APICS ECO Key Vocabulary

Batch processing

1) A manufacturing technique in which parts are accumulated and processed together in a lot. 2) A computer technique in which transactions are accumulated and processed together or in a lot.

Design of experiments (DOE)

1) A process for structuring statistically valid studies in any science. 2) A quality management technique used to evaluate the effect of carefully planned and controlled changes to input process variables on the output variable. The objective is to improve production processes.

Buffer

1) A quantity of materials awaiting further processing. It can refer to raw materials, semi finished stores or hold points, or a work backlog that is purposely maintained behind a work center. 2) In 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.

Batch

1) A quantity scheduled to be produced or in production. 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. 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 before a specific customer order or for stock replenishment.

Andon

1) An electronic board that provides visibility of floor status and supplies information to help coordinate the efforts to linked work centers. Signal lights are green (running), red (stop), and yellow (needs attention). 2) A visual signaling system.

Constraint

1) 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. 2) One of a set of equations that cannot be violated in an optimization procedure.

Direct costs

1) In traditional cost accounting, variable costs that can be directly attributed to a particular job or operation. Direct material and direct labor are traditionally considered direct costs. 2) In activity-based cost (ABC) accounting, a cost that can specifically be traced and is economically feasible to track to a particular cost object (e.g., the units produces, a production line, a department, a manufacturing plant). In contrast, if the cost must be allocated across various cost objects, it is an indirect cost. Based on the cost object under consideration, the classification of direct and indirect can change. ABC accounting assumes that more costs traditionally viewed as fixed costs are variable and can be traced to cost objects.

Distribution

1) The activities associated with the movement of material, usually finished goods or service parts, from the manufacturer to the customer. Theses 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.

Allocation

1) The classification of quantities of items that have been assigned to specific orders but have not yet been released from the stockroom to production. It is an "uncased" stockroom requisition. 2) A process used to distribute material in short supply.

Acceptance sampling

1) The process of sampling a portion of goods for inspection rather than examining the entire lot. The entire lot may be accepted or rejected based on the sample even thought the specific units in the lot are better or worse than the sample. There are two types: attributes sampling and variables sampling. In attributes sampling, the presence or absence of a characteristic is noted in each of the unites inspected. In variables sampling, the numerical magnitude of a characteristic is measured and recorded for each inspected unit; this type of sampling involves reference to a continuous scale of some kind. 2) A method of measuring random samples of lots or batches of products against predetermined standards.

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.

Critical characteristics

The attributes of a product that must function properly to avoid the failure of the product. Syn: functional requirements.

Activity-based cost accounting

A cost accounting system that accumulates costs based on activities performed and then uses cost drives to allocate these costs to products or other bases, such as customers, markets, or projects. It is an attempt to allocate overhead costs on a more realistic basis than direct labor or machine hours.

Critical ratio

A dispatching rule that calculates a priority index number by dividing the time to due date remaining by the expected elapsed time to finish the job. Critical ratio=time remaining/ work remaining.

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.

Environmentally responsible business

A firm that operates in such a way as to minimize deleterious impacts to society.

Customer-supplier partnership

A long-term relationship between a buyer and a supplier characterized by teamwork and mutual confidence. The supplier is considered an extension of the buyer's organization. The partnership is based on several commitments. The buyer provides long-term contracts and uses fewer suppliers. The supplier implements quality assurance processes so that incoming inspection can be minimized. The supplier also helps the buyer reduce costs and improve product and process design. Syn: customer partnership. See: outpartnering.

Fabricator

A manufacturer that turns the product of a converter into a larger variety of products. For example, a fabricator may turn steel rods into nuts, bolts, and twist drills, or may turn paper into bags and boxes.

Cell

A manufacturing or service unit consisting of a number of workstations and the materials transport mechanisms and storage buffers that interconnect them.

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.

Decision matrix

A matrix used by teams to evaluate problems or possible solutions, for example, the team lists the solutions in the far left vertical column. Next the team selects criteria to rate the possible solutions, writing them across the top row. Third, each possible solution is rated on a scale of 1 to 5 for each criterion and the rating recorded in the corresponding grid. Finally, the ratings of all the criteria for each possible solution are added to determine its total score. The total score is then used to help decide which solution deserves the most attention.

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 percent. (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 produce $780 with a standard of $800; the efficiency is $780/800 converted to a percentage, or 97.5 percent.

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 identified those elements that actually constrain the total time for the project, can be determined. See: critical chain method, network analysis, critical activity, critical path.

Count point

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

Design for manufacture and assembly (DFMA)

A product development approach that involves the manufacturing function in the initial stages of product design to ensure ease of manufacturing and assembly.

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.

Anticipated delay report

A report, normally issued by both manufacturing and purchasing to the material planning function, regarding jobs or purchase orders that will not be completed on time. This report explains why the jobs or purchases are delayed and when they will be completed. This report is an essential ingredient of the closed-loop MRP system. It is normally a handwritten report.

Capacity-constrained resource (CCR)

A resource that is not a constraint but will become a constraint unless scheduled carefully. Any resource that, if its capacity is not carefully managed, is likely to compromise the throughput of the organization. (Also called capacity constraint resource).

