MPR Exam Resource Planning

Collaborative Planning, Forecasting, and Replenishment (CPFR)

1) A collaboration process whereby supply chain trading partners can jointly plan key supply chain activities from production and delivery of raw materials to production and delivery of final products to end customers. Collaboration encompasses business planning, sales forecasting, and all operations required to replenish raw materials and finished goods. 2) A process philosophy for facilitating collaborative communications. CPFR is considered a standard, endorsed by the Voluntary Interindustry Commerce Standards. Syn: collaborative planning.

APS

Abbreviation for advanced planning and scheduling, abbreviation for advanced planning system. Techniques that deal with analysis and planning of logistics and manufacturing over the short, intermediate, and long-term time periods. APS describes any computer program that uses advanced mathematical algorithms or logic to perform optimization or simulation on finite capacity scheduling, sourcing, capital planning, resource planning, forecasting, demand management, and others. These techniques simultaneously consider a range of constraints and business rules to provide real-time planning and scheduling, decision support, available-to-promise, and capable-to-promise capabilities. APS often generates and evaluates multiple scenarios. Management then selects one scenario to use as the "official plan." The five main components of APS systems are demand planning, production planning, production scheduling, distribution planning, and transportation planning.

CTP

Abbreviation for capable-to-promise. The process of committing orders against available capacity as well as inventory. This process may involve multiple manufacturing or distribution sites. Capable-to-promise is used to determine when a new or unscheduled customer order can be delivered. Capable-to-promise employs a finite-scheduling model of the manufacturing system to determine when an item can be delivered. It includes any constraints that might restrict the production, such as availability of resources, lead times for raw materials or purchased parts, and requirements for lower-level components or subassemblies. The resulting delivery date takes into consideration production capacity, the current manufacturing environment, and future order commitments. The objective is to reduce the time spent by production planners in expediting orders and adjusting plans because of inaccurate delivery-date promises.

CPOF

Abbreviation for capacity planning using overall factors. A rough-cut capacity planning technique. The master schedule items and quantities are multiplied by the total time required to build each item to provide the total number of hours to produce the schedule. Historical work center percentages are then applied to the total number of hours to provide an estimate of the hours per work center to support the master schedule. This technique eliminates the need for engineered time standards. Syn: overall factors. See: bill of resources, capacity planning, resource profile, rough-cut capacity planning.

CPFR

Abbreviation for collaborative planning, forecasting, and replenishment. 1) A collaboration process whereby supply chain trading partners can jointly plan key supply chain activities from production and delivery of raw materials to production and delivery of final products to end customers. Collaboration encompasses business planning, sales forecasting, and all operations required to replenish raw materials and finished goods. 2) A process philosophy for facilitating collaborative communications. CPFR is considered a standard, endorsed by the Voluntary Interindustry Commerce Standards. Syn: collaborative planning.

CRM

Abbreviation for customer relationship management and customer relations management. Syn: customer relationship management.

POS

Abbreviation for point of sale. The relief of inventory and computation of sales data at the time and place of sale, generally through the use of bar coding or magnetic media and equipment.

Actual Demand

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

Bucketed System

An MRP, DRP, or other time-phased system in which all time-phased data are accumulated into time periods, or buckets. If the period of accumulation is one week, then the system is said to have weekly buckets.

Bucketless System

An MRP, DRP, or other time-phased system in which all time-phased data are processed, stored, and usually displayed using dated records rather than defined time periods, or buckets.

Curve Fitting

An approach to forecasting based on a straight line, polynomial, or other curve that describes some historical time series data.

Qualitative Forecasting Techniques

An approach to forecasting that is based on intuitive or judgmental evaluation. It is used generally when data are scarce, not available, or no longer relevant. Common types of qualitative techniques include: personal insight, sales force estimates, panel consensus, market research, visionary forecasting, and the Delphi method. Examples include developing long-range projections and new product introduction.

Quantitative Forecasting Techniques

An approach to forecasting where historical demand data is used to project future demand. Extrinsic and intrinsic techniques are typically used. See: extrinsic forecasting method, intrinsic forecasting method.

