APICS DIC

material usage variance

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

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.

design engineering

The discipline consisting of process engineering and product engineering.

distribution channel

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

labor cost

The dollar amount of labor performed during manufacturing. This amount is added to direct material cost and overhead cost to obtain total manufacturing cost.

Gantt chart

The earliest and best-known type of planning and control chart, especially designed to show graphically the relationship between planned performance and actual performance over time. Named after its originator, Henry L. Gantt, the chart is used (1) for machine loading, in which one horizontal line is used to represent capacity and another to represent load against that capacity; or (2) for monitoring job progress, in which one horizontal line represents the production schedule and another parallel line represents the actual progress of the job against the schedule in time. Syn: job progress chart, milestone chart.

feedback

The flow of information back into the control system so that actual performance can be compared with planned performance.

internal controls

The policies and procedures, the documentation, and the plan for an organization that authorize transactions, safeguard assets, and maintain the accuracy of financial records.

continuous process improvement (CPI)

A never-ending effort to expose and eliminate root causes of problems; small-step improvement as opposed to big-step improvement. Syn: continuous improvement. See: kaizen.

Institute of Industrial Engineers (IIE)

A nonprofit educational organization with members interested in the field of industrial engineering.

Institute of Supply Management (ISM)

A nonprofit society for purchasing managers and others (formerly known as the National Association of Purchasing Management).

carcass

A nonserviceable item obtained from a customer which is intended for use in remanufacturing.

low-level code

A number that identifies the lowest level in any bill of material at which a particular component appears. Net requirements for a given component are not calculated until all the gross requirements have been calculated down to that level. Low-level codes are normally calculated and maintained automatically by the computer software. Syn: explosion level.

item number

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

express warranty

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

cash discount

A price break offered for the early payment of an invoice.

cost-plus contract

A pricing method where the buyer agrees to pay the seller all the acceptable costs of the product or service up to a maximum cost plus a fixed fee. Syn: cost-type contract.

cost-plus

A pricing method where the purchaser agrees to pay the supplier an amount determined by the cost incurred by the supplier to produce the goods or services plus a stated percentage or fixed sum.

hard copy

A printed (computer) report, message, or special listing.

earliest due date (EDD)

A priority rule that sequences the jobs in a queue according to their (operation or job) due dates. See: earliest operation due date.

awareness efficiency

In e-commerce, a measurement of how well an organization informs people who have access to the Web that the organization's Web site exists.

banner

In e-commerce, a portion of a Web page that contains advertising or the name of a Web site. The banner usually contains a hypertext connection to a Web page of the company doing the advertising.

adaptable Web site

In e-commerce, a site that a visitor can change to customize.

customer service life cycle

In information systems, a model that describes the relationship with a customer as having four phases: requirements, acquisition, ownership, and retirement.

generally accepted accounting principles (GAAP)

Accounting practices that conform to conventions, rules, and procedures that have general acceptability by the accounting profession.

constrained optimization

Achieving the best possible solution to a problem in terms of a specified objective function and a given set of constraints.

client

In information systems, a software program that is used to contact and obtain data from a server program on another computer. Each client program is designed to work with one or more specific kinds of server programs, and each server requires a specific kind of client. A browser is one type of client.

hit

In information systems, an instance of a request of a single item made to an Internet server. A hit is counted each time there is a request to the server. Multiple hits may be counted from one visit to a site as the user moves around the site.

authentication

In information systems, the act of identifying a person or confirming the source of a message.

manufacturer's representative

One who sells goods for several firms but does not take title to them. Syn: manufacturer's agent, manufacturing representative.

free slack

The amount of time by which the completion of an activity in a project network can increase without delaying the start of the next activity.

demand lead time

The amount of time potential customers are willing to wait for the delivery of a good or a service. Syn: customer tolerance time.

machine hours

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

microeconomics

The analysis of the behavior of individual economic decision makers (individuals and firms).

backflush costing

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

configuration

The arrangement of components as specified to produce an assembly.

depletion

The reduction in the value of a capital asset (usually a natural resource) in the balance sheet and charging this amount as an expense against income for the period. See: capital recovery.

horizontal dependency

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

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.

earmarked material

The reserved material on hand that is physically identified, rather than merely reserved in a balance-of-stores record.

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.

bid proposal

The response to the written request from a potential customer asking for the submission of a quotation or proposal to provide goods or services. The bid proposal is in response to an RFP or RFQ.

material requirements plan

The result from the process of material requirements planning.

innovation risk

The risk of losing customers because another firm creates more innovative products.

inefficiency risk

The risk of losing customers because another firm has lower unit costs.

demand risk

The risk that declining economic activity substantially reduces the demand for a firm's products or services.

end user

1) The final consumer of a product. 2) The recipient of an output from a computer system.

manufacturing calendar

A calendar used in inventory and production planning functions that consecutively numbers only the working days so that the component and work order scheduling may be done based on the actual number of workdays available. Syn: M-day calendar, planning calendar, production calendar, shop calendar.

job grade

A form of job evaluation that assigns jobs to predetermined job classifications according to the job's relative worth to the organization. Pay scales are usually set for each job grade.

data element

A group of characters that defines an item at a basic level. Syn: data field.

FAR

Acronym for Federal Acquisition Regulation.

competitive advantage

An edge, e.g., a process, patent, management philosophy, or distribution system, that a seller has that enables the seller to control a larger market share or profit than the seller would otherwise have. Syn: competitive edge.

file

An organized collection of records.

finished good waivers

Approvals for deviation from normal product specifications.

encryption

Changing readable words into another form, called a cipher, that hides the text's meaning.

annual percentage rate

In finance, the rate of interest paid for a loan after compounding is considered. Syn: effective interest rate.

milestone schedule

In project management, a high-level schedule displaying important deliverables.

crashing

In project management, adding resources to critical path or near-critical path activities on a project to shorten project duration after analyzing the project to identify the most cost-effective course of action.

early start date

In the critical path method of project management, the earliest time at which a given activity is estimated to begin. This date can change as the project is executed.

direct labor

Labor that is specifically applied to the good being manufactured or used in the performance of the service. Syn: touch labor.

bona fide

Latin for in good faith.

inventory shrinkage

Losses of inventory resulting from scrap, deterioration, pilferage, etc.

fiduciary

One having the duty to act on another's behalf in a trustworthy and confidential fashion.

environmental scanning

Process used to expose an organization's potential strengths, weaknesses, opportunities, and threats.

middleware

Software that interconnects incompatible applications software and databases from various trading partners into decision-support tools such as ERP.

live load

Syn: available work.

continuous improvement

Syn: continuous process improvement.

continuous flow (production)

Syn: continuous production.

continuous process

Syn: continuous production.

flow line

Syn: flow shop.

direct materials cost

The acquisition cost of all materials used directly in the finished product.

mission statement

The company statement of purpose.

co-destiny

The evolution of a supply chain from intraorganizational management to interorganizational management.

average outgoing quality (AOQ)

The expected average quality level of outgoing product for a given value of incoming product quality.

distribution resource planning (DRP II)

The extension of distribution requirements planning into the planning of the key resources contained in a distribution system: warehouse space, workforce, money, trucks, freight cars, etc.

embezzlement

The fraudulent taking of another's property while acting in a fiduciary capacity.

corrective action

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

incentive arrangements

The incentive contract allows for the sharing of the cost responsibility between the buyer and seller. Incentives are incorporated into the contracts to motivate the supplier to improve its performance in areas such as quality, on-time delivery, and customer satisfaction. There are three elements of an incentive agreement: target cost, target profit, and the sharing agreement.

cargo container capacity

The inside usable cubic volume of a container.

certified fixtures

The inspection models that conform to known specifications.

industrial facilities management

The installation and maintenance of the physical plant, its surroundings, and the physical assets of an organization.

calibration frequency

The interval in days between tooling calibrations.

manufacturing release

The issuance of a manufacturing order into the factory.

decoupling points

The locations in the product structure or distribution network where inventory is placed to create independence between processes or entities. Selection of decoupling points is a strategic decision that determines customer lead times and inventory investment. See: control points.

dispatching rule

The logic used to assign priorities to jobs at a work center.

market strategy

The marketing plan to support the business strategy.

enforced problem solving

The methodology of intentionally restricting a resource (e.g., inventory, storage space, number of workers) to expose a problem that must then be resolved.

cash flow

The net flow of dollars into or out of the proposed project. The algebraic sum, in any time period, of all cash receipts, expenses, and investments. Also called cash proceeds or cash generated.

mission

The overall goal(s) for an organization set within the parameters of the business scope.

compensation

The pay and benefits given for services rendered to an organization.

base demand

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

forecast horizon

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

cumulative MRP

The planning of parts and subassemblies by exploding a master schedule, as in MRP, except that the master-scheduled items and therefore the exploded requirements are time phased in cumulative form. Usually these cumulative figures cover a planning year.

committed capability

The portion of the production capability that is currently in use or is scheduled for use.

monitoring

The process of comparing actual to planned progress.

churn

The process of customers changing their buying preferences because they find better and/or cheaper products and services elsewhere. The Internet makes it easy for customers to shop electronically in search of a better deal.

bill-of-material structuring

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

knowledge creation

The propensity for generating knowledge.

expected demand

The quantity expected to be consumed during a given time period when usage is at the forecast rate. See: demand during lead time.

demand during lead time

The quantity of a product expected to be withdrawn from stock or to be consumed during its replenishment lead time when usage is at the forecasted rate. See: expected demand.

dividend yield

The ratio of dividends per share over stock price.

deadhead

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

intangible costs

Those costs that are difficult to quantify such as the cost of poor quality or of high employee turnover.

checking

Verifying and documenting the order selection in terms of both product number and quantity.

flexibility responsiveness

The ability of the firm and its management to change rapidly in response to changes taking place in the marketplace.

closed period

The accounting time period for which the adjusting and closing entries have been posted. Ant: open period.

caveat emptor

A Latin phrase meaning "Let the buyer beware," i.e., the purchase is at the buyer's risk.

eurodollar

A U.S. dollar held in a foreign bank.

baseband coax

A coaxial cable offering a single channel for text, voice, or video transmission.

cache

A high-speed device used within a computer to store frequently retrieved data.

basic producer

A manufacturer that uses natural resources to produce materials for other manufacturing. A typical example is a steel company that processes iron ore and produces steel ingots; others are those making wood pulp, glass, and rubber.

end item

A product sold as a completed item or repair part; any item subject to a customer order or sales forecast. Syn: end product, finished good, finished product. See: good.

homogeneous product

A product that is effectively identical from producer to producer.

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.

dock receipt

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

drawback

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

lease

A rental agreement lasting an extended period.

model

A representation of a process or system that attempts to relate the most important variables in the system in such a way that analysis of the model leads to insights into the system. Frequently, the model is used to anticipate the result of a particular strategy in the real system.

campaign

A series of batches of the same product run together (back to back).

ethical standards

A set of guidelines for proper conduct by business professionals. For example, the ISM (formerly NAPM) provides a set of principles and standards for the proper conduct of purchasing activities.

ASQC

Abbreviation for American Society for Quality Control.

ABC

Abbreviation for activity-based costing.

ABM

Abbreviation for activity-based management.

DBMS

Abbreviation for database management system.

FPO

Abbreviation for firm planned order.

FMC

Abbreviation for flexible machine center.

advance ship notice (ASN)

An EDI notification of shipment of product.

demand segmentation

Categorizing demand types into groups that share similar characteristics, e.g., government, large customers, and seasonal products. Similar segments can be treated alike in business or capacity planning.

common causes

Causes of variation that are inherent in a process over time. They affect every outcome of the process and everyone working in the process. Syn: common cause variability, random cause. See: assignable cause.

direct marketing

Communicating directly with consumers in an effort to elicit a response or a transaction.

earnings before taxes (EBT)

Earnings before interest and taxes minus interest charges.

employee assistance program (EAP)

Employer-provided service aimed at helping employees and their families with personal and work-related problems. Examples include financial counseling and chemical-dependency rehabilitation programs.

dedicated equipment

Equipment whose use is restricted to specific operations on a limited set of components.

financial forecasting

Estimating a firm's future financial statements.

Fair Labor Standards Act (FLSA)

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

liquidity ratio

Financial ratios that are indicators of a firm's ability to retire short-term financial obligations.

durable goods

Generally, any goods whose continuous serviceability is likely to exceed three years (e.g., trucks, furniture).

commodity buying

Grouping like parts or materials under one buyer's control for the procurement of all requirements to support production.

mass production

High-quantity production characterized by specialization of equipment and labor. See: continuous production.

earliness

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

actual finish date

In project management, the date on which an activity in a project was actually completed.

ingredient

In the process industries, the raw material or component of a mixture. See: component.

convergent point

In the theory of constraints, a control point in the logical product structure where nonconstraint parts are assembled with constraint parts. To maintain the flow of parts to products, the schedule of nonconstraint parts must be synchronized with that of constraint parts.

fluctuation inventory

Inventory that is carried as a cushion to protect against forecast error. Syn: fluctuation stock. See: inventory buffer.

flexible capability

Machinery's ability to be readily adapted to processing different components on an ongoing basis.

input control

Management of the release of work to a work center or production facility.

design for service

Simplification of parts and processes to improve the after-sale service of a product.

design for manufacturability

Simplification of parts, products, and processes to improve quality and reduce manufacturing costs.

listserver

Software running on a Web-accessed computer that facilitates electronic discussions by e-mailing submissions from one member to all other members of the discussion group. Syn: listserve.

helper application

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

monopoly

Sole control of a market by a company. In the United States, a monopoly is a violation of Article 2 of the Sherman Act.

