simplify (neatly arrange items for use), (3) scrub (cleanup work area), (4) standardize (sort, simplify, scrub daily), (5) sustain (always follow steps 1-4)

Demand planning

Using forecasts and experience to estimate demand for various items at various points in a supply chain; several forecasting techniques may be used during the planning process; often, families of items are aggregated (geographical region or by life cycle stage)

Modularization

Using same set of components in a variety of FGs

Spread

Variability of an action; measured by range or standard deviation of a particular dimension

Genchi Genbutsu

Visit shop floor to observe what is occurring

United Nations Global Compact

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

Jishuken

Voluntary study groups

Queue

Waiting line; jobs at a given work center waiting to be processed

Zone

Warehouse location methodology that includes some characteristics of fixed and random location methods; holds certain kinds of items, depending on physical characteristics or frequency of use

Distribution center

Warehouse with FG and/or service items

Muda

Waste

Inventory accuracy

When on-hand quantity is within an allowed tolerance of the recorded balance, usually measured as the % of items with inventory levels that fall within tolerance. Target values are commonly between 95 and 99%, depending on value of item

Line-haul costs

Within physical distribution, cost elements that vary by distance traveled and not by weight carried (e.g., fuel, drivers' wages, wear and tear on the vehicle)

Setup

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; refitting of equipment to neutralize the effects of the last lot produced (e.g., teardown of the just-completed production, preparation of the equipment for production of the next scheduled item)