Moving Average

An arithmetic average of a certain number (n) of the most recent observations. As each new observation is added, the oldest observation is dropped. The value of n (the number of periods to use for the average) reflects responsiveness versus stability in the same way that the choice of smoothing constant does in exponential smoothing. There are two types of moving average, simple and weighted. See: simple moving average, weighted moving average.

Planning Bill of Material

An artificial grouping of items or events in bill-of-material format used to facilitate master scheduling and material planning. It may include the historical average of demand expressed as a percentage of total demand for all options within a feature or for a specific end item within a product family and is used as the quantity per in the planning bill of material. Syn: planning bill. See: hedge, option overplanning, production forecast, pseudo bill of material.

Aggregate Forecast

An estimate of sales, often time phased, for a grouping of products or product families produced by a facility or firm. Stated in terms of units, dollars, or both, the aggregate forecast is used for sales and production planning (or for sales and operations planning) purposes. See: product group forecast.

Option

A choice that must be made by the customer or company when customizing the end product. In many companies, the term option means a mandatory choice from a limited selection. See: feature.

Outlier

A data point that differs significantly from other data for a similar phenomenon. For example, if the average sales for a product were 10 units per month, and one month the product had sales of 500 units, this sales point might be considered an outlier. See: abnormal demand.

Feature

A distinctive characteristic of a good or service. The characteristic is provided by an option, accessory, or attachment. For example, in ordering a new car, the customer must specify an engine type and size (option), but need not necessarily select an air conditioner (attachment). See: accessory, attachment, option.

Product Group Forecast

A forecast for a number of similar products. See: aggregate forecast, product group.

Pyramid Forecasting

A forecasting technique that enables management to review and adjust forecasts made at an aggregate level and to keep lower level forecasts in balance. The procedure begins with the roll up (aggregation) of item forecasts into forecasts by product group. The management team establishes a (new) forecast for the product group. The value is then forced down (disaggregation) to individual item forecasts so that they are consistent with the aggregate plan. The approach combines the stability of aggregate forecasts and the application of management judgment with the need to forecast many end items within the constraints of an aggregate forecast or sales plan. See: management estimation, planning bill of material, product group forecast.

Adaptive Smoothing

A form of exponential smoothing in which the smoothing constant is automatically adjusted as a function of forecast error measurement.

Product Line

A group of products whose similarity in manufacturing procedures, marketing characteristics, or specifications enables them to be aggregated for planning, marketing, or, occasionally, costing. Syn: product family, product group.

Master Planning of Resources

A grouping of business processes that includes the following activities: demand management, which includes the forecasting of sales, the planning of distribution, and the servicing of customer orders; sales and operations planning, which includes sales planning, production planning, inventory planning, backlog planning, and resource planning; master scheduling, which includes the preparation of the master production schedule and the rough-cut capacity plan.

Panel Consensus

A judgmental forecasting technique by which a committee, sales force, or group of experts arrives at a sales estimate. See: Delphi method, management estimation.

Echelon

A level of supply chain nodes. For example, a supply chain with two independent factory warehouses and nine wholesale warehouses delivering product to 350 retail stores is a supply chain with three echelons between the factory and the end customer. One echelon consists of the two independent factory warehouses, one echelon consists of the nine wholesale warehouses, and one echelon consists of the 350 retail stores. Each echelon adds operating expense, holds inventory, adds to the cycle time, and expects to make a profit. See: disintermediation.

Product Configuration Catalog

A listing of all upper level configurations contained in an end-item product family. Its application is most useful when there are multiple end-item configurations in the same product family. It is used to provide a transition linkage between the end-item level and a two-level master production schedule. It also provides a correlation between the various units of upper level product definition.

Bill of Resources

A listing of the required capacity and key resources needed to manufacture one unit of a selected item or family. Rough-cut capacity planning uses these bills to calculate the approximate capacity requirements of the master production schedule. Resource planning may use a form of this bill. Syn: bill of capacity. See: bill of labor, capacity planning using overall factors, product load profile, resource profile, rough-cut capacity planning, routing.

Product Load Profile

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

Distribution Center

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

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 designs. Syn: customer partnership. See: outpartnering.

Multilevel Master Schedule

A master scheduling technique that allows any level in an end item's bill of material to be master scheduled. To accomplish this, MPS items must receive requirements from independent and dependent demand sources. See: two-level master schedule.