Deming's 14 Points

Syn: 14 Points.

bank

Syn: buffer.

mean

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

blanket release

The authorization to ship and/or produce against a blanket agreement or contract.

marketing strategy

The basic plan marketing expects to use to achieve its business and marketing objectives in a particular market. This plan includes marketing expenditures, marketing mix, and marketing allocation.

market boundary

The boundary where the laid-down cost for two companies is equal. Laid-down cost is product cost plus unit transportation cost.

design changeover flexibility

The capability of the existing production system to accommodate and introduce a large variety of major design changes quickly.

demographics

The characteristics of a specific population, such as a set of potential customers.

container design

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

fee

The charge for the use of the contractor's organization for the period and to the extent specified in the contract.

handling cost

The cost involved in the movement of material. In some cases, the handling cost depends on the size of the inventory.

industrial engineering

The engineering discipline concerned with facilities layout, methods measurement and improvement, statistical quality control, job design and evaluation, and the use of management sciences to solve business problems.

macro environment

The environment external to a business including technological, economic, natural, and regulatory forces that marketing efforts cannot control.

major setup

The equipment setup and related activities required to manufacture a group of items in sequence, exclusive of the setup required for each item in the group.

cross-functional integration

The establishment of processes among the business functions to improve communication and coordination in providing a good or service.

configuration control

The function of ensuring that the product being built and shipped corresponds to the product that was designed and ordered. This means that the correct features, customer options, and engineering changes have been incorporated and documented.

cybernetic system

The information flow or information system (electronic, mechanical, logical) that controls an industrial process.

competitive intelligence

The information required to conduct a competitive analysis.

charge

The initial loading of ingredients or raw materials into a processor, such as a reactor, to begin the manufacturing process.

master schedule

The master schedule is a format that includes time periods (dates), the forecast, customer orders, projected available balance, available-to-promise, and the master production schedule. The master schedule takes into account the forecast; the production plan; and other important considerations such as backlog, availability of material, availability of capacity, and management policies and goals. Syn: master production schedule.

data transfer

The movement by electronic means of data from one location to another. The data can take the form of voice, text, image, or others. The movement is accomplished by communication links between computers and a variety of input/output devices.

baud

The number of bits transmitted per second.

exchange unit

The number of units to be produced before changing the bit, tool, or die. See: process batch.

electronic data interchange (EDI)

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

feedback loop

The part of a closed-loop system that allows the comparison of response with command.

equity

The part of a company's total assets not provided by creditors; owner-invested funds.

calendar time

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

material analyst

The person assigned responsibility for and identification of the planning requirements for specific items and responsibility for each order.

brand manager

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

lot sizing

The process of, or techniques used in, determining lot size. See: order policy.

commodity procurement strategy

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

customer satisfaction

The results of delivering a good or service that meets customer requirements.

implied authority

The right of an agent, when directed by a principal to accomplish a task, to do what is reasonably necessary to accomplish it.

equivalent days

The standard hour requirements of a job converted to days for scheduling purposes.

confiscation

The taking of property without adequate compensation for it.

downstream operation

The tasks subsequent to the task currently being planned or executed.

cybercash

The technology that enables online acceptance of credit cards, approving customers for payment before delivery is made.

market-positioned warehouse

Warehouse positioned to replenish customer inventory assortments and to afford maximum inbound transport consolidation economies from inventory origin points with relatively short-haul local delivery.

input

Work arriving at a work center or production facility.

eurobond

An internationally marketed bond.

exit interview

An interview given to an employee who is leaving the company. The purpose is to find out why a person is leaving, what was liked and disliked about the job and the company, and what changes would make the department and the company a better place to work.

cycle counting

An inventory accuracy audit technique where inventory is counted on a cyclic schedule rather than once a year. A cycle inventory count is usually taken on a regular, defined basis (often more frequently for high-value or fast-moving items and less frequently for low-value or slow-moving items). Most effective cycle counting systems require the counting of a certain number of items every workday with each item counted at a prescribed frequency. The key purpose of cycle counting is to identify items in error, thus triggering research, identification, and elimination of the cause of the errors.

auxiliary item

An item required to support the operation of another item.

audit

An objective comparison of actions to policies and plans.

host computer

Any computer on a network that is a repository for services available to other computers on the network. It is common to have one host machine provide several services such as the World Wide Web.

indented tracking

The following of all lot numbers of intermediates and ingredients consumed in the manufacture of a given batch of product down through all levels of the formula.

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.

Federal Acquisition Regulation (FAR)

The primary regulation governing all federal agencies (U.S.) acquiring supplies and services.

dampeners

User-input parameters to suppress the reporting of insignificant or unimportant action messages created during the computer processing of MRP.

commonality

A condition where given raw materials or ingredients are used in multiple parents.

composite yield

A condition where loss occurs along several operations resulting in a decreased yield for the end item. Syn: cumulative yield.

empowerment

A condition whereby employees have the authority to make decisions and take action in their work areas without prior approval. For example, an operator can stop a production process if a problem is detected, or a customer service representative can send out a replacement product if a customer calls with a problem.

log normal distribution

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

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.

corporation

A firm owned by shareholders who have rights to the firm's profits but whose liability is limited to the value of the shares. See: partnership, sole proprietorship.

initial public offering (IPO)

A firm's first sale of common stock.

equivalent unit cost

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

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.

gain sharing

A method of incentive compensation where employees share collectively in savings from productivity improvements. Syn: game sharing plans.

law of diminishing marginal returns

A principle that as the quantity of a variable factor applied to a fixed factor is increased, the additional units of the variable factor will result in smaller and smaller increases in output. See: marginal product.

flow control

A specific production control system that is based primarily on setting production rates and feeding work into production to meet these planned rates, then monitoring and controlling production.

double-declining-balance depreciation

A type of accelerated depreciation. See: depreciation.

expert system

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

knowledge worker

A worker whose job is the accumulation, transfer, validation, analysis, and creation of information.

broadband

A coaxial cable offering several channels for text, voice, and/or video transmission.

Internet service provider (ISP)

A company that links users to the Internet and provides them with other services.

material definition

A definition of the properties and characteristics of a substance.

closely held

A description of an organization owned by a small number of people.

costed bill of material

A form of bill of material that extends the quantity per of every component in the bill by the cost of the components.

adaptive smoothing

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

intermittent production

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

interactive customer care

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

cartel

A group of companies that agree to cooperate, rather than compete, in producing a product or service, thus limiting or regulating competition.

material class

A means to describe a grouping of materials with similar characteristics for planning and scheduling purposes.

machine utilization

A measure of how intensively a machine is being used. Machine utilization compares the actual machine time (setup and run time) to available time.

contact efficiency

A measure of how well an organization transforms Web site hits into visits.

allowed time

A normal time value increased by appropriate allowances.

exempt employee

A person filling an exempt position. See: exempt positions.

external customer

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

economy of scale

A phenomenon whereby larger volumes of production reduce unit cost by distributing fixed costs over a larger quantity.

locator system

A system for maintaining a record of the storage locations of items in inventory. See: locator file.

bucket

A time period, usually a week.

Index

A value, expressed as a percentage, giving the relationship of a measurement to a base value. A result of 100 would be average while numbers greater than 100 would be above average and those less than 100 would be below average.

ANSI

Acronym for American National Standards Institute.

horizontal merger

An alliance of two or more competing firms.

assembly parts list

As used in the manufacturing process, a list of all parts (and subassemblies) that make up a particular assembly. See: batch card, manufacturing order.

automatic rescheduling

Rescheduling done by the computer to automatically change due dates on scheduled receipts when it detects that due dates and need dates are out of phase. Ant: manual rescheduling.

chance

Something that happens as a result of random, unknown, or unconsidered influences.

flexible capacity

The ability to operate manufacturing equipment at different production rates by varying staffing levels and operating hours or starting and stopping at will.

jurisdiction

The authority of a governmental agency to undertake its activities.

gross margin

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

final assembly

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

graphical forecasting methods

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

bin trips

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

data dictionary

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

buffer

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

batch

1) A quantity scheduled to be produced or in production. See: process batch, transfer batch. 2) For discrete products, the batch is planned to be the standard batch quantity, but during production, the standard batch quantity may be broken into smaller lots. See: lot. 3) In nondiscrete products, the batch is a quantity that is planned to be produced in a given time period based on a formula or recipe that often is developed to produce a given number of end items. 4) A type of manufacturing process used to produce items with similar designs and that may cover a wide range of order volumes. Typically, items ordered are of a repeat nature, and production may be for a specific customer order or for stock replenishment. See: project manufacturing.

lead time

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

line

1) A specific physical space for the manufacture of a product that in a flow shop layout is represented by a straight line. In actuality, this may be a series of pieces of equipment connected by piping or conveyor systems. 2) A type of manufacturing process used to produce a narrow range of standard items with identical or highly similar designs. Production volumes are high, production and material handling equipment is specialized, and all products typically pass through the same sequence of operations. See: assembly line.

business plan

1) A statement of long-range strategy and revenue, cost, and profit objectives usually accompanied by budgets, a projected balance sheet, and a cash flow (source and application of funds) statement. A business plan is usually stated in terms of dollars and grouped by product family. The business plan is then translated into synchronized tactical functional plans through the production planning process (or the sales and operations planning process). Although frequently stated in different terms (dollars versus units), these tactical plans should agree with each other and with the business plan. See: long-term planning, strategic plan. 2) A document consisting of the business details (organization, strategy, and financing tactics) prepared by an entrepreneur to plan for a new business.

bin

1) A storage device designed to hold small discrete parts. 2) A shelving unit with physical dividers separating the storage locations.

FAS

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

enterprise resources planning (ERP) system

1) An accounting-oriented information system for identifying and planning the enterprisewide resources needed to take, make, ship, and account for customer orders. An ERP system differs from the typical MRP II system in technical requirements such as graphical user interface, relational database, use of fourth-generation language, and computer-assisted software engineering tools in development, client/server architecture, and open-system portability. 2) More generally, a method for the effective planning and control of all resources needed to take, make, ship, and account for customer orders in a manufacturing, distribution, or service company.

andon

1) An electronic board that provides visibility of floor status and provides 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.

appraisal

1) An evaluation of employee performance. 2) In TQM, the formal evaluation and audit of quality.

express

1) Carrier payment to its customers when ships, rail cars, or trailers are unloaded or loaded in less than the time allowed by contract and returned to the carrier for use. See: demurrage, detention. 2) The use of priority package delivery to achieve overnight or second-day delivery.

arrow

1) In activity-on-arc networks, the graphic presentation of an activity. The tail of the arrow represents the start of the activity. The head of the arrow represents the finish. Unless a timescale is used, the length of the arrow stem has no relation to the duration of the activity. Length and direction of the arrow are usually a matter of convenience and clarity. 2) In activity-on-node networks, an arrow represents a precedence requirement.

logistics

1) In an industrial context, the art and science of obtaining, producing, and distributing material and product in the proper place and in proper quantities. 2) In a military sense (where it has greater usage), its meaning can also include the movement of personnel.

cycle time

1) In industrial engineering, the time between completion of two discrete units of production. For example, the cycle time of motors assembled at a rate of 120 per hour would be 30 seconds. 2) In materials management, it refers to the length of time from when material enters a production facility until it exits. Syn: throughput time.

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.

inventory issue

1) Items released from an inventory location for use or sale. 2) The inventory record transaction reducing the inventory balance by the amount released.

linearity

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

customer service

1) The ability of a company to address the needs, inquiries, and requests from customers. 2) A measure of the delivery of a product to the customer at the time the customer specified.

line balancing

1) The balancing of the assignment of the tasks to workstations in a manner that minimizes the number of workstations and minimizes the total amount of idle time at all stations for a given output level. In balancing these tasks, the specified time requirement per unit of product for each task and its sequential relationship with the other tasks must be considered. 2) A technique for determining the product mix that can be run down an assembly line to provide a fairly consistent flow of work through that assembly line at the planned line rate.

job

1) The combination of tasks, duties, and responsibilities assigned to an individual employee and usually considered his or her work assignment. 2) The contents of a work order.

demand management

1) The function of recognizing all demands for goods and services to support the market place. It involves prioritizing demand when supply is lacking. Proper demand management facilitates the planning and use of resources for profitable business results. 2) In marketing, the process of planning, executing, controlling, and monitoring the design, pricing, promotion, and distribution of products and services to bring about transactions that meet organizational and individual needs. Syn: marketing management.

issue

1) The physical movement of items from a stocking location. 2) Often, the transaction reporting of this -activity.

compound interest

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

interrupt

A break in the normal flow of a computer routine such that the flow can be resumed from that point at a later time. An interrupt is usually caused by a signal from an external source.

diagnostic study

A brief investigation or cursory methods study of an operation, process, group, or individual to discover causes of operational difficulties or problems for which more detailed remedial studies may be feasible. An appropriate work measurement technique may be used to evaluate alternatives or to locate major areas requiring improvement.

cash budget

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

fixed budget

A budget of expected costs based on a specific level of production or other activity.

matrix bill of material

A chart made up from the bills of material for a number of products in the same or similar families. It is arranged in a matrix with components in columns and parents in rows (or vice versa) so that requirements for common components can be summarized conveniently.

flowchart

A chart that shows the operations, transportation, storages, delays, inspections, etc., related to a process. Flowcharts are drawn to better understand processes. The flowchart is one of the seven tools of quality. See: block diagram, flow process chart.

knowledge-based system

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

decision support system (DSS)

A computer system designed to assist managers in selecting and evaluating courses of action by providing a logical, usually quantitative, analysis of the relevant factors.

interactive computer system

A computer system that supports real-time interaction with a user. The response time to the user is similar to the actual timing of the business or physical process.

electronic funds transfer (EFT)

A computerized system that processes financial transactions and information about these transactions or performs the exchange of value between two parties.

exponential distribution

A continuous probability distribution where the probability of occurrence either steadily increases or decreases. The steady increase case (positive exponential distribution) is used to model phenomena such as customer service level versus cost. The steady decrease case (negative exponential distribution) is used to model phenomena such as the weight given to any one time period of demand in exponential smoothing.

C chart

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

job costing

A cost accounting system in which costs are assigned to specific jobs. This system can be used with either actual or standard costs in the manufacturing of distinguishable units or lots of products. Syn: job order costing.

customer partner

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

depreciation of a currency

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

discontinuous demand

A demand pattern that is characterized by large demands interrupted by periods with no demand, as opposed to a continuous or steady (e.g., daily) demand. Syn: lumpy demand.

fixture

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

firewall

A device used to control access to a company's data from the Internet or other outside sources.

fuzzy logic

A field of logic based on "fuzzy sets," that is, sets in which membership is probabilistic rather than deterministic.

dividend

A payment to stockholders either in cash or stock.

design for manufacture and assembly

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

cargo

A product shipped in an aircraft, railroad car, ship, barge, or truck.

co-product

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

manifest system

A production control system where the exact sequence of items to be assembled is required.

assemble-to-order

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

make-to-order

A production environment where a good or service can be made after receipt of a customer's order. The final product is usually a combination of standard items and items custom-designed to meet the special needs of the customer. Where options or accessories are stocked before customer orders arrive, the term assemble-to-order is frequently used. See: assemble-to-order, make-to-stock.

machine-limited capacity

A production environment where a specific machine limits throughput of the process. See: constraint, throughput.

dedicated line

A production line permanently configured to run well-defined parts, one piece at a time, from station to station.

level production method

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

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. See: mass production, project manufacturing.

autonomous work group

A production team that operates a highly focused segment of the production process to an externally imposed schedule but with little external reporting, supervision, interference, or help.

dock-to-stock

A program by which specific quality and packaging requirements are met before the product is released. Prequalified product is shipped directly into the customer's inventory. Dock-to-stock eliminates the costly handling of components, specifically in receiving and inspection and enables product to move directly into production.

line of balance planning

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

hypertext transfer protocol (HTTP)

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

confirming order

A purchase order issued to a supplier, listing the goods or services and terms of an order placed orally or otherwise before the usual purchase document.

family contracts

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

capacity buying

A purchasing practice whereby a company commits to a supplier for a given amount of its capacity per unit of time. Subsequently, schedules for individual items are given to the supplier in quantities to match the committed level of capacity. Syn: buying capacity.

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.

imperfection

A quality characteristic's departure from its intended level or state without any association to conformance to specification requirements or to the usability of a product or service. See: blemish, defect, nonconformity.