Alternate routing

A routing that is usually less preferred than the primary routing but results in an identical item. Alternate routings may be maintained in the computer or off-line via manual methods, but the computer software must be able to accept alternate routings for specific jobs.

Check sheet

A simple data-recording device. The check sheet designed by users to facilitate the user's interpretation of the results. The check sheet is one of the seven tools qualities. Check sheets are often confused with data sheets and checklists.

Define, measure, analyze, improve, control (DMAIC) process

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

Assignable cause

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.

Earned hours

A statement reflecting the standard hour assigned for actual production reported during the period. Syn: earned volume

Analysis of variance (ANOVA)

A statistical analysis system that estimates what portion of variation in a dependent variable is caused by variation in one or more independent variables. It also produces a number used to infer whether any or all of the independent-dependent variable relationships have statistical significance.

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.

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.

Bill of labor

A structured listing of all labor requirements for the fabrication, assembly, and testing of a parent item.

Certificate of compliance

A supplier's certification that the supplies or services in question meet specified requirements.

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.

Continuous manufacturing

A type if manufacturing process that is dedicated to the production of a vary narrow range of standard products. The rate of product change and new product information is very low. Significant investment in highly specialized equipment allows for a high volume of production at the lowest manufacturing cost. Thus, unit sales volumes are very large, and prices are almost always a key order-winning criterion. Examples of items produced by a continuous process include gasoline, steel, fertilizer, glass, and paper. Syn: Continuous production.

Activity-based accounting

ABB (activity-based budgeting): In activity-based cost accounting, a budgeting process employing knowledge of activities and drive relationships to predict workload and resource requirements in developing a business plan. Budgets show the predicted consumption and cost of resources using forecast workload as a basis. The company can use performance to buget in evaluating success in setting and pursuing strategic goals; this activity is part of the activity-based planning process.

Conformance

An affirmative indication or judgment that a product or service has met the requirements of a relevant specification, contract, or regulation.

Absorption costing

An approach to inventory valuation in which variable costs and a portion of fixed costs are assigned to each unit of production. The fixed costs are usually allocated to units of output on the basis of direct labor hours, machine hours, or material costs.

Divergent point

An operation in a production process in which a single material/component enters and, after processing, can then be routed to a number of different downstream operations.

Block scheduling

An operation scheduling technique where each operation is allowed a "block" of time, such as a day or a week.

Certification audits

Audits occurring within registration processes.

Critical point backflush

Backflush performed at a specific point in the manufacturing process, at a critical operation, or at an operation where key components are consumed.

Capacity-related costs

Costs generally related to increasing (or decreasing) capacity in the medium-to-long-range time horizon. Personnel costs include hiring and training of direct laborers, supervisors, and support personnel in the areas related to the capacity increase. Equipment purchases to increase capacity are also considered. In contrast, costs related to decreasing capacity include layoffs, the fixed overhead spread over fewer units, the impact of low morale, and the inefficiencies of lower production levels.

Excess capacity

Capacity that is not used to either produce or protect the creation of throughput.

Adjustable capacity

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

Common causes

Causes of variation that are inherent in a process over time. The affect every outcome of the process and everyone working in the process. Syn: random cause.

Benchmarking

Comparing a company's costs, products, and services to that of a company thought to have superior performance. The benchmark target is often a competitor but is not always a firm in the same industry. Seven types of benchmarking have been cited: (1) competitive benchmarking (2) Financial benchmarking (3) functional benchmarking (4) performance benchmarking (5) process benchmarking (6) product benchmarking (7) strategic benchmarking

Decoupling

Creating independence between supply and use of material. Commonly denotes providing inventory between operations so that fluctuations in the production rate of the supplying operation do not constrain production or use rates of the next operation.

Critical-to-quality characteristics (CTQ)

Critical-to-quality characteristics (CTQs) are the important and measurable traits of a product or process whose performance targets must be met to satisfy the customer. They adjust improvement efforts to meet consumer requirements. CTQs represent customer expectations for a product.

Early supplier involvement

ESI—The process of involving supplier early in the product design activity and drawing on their expertise, insights, and knowledge to generate better designs in less time and designs that are easier to manufacture with high quality.

Attribute data

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

Capacity utilization

Goods produced, or customers served, divided by total output capacity.

Cost variance

In cost accounting, the difference between what has been budgeted for an activity and what it actually costs.

Balancing operations

In repetitive Just-In-Time production, matching actual output cycle times of all operations to the demand or use for parts as required by final assembly and, eventually, as required by the market.

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 (constraints, 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.

Control points

In the theory of constraints, strategic locations in the logical product structure for product or family that simplify the planning, scheduling, and control functions. Control points include gating operations, convergent points, divergent points, constraints, and shipping points. Detailed scheduling instruction are planned, implemented, and monitored at these locations. Other work centers are instructed to "work if they have work; otherwise, be prepared for work". In this manner, materials flow rapidly through the facility without detailed work center scheduling and control.