By-Product

A material of value produced as a residual of or incidental to the production process. The ratio of by-product to primary product is usually predictable. By-products may be recycled, sold as is, or used for other purposes. See: co-product.

Mean Absolute Percent Error (MAPE)

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

Mean Squared Error (MSE)

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

Least-Squares Method

A method of curve fitting that selects a line of best fit through a plot of data to minimize the sum of squares of the deviations of the given points from the line. See: regression analysis.

Discrete Available-To-Promise

A calculation based on the available-to-promise figure in the master schedule. For the first period, the ATP is the sum of the beginning inventory plus the MPS quantity minus backlog for all periods until the item is master scheduled again. For all other periods, if a quantity has been scheduled for that time period then the ATP is this quantity minus all customer commitments for this and other periods until another quantity is scheduled in the MPS. For those periods where the quantity scheduled is zero, the ATP is zero (even if deliveries have been promised). The promised customer commitments are accumulated and shown in the period where the item was most recently scheduled. Syn: incremental available-to-promise. See: available-to-promise.

Cumulative Available-to-Promise

A calculation based on the available-to-promise (ATP) figure in the master schedule. Two methods of computing the cumulative available-to-promise are used, with and without lookahead calculation. The cumulative with lookahead ATP equals the ATP from the previous period plus the MPS of the period minus the backlog of the period minus the sum of the differences between the backlogs and MPSs of all future periods until, but not to include, the period where point production exceeds the backlogs. The cumulative without lookahead procedure equals the ATP in the previous period plus the MPS, minus the backlog in the period being considered. See: available-to-promise.

Decomposition

A method of forecasting where time series data are separated into up to three components: trend, seasonal, and cyclical; where trend includes the general horizontal upward or downward movement over time; seasonal includes a recurring demand pattern such as day of the week, weekly, monthly, or quarterly; and cyclical includes any repeating, nonseasonal pattern. A fourth component is random, that is, data with no pattern. The new forecast is made by projecting the patterns individually determined and then combining them. See: cyclical component, random component, seasonal component, trend component.

Master Schedule Item

A part number selected to be planned by the master scheduler. The item is deemed critical in its impact on lower level components or resources such as skilled labor, key machines, or dollars. Therefore, the master scheduler, not the computer, maintains the plan for these items. A master schedule item may be an end item, a component, a pseudo number, or a planning bill of material.

Normal Distribution

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

Lean Production

A philosophy of production that emphasizes the minimization of the amount of all the resources (including time) used in the various activities of the enterprise. It involves identifying and eliminating non-value-adding activities in design, production, supply chain management, and dealing with the customers. Lean producers employ teams of multiskilled workers at all levels of the organization and use highly flexible, increasingly automated machines to produce volumes of products in potentially enormous variety. It contains a set of principles and practices to reduce cost through the relentless removal of waste and through the simplification of all manufacturing and support processes. Syn: lean, lean manufacturing.

Production Scheduling

A plan that authorizes the factory to manufacture a certain quantity of a specific item. It is usually initiated by the production planning department.

Aggregate Plan

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

Planning Time Fence

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

Postponement

A product design strategy that shifts product differentiation closer to the consumer by postponing identity changes, such as assembly or packaging, to the last possible supply chain location.

Co-Product

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

Process Flow Production

A production approach with minimal interruptions in the actual processing in any one production run or between production runs of similar products. Queue time is virtually eliminated by integrating the movement of the product into the actual operation of the resource performing the work.

Hybrid Production Model

A production planning method that combines the aspects of both the chase and level production planning methods. Syn: hybrid strategy. See: chase production method, level production method, production planning method, hybrid manufacturing process.

Chase Production Method

A production planning method that maintains a stable inventory level while varying production to meet demand. Companies may combine chase and level production schedule methods. Syn: chase strategy, chase-demand strategy.

Continuous Production

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

Production Forecast

A projected level of customer demand for a feature (option, accessory, etc.) of a make-to-order or an assemble-to-order product. Used in two-level master scheduling, it is calculated by netting customer backlog against an overall family or product line master production schedule and then factoring this product's available-to-promise by the option percentage in a planning bill of material. See: assemble-to-order, planning bill of material, two-level master schedule.