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.

kaizen blitz(SM)

A rapid improvement of a limited process area, for example, a production cell. Part of the improvement team consists of workers in that area. The objectives are to use innovative thinking to eliminate non-value-added work and to immediately implement the changes within a week or less. Ownership of the improvement by the area work team and the development of the team's problem-solving skills are additional benefits.

margin

A ratio of an organization's operating profit to revenues, measuring management's ability to control operating expenses.

milk run

A regular route for pickup of mixed loads from several suppliers. For example, instead of each of five suppliers sending a truckload per week to meet the weekly needs of the customer, one truck visits each of the suppliers on a daily basis before delivering to the customer's plant. Five truckloads per week are still shipped, but each truckload contains the daily requirement from each supplier. See: consolidation.

engineering change

A revision to a drawing or design released by engineering to modify or correct a part. The request for the change can be from a customer or from production, quality control, another department, or a supplier. Syn: engineering change notice, engineering change order.

capacity bill procedure

A rough-cut capacity planning method that takes into account any shifts in product mix. Bill of material and routing information are required with direct labor-hour or machine-hour data available for each operation. See: bill of labor.

contributory negligence

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

module

A self-contained unit of a computer program that communicates with other parts of the program solely through inputs and outputs.

EDI for administration, commerce, and transport (EDIFACT)

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

business process

A set of logically related tasks or activities performed to achieve a defined business outcome.

excess capacity

A situation where the output capabilities at a nonconstraint resource exceed the amount of productive and protective capacity required to achieve a given level of throughput at the constraint. See: idle capacity, productive capacity, protective capacity.

dog

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

computer virus

A small program that invades other programs. Some are relatively harmless; others may destroy large amounts of data.

executive information system

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

Monte Carlo simulation

A subset of digital simulation models based on random or stochastic processes.

certificate of compliance

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

force field analysis

A technique for analyzing the forces that will aid or hinder an organization in reaching an objective. An arrow pointing to an objective is drawn down the middle of a piece of paper. The factors that will aid the objective's achievement (called the driving forces) are listed on the left side of the arrow; the factors that will hinder its achievement (called the restraining forces) are listed on the right side of the arrow.

fishbone analysis

A technique to organize the elements of a problem or situation to aid in the determination of the causes of the problem or situation. The analysis relates the effect of the environment to the several possible sources of the problem.

lead-time offset

A technique used in MRP where a planned order receipt in one time period will require the release of that order in an earlier time period based on the lead time for the item. Syn: component lead-time offset, offsetting.

materiel

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

CFPIM

Abbreviation for Certified Fellow in Production and Inventory Management.

CPIM

Abbreviation for Certified in Production and Inventory Management.

APS

Abbreviation for advanced planning and scheduling, abbreviation for advanced planning system.

APR

Abbreviation for annual percentage rate.

DNS

Abbreviation for domain name service.

HLL

Abbreviation for high-level language.

GAMP

Acronym for generally accepted manufacturing practices.

GERT

Acronym for graphical evaluation and review technique.

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.

cost of goods sold

An accounting classification useful for determining the amount of direct materials, direct labor, and allocated overhead associated with the products sold during a given period of time.

bilateral contract

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

depreciation

An allocation of the original value of an asset against current income to represent the declining value of the asset as a cost of that time period. Depreciation does not involve a cash payment. It acts as a tax shield and thereby reduces the tax payment. See: capital recovery, depletion, double-declining-balance depreciation, straight line depreciation, units-of-production depreciation.

fixed-cost contribution per unit

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

discount

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

backup support

An alternate location or maintainer that can provide the same service response or support as the primary location or maintainer.

contribution margin

An amount equal to the difference between sales revenue and variable costs.

escalation

An amount or percentage by which a contract price may be adjusted if specified contingencies occur, such as changes in the supplier's raw material or labor costs.

debt

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

feasibility study

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

competitive analysis

An analysis of a competitor that includes its strategies, capabilities, prices, and costs.

manufacturing automation protocol (MAP)

An application-specific protocol based on the International Standards Organization's open systems interconnection (OSI) standards. It is designed to allow communication between a company's computers and computers from different vendors in the manufacturing shop floor environment.

curve fitting

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

harmonic smoothing

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

general warranty

An assurance that the product is fit for use. See: special warranty, warranty.

inspection order

An authorization to an inspection department or group to perform an inspection operation.

customer order servicing system

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

flexible machine center (FMC)

An automated system, which usually consists of CNC machines with robots loading and unloading parts conveyed into and through the system. Its purpose is to provide quicker throughput, changeovers, setups, etc., to manufacture multiple products.

cooperative training

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

digital cash or money

An electronic currency equivalent of currency or coins.

ecash

An electronic system that provides for deposits and withdrawals of digital money. It permits a payer using it to remain anonymous.

electronic form

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

manufacturing layout strategies

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

cellular layout

An equipment configuration to support cellular manufacturing.

finite forward scheduling

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

fixed cost

An expenditure that does not vary with the production volume; for example, rent, property tax, and salaries of certain personnel.

appreciation of a currency

An increase in the buying power of a country's currency in terms of other countries' goods and services.

job enrichment

An increase in the number of tasks that an employee performs and an increase in the control over those tasks. It is associated with the design of jobs and especially the production worker's job. Job enrichment is an extension of job enlargement.

job enlargement

An increase in the number of tasks that an employee performs. Job enlargement is associated with the design of jobs, particularly production jobs, and its purpose is to reduce employee dissatisfaction.

blend formula

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

block scheduling

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

future order

An order entered for shipment at some future date.

flow order

An order filled, not by moving material through production as an integral lot, but by production made over time and checked by a cumulative count until the flow order quantity is complete.

customer order

An order from a customer for a particular product or a number of products. It is often referred to as an actual demand to distinguish it from a forecasted demand.

experimental order

An order generated by the laboratory, research and development, or engineering group that must be run through regular production facilities with potential future product or market development as a project or team goal. Syn: engineering order, laboratory order, pilot order, R&D order.

learning organization

An organization in which each of the individuals in the group is engaged in problem identification and solution generation. A learning organization is characterized by continuous experimentation and improving its capabilities in support of the organization's strategic direction.

material review board (MRB)

An organization within a company, often a standing committee, that determines the resolution or disposition of items that have questionable quality or other attributes.

finite loading

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

lot number control

Assignment of unique numbers to each instance of receipt and carrying forth that number into subsequent manufacturing processes so that, in review of an end item, each lot consumed from raw materials through end item can be identified as having been used for the manufacture of this specific end item lot.

apparent authority

Authority perceived by a third party to flow from a principal to an ostensible agent when in fact no agency relationship exists.

autonomation

Automated shutdown of a line, process, or machine upon detection of an abnormality or defect.

Hoshin planning

Breakthrough planning. A Japanese strategic planning process in which a company develops up to four vision statements that indicate where the company should be in the next five years. Company goals and work plans are developed based on the vision statements. Periodic audits are then conducted to monitor progress.

business-to-consumer sales (B2C)

Business being conducted between businesses and final consumers largely over the Internet. It includes traditional brick and mortar businesses that also offer products online and businesses that trade exclusively electronically.

infinite loading

Calculation of the capacity required at work centers in the time periods required regardless of the capacity available to perform this work. Syn: infinite scheduling.

detention

Carrier charges and fees applied when truck trailers are retained beyond a specified loading or unloading time. See: demurrage, express.

commercial speech

Communication that is primarily for a business purpose. Such speech is protected under the First Amendment to the U.S. Constitution but less so than is noncommercial speech.

information

Data arranged or presented so that they yield an understanding not available from any single data element.

decisions under risk

Decision problems in which the analyst elects to consider several possible futures, the probabilities of which can be estimated.

decisions under uncertainty

Decisions for which the analyst elects to consider several possible futures, the probabilities of which cannot be estimated.

less than carload (LCL)

Either a small shipment that does not fill the railcar or a shipment of not enough weight to qualify for a carload quantity rate discount.

less than truckload (LTL)

Either a small shipment that does not fill the truck or a shipment of not enough weight to qualify for a truckload quantity (usually set at about 10,000 lbs.) rate discount, offered to a general commodity trucker.

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.

cost pool

In activity-based cost accounting, an aggregation of resources assigned to activities or activities assigned to cost objects. Items may be aggregated or disaggregated depending on how the data are to be used.

cost object

In activity-based cost accounting, anything for which a separate cost measurement is desirable. This may include a product, a customer, a project, or other work unit.

cost management

In activity-based cost accounting, control of activities to eliminate waste, improve cost drivers, and plan operations. This process should affect the organization's setting of strategy. Factors such as product pricing, introduction of new products, and distribution of existing products are examples of strategic decisions that are affected by cost management.

cost driver analysis

In activity-based cost accounting, the examination of the impact of cost drivers. The results of this analysis are useful in the continuous improvement of cost, quality, and delivery times.

consideration

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

average cost system

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

efficiency variance

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

capital rationing

In financial management, the process of apportioning capital expenditures among prospective projects to conserve limited investment funds.

market value added

In financial management, the surplus of a firm's equity over the capital that has been invested in the firm.

attractor

In information systems, a Web site that, over time, continues to attract a large number of visitors.

authentication key

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

growth-share matrix

In marketing, a division of products by relative market share and market growth rate. Products are divided as follows: (1) Cash cows—high market share, low growth rate; (2) Stars—high market share, high growth rate; (3) Dogs—low market share, low growth rate; and (4) Question marks—low market share, high growth rate. Sometimes this same set of terms is used to categorize products by market share and profitability. See: cash cow, dog, question mark, star.

forward pass

In the critical path method of project management, working from the first node to the last node calculating early start times and early finish times as well as the project's duration. Syn: forward scheduling. See: backward pass, critical path method.

cube utilization

In warehousing, a measurement of the utilization of the total storage capacity of a vehicle or warehouse.

critical mass

Individuals who add value to the product or service. These individuals include personnel working directly on the product, personnel providing a service to the customer, and personnel who provide support for the product or service, e.g., after-sale service.

information system

Interrelated computer hardware and software along with people and processes designed for the collection, processing, and dissemination of information for planning, decision making, and control.

centralized inventory control

Inventory decision making (for all SKUs) exercised from one office or department for an entire company.

limited life material

Material having a finite shelf life.

intransit inventory

Material moving between two or more locations, usually separated geographically; for example, finished goods being shipped from a plant to a distribution center.

intermediate part

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

direct material

Material that becomes a part of the final product in measurable quantities.

linear programming

Mathematical models for solving linear optimization problems through minimization or maximization of a linear function subject to linear constraints. For example, in blending gasoline and other petroleum products, many intermediate distillates may be available. Prices and octane ratings as well as upper limits on capacities of input materials that can be used to produce various grades of fuel are given. The problem is to blend the various inputs in such a way that (1) cost will be minimized (profit will be maximized), (2) specified optimum octane ratings will be met, and (3) the need for additional storage capacity will be avoided.

capital expenditure

Money invested in a long-term asset, one that is expected to last longer than one year. The investment is expected to generate a stream of future benefits.

bid pricing

Offering a specific price for each job rather than setting a standard price that applies for all customers.

line item

One item on an order, regardless of quantity.

flexible benefits/cafeteria plans

Plans designed to give employees a core of minimum basic coverage with the option to choose additional coverage or, sometimes, cash. Employees can customize their benefits packages to suit their personal needs.

imports

Products bought in one country and produced in another.

market driven

Responding to customers' needs.

interrogate

Retrieve information from computer files by use of predefined inquiries or unstructured queries handled by a high-level retrieval language.

decisions under certainty

Simple decisions that assume complete information and no uncertainty connected with the analysis of decisions.

distribution by value

Syn: ABC classification.

demerit chart

Syn: D chart.

job progress chart

Syn: Gantt chart.

milestone chart

Syn: Gantt chart.

Baldrige Award

Syn: Malcolm Baldrige National Quality Award.

count-per-unit chart

Syn: U chart.

assembly bin

Syn: accumulation bin.

exception message

Syn: action message.

arrow diagram method

Syn: activity-on-arrow network.

event-on-arrow network

Syn: activity-on-arrow network.

event-on-node network

Syn: activity-on-node network.

assignment

Syn: allocation.

effective interest rate

Syn: annual percentage rate.

delay report

Syn: anticipated delay report.

expected receipt date

Syn: arrival date, due date.

finish-to-order

Syn: assemble-to-order.

beginning available balance

Syn: available inventory.

cumulative yield

Syn: cascading yield loss, composite yield.

Ishikawa diagram

Syn: cause-and-effect diagram.

fishbone chart

Syn: cause-and-effect diagram.

chase strategy

Syn: chase production method.

collaborative planning

Syn: collaborative planning, forecasting, and replenishment.

common parts bill

Syn: common parts bill of material.

competitive edge

Syn: competitive advantage.

consignment inventory

Syn: consigned stocks. See: consignment.

consumable tooling, supplies

Syn: consumables.

expendables

Syn: consumables.

forecast consumption

Syn: consuming the forecast.

dispatch(ing) board

Syn: control board.

comptroller

Syn: controller.

cost-type contract

Syn: cost-plus contract.

key point backflush

Syn: count point backflush.

functional requirements

Syn: critical characteristics.

direct loading

Syn: cross-docking.

combined lead time

Syn: cumulative lead time.

composite lead time

Syn: cumulative lead time.

critical path lead time

Syn: cumulative lead time.

composite manufacturing lead time

Syn: cumulative manufacturing lead time.

configuration system

Syn: customer order servicing system.

cost driver

Syn: driver (first definition).

engineering order

Syn: experimental order.

laboratory order

Syn: experimental order.

fixed-interval order system

Syn: fixed reorder cycle inventory model.

fixed order quantity system

Syn: fixed reorder quantity inventory model.

lot-size system

Syn: fixed reorder quantity inventory model.

bench stocks

Syn: floor stocks.

expensed stocks

Syn: floor stocks.

flow manufacturing

Syn: flow shop.

flow plant

Syn: flow shop.

formulation

Syn: formula.

contract pegging

Syn: full pegging.

job shop layout

Syn: functional layout.

cash flow management

Syn: funds flow management.

cash flow statement

Syn: funds flow statement.

gain sharing plans

Syn: gain sharing.

gap phasing

Syn: gapped schedule.

gross profit margin

Syn: gross margin.

hybrid strategy

Syn: hybrid production method.

business market

Syn: industrial market.

infinite scheduling

Syn: infinite loading.

input/output analysis

Syn: input/output control.

inventory cushion

Syn: inventory buffer.

material control

Syn: inventory control.

material planning

Syn: inventory planning.

inventory turns

Syn: inventory turnover.

item master record

Syn: item record.

job order costing

Syn: job costing.

jobbing

Syn: job shop.

joint replenishment system

Syn: joint replenishment.

kitted material

Syn: kit.

labor ticket

Syn: labor claim.

labor voucher

Syn: labor claim.

component lead-time offset

Syn: lead-time offset.

lean

Syn: lean production.

lean manufacturing

Syn: lean production.

experience curve

Syn: learning curve.

annual inventory count

Syn: physical inventory.

annual physical inventory

Syn: physical inventory.

integrated resource management (IRM)

Syn: resource management.

long-range resource planning

Syn: resource planning.

manufacturing data sheet

Syn: routing.

collaborative supply relationship

Syn: supplier partnership.

clock card

Syn: time card.

job ticket

Syn: time ticket.

bin reserve system

Syn: two-bin inventory system.

dual-card kanban system

Syn: two-card kanban system.

direct costing

Syn: variable costing.

item record

The "master" record for an item. Typically, it contains identifying and descriptive data and control values (lead times, lot sizes, etc.) and may contain data on inventory status, requirements, planned orders, and costs. Item records are linked by bill of material records (or product structure records), thus defining the bill of material. Syn: item master record, part master record, part record.