Failsafe work methods

Methods of performing operations so that actions that are incorrect cannot be completed. For example, a part without holes in the proper place cannot be removed from a jig, or a computer system will reject invalid numbers or require double entry of transaction quantities outside the normal range. Called poka-yoke by the Japanese.

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.

Alternate operation

Replacement for a normal step in the manufacturing process.

Backward scheduling

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

Bottleneck operation

Syn: bottkeneck

Capacity available

Syn: capacity available

Available capacity

Syn: capacity available (The capacity of a system or resource to produce a quantity of output in a particular time period.)

Cost of quality

Syn: cost of poor quality (The cost associated with providing poor quality products or services. There are four categories of cost: 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); 4) prevention costs (costs incurred to keep failure and appraisal costs to a minimum))

Customer service level

Syn: customer service ratio: 1) A measure of delivery performance of finished goods, usually expressed as a percentage. In a make-to-stock company, this percentage usually represent the number of items or dollars (on one or more customer orders) that were shipped on schedule for a specific time period, compared with the total that were supposed to be shipped in that time period. Syn: customer service level, fill rate, order-fill ratio, percent of fill. Ant: stockout percentage. 2) In a make-to-order company, it is usually some comparison of the number of jobs of dollars shipped in a given time period. (e.g., a week) compared with the number of jobs or dollars that were supposed to be shipped in that time period.

Concurrent design

Syn: participative design/engineering (A concept that refers to the 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.)

Changeover

Syn: 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, preparation of the equipment for production of the next scheduled item)

Changeover costs

Syn: setup costs.

Backflush costing

The application of costs based on the output of a process. Backflush costing is usually associated with repetitive manufacturing environments.

Employee involvement (EI)

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 processed appropriate to their areas of expertise. Employee involvement focuses on quality and productivity improvements.

Contribution

The difference between price and variable costs. Contribution is used to cover fixed costs and profits.

Average cost per unit

The estimated total cost, including allocated overhead, to produce a batch of goods divided by the total number of units produced.

Continuous improvement

The fact of making incremental, regular improvements and upgrades to a process or product in the search for excellence.

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, 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.

Corrective action

The implementation of solutions resulting in the reduction or elimination of an identified problem.

Actual costs

The labor, material, and associated overhead costs that are charged against a job as it moves through the product process.

Average outgoing quality limit (AOQL)

The maximum average outgoing quality over all possible levels of incoming quality for a given acceptance sampling plan and disposal specification.

Employee empowerment

The practice of giving non-managerial 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.

Constraints management

The practice of managing resources and organizations in accordance with the theory of constraints (TOC) principles. See: theory of constraints.

Early manufacturing involvement

The process of involving manufacturing personnel early in the product design activity and drawing on their expertise, insights, and knowledge to generate better designs in less time and to generate designs that are easier to manufacture. Early involvement of manufacturing, field service, suppliers, customers, and so on means drawing on their expertise, knowledge, and insight to improve the design. Benefits include increased functionality, increased quality, easy of manufacture and assembly, ease of testing, better testing procedures, ease of service, decreased cost, and improved aesthetics,

Capacity control

The process of measuring production output and comparing it with the capacity plan, determining if the variance exceeds pre-established limits, and taking corrective action to get back on plan if the limits are exceeded.

Correlation

The relationship between two sets of data such that when one changes, the other is likely to make a corresponding change. If the changes are in the same direction, there is positive correlation. When changes tend to occur in opposite directions, there is negative correlation. When there is little correspondence or random changes, there is no correlation.

De-expedite

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

Delivery schedule

The required or agreed time or rate of delivery of goods or services purchased for a future period.

Capacity requirements

The resources needed to produce the projected level of work required from a facility over a time horizon. Capacity requirements are usually expressed in terms of hours of work or, when units consume similar resources at the same rate, units of production.

Cost center

The smallest segment of an organization for which costs are collected and formally reported, typically a department. The criteria in defining cost centers are that the cost be significant and that the area of responsibility be clearly defined. A cost center is not necessarily identical to work center; normally, a cost center encompasses more than one work center, but this may not always be the case.

Basic seven tools of quality (B7)

Tools that help organizations understand their processes to improve them. The tools are the cause-and-effect diagram (also known as the fishbone diagram or the Ishikawa diagram), check sheet, flowchart, histogram, Pareto chart, process may, and scatter plot. Syn: seven tools of quality.

Cost-volume-profit analysis

The study of how profits change with various levels of output and selling price.

Drum-buffer-rope (DBR)

The theory of constraints method for scheduling and managing operations that have an internal constraint or capacity-constrained resource.

External setup time

The time associated with elements of a setup procedure performed while the process or machine is running.

Continuous process control

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

Appraisal costs

Those costs associated with formal evaluation and audit of quality in the firm. Typical costs include inspection, quality audits, testing, calibration, and checking time.

Downtime

Time when a resource is scheduled for operation but is not producing for reasons such as maintenance, repair, or setup.

Expedite

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

Acceptable quality level (AQL)

When a continuing series of lots is considered, a quality level that, for the purposes of sampling inspection, is the limit of a satisfactory process average.