Delphi Method

A qualitative forecasting technique where the opinions of experts are combined in a series of iterations. The results of each iteration are used to develop the next, so that convergence of the experts' opinions is obtained. See: management estimation, panel consensus.

Life Cycle Analysis

A quantitative forecasting technique based on applying past patterns of demand data covering introduction, growth, maturity, saturation, and decline of similar products to a new product family.

P:D Ratio

A ratio where P is the manufacturing lead time and D is the customer required delivery time. If the P:D ratio exceeds 1.00, either a customer's order will be delayed or production will start as the result of a forecast (make-to-stock) or an anticipated customer order (make-to-order).

Capacity Planning using Overall Factors (CPOF)

A rough-cut capacity planning technique. The master schedule items and quantities are multiplied by the total time required to build each item to provide the total number of hours to produce the schedule. Historical work center percentages are then applied to the total number of hours to provide an estimate of the hours per work center to support the master schedule. This technique eliminates the need for engineered time standards. Syn: overall factors. See: bill of resources, capacity planning, resource profile, rough-cut capacity planning.

Overstated Master Production Schedule

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

Random Sample

A selection of observations taken from all the observations of a phenomenon in such a way that each chosen observation has the same possibility of selection.

Econometric Model

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

First-Order Smoothing

A single exponential smoothing; a weighted moving average approach that is applied to forecasting problems where the data do not exhibit significant trend or seasonal patterns. Syn: single exponential smoothing, single smoothing.

Base Series

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

Demand Filter

A standard that is set to monitor sales data for individual items in forecasting models. It is usually set to be tripped when the demand for a period differs from the forecast by more than some number of mean absolute deviations.

Probability

Mathematically, a number between 0 and 1 that estimates the fraction of experiments (if the same experiment were being repeated many times) in which a particular result would occur. This number can be either subjective or based upon the empirical results of experimentation. It can also be derived for a process to give the probable outcome of experimentation.

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, and (7) strategic benchmarking. See: competitive benchmarking, financial benchmarking, functional benchmarking, performance benchmarking, process benchmarking, product benchmarking, strategic benchmarking.

Abnormal Demand

Demand in any period that is outside the limits established by management policy. This demand may come from a new customer or from existing customers whose own demand is increasing or decreasing. Care must be taken in evaluating the nature of the demand: is it a volume change, is it a change in product mix, or is it related to the timing of the order? See: outlier.

Master Scheduler

Often the job title of the person charged with the responsibility of managing, establishing, reviewing, and maintaining a master schedule for select items. Ideally, the person should have substantial product, plant, process, and market knowledge because the consequences of this individual's actions often have a great impact on customer service, material, and capacity planning. See: master production schedule.

Interplant Demand

One plant's need for a part or product that is produced by another plant or division within the same organization. Although it is not a customer order, it is usually handled by the master production scheduling system in a similar manner. See: interplant transfer.

Process Manufacturing

Production that adds value by mixing, separating, forming, and/or performing chemical reactions. It may be done in either batch or continuous mode. See: project manufacturing.

Advanced Production System (APS)

Syn: advance planning and scheduling

Forecast Consumption

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

Customer Relations Management (CRM)

Syn: customer relationship management.

Bill of Distribution

Syn: distribution network structure. The planned channels of inventory disbursement from one or more sources to field warehouses and ultimately to the customer. There may be one or more levels in the disbursement system. Syn: bill of distribution.

Design-To-Order

Syn: engineer-to-order. Products whose customer specifications require unique engineering design, significant customization, or new purchased materials. Each customer order results in a unique set of part numbers, bills of material, and routings. Syn: design-to-order.

Operations Plan

Syn: production plan. The agreed-upon plan that comes from the production planning (sales and operations planning) process, specifically the overall level of manufacturing output planned to be produced, usually stated as a monthly rate for each product family (group of products, items, options, features, and so on). Various units of measurement can be used to express the plan: units, tonnage, standard hours, number of workers, and so on. The production plan is management's authorization for the master scheduler to convert it into a more detailed plan, that is, the master production schedule. See: sales and operations planning, sales plan.

Production Level

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

Distribution of Forecast Errors

Tabulation of the forecast errors according to the frequency of occurrence of each error value. The errors in forecasting are, in many cases, normally distributed even when the observed data do not come from a normal distribution.