Certified in Integrated Resource Management (CIRM)

The APICS certification that is a recognition of a high level of professional knowledge in enterprisewide processes and activities.

Certified in Production and Inventory Management (CPIM)

The APICS certification that is a recognition of a high level of professional knowledge.

Certified Fellow in Production and Inventory Management (CFPIM)

The APICS certification that is a recognition of superior knowledge and performance in contributing to the profession.

Certified Purchasing Manager (C.P.M.)

The Institute for Supply Management (ISM) [formerly NAPM] certification.

kaizen

The Japanese term for improvement; continuing improvement involving everyone—managers and workers. In manufacturing, kaizen relates to finding and eliminating waste in machinery, labor, or production methods. See: continuous process improvement.

jidoka

The Japanese term for the practice of stopping the production line when a defect occurs.

delivery policy

The company's goal for the time to ship the product after the receipt of a customer's order. The policy is sometimes stated as "our quoted delivery time."

calibration

The comparison of a measurement instrument or system of unverified accuracy with a measurement -instrument or system of a known accuracy to detect any variation from the required performance specification.

direct labor cost

The compensation of workers who are involved in converting material into a finished product.

indirect labor cost

The compensation paid to workers whose activities are not related to a specific product.

fully qualified domain name

The complete, registered address (URL) of an Internet site.

Deming circle

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

mix control

The control of the individual items going through the plant.

external failures cost

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

master budget

The document that consolidates all other budgets of an organization into an overall plan, including the projection of a cash flow statement and an operating statement for the budget period as well as a balance sheet for the end of the budget period. Syn: static -budget.

inventory investment

The dollars that are in all levels of inventory.

earliest start date

The earliest date an operation or order can start. It may be restricted by the current date, material availability, or management-specified "maximum -advance."

central processing unit (CPU)

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

electronic document

The electronic representation of a document that can be printed.

manufacturing engineering

The engineering discipline concerned with designing and improving production -processes. Syn: process engineering.

contract target cost

The estimated cost negotiated in a contract.

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.

manufacturing ramp-up

The final phase of new product and process development, whereby the new product moves from pilot production to full-scale manufacturing.

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.

financial management

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

contract accounting

The function of collecting costs incurred on a given job or contract, usually in a progress payment situation. Certain U.S. government contracting procedures require contract accounting.

job design

The function of describing a job with respect to its content and the methods to be used. Criteria, such as the degree of job specialization, job enrichment, and job enlargement are useful in designing work content.

field service

The functions of installing and maintaining a product for a customer after the sale or during the lease. Field service may also include training and implementation assistance. Syn: after-sale service.

management

The functions of planning, organizing, and controlling the transformation process and its utility in providing a good or service to customers.

deblend

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

mathematical programming

The general problem of optimizing a function of several variables subject to a number of constraints. If the function and constraints are linear in the variables and a subset of the constraints restricts the variables to be nonnegative, a linear programming problem exists.

legal environment

The governmental restrictions placed on an organization regarding the goods and services provided by the business, for example, environmental regulations, export/import restrictions, safety regulations, and mandated deregulations.

CAD/CAM

The integration of computer-aided design and computer-aided manufacturing to achieve automation from design through manufacturing.

computer-integrated manufacturing (CIM)

The integration of the total manufacturing organization through the use of computer systems and managerial philosophies that improve the organization's effectiveness; the application of a computer to bridge various computerized systems and connect them into a coherent, integrated whole. For example, budgets, CAD/CAM, process controls, group technology systems, MRP II, financial reporting systems, etc., are linked and interfaced.

globalization

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

design cycle

The interval of time between the start of the design process of one model and the completion of the design process for the model.

home page

The introductory page of a Web site, usually containing the name and a list of contents. It usually contains links to other pages on the site.

idle inventory

The inventory generally not needed in a system of linked resources. Idle inventory generally consists of protective inventory and excess inventory. See: excess inventory, productive inventory, protective inventory.

available inventory

The on-hand inventory balance minus allocations, reservations, backorders, and (usually) quantities held for quality problems. Often called beginning available balance. Syn: beginning available balance, net inventory.

distribution planning

The planning activities associated with transportation, warehousing, inventory levels, materials handling, order administration, site and location planning, industrial packaging, data processing, and communications networks to support distribution.

logistics system

The planning and coordination of the physical movement aspects of a firm's operations such that a flow of raw materials, parts, and finished goods is achieved in a manner that minimizes total costs for the levels of service desired.

forward buying

The practice of buying materials in a quantity exceeding current requirements but not beyond the point that the long-term need exists.

hedging

The practice of entering into contracts on a commodity exchange to protect against future fluctuations in the commodity. This practice allows a company to isolate profits to the value-added process rather than to uncontrolled pricing factors.

employee empowerment

The practice of giving nonmanagerial employees the responsibility and the power to make decisions regarding their jobs or tasks. It is associated with the practice of transfer of managerial responsibility to the employee. Empowerment allows the employee to take on responsibility for tasks normally associated with staff specialists. Examples include allowing the employee to make scheduling, quality, process design, or purchasing decisions.

constraint management

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

format

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

current price

The price currently being paid as opposed to standard cost.

forecast management

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

excess issue

The removal from stock and assignment to a schedule of a quantity higher than the schedule quantity. Syn: overissue.

business service

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

message distribution

The software component of electronic commerce that enables the sending and receiving of messages.

interoperation time

The time between the completion of one operation and the start of the next.

delivery lead time

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

move time

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

customer

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

implode

1) Compression of detailed data in a summary-level record or report. 2) Tracing a usage and/or cost impact from the bottom to the top (end product) of a bill of material using where-used logic.

labor efficiency

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

future worth

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

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.

branch warehouse demand

Syn: warehouse demand.

in-process inventory

Syn: work in process.

MDS

Abbreviation for material-dominated scheduling.

incremental available-to-promise

Syn: discrete available-to-promise.

branch warehouse

Syn: distribution center.

field warehouse

Syn: distribution center.

bill of distribution

Syn: distribution network structure.

earned volume

Syn: earned hours.

economic lot size

Syn: economic order quantity.

minimum cost order quantity

Syn: economic order quantity.

effectivity

Syn: effective date.

effectivity date

Syn: effective date.

end product

Syn: end item.

finished good

Syn: end item.

design-to-order

Syn: engineer-to-order.

engineering change notice

Syn: engineering change.

engineering change order

Syn: engineering change.

equal runout method

Syn: equal runout quantities.

failsafe techniques

Syn: failsafe work methods, poka-yoke.

mistake-proofing

Syn: failsafe work methods, poka-yoke.

after-sale service

Syn: field service.

finished products inventory

Syn: finished goods inventory.

fixed-price contract

Syn: firm fixed-price contract.

first-piece inspection

Syn: first-article inspection.

five W's

Syn: five why's.

fluctuation stock

Syn: fluctuation inventory.

forecast period

Syn: forecast interval.

level strategy

Syn: level production method.

level loading

Syn: load leveling.

consumer

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

make-buy analysis

Syn: make-or-buy decision.

count point backflush

A backflush technique using more than one level of the bill of materials and extending back to the previous points where production was counted. Syn: key point backflush.

breeder bill of material

A bill of material that recognizes and plans for the availability and usage of by-products in the manufacturing process. The breeder bill allows for complete by-product MRP and product/by-product costing.

implied contract

A binding agreement inferred from the actions of the parties.

debenture

A bond that is backed by the general credit of the issuing firm.

managerial accounting

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

manufacturer's agent

Syn: manufacturer's representative.

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.

contract carrier

A carrier that does not serve the general public, but provides transportation for hire for one or a limited number of shippers under a specific contract.

line of credit

A contract that enables a company to borrow funds at any time up to a predetermined limit.

interactive system

A data processing system in which the response to an inquiry is developed within the system within a time period acceptable to the user and regarded as immediate.

marginal analysis

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

double order point system

A distribution inventory management system that has two order points. The smallest equals the original order point, which covers demand during replenishment lead time. The second order point is the sum of the first order point plus normal usage during manufacturing lead time. It enables warehouses to forewarn manufacturing of future replenishment orders.

exempt carrier

A for-hire carrier that is free from economic regulation.

extrinsic forecast

A forecast based on a correlated leading indicator, such as estimating furniture sales based on housing starts. Extrinsic forecasts tend to be more useful for large aggregations, such as total company sales, than for individual product sales. Ant: intrinsic forecast method.

demand curve

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

bond (performance)

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

automated storage/retrieval system (AS/RS)

A high-density rack inventory storage system with vehicles automatically loading and unloading the racks.

local area network (LAN)

A high-speed data communication system for linking computer terminals, programs, storage, and graphic devices at multiple workstations distributed over a relatively small geographic area such as a building or campus.

cash cow

A highly profitable product in a low-growth market. See: growth share matrix

collective bargaining

A highly regulated system established to control conflict between labor and management. It defines and specifies the rules and procedures of initiating, negotiating, maintaining, changing, and terminating the labor-management relationship.

date code

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

indented where-used

A listing of every parent item, and the respective quantities required, as well as each of their respective parent items, continuing until the ultimate end item or level-0 item is referenced. Each of these parent items calls for a given component item in a bill-of-material file. The component item is shown closest to the left margin of the listing, with each parent indented to the right, and each of their respective parents indented even further to the right.

bond

A long-term debt of a firm.

extranet

A network connection to a partner's network using secure information processing and Internet protocols to do business.

capital asset

A physical object that is held by an organization for its production potential and that costs more than some threshold value.

future value

A present payment's value at some point in the future valued at a given interest rate.

forward flow scheduling

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

failure mode effects analysis (FMEA)

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

contingent project

A project that can be accepted only if one or more other projects is accepted first. See: independent project, mutually exclusive project.

incentive

A reward, financial or otherwise, that compensates a worker for high or continued performance above standard. An incentive is also a motivating influence to induce effort above normal.

market

A set of buyers and sellers exchanging products. Prices tend to equalize through ongoing exchanges between buyers and sellers. Markets include institutional markets, government markets, industrial markets, and consumer markets. See: consumer market, government market, industrial market, institutional market.

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.

inventory policy

A statement of a company's goals and approach to the management of inventories.

formula

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

ending inventory

A statement of on-hand quantities or dollar value of an SKU at the end of a period, often determined by a physical inventory.

demand rate

A statement of requirements in terms of quantity per unit of time (hour, day, week, month, etc.).

beginning inventory

A statement of the inventory count at the end of last period, usually from a perpetual inventory record.

earned hours

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

degrees of freedom

A statistical term indicating the number of variables or data points used for testing a relationship. The greater the degrees of freedom, the greater the confidence that can be placed on the statistical significance of the results.

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.

clean technology

A technical measure taken to reduce or eliminate at the source the production of any nuisance, pollution, or waste and to help save raw materials, natural resources, and energy.

base point pricing

A type of geographic pricing policy where customers order from designated shipping points without freight charges if they are located within a specified distance from the base point. Customers outside area boundaries pay base price plus transportation costs from the nearest base point.

movement inventory

A type of in-process inventory that arises because of the time required to move goods from one place to another.

implied warranty

A warranty imposed on sellers beyond any express agreement in the contract.

brand plan

Syn: market plan.

B2C

Abbreviation for business-to-consumer sales.

CCR

Abbreviation for capacity constraint resource.

CPOF

Abbreviation for capacity planning using overall factors.

CRP

Abbreviation for capacity requirements planning.

CPU

Abbreviation for central processing unit.

CPI

Abbreviation for continuous process improvement.

CIF

Abbreviation for cost, insurance, freight.

CRT

Abbreviation for current reality tree.

AS/RS

Abbreviation for automated storage/retrieval system.

ATP

Abbreviation for available-to-promise.

AOQL

Abbreviation for average outgoing quality limit.

AOQ

Abbreviation for average outgoing quality.

CAM

Acronym for computer-aided manufacturing.

CAPP

Acronym for computer-aided process planning.

CASE

Acronym for computer-assisted software engineering.

CIM

Acronym for computer-integrated manufacturing.

EBIT

Acronym for earnings before interest and taxes.

e-mail

Acronym for electronic mail.

ESOP

Acronym for employee stock ownership plan.

FIFO

Acronym for first in, first out.

linear production

Actual production to a level schedule, so that a plotting of actual output versus planned output forms a straight line, even when plotted for a short segment of time.

anticipation inventories

Additional inventory above basic pipeline stock to cover projected trends of increasing sales, planned sales promotion programs, seasonal fluctuations, plant shutdowns, and vacations.

market research

Syn: marketing research.

decoupling inventory

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

electronic market

An Internet-based market where most sales occur electronically.

customer convergence

An Internet-based marketing concept in which organizations must provide descriptions of the goods and services they offer so that potential customers locate or converge on the appropriate Web sites.

fixed-period quantity

An MRP lot-sizing technique that sets the lot size equal to the net requirements for a given number of periods.

excess inventory

Any inventory in the system that exceeds the minimum amount necessary to achieve the desired throughput rate at the constraint or that exceeds the minimum amount necessary to achieve the desired due date performance. Total inventory = productive inventory + protective inventory + excess inventory.

flexible automation

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

green marketing

In advertising, promoting products because of their environmental sensitivity.

long-term planning

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

inventory planner

Syn: material planner (first definition).

arithmetic mean

Syn: mean.

move signal

Syn: move card.

consumer's risk (ß)

For a given sampling plan, the probability of acceptance of a lot, the quality of which has designated numerical value representing a level that is worse than some threshold value. See: type II error.

inspection ticket

Frequently used as a synonym for an inspection order; more properly a reporting of an inspection function performed.

earnings before interest and taxes (EBIT)

Syn: net operating income.

electronic communities

Communities of people who communicate exclusively electronically.

automated information system (AIS)

Computer hardware and software configured to automate calculating, computing, sequencing, storing, retrieving, displaying, communicating, or otherwise manipulating data and textual material to provide information.

interactive scheduling

Computer scheduling where the process is either automatic or manually interrupted to allow the scheduler the opportunity to review and change the schedule.

futures

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

business environment

Syn: operating environment.

management science

Syn: operations research.