Manufacturing Environment

The framework in which manufacturing strategy is developed and implemented. Elements of the manufacturing environment include external environmental forces, corporate strategy, business unit strategy, other functional strategies (marketing, engineering, finance, etc.), product selection, product/process design, product/process technology, and management competencies. Often refers to whether a company, plant, product, or service is make-to-stock, make-to-order, or assemble-to-order. Syn: production environment.

Product Positioning

The marketing effort involved in placing a product in a market to serve a particular niche or function. Syn: service positioning.

Median

The middle value in a set of measured values when the items are arranged in order of magnitude. If there is no single middle value, the median is the mean of the two middle values.

Mode

The most common or frequent value in a group of values.

Forecast Horizon

The period of time into the future for which a forecast is prepared.

Distribution Network Structure

The planned channels of inventory disbursement from one or more sources to field warehouses and ultimately to the customer. There may be one or more levels in the disbursement system. Syn: bill of distribution.

Delivery Lead Time

The time from the receipt of a customer order to the delivery of the product. Syn: delivery cycle.

Forecast Interval

The time unit for which forecasts are prepared, such as week, month, or quarter. Syn: forecast period.

Noise

The unpredictable or random difference between the observed data and the "true process."

Option Overplanning

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

Hedge

1) An action taken in an attempt to shield the company from an uncertain event such as a strike, price increase, or currency reevaluation. 2) In master scheduling, a scheduled quantity to protect against uncertainty in demand or supply. The hedge is similar to safety stock, except that a hedge has the dimension of timing as well as amount. A volume hedge or market hedge is carried at the master schedule or production plan level. The master scheduler plans excess quantities over and above the demand quantities in given periods beyond some time fence such that, if the hedge is not needed, it can be rolled forward before major resources must be committed to produce the hedge and put it in inventory. A product mix hedge is an approach where several interrelated optional items are overplanned. Sometimes, using a planning bill, the sum of the percent mix can exceed 100% by a defined amount, thus triggering additional hedge planning. 3) In purchasing, any purchase or sale transaction having as its purpose the elimination of the negative aspects of price fluctuations. See: market hedge, option overplanning, planning bill of material, safety stock, time fence, two-level master schedule, speculative buying.

Level Schedule

1) In traditional management, a production schedule or master production schedule that generates material and labor requirements that are as evenly spread over time as possible. Finished goods inventories buffer the production system against seasonal demand. See: level production method. 2) In JIT, a level schedule (usually constructed monthly) in which each day's customer demand is scheduled to be built on the day it will be shipped. A level schedule is the output of the load-leveling process. Syn: JIT master schedule, level production schedule. See: load leveling.

Demand Time Fence (DTF)

1) That point in time inside of which the forecast is no longer included in total demand and projected available inventory calculations; inside this point, only customer orders are considered. Beyond this point, total demand is a combination of actual orders and forecasts, depending on the forecast consumption technique chosen. 2) In some contexts, the demand time fence may correspond to that point in the future inside which changes to the master schedule must be approved by an authority higher than the master scheduler. Note, however, that customer orders may still be promised inside the demand time fence without higher authority approval if there are quantities available-to-promise (ATP). Beyond the demand time fence, the master scheduler may change the MPS within the limits of established rescheduling rules, without the approval of higher authority. See: option overplanning, planning time fence, time fence.

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 "uncashed" stockroom requisition. 2) A process used to distribute material in short supply. Syn: assignment. See: reservation.

Finishing Lead Time

1) The time that is necessary to finish manufacturing a good after receipt of a customer order. 2) The time allowed for completing the good based on the final assembly schedule.

Focus Forecasting

A system that allows the user to simulate the effectiveness of numerous forecasting techniques, enabling selection of the most effective one.

Probability Distribution

A table of numbers or a mathematical expression that indicates the frequency with which each of all possible results of an experiment should occur.

Frequency Distribution

A table that indicates the frequency with which data fall into each of any number of subdivisions of the variable. The subdivisions are usually called classes.

Project Manufacturing

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

Common Parts Bill of Material

A type of planning bill that groups common components for a product or family of products into one bill of material, structured to a pseudoparent item number. Syn: common parts bill.