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.

current ratio

Current assets divided by current liabilities.

detailed scheduling

Syn: operations scheduling.

customer order promising

Syn: order promising.

burden

Syn: overhead.

lap phasing

Syn: overlapped schedule.

cost element

In activity-based cost accounting, the lowest subdivision of a resource, activity, or cost object.

concurrent engineering

Syn: participative design/engineering.

delinquent order

Syn: past due order.

late order

Syn: past due order.

metrics

Syn: performance measurement system.

disbursement list

Syn: picking list.

cross-subsidy

In activity-based cost accounting, the situation of assigning too much or too little cost to a cost object. This may lead to poor decision making relative to the economic goals of the organization.

controlled issue

Syn: planned issue.

designing in quality vs. inspecting in quality

Syn: prevention vs. detection.

capability study

Syn: process capability analysis.

dummy activity

In activity-on-arrow diagramming, an activity with zero duration used to express a precedence relationship that can't otherwise be diagrammed. It is shown graphically with a dashed arrow.

derived demand

Demand for component products that arises from the demand for final design products. For example, the demand for steel is derived from the demand for automobiles.

dependent demand

Demand that is directly related to or derived from the bill of material structure for other items or end products. Such demands are therefore calculated and need not and should not be forecast. A given inventory item may have both dependent and independent demand at any given time. For example, a part may simultaneously be the component of an assembly and sold as a service part. See: independent demand.

demand deposits

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

engineering standard

Design or test guidelines intended to promote the design, production, and test of a part, component, or product in a manner that promotes standardization, ease of maintenance, consistency, adequacy of test procedures, versatility of design, ease of production and field service, and minimization of the number of different tools and special tools required.

environmentally sensitive engineering

Designing features in a product that improve recycling, etc. It can include elimination of compounds that are hazardous to the environment.

best practices

In benchmarking, the measurement or performance standard by which similar items are evaluated. Defining a best practice identifies opportunities to improve effectiveness. The process of comparing an actual result to a best practice may be applied to resources, activities, or cost objects.

capacity pegging

Displaying the specific sources of capacity requirements. This is analogous to pegging in MRP, which displays the source of material -requirements.

manufacturing order reporting

Syn: production reporting and status control.

backbone

In information systems, the term for the primary, high-speed connection among large computer centers. These large computer centers are then linked to other computers.

income

Syn: profit.

Juran trilogy

Syn: quality trilogy.

acid test ratio

Syn: quick asset ratio.

batch sheet

In many process industries, a document that combines product and process definition. See: batch card.

late finish date

In the critical path method of project management, the last date upon which a given activity can be completed without delaying the completion date of the project.

floating inventory location system

Syn: random-location storage.

floating storage location

Syn: random-location storage.

calculated capacity

Syn: rated capacity.

late start date (LS)

In the critical path method of project management, the last date upon which a given activity can be started without delaying the completion date of the project.

effective capacity

Syn: rated capacity.

average collection period

Syn: receivables conversion period.

frequency of repair

Syn: repair factor.

invitation for bid (IFB)

Syn: request for proposal.

industry structure types

Economists have developed models of the types of competition faced by various firms. These types are (1) Pure monopoly—Only one firm provides a particular product or service. The monopoly may be regulated or unregulated; (2) Pure oligopoly—A few companies produce essentially the same product or service and market it within a given area. A company is forced to price its product at the going rate unless it can differentiate its product; (3) Differentiated oligopoly—A few companies produce partially differentiated products or services that are marketed within a given area. Differentiation may be based on quality, features, styling, or services offered along with the product; (4) Monopolistic competition—Many competitors offer partially differentiated products or services. Most competitors focus on market segments where they can meet customers' needs somewhat better than their competitors; and (5) Pure competition—Many competitors offer undifferentiated products or services.

extrapolation

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

full cost pricing

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

level

Every part or assembly in a product structure is assigned a level code signifying the relative level in which that part or assembly is used within the product structure. Often times the end items are assigned level 0 with the components and subassemblies going into it assigned to level 1 and so on. The MRP explosion process starts from level 0 and proceeds downward one level at a time.

expense

Expenditures of short-term value, including depreciation, as opposed to land and other fixed capital. See: overhead.

explosion

Syn: requirements explosion. Ant: implosion.

lot tolerance percent defective (LTPD)

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

assigned material

Syn: reserved material.

concurrency

Syn: resource contention.

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.

demand forecasting

Forecasting the demand for a particular good, component, or service.

leveling

Syn: resource leveling.

exempt

Generally, a classification of employees/jobs for which compensation is not determined by extending the recorded hours worked by an hourly rate, e.g., pay is specified at an annual or monthly rate. Exempt employees include most professionals, administrative and management personnel, and sales representatives. Specifically, the term refers to and is fully defined by the U.S. Department of Labor Fair Labor Standards Act, which regulates minimum wages and overtime for nonexempt employees. See: exempt positions, nonexempt positions.

heel

In the process industry, an item used in the manufacture of itself. For example, in the manufacture of plastic, the ingredients will include the parent as well as the components.

divergent point

In the theory of constraints, a control point in the logical product structure where a common part or assembly can be directed to two or more different end items. To maintain the flow of parts to products, the schedule of common parts must be synchronized with the constraint schedule and shipping commitments.

move card

In a Just-in-Time context, a card or other signal indicating that a specific number of units of a particular item are to be taken from a source (usually an outbound stockpoint) and taken to a point of use (usually an inbound stockpoint). It authorizes the movement of one part number between a single pair of work centers. The card circulates between the outbound stockpoint of the supplying work center and the inbound stockpoint of the using work center. Syn: move signal. See: kanban.

control center

In a centralized dispatching operation, the place at which the dispatching is done.

cost object driver

In activity-based cost accounting, a numerical measure of the demand placed on one cost object by other cost objects.

disassembly bill of material

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

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.

maximum allowable cost

In service organizations, the limit of reimbursement allowed by an agency for the cost of a supply item.

dynamic congruence

In simulation, the situation where a physical system and a simulation model mimic one another closely.

lower specification limit (LSL)

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

measures constraint

In the theory of constraints, measures are a constraint if they drive behaviors that are incongruous with the achievement of organizational goals, or discourage the behaviors needed to achieve these goals.

cubic space

In warehousing, a measurement of space available or required in transportation and warehousing.

lot-size inventory

Inventory that results whenever quantity price discounts, shipping costs, setup costs, or similar considerations make it more economical to purchase or produce in larger lots than are needed for immediate purposes.

inventory buffer

Inventory used to protect the throughput of an operation or the schedule against the negative effects caused by statistical fluctuations. Syn: inventory cushion. See: fluctuation inventory, safety stock.

bill of operations

Syn: routing.

metered issues

Issues of parts or materials from stores in quantities that correspond to the rate at which materials are used.

instruction sheet

Syn: routing.

mixed-model production

Making several different parts or products in varying lot sizes so that a factory produces close to the same mix of products that will be sold that day. The mixed-model schedule governs the making and the delivery of component parts, including those provided by outside suppliers. The goal is to build every model every day, according to daily demand.

fabrication

Manufacturing operations for making components, as opposed to assembly operations.

differentiated marketing

Marketing to different market segments with a different marketing strategy for each segment.

grouping

Matching like operations and running them together sequentially, thereby taking advantage of a common setup.

cross-shipment

Material flow activity where materials are shipped to customers from a secondary shipping point rather than from a preferred shipping point.

grievance procedures

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

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. Syn: failsafe techniques, mistake-proofing, poka-yoke.

independent demand item management models

Models for the management of items whose demand is not strongly influenced by other items managed by the same company. These models can be characterized as follows: (1) stochastic or deterministic, depending on the variability of demand and other factors; (2) fixed quantity, fixed cycle, or hybrid -(optional replenishment). See: fixed reorder cycle inventory model, fixed reorder quantity inventory model, optional replenishment model.

deterministic models

Models where no uncertainty is included, e.g., inventory models without safety stock considerations.

eurocurrency

Money that is deposited outside of the country that issued it (outside of the issuing country's control).

buffer stock

Syn: safety stock.

cross plot

Syn: scatter chart.

cascaded systems

Multistage operations. The input to each stage is the output of a preceding stage, thereby causing interdependencies among the stages.

double smoothing

Syn: second-order smoothing.

changeover costs

Syn: setup costs.

changeover

Syn: setup.

alpha factor

Syn: smoothing constant.

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.

critical success factor

One of a few organizational objectives whose achievement should be sufficient for organizational success.

capacity strategy

One of the strategic choices that a firm must make as part of its manufacturing strategy. There are three commonly recognized capacity strategies: lead, lag, and tracking. A lead capacity strategy adds capacity in anticipation of increasing demand. A lag strategy does not add capacity until the firm is operating at or beyond full capacity. A tracking strategy adds capacity in small amounts to attempt to respond to changing demand in the marketplace.

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.

appellant

One who appeals a court decision to higher authority.

entrepreneur

One who organizes resources productively and bears the risk of the venture.

assignee

One who receives a transfer of contract rights from a party to the contract.

assignor

One who sells contract rights to a third person.

bulk issue

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

licensing

Paying a fee for permission to manufacture and sell a product created by another.

authorized deviation

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

deployment planning and scheduling

Planning how to use existing inventory to meet demand requirements.

exempt positions

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

loss leader pricing

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

general stores

Syn: supplies.

indirect materials

Syn: supplies.

applications software

Programs created for a particular business purpose such as payroll or inventory control.

forward integration

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

deterioration

Product spoilage, damage to the package, etc. This is one of the considerations in inventory carrying cost.

military standards

Product standards and specifications for military or defense contractors, units, suppliers, etc. These standards sometimes become de facto standards within the civilian community.

fixed property

Property attached to, and not easily removed from, the location.

demonstrated capacity

Proven capacity calculated from actual performance data, usually expressed as the average number of items produced multiplied by the standard hours per item. See: maximum demonstrated capacity.

high-level language (HLL)

Relatively sophisticated computer language that allows users to employ a notation with which they are already familiar. For example: COBOL (business), ALGOL (mathematical and scientific), FORTRAN, BASIC, Java, and Visual Basic.

common material

Readily available items used in industry that require no special handling.

bracketed recall

Recall from customers of suspect lot numbers plus a specified number of lots produced before and after the suspect ones.

EOQ = 1

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

breakdown maintenance

Remedial maintenance that occurs when equipment fails and must be repaired on an emergency or priority basis.

American Society for Quality Control (ASQC)

Renamed American Society for Quality in 1997. See: American Society for Quality.

line manufacturing

Repetitive manufacturing performed by specialized equipment in a fixed sequence.

delay reporting

Reporting against an operation status of a manufacturing order on an exception basis, when delays are anticipated.

contract reporting

Reporting of and the accumulation of finished production against commitments to a customer.

electronic publishing

Representation of text and multimedia documents electronically.

arbitrage

Risk-free buying of an asset in one market and simultaneous selling of an identical asset at a profit in another market.

flow rate

Running rate; the inverse of cycle time; for example, 360 units per shift (or 0.75 units per minute).

fixed-asset turnover

Sales divided by net fixed assets. Fixed assets reflect asset acquisition price less depreciation.

direct sales

Sales from the manufacturer to the ultimate consumer without going through a distributor or retailer.

gross profit margin rate

Sales minus cost of goods sold then divided by sales.

gross profit

Sales minus cost of goods sold.

market hedge

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

contract labor

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

dumping

Selling goods below costs in selected markets.

constraint accounting

Syn: theory of constraints accounting.

browser

Software used on the Web to retrieve and display documents on-screen, connect to other sites using hypertext links, display images, and play audio files.

international standards

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

Bayesian analysis

Statistical analysis where uncertainty is incorporated, using all available information to choose among a number of alternative decisions.

customer relations management (CRM)

Syn: customer relationship management.

customer service level

Syn: customer service ratio.

inactive inventory

Stock designated as in excess of consumption within a defined period or stocks of items that have not been used for a defined period.

cycle reduction stock

Stock held to reduce delivery time.

hold points

Stockpoints for semifinished inventory.

floor stocks

Stocks of inexpensive production parts held in the factory, from which production workers can draw without requisitions. Syn: bench stock, expensed stocks.

customer partnership

Syn: customer-supplier partnership.

data field

Syn: data element.

decision-support data

Syn: data warehouse.

information data warehouse

Syn: data warehouse.

delivery cycle

Syn: delivery lead time.

consumables

Supplies or materials (such as paint, cleaning materials, or fuel) that are consumed or exhausted in the production or sale of a good or service. Syn: consumable tooling, supplies; expendables.

customer tolerance time

Syn: demand lead time.

marketing management

Syn: demand management.

discrete issue

Syn: direct-deduct inventory transaction processing.

lumpy demand

Syn: discontinuous demand.

count chart

Syn: C chart.

inventory tax

Tax based on the value of inventory on hand at a particular time.

EOQ tables

Tables listing several ranges of monthly usages in dollars and the appropriate order size in dollars or monthly usage for each usage range.

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.

demand-side analysis

Techniques such as market research, surveys, focus groups, and performance/cost modeling used to identify emerging technologies.

forecast bias

Tendency of a forecast to systematically miss the actual demand (consistently either high or low).

machine loading

The accumulation by workstation, machine, or machine group of the hours generated from the scheduling of operations for released orders by time period. Machine loading differs from capacity requirements planning in that it does not use the planned orders from MRP but operates solely from released orders. It may be of limited value because of its limited visibility of resources.

merger

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

make-or-buy decision

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

implementation

The act of installing a system into operation. It concludes the system project with the exception of appropriate follow-up or post-installation review.

marginal utility

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

asset value

The adjusted purchase price of the asset plus any costs necessary to prepare the asset for use.

failure analysis

The collection, examination, review, and classification of failures to determine trends and to identify poorly performing parts or components.

informal culture

The collective underlying core values, attitudes, beliefs, and assumptions of the organization employees. See: formal culture.

cost of poor quality

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

compound yield

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

cumulative manufacturing lead time

The cumulative planned lead time when all purchased items are assumed to be in stock. Syn: composite manufacturing lead time.

functional systems design

The development and definition of the business functions to be accomplished by a computer system—i.e., the work of preparing a statement of the data input, data manipulation, and information output of the proposed computer system in common business terms that can be reviewed, understood, and approved by a user organization. This statement, after approval, provides the basis for the computer systems design.

forecast error

The difference between actual demand and forecast demand, stated as an absolute value or as a percentage. See: average forecast error, forecast accuracy, mean absolute deviation, tracking signal.

functional oriented

The grouping of employees who perform similar activities or work processes together in an organization. See: team oriented.

materials management

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

marginal revenue

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

minor setup

The incremental setup activities required when changing from one item to another within a group of items.

decentralized dispatching

The organization of the dispatching function into individual departmental dispatchers.

equal employment opportunity (EEO)

The laws prohibiting discrimination in employment because of race or color, sex, age, handicap status, religion, and national origin.

inventory cycle

The length of time between two consecutive replenishment shipments.

lot operation cycle time

The length of time required from the start of setup to the end of cleanup for a production lot at a given operation, including setup, production, and cleanup.

break-even point

The level of production or the volume of sales at which operations are neither profitable nor unprofitable. The break-even point is the intersection of the total revenue and total cost curves. See: total cost curve.

line loading

The loading of a production line by multiplying the total pieces by the rate per piece for each item to come up with a finished schedule for the line.

composition

The makeup of an item, typically expressing chemical properties rather than physical properties.

manual rescheduling

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

mode

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

confidence level

The probability that a particular value lies between an upper and a lower bound—the confidence limits.

interplant transfer

The shipment of a part or product by one plant to another plant or division within the corporation. See: interplant demand, transfer pricing.

inventory diversion

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

mass marketing

The strategy of sending the same message to all potential customers.

engineering characteristics

The technical features designed into a product.

intransit lead time

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

domain name

The unique name that identifies an Internet site. Domain names always have two or more parts separated by dots. The part on the left is the most specific and the part on the right is the most general. A given machine may have more than one domain name but a given domain name points to only one machine.

integrated Internet marketing (I2M)

The use of Internet facilities to sell products, influence stakeholder attitudes, and improve the company's image.

branding

The use of a name, term, symbol, or design, or a combination of these, to identify a product.

electronic commerce (e-commerce)

The use of computer and telecommunication technologies to conduct business.

extensible markup language (XML)

This language facilitates direct communication among computers on the Internet. Unlike the older hypertext markup language (HTML), which provides HTML tags giving instructions to a Web browser about how to display information, XML tags give instructions to a Web browser about the category of information.

JIT supplier environment

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

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. Syn: stockchase.

drop ship

To take the title of the product but not actually handle, stock, or deliver it, e.g., to have one supplier ship directly to another or to have a supplier ship directly to the buyer's customer.

business judgment rule

Under common law, an absence of liability for corporate directors and officers if they have used rational business judgment and have no conflict of interest.

end-user computing

Use of computer resources by non-information-system personnel to enter, retrieve, manipulate, or print data.

hard automation

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

assembly line

An assembly process in which equipment and work centers are laid out to follow the sequence in which raw materials and parts are assembled. See: line, production line.

convertible security

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

letter of credit

An assurance by a bank that payment will be made as long as the sales terms agreed to by the buyer and seller are met. This method of payment for sales contracts provides a high degree of protection for the seller.

bonded warehouse

Buildings or parts of buildings designated by the U.S. Secretary of the Treasury for storing imported merchandise, operated under U.S. Customs supervision.

critical path

In project management, that set of activities that defines the duration of a network. These activities have very little float or slack, usually zero. A delay in any critical path activity will delay the entire project. See critical chain.

actual start date

In project management, the date on which an activity in a project was actually started.

adaptive Web site

In e-commerce, a site that records a visitor's behavior, uses artificial intelligence software to "learn" this behavior, and chooses what to present to the visitor based on this learning.

marginal product

In economics, the additional quantity of total output following from a one-unit increase in variable input. See: law of diminishing marginal returns.

blueprint

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

life-cycle costing

In evaluating alternatives, the consideration of all costs, including acquisition, operation, and disposition costs, that will be incurred over the entire time of ownership of a product.

holding company

In financial management, a firm that controls the voting stock of other firms.

bad-debt loan ratio

In financial management, the fraction of accounts receivable that is never recovered.

bar coding

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

electronic mail (e-mail)

A technology for handling mail electronically.

material sublot

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

contestable market

A market having low entry costs.

market demand

In marketing, the total demand that would exist within a defined customer group in a given geographical area during a particular time period given a known marketing program.

confidence limit

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

inventory accounting

The branch of accounting dealing with valuing inventory. Inventory may be recorded or valued using either a perpetual or a periodic system. A perpetual inventory record is updated frequently or in real time, while a periodic inventory record is counted or measured at fixed time intervals, e.g., every two weeks or monthly. Inventory valuation methods of LIFO, FIFO, or average costs are used with either recording system.

cost accounting

The branch of accounting that is concerned with recording and reporting business operating costs. It includes the reporting of costs by departments, activities, and products.

inventory management

The branch of business management concerned with planning and controlling -inventories.

attrition factor

The budget fraction apportioned for replacement personnel training because of projected personnel losses (retirements, promotions, and terminations).

forecasting

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

change management

The business process that coordinates and monitors all changes to the business processes and applications operated by the business as well as to their internal equipment, resources, operating systems, and procedures. The change management discipline is carried out in a way that minimizes the risk of problems that will affect the operating environment and service delivery to the users.

modification flexibility

The capability of the transformation process to quickly implement minor product design changes.

acceptance number

1) A number used in acceptance sampling as a cutoff at which the lot will be accepted or rejected. For example, if x or more units are bad within the sample, the lot will be rejected. 2) The value of the test statistic that divides all possible values into acceptance and rejection regions.

activity

1) In activity-based cost accounting, a task or activity, performed by or at a resource, required in producing the organization's output of goods and services. A resource may be a person, machine, or facility. Activities are grouped into pools by type of activity and allocated to products. 2) In project management, an element of work on a project. It usually has an anticipated duration, anticipated cost, and expected resource requirements. Sometimes "major activity" is used for larger bodies of work.

allowance

1) In work measurement, a time value or percentage of time by which the normal time is increased, or the amount of nonproductive time applied, to compensate for justifiable causes or policy requirements that necessitate performance time not directly measured for each element or task. Usually includes irregular elements, incentive opportunity on machine-controlled time, minor unavoidable delays, rest time to overcome fatigue, and time for personal needs. 2) In assembly, the minimum clearance or maximum interference distance between two adjacent objects.

alternate feedstock

A backup supply of an item that either acts as a substitute or is used with alternate equipment.

affirmative action

A hiring policy that requires employers to analyze the workforce for underrepresentation of protected classes. It involves recruiting minorities and members of protected classes, changing management attitudes or prejudices toward them, removing discriminatory employment practices, and giving preferential treatment to protected classes.

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.

algorithm

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

alternate routing

A routing, usually less preferred than the primary routing, but resulting 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.

activity-based costing system

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

additives

A special class of ingredients characterized either by being used in minimal quantities or by being introduced into the processing cycle after the initial stage.

acceptable sampling plan

A specific plan that indicates the sampling sizes and the associated acceptance or nonacceptance criteria to be used.

affidavit

A sworn written statement.

affinity diagram

A total quality management tool whereby employees working in silence generate ideas and later categorize these ideas.

ABB

Abbreviation for activity-based budgeting.

ABP

Abbreviation for activity-based planning.

AGVS

Abbreviation for automated guided vehicle system.

AIS

Abbreviation for automated information system.

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.

actual volume

Actual output expressed as a volume of capacity. It is used in the calculation of variances when compared with demonstrated capacity (practical capacity) or budgeted capacity.

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. Syn: allocation costing. See: activity-based costing.

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.

ABC inventory control

An inventory control approach based on the ABC classification.

action message

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

accreditation

Certification by a recognized body of the facilities, capability, objectivity, competence, and integrity of an agency, service, operational group, or individual to provide the specific service or operation needed. For example, the Registrar Accreditation Board accredits those organizations that register companies to the ISO 9000 Series Standards.

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.

aggregate inventory management

Establishing the overall level (dollar value) of inventory desired and implementing controls to achieve this goal.

American Society for Quality (ASQ)

Founded in 1946, a not-for-profit educational organization with 144,000 members who are interested in quality improvement.

activity-based budgeting (ABB)

In activity-based cost accounting, a budgeting process employing knowledge of activities and driver 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 budget in evaluating success in setting and pursuing strategic goals; this activity is part of the activity-based planning process.

activity-based costing model

In activity-based cost accounting, a model, by time period, of resource costs created because of activities related to products or services or other items causing the activity to be carried out.

activity dictionary

In activity-based cost accounting, a set of standard definitions of activities including descriptions, business process, function source, cost drivers, and other data important to activity-based planning.

activity driver

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

agent

One who acts on behalf of another (the principal) in dealing with a third party. Examples include a sales agent and a purchasing agent.

advance material request

Ordering materials before the release of the formal product design. This early release is required because of long lead times.

alternate operation

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

ABC analysis

Syn: ABC classification.

allocation costing

Syn: absorption costing.

action report

Syn: action message.

activity-based costing

Syn: activity-based cost accounting.

advanced planning system (APS)

Syn: advanced planning and scheduling.

aggregate lead time

Syn: cumulative lead time.

allocated material

Syn: reserved material.

ABC classification

The classification of a group of items in decreasing order of annual dollar volume (price multiplied by projected volume) or other criteria. This array is then split into three classes, called A, B, and C. The A group usually represents 10% to 20% by number of items and 50% to 70% by projected dollar volume. The next grouping, B, usually represents about 20% of the items and about 20% of the dollar volume. The C class contains 60% to 70% of the items and represents about 10% to 30% of the dollar volume. The ABC principle states that effort and money can be saved through applying looser controls to the low-dollar-volume class items than will be applied to high-dollar-volume class items. The ABC principle is applicable to inventories, purchasing, sales, and so on. Syn: ABC analysis, distribution by value, Pareto analysis. See: 80-20, Pareto's law.

accuracy

The degree of freedom from error or the degree of conformity to a standard. Accuracy is different from precision. For example, four-significant-digit numbers are less precise than six-significant-digit numbers; however, a properly computed four-significant-digit number might be more accurate than an improperly computed six-significant-digit number.

actual cost of work performed

The direct costs actually incurred and the indirect costs applied in accomplishing the work performed within a given time period. These costs should reconcile with the contractor's incurred-cost ledgers, which are regularly audited by the client.

accounting

The function of maintaining, analyzing, and explaining the financial records and status of an organization.

activity analysis

The identification and description of activities within an organization for the purpose of activity-based costing.

aggregate inventory

The inventory for any grouping of items or products involving multiple stockkeeping units. See: base inventory level.

accounts receivable

The value of goods shipped or services rendered to a customer on which payment has not yet been received. Usually includes an allowance for bad debts.

alternate work center

The work center where an operation is not normally performed but can be performed. Ant: primary work center.

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.

active load

Work scheduled that may not be on hand.

FLSA

Abbreviation for Fair Labor Standards Act.

job order

Syn: manufacturing order.

manufacturing authorization

Syn: manufacturing order.

market reach

Syn: market penetration.

ESI

Abbreviation for early supplier involvement.

eBPP

Abbreviation for electronic bill presentation and payment.

e-commerce

Abbreviation for electronic commerce.

EDI

Abbreviation for electronic data interchange.

e-form

Abbreviation for electronic form.

EFT

Abbreviation for electronic funds transfer.

EAP

Abbreviation for employee assistance program.

EI

Abbreviation for employee involvement.

ERP

Abbreviation for enterprise resources planning.

EEO

Abbreviation for equal employment opportunity.

FMA

Abbreviation for failure mode analysis.

FMEA

Abbreviation for failure mode effects analysis.

FMECA

Abbreviation for failure mode effects and criticality analysis.

FTP

Abbreviation for file transfer protocol.

FMS

Abbreviation for flexible manufacturing system.

FTZ

Abbreviation for foreign trade zone.

4GL

Abbreviation for fourth-generation language.

FOB

Abbreviation for free on board.

FRT

Abbreviation for future reality tree.

G and A

Abbreviation for general and administrative expenses.

GNP

Abbreviation for gross national product.

GDSS

Abbreviation for group decision support system.

GT

Abbreviation for group technology.

HOQ

Abbreviation for house of quality.

HTML

Abbreviation for hypertext markup language.

HTTP

Abbreviation for hypertext transfer protocol.

IPO

Abbreviation for initial public offering.

I2M

Abbreviation for integrated Internet marketing.

IRM

Abbreviation for integrated resource management.

ISDN

Abbreviation for integrated services digital network.

IFB

Abbreviation for invitation for bid.

LF

Abbreviation for late finish date.

LS

Abbreviation for late start date.

LTL

Abbreviation for less than truckload.

LBO

Abbreviation for leveraged buyout.

LTPD

Abbreviation for lot tolerance percent defective.

LSL

Abbreviation for lower specification limit.

MBO

Abbreviation for management by objectives.

MBWA

Abbreviation for management by walking around.

MIS

Abbreviation for management information system.

MES

Abbreviation for manufacturing execution system.

MPC

Abbreviation for manufacturing planning and control.

MRP II

Abbreviation for manufacturing resource planning.

MPS

Abbreviation for master production schedule.

MRP

Abbreviation for material requirements planning.

MRB

Abbreviation for material review board.

MSDS

Abbreviation for material safety data sheet.

MTBF

Abbreviation for mean time between failures.

domestic corporation

A company incorporated in a particular state or country.

consortium

A group of companies that work together to jointly produce a product, service, or project.

domain name service (DNS)

A service that records and tracks all Internet addresses.

job lot

A specific quantity of a part or product that is produced at one time.

deficiency

Failure to meet quality standards.

listserve

Syn: listserver.

core process

That unique capability that is central to a company's competitive strategy.

bar

The darker, nonreflective element of a bar code.

data communications

The transmission of data over a distance.

matrix chart

A graphical technique used to analyze the relationship between two related groups of ideas.

cost-volume-profit analysis

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

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.

hedge inventory

A form of inventory buildup to buffer against some event that may not happen. Hedge inventory planning involves speculation related to potential labor strikes, price increases, unsettled governments, and events that could severely impair a company's strategic initiatives. Risk and consequences are unusually high, and top management approval is often required.

data warehouse

A repository of data that has been specially prepared to support decision-making applications. Syn: decision-support data, information data warehouse.

Internet

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

firm offer

A written offer to buy or sell goods that will be held open for a stipulated period.

EDD

Abbreviation for earliest due date.

attachment

An accessory that has to be physically attached to the product. See: feature.

book inventory

An accounting definition of inventory units or value obtained from perpetual inventory records rather than by actual count.

M-days

Available manufacturing days excluding holidays and weekends.

accountability

Being answerable for but not necessarily personally charged with doing the work. Accountability cannot be delegated, but it can be shared.

competitive benchmarking

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

core competencies

Bundles of skills or knowledge sets that enable a firm to provide the greatest level of value to its customers in a way that is difficult for competitors to emulate and that provides for future growth. Core competencies are embodied in the skills of the workers and in the organization. They are developed through -collective -learning, communication, and commitment to work across levels and functions in the organization and with the customers and suppliers. For example, a core competency could be the capability of a firm to coordinate and harmonize diverse production skills and multiple technologies. To illustrate, advanced casting processes for making steel require the integration of machine design with sophisticated sensors to track temperature and speed, and the sensors require mathematical modeling of heat transfer. For rapid and effective development of such a process, materials scientists must work closely with machine designers, software engineers, process specialists, and operating personnel. Core competencies are not directly related to the product or market.

business-to-business commerce (B2B)

Business being conducted over the Internet between businesses. The implication is that this connectivity will cause businesses to transform themselves via supply chain management to become virtual organizations, reducing costs, improving quality, reducing delivery lead time, and improving due-date performance.

inventory costs

Costs associated with ordering and holding inventory. See: carrying costs, ordering cost.

cubage

Cubic volume of space being used or available for shipping or storage.

integrated services digital network (ISDN)

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

barrier to entry

Factors that prevent companies from entering into a particular market, such as high initial investment in equipment.

attribute data

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

category management

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

demographic segmentation

In marketing, dividing potential markets by characteristics of potential customers, such as age, sex, income, and education.

customer acquisition

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

influence filter

In e-commerce, a device to make stakeholders better satisfied with a Web site.

ceteris paribus

Latin for all other things being the same.

hypertext links

Links contained within text connecting to other Web sites or other pages on the current site.

capacity smoothing

Syn: load leveling.

assays

Tests of the physical and chemical properties of a sample.

externality

The costs or benefits of a firm's activities borne or received by others.

actual costs

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

hurdle rate

The minimum acceptable rate of return on a project.