Modular Bill of Material

A type of planning bill that is arranged in product modules or options. It is often used in companies where the product has many optional features, e.g., assemble-to-order companies such as automobile manufacturers. See: pseudo bill of material.

Exponential Smoothing Forecast

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

Cash-to-cash Cycle Time

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

Distribution Channel

The distribution route, from raw materials through consumption, along which products travel. See: channels of distribution, marketing channel.

Extrapolation

Estimation of the future value of some data series based on past observations. Statistical forecasting is a common example. Syn: projection.

Mix Forecast

Forecast of the proportion of products that will be sold within a given product family, or the proportion of options offered within a product line. Product and option mix as well as aggregate product families must be forecasted. Even though the appropriate level of units is forecasted for a given product line, an inaccurate mix forecast can create material shortages and inventory problems.

Product/Service Hierarchy

In sales and operations planning, a general approach to dividing products or services into families, brands, and subfamilies for various planning levels. This ensures that a correct top-down or bottom-up approach is taken to grouping (or aggregating) demand at each subsequent level. Forecasts are more accurate the higher up the product hierarchy they are developed; consequently, forecasts should usually be driven down from the top.

Bottom-Up Replanning

In MRP, the process of using pegging data to solve material availability or other problems. This process is accomplished by the planner (not the computer system), who evaluates the effects of possible solutions. Potential solutions include compressing lead time, cutting order quantity, substituting material, and changing the master schedule.

Priority

In a general sense, the relative importance of jobs, i.e., the sequence in which jobs should be worked on. It is a separate concept from capacity.

Alpha Factor

In exponential smoothing, the weighting factor that is applied to the most recent demand, observation, or error. In this case, the error is defined as the difference between actual demand and the forecast for the most recent period. The weighting factor is represented by the symbol . Theoretically, the range of is 0.0 to 1. Syn: alpha factor, smoothing factor.

Advanced Planning and Scheduling (APS)

Techniques that deal with analysis and planning of logistics and manufacturing over the short, intermediate, and long-term time periods. APS describes any computer program that uses advanced mathematical algorithms or logic to perform optimization or simulation on finite capacity scheduling, sourcing, capital planning, resource planning, forecasting, demand management, and others. These techniques simultaneously consider a range of constraints and business rules to provide real-time planning and scheduling, decision support, available-to-promise, and capable-to-promise capabilities. APS often generates and evaluates multiple scenarios. Management then selects one scenario to use as the "official plan." The five main components of APS systems are demand planning, production planning, production scheduling, distribution planning, and transportation planning.

Planning Horizon

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

Mean

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

Mass Customization

The creation of a high-volume product with large variety so that a customer may specify his or her exact model out of a large volume of possible end items while manufacturing cost is low because of the large volume. An example is a personal computer order in which the customer may specify processor speed, memory size, hard disk size and speed, removable storage device characteristics, and many other options when PCs are assembled on one line and at low cost.

Deviation

The difference, usually the absolute difference, between a number and the mean of a set of numbers, or between a forecast value and the actual value.

Capable-to-Promise (CTP)

The process of committing orders against available capacity as well as inventory. This process may involve multiple manufacturing or distribution sites. Capable-to-promise is used to determine when a new or unscheduled customer order can be delivered. Capable-to-promise employs a finite-scheduling model of the manufacturing system to determine when an item can be delivered. It includes any constraints that might restrict the production, such as availability of resources, lead times for raw materials or purchased parts, and requirements for lower-level components or subassemblies. The resulting delivery date takes into consideration production capacity, the current manufacturing environment, and future order commitments. The objective is to reduce the time spent by production planners in expediting orders and adjusting plans because of inaccurate delivery-date promises.

Mixed-Model Scheduling

The process of developing one or more schedules to enable mixed-model production. The goal is to achieve a day's production each day. See: mixed-model production.

Forecast Management

The process of making, checking, correcting, and using forecasts. It also includes determination of the forecast horizon.

Consuming the Forecast

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

Product Mix

The proportion of individual products that make up the total production or sales volume. Changes in the product mix can mean drastic changes in the manufacturing requirements for certain types of labor and material.

Production Rate

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

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.

Point of Sale (POS)

The relief of inventory and computation of sales data at the time and place of sale, generally through the use of bar coding or magnetic media and equipment.