AON

Abbreviation for activity-on-node network.

ASN

Abbreviation for advance ship notice.

BOM

Abbreviation for bill of material.

BCP

Abbreviation for business continuation plan.

BPR

Abbreviation for business process reengineering.

B2B

Abbreviation for business-to-business commerce.

CPFR

Abbreviation for collaborative planning, forecasting, and replenishment.

CNC

Abbreviation for computer numerical control.

CAE

Abbreviation for computer-aided engineering.

CAIT

Abbreviation for computer-aided inspection and test.

COFC

Abbreviation for container on a railroad flatcar.

denied party list

A list of organizations that are unauthorized to submit a bid for an activity.

CRM

Abbreviation for customer relationship management and customer relations management.

CSR

Abbreviation for customer service representative.

DSS

Abbreviation for decision support system.

DTF

Abbreviation for demand time fence.

DFMA

Abbreviation for design for manufacture and assembly.

DOE

Abbreviation for design of experiments.

DNC

Abbreviation for direct numerical control.

DDP

Abbreviation for distributed data processing.

DRP

Abbreviation for distribution requirements planning.

DRP II

Abbreviation for distribution resource planning.

DBR

Abbreviation for drum-buffer-rope.

EF

Abbreviation for early finish date.

ES

Abbreviation for early start date.

electronic commerce application

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

EBT

Abbreviation for earnings before taxes.

bill-of-material processor

A computer program for maintaining and retrieving bill-of-material information.

EOQ

Abbreviation for economic order quantity.

FAQs

Abbreviation for frequently asked questions.

application package

A computer program or set of programs designed for a specific application; e.g., inventory control, MRP.

contract administration

Managing all aspects of a contract to guarantee that the contractor fulfills his obligations.

extended enterprise

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

buyer's market

A market in which goods can easily be secured and in which the economic forces of business tend to cause goods to be priced at the purchaser's estimate of value.

efficient consumer response

1) A grocery industry-based, demand-driven replenishment system that links suppliers to develop a large flow-through distribution network. Information technology is designed to enable suppliers to anticipate demand. Manufacture is initiated based on point-of-sale information. Accurate, instantaneous data are essential to this concept. 2) A management approach that streamlines the supply chain by improving its effectiveness in providing customer service and reducing costs through innovation and technology.

bill of material (BOM)

1) A listing of all the subassemblies, intermediates, parts, and raw materials that go into a parent assembly showing the quantity of each required to make an assembly. It is used in conjunction with the master production schedule to determine the items for which purchase requisitions and production orders must be released. A variety of display formats exist for bills of material, including the single-level bill of material, indented bill of material, modular (planning) bill of material, transient bill of material, matrix bill of material, and costed bill of material. 2) A list of all the materials needed to make one production run of a product, by a contract manufacturer, of piece parts/components for its customers. The bill of material may also be called the formula, recipe, or ingredients list in certain process industries.

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. Syn: batch production.

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 represents 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 or 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.

holonic network

1) A network of autonomous, distributed human or computer systems with the capability to act in an integrated manner. 2) A network of companies dynamically interacting to act as one system. Each company or holon has a different process and core competency. Virtual enterprises are created by organizing the holons, to take advantage of core competencies.

MAPI method

1) A procedure for equipment replacement analysis sponsored by the Machinery and Allied Products Institute. 2) A method of capital investment analysis that has been formulated by the Machinery and Allied Products Institute. This method uses a fixed format and provides charts and graphs to facilitate calculations. A prominent feature of this method is that it explicitly includes obsolescence.

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.

dispatcher

1) A production control person whose primary function is dispatching. 2) A transportation worker who sends out and tracks cars, buses, trucks, railcars, and other vehicles.

consignment

1) A shipment that is handled by a common carrier. 2) The process of a supplier placing goods at a customer location without receiving payment until after the goods are used or sold. See: consigned stocks.

bin tag

1) A type of perpetual inventory record, designed for storekeeping purposes, maintained at the storage area for each inventory item. 2) An identifying marking on a storage location.

CPM

1) Abbreviation for critical path method. 2) Abbreviation for Certified Purchasing Manager.

I/O

1) Abbreviation for input/output control. 2) Abbreviation for computer input/output.

LCL

1) Abbreviation for less than carload (lot shipment). 2) Abbreviation for lower control limit.

MRO

1) Abbreviation for maintenance, repair, and operating supplies. 2) Abbreviation for maintenance, repair, and overhaul.

float

1)The amount of work-in-process inventory between two manufacturing operations, especially in repetitive manufacturing. 2) In supply chains, the time necessary for items such as documents and checks to go from one supply chain partner to another. 3) In the critical path method of project management, the amount of time that an activity's early start or early finish time can be delayed without delaying the completion time of the entire project. There are three types: total float, free float, and independent float. Syn: path float, slack.

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 production schedule.

materials requisition

1) An authorization that identifies the items and quantities to be withdrawn from inventory. 2) An authorization that identifies the items and quantities to be included in a purchase order. Syn: production materials requisition.

job shop

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

capital recovery

1) Charging periodically to operations amounts that will ultimately equal the amount of capital expenditure. See: amortization, depletion, depreciation. 2) The replacement of the original cost of an asset plus interest. 3) The process of regaining the net investment in a project by means of revenue in excess of the cost from the project. (Usually implies amortization of principal plus interest on the diminishing unrecovered balance.)

artificial intelligence (AI)

1) Computer programs that can learn and reason in a manner similar to humans. The problem is defined in terms of states and operators to generate a search space that is examined for the best solution. In contrast, conventional programming collects and processes data by algorithm or fixed step-by-step procedures. 2) An area in computer science that attempts to develop AI computer programs.

incremental cost

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

interest

1) Financial share in a project or enterprise. 2) Periodic compensation for lending money. 3) In an economy study, synonymous with required return, expected profit, or charge for the use of capital. 4) The cost for the use of capital. Sometimes referred to as the time value of money.

driver

1) In activity-based cost accounting, an operation that influences the quantity of work required and cost of an activity. Syn: cost driver. 2) In the theory of constraints, an underlying cause that is responsible for several observed effects.

hardware

1) In manufacturing, relatively standard items such as nuts, bolts, washers, or clips. 2) In data processing, the computer and its peripherals.

cash conversion cycle

1) In retailing, the length of time between the sale of products and the cash payments for a company's resources. 2) In manufacturing, the length of time from the purchase of raw materials to the collection of accounts receivable from customers for the sale of products or services.

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 accounting, a cost that can specifically be traced and is economically feasible to track to a particular cost object, e.g., units produced, a production line, a department, or 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. Activity-based cost accounting assumes that more costs traditionally viewed as fixed costs are variable and can be traced to cost objects.

layout

1) Physical arrangement of resources or centers of economic activity (machines, groups of people, workstations, storage areas, aisles, etc.) within a facility. Layouts include product (linear or line), functional (job shop or process), cellular, and fixed position. 2) Syn: kit.

intermodal transport

1) Shipments moved by different types of equipment combining the best features of each mode. 2) The use of two or more different carrier modes in the through movement of a shipment.

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.

flexibility

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

balance

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

distribution

1) The activities associated with the movement of material, usually finished goods or service parts, from the manufacturer to the customer. These activities encompass the functions of transportation, warehousing, inventory control, material handling, order administration, site and location analysis, industrial packaging, data processing, and the communications network necessary for effective management. It includes all activities related to physical distribution, as well as the return of goods to the manufacturer. In many cases, this movement is made through one or more levels of field warehouses. Syn: physical distribution. 2) The systematic division of a whole into discrete parts having distinctive -characteristics.

average forecast error

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

capacity

1) The capability of a system to perform its expected function. 2) The capability of a worker, machine, work center, plant, or organization to produce output per time period. Capacity required represents the system capability needed to make a given product mix (assuming technology, product specification, etc.). As a planning function, both capacity available and capacity required can be measured in the short term (capacity requirements plan), intermediate term (rough-cut capacity plan), and long term (resource requirements plan). Capacity control is the execution through the I/O control report of the short-term plan. Capacity can be classified as budgeted, dedicated, demonstrated, productive, protective, rated, safety, standing, or theoretical. See: capacity available, capacity required. 3) Required mental ability to enter into a contract.

kit

1) The components of a parent item that have been pulled from stock and readied for movement to a production area. 2) A group of repair parts to be shipped with an order. Syn: kitted material, layout, staged material.

current cost

1) The current or replacement cost of labor, material, or overhead. Its computation is based on current performance or measurements, and it is used to address today's costs before production as a revision of annual standard costs. 2) An asset's value based on the cost of an identical asset purchased today.

distribution requirements planning (DRP)

1) The function of determining the need to replenish inventory at branch warehouses. A time-phased order point approach is used where the planned orders at the branch warehouse level are "exploded" via MRP logic to become gross requirements on the supplying source. In the case of multilevel distribution networks, this explosion process can continue down through the various levels of regional warehouses (master warehouse, factory warehouse, etc.) and become input to the master production schedule. Demand on the supplying sources is recognized as dependent, and standard MRP logic applies. 2) More generally, replenishment inventory calculations, which may be based on other planning approaches such as period order quantities or "replace exactly what was used," rather than being limited to the time-phased order point approach.

balance delay

1) The idle time of one hand in an operation caused by uneven workload balancing. 2) The idle time of one or more operations in a series caused by uneven workload balancing. See: balance, lost time factor.

cycle

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

material planner

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

inventory

1) Those stocks or items used to support production (raw materials and work-in-process items), supporting activities (maintenance, repair, and operating supplies), and customer service (finished goods and spare parts). Demand for inventory may be dependent or independent. Inventory functions are anticipation, hedge, cycle (lot size), fluctuation (safety, buffer, or reserve), transportation (pipeline), and service parts. 2) In the theory of constraints, inventory is defined as those items purchased for resale and includes finished goods, work in process, and raw materials. Inventory is always valued at purchase price and includes no value-added costs, as opposed to the traditional cost accounting practice of adding direct labor and allocating overhead as work in process progresses through the production process.

call center

A facility housing personnel who respond to customer phone queries. These personnel may provide customer service or technical support. Call center services may be in-house or outsourced.

grievance

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

analysis of variance (ANOVA)

A basic statistical technique for analyzing experimental data. It subdivides the total variation of a data set into meaningful component parts associated with specific sources of variation in order to test a hypothesis on the parameters of the model or to estimate variance components. There are three models: fixed, random, and mixed.

flexible budget

A budget showing the costs and revenues expected to be incurred or realized over a period of time at different levels of activity, measured in terms of some activity base such as direct labor hours, direct labor costs, or machine hours. A flexible manufacturing overhead budget gives the product costs of various manufacturing overhead items at different levels of activity. See: step budget.

dark factory

A completely automated production facility with no labor. Syn: lightless plant.

integrated enterprise

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

limited liability company

A business organization which, as does a corporation, enjoys limited liability yet is not a taxable entity.

distributor

A business that does not manufacture its own products, but purchases and resells these products. Such a business usually maintains a finished goods inventory. Syn: wholesaler.

buyer/planner

A buyer who also does material planning. This term should not be confused with planner/buyer.

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.

bill of lading (uniform)

A carrier's contract and receipt for goods the carrier agrees to transport from one place to another and to deliver to a designated person. In case of loss, damage, or delay, the bill of lading is the basis for filing freight claims.

certificate of analysis

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

inventory adjustment

A change made to an inventory record to correct the balance, to bring it in line with actual physical inventory balances. The adjustment either increases or decreases the item record on-hand balance.

interactive

A characteristic of those applications where a user communicates with a computer program via a terminal, entering data and receiving responses from the computer.

labor grade

A classification of workers whose capability indicates their skill level or craft. See: skill-based compensation, skills inventories.

manufacturing planning and control system (MPC)

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

lot-size code

A code that indicates the lot-sizing technique selected for a given item. Syn: order policy code.

buyer code

A code used to identify the purchasing person responsible for a given item or purchase order.

environmentally responsible manufacturing

A collection of manufacturing activities that includes design of the product, facility, manufacturing processes, logistics, and supplier relationships that reduce or eliminate environmental waste through innovation and improvements.

data file

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

manufacturing strategy

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

cyberspace

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

make-or-buy cost analysis

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

bid evaluation

A comparison of supplier quotes for a product based on price, quality, lead time, delivery performance, and other criteria and, based on that comparison, selecting a supplier.

cyclical component

A component of demand, usually describing the impact of the business cycle on demand. See: decomposition, time series analysis.

materials efficiency

A concept that addresses the efficiency with which materials are obtained, converted, and shipped in the overall purchasing, production, and distribution process. It can be considered as a companion concept to labor efficiency, and it is potentially more significant as the materials portion of cost of goods sold continues to grow.

graphical user interface (GUI)

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

bias

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

business continuation plan (BCP)

A contingency plan for sustained operations during periods of high risk, such as during labor unrest.

fixed-price-incentive-fee contract

A contract in which the seller is paid a set price and can earn an additional profit if certain stipulations are met.

firm fixed-price contract

A contract in which the seller is paid a set price without regard to costs. Syn: fixed-price contract.

cost-plus-incentive-fee contract

A contract in which the seller is paid for costs specified as allowable in the contract plus a profit provided certain provisions are met.

cost-plus-fixed-fee contract

A contract in which the seller is paid for costs specified as allowable in the contract plus a stipulated fixed fee.

incentive contract

A contract where the buyer and seller agree to a target cost and maximum price. Cost savings below the target are shared between buyer and seller. If actual cost exceeds the target cost, the cost overrun is shared between buyer and seller up to the maximum price.

guarantee

A contractual obligation by one entity to another that a fact regarding a product is true. See: warranty.

D chart

A control chart for evaluating a process in terms of a demerit (or quality score), e.g., a weighted sum of counts of various classified nonconformities. Syn: demerit chart.

average chart

A control chart in which the subgroup average, X-bar, is used to evaluate the stability of the process level. Syn: X-bar chart.

cumulative sum control chart

A control chart on which the plotted value is the cumulative sum of deviations of successive samples from a target value. The ordinate of each plotted point represents the algebraic sum of the previous ordinate and the most recent deviations from the target.

hash total

A control process used to ensure that all documents in a group are present or processed. In practice, the arithmetic sum of data not normally added together is found, the checking (audit) process adds the same data, and a comparison is made. If the sums do not agree, an error exists. Example: the last digit of every part number in an assembly is added and the last digit of the sum becomes the last digit of the assembly. If the last digit of an assembly is not the same as the sum of the last digit of the components' sum, the assembly must be missing a part or must have the wrong combination of parts.

avoidable cost

A cost associated with an activity that would not be incurred if the activity was not performed (e.g., telephone cost associated with vendor support).

controllable cost

A cost that is under the direct control of a given level of management.

burden rate

A cost, usually in dollars per hour, that is normally added to the cost of every standard production hour to cover overhead expenses.

core team

A cross-functional team of specialists formed to manage new product introduction. See: cross-functional team.

cumulative receipts

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

European currency unit (ECU)

A currency consisting of fixed amounts of currencies of members of certain European countries based upon the exchange rate mechanism.

learning curve

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

database

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

distributed data processing

A data processing organizational concept under which computer resources of a company are installed at more than one location with appropriate communication links. Processing is performed at the user's location generally on a smaller computer and under the user's control and scheduling, as opposed to processing for all users being done on a large, centralized computer system.

inventory write-off

A deduction of inventory dollars from the financial statement because the inventory is of less value. An inventory write-off may be necessary because the value of the physical inventory is less than its book value or because the items in inventory are no longer usable.

inbound stockpoint

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

analytic workplace design

A design based on established biomechanical and behavioral concepts, including the known operating characteristics of people. Produces a workplace situation well within the range of human capacity and does not generally require modification, improvement, or preliminary experimental "mock-up."

modem

A device that converts digital signals to analog signals (and vice versa) so they can be sent over phone lines.

jig

A device that holds a piece of work in a desired position and guides the tool or tools that perform the necessary operations. See: fixture.

bubble chart

A diagram that attempts to display the interrelationships of systems, functions, or data in a sequential flow. It derives its name from the circular symbols used to enclose the statements on the chart.

block diagram

A diagram that shows the operations, interrelationships, and interdependencies of components in a system. Boxes, or blocks (hence the name), represent the components; connecting lines between the blocks represent interfaces. There are two types of block diagrams: functional block diagrams, which show a system's subsystems and lower level products, their interrelationships, and interfaces with other systems; and reliability block diagrams, which are similar to the functional block diagram except that they are modified to emphasize those aspects influencing reliability. See: flowchart.

check digit

A digit added to each number in a coding system that allows for detection of errors in the recording of the code numbers. Through the use of the check digit and a predetermined mathematical formula, recording errors such as digit reversal or omission can be discovered.

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. For example, <br><br><center><img border="0" src="http://members.apics.org/publications/dictionary/images/critical_ratio.gif"><br><br></center> A ratio less than 1.0 indicates the job is behind schedule, a ratio greater than 1.0 indicates the job is ahead of schedule, and a ratio of 1.0 indicates the job is on schedule.

due date rule

A dispatching rule that directs the sequencing of jobs by the earliest due date.

earliest operation due date (ODD)

A dispatching rule that selects the job having the earliest due date for the impending operation. See: earliest due date.

first-come-first-served rule

A dispatching rule under which the jobs are sequenced by their arrival times. Syn: first-in, first-out.

load profile

A display of future capacity requirements based on released and/or planned orders over a given span of time. Syn: load projection. See: capacity requirements plan.

client/server system

A distributed computing system in which work is assigned to the computer best able to perform it from among a network of computers.

business unit

A division or segment of an organization generally treated as a separate profit-and-loss center.

material safety data sheet (MSDS)

A document that is part of the materials information system and accompanies the product. Prepared by the manufacturer, the MSDS provides information regarding the safety and chemical properties and (if necessary) the long-term storage, handling, and disposal of the product. Among other factors, the MSDS describes the hazardous components of a product; how to treat leaks, spills, and fires; and how to treat improper human contact with the product.

charge ticket

A document used for receiving goods and charging those goods to an operating cost center.

move ticket

A document used in dispatching to authorize or record movement of a job from one work center to another. It may also be used to report other information, such as the actual quantity or the material storage -location.

batch card

A document used in the process industries to authorize and control the production of a quantity of material. Batch cards usually contain quantities and lot numbers of ingredients to be used, processing variables, pack-out instructions, and product disposition. See: assembly parts list, batch sheet, blend formula, fabrication order, manufacturing order, mix ticket.

manufacturing order

A document, group of documents, or schedule conveying authority for the manufacture of specified parts or products in specified quantities. Syn: job order, manufacturing authorization, production order, production release, run order, shop order. See: assembly parts list, batch card, blend order, fabrication order, mix ticket, work order.

balance-of-stores record

A double-entry record system that shows the balance of inventory items on hand and the balances of items on order and available for future orders. Where a reserve system of materials control is used, the balance of material on reserve is also shown.

least unit cost

A dynamic lot-sizing technique that adds ordering cost and inventory carrying cost for each trial lot size and divides by the number of units in the lot size, picking the lot size with the lowest unit cost. See: discrete order quantity, dynamic lot sizing.

least total cost

A dynamic lot-sizing technique that calculates the order quantity by comparing the setup (or ordering) costs and the carrying cost for various lot sizes and selects the lot size where these costs are most nearly equal. See: discrete order quantity, dynamic lot sizing.

functional layout

A facility configuration in which operations of a similar nature or function are grouped together; an organizational structure based on departmental specialty (e.g., saw, lathe, mill, heat treat, and press). Syn: job shop layout, process layout.

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.

labor claim

A factory worker's report listing the jobs the employee has worked on, the number of pieces, the number of hours, etc., and often the amount of money to which the employee is entitled. A labor claim is usually made on a labor chit or time ticket. Syn: labor ticket, labor voucher.

Environmental Protection Agency (EPA)

A federal (U.S.) agency with regulatory authority over matters affecting the environment, including waste generation and habitat -destruction.

cancellation charge

A fee charged by a seller to cover its costs associated with a customer's cancellation of an order. If the seller has started engineering work, purchased raw materials, or started manufacturing operations, these charges could also be included in the cancellation charge.

item master file

A file containing all item master records for a product, product line, plant, or company. See: master file.

detail file

A file that contains manufacturing, routing, or specification details. See: master file.

bin location file

A file that specifically identifies the location where each item in inventory is stored.

locator file

A file used in a stockroom (or anywhere) providing information on where each item is located. See: locator system.

funds flow statement

A financial statement showing the flow of cash and its timing into and out of an organization or project. Syn: cash flow statement, statement of cash flows.

income statement

A financial statement showing the net income for a business over a given period of time. See: balance sheet, funds flow statement.

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. See: funds flow statement, income statement.

intrinsic forecast method

A forecast based on internal factors, such as an average of past sales. Ant: extrinsic forecast.

extrinsic forecasting method

A forecast method on a correlated leading indicator, such as estimating furniture sales based on housing starts. Extrinsic forecasts tend to be more useful for large aggregations, such as total company sales, than for individual product sales. Ant: intrinsic forecast method. See: quantitative forecasting technique.

Box-Jenkins model

A forecasting method based on regression and moving average models. The model is based not on regression of independent variables, but on past observations of the item to be forecast at varying time lags and on previous error values from forecasting. See: forecast.

moving average forecast

A forecasting technique that uses a simple moving average or a weighted moving average projected forward as a forecast.

Boolean algebra

A form of algebra that, like ordinary algebra, represents relationships and properties with symbols. However, Boolean algebra also has classes, propositions, on-off circuit elements, and operators (and, or, not, except, if, then). Boolean algebra is useful in defining the logic of a complex system.

Fourier series

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

keiretsu

A form of cooperative relationship among companies in Japan where the companies largely remain legally and economically independent, even though they work closely in various ways such as sole sourcing and financial backing. A member of a keiretsu generally owns a limited amount of stock in other member companies. A keiretsu generally forms around a bank and a trading company but "distribution" (supply chain) keiretsus exist linking companies from raw material suppliers to retailers.

fixed reorder quantity inventory model

A form of independent demand item management model in which an order for a fixed quantity, Q, is placed whenever stock on hand plus on order reaches a predetermined reorder level, R. The fixed order quantity Q may be determined by the economic order quantity, by a fixed order quantity (such as a carton or a truckload), or by another model yielding a fixed result. The reorder point, R, may be deterministic or stochastic, and in either instance is large enough to cover the maximum expected demand during the replenishment lead time. Fixed reorder quantity models assume the existence of some form of a perpetual inventory record or some form of physical tracking, e.g., a two-bin system that is able to determine when the reorder point is reached. These reorder systems are sometimes called fixed order quantity systems, lot-size systems, or order point-order quantity systems. Syn: fixed order quantity system, lot size system, order point-order quantity system, quantity-based order system. See: fixed reorder cycle inventory model, hybrid inventory system, independent demand item management models, optional replenishment model, order point, order point system, statistical inventory control, time-phased order point.

flow process chart

A graphic, symbolic representation of the work performed or to be performed on a product as it passes through some or all of the stages of a process. Typically, the information included in the chart is quantity, distance moved, type of work done (by symbol with explanation), and equipment used. Work times may also be included. Flow process chart symbols (ASME Standard Symbols) generally used are as follows: <br><center><img border ="0" src="http://members.apics.org/Publications/dictionary/images/flowchart.gif"><br></center> (Syn: process flow chart. See: flowchart.)

break-even chart

A graphical tool showing the total variable cost and fixed cost curve along with the total revenue curve. The point of intersection is defined as the break-even point, i.e., the point at which total revenues exactly equal total costs. See: total cost curve.

fixed reorder cycle inventory model

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

flow shop

A form of manufacturing organization in which machines and operators handle a standard, usually uninterrupted, material flow. The operators generally perform the same operations for each production run. A flow shop is often referred to as a mass production shop or is said to have a continuous manufacturing layout. The plant layout (arrangement of machines, benches, assembly lines, etc.) is designed to facilitate a product "flow." Some process industries (chemicals, oil, paint, etc.) are extreme examples of flow shops. Each product, though variable in material specifications, uses the same flow pattern through the shop. Production is set at a given rate, and the products are generally manufactured in bulk. Syn: flow line, flow manufacturing, flow plant.

indented bill of material

A form of multilevel bill of material. It exhibits the highest level parents closest to the left margin, and all the components going into these parents are shown indented toward the right. All subsequent levels of components are indented farther to the right. If a component is used in more than one parent within a given product structure, it will appear more than once, under every subassembly in which it is used.

heuristics

A form of problem solving in which the results or rules have been determined by experience or intuition instead of by optimization. Heuristics can be used in such areas as forecasting; lot sizing; or determining production, staff, or inventory levels.

focus-group research

A form of research (frequently used in marketing research) where data are gathered by interviewing consumers in groups of 6 to 10 at a time (the focus group). See: marketing research.

experimental research

A form of research (sometimes used in marketing research) where matched sets of people are controlled for certain variables (such as income, age, and so on) while other variables (such as products offered) are varied to test research questions. See: marketing research.

change order

A formal notification that a purchase order or shop order must be modified in some way. This change can result from a revised quantity, date, or specification by the customer; an engineering change; a change in inventory requirement date; etc.

experimental design

A formal plan that details the specifics for conducting an experiment, such as which statistical techniques and responses, factors, levels, blocks, and treatments, are to be used.

job description

A formal statement of duties, qualifications, and responsibilities associated with a particular job.

cost, insurance, freight (CIF)

A freight term indicating that the seller is responsible for cost, the marine insurance, and the freight charges on an ocean shipment of goods.

fourth-generation language (4GL)

A general term for a series of high-level nonprocedural languages that enable users or programmers to prototype and to code new systems. Nonprocedural languages use menus, question-and-answer combinations, and a simpler, English-like wording to design and implement systems, update databases, generate reports, create graphs, and answer inquiries.

defect

A good's or service's nonfulfillment of an intended requirement or reasonable expectation for use, including safety considerations. There are four classes of defects: Class 1, Very Serious, leads directly to severe injury or catastrophic economic loss; Class 2, Serious, leads directly to significant injury or significant economic loss; Class 3, Major, is related to major problems with respect to intended normal or reasonably foreseeable use; and Class 4, Minor, is related to minor problems with respect to intended normal or reasonably foreseeable use. See: blemish, imperfection, nonconformity.

histogram

A graph of contiguous vertical bars representing a frequency distribution in which the groups or classes of items are marked on the x axis and the number of items in each class is indicated on the y axis. The pictorial nature of the histogram lets people see patterns that are difficult to see in a simple table of numbers. The histogram is one of the seven tools of quality.

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.

distribution curve

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

master planning

A group of business processes that includes the following activities: demand management (which includes forecasting and order servicing); production and resource planning; and master scheduling (which includes the master schedule and the rough-cut capacity plan).

family

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

lean enterprise

A group of individuals, functions, and sometimes legally separate but operationally synchronized organizations. The value stream defines the lean enterprise. The objectives of the lean enterprise are to correctly specify value to the ultimate customer, and to analyze and focus the value stream so that it does everything from product development and production to sales and service in a way that actions that do not create value are removed and actions that do create value proceed in a continuous flow as pulled by the customer. Lean enterprise differs from a "virtual corporation" in which the organizational membership and structure keeps changing.

distribution system

A group of interrelated facilities—manufacturing and one or more levels of warehousing—linking the production, storage, and consumption activities for spare parts and finished goods inventory. See: pipeline stock.

flexible manufacturing system (FMS)

A group of numerically controlled machine tools interconnected by a central control system. The various machining cells are interconnected via loading and unloading stations by an automated transport system. Operational flexibility is enhanced by the ability to execute all manufacturing tasks on numerous product designs in small quantities and with faster delivery.

blocked operations

A group of operations identified separately for instructions and documentation but reported as one.

discussion list

A group of people who have all signed up on a listserver to participate via e-mail in the discussion of a given topic.

market segment

A group of potential customers sharing some measurable characteristics based on demographics, psychographics, lifestyle, geography, benefits, etc.

generally accepted manufacturing practices (GAMP)

A group of practices and principles, independent of any one set of techniques, that defines how a manufacturing company should be managed. Included are such elements as the need for data accuracy, frequent communication between marketing and manufacturing, top management control of the production planning process (sales and operations planning process), systems capable of validly translating high-level plans into detailed schedules, and so on. Today GAMP includes such paradigms as Just-in-Time, theory of constraints, total quality management, business process reengineering, and supply chain management.

assembly

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

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.

fixed-interval review system

A hybrid inventory system in which the inventory analyst reviews the inventory position at fixed time periods. If the inventory level is found to be above a preset reorder point, no action is taken. If the inventory level is at or below the reorder point, the analyst orders a variable quantity equal to M - x where M is a maximum stock level and x is the current quantity on hand and on order (if any). This hybrid system does not reorder every review interval. It therefore differs from the fixed-interval order system, which automatically places an order whenever inventory is reviewed.

historical analogy

A judgmental forecasting technique based on identifying a sales history that is analogous to a present situation, such as the sales history of a similar product, and using that past pattern to predict future sales. See: management estimation.

management estimation

A judgmental forecasting technique whereby responsible individuals predict the demand for new products or alter a quantitative forecast for existing products largely on the basis of experience and intuition. Other judgmental forecasting techniques may be used in combination with management estimation to improve the accuracy of the estimate. See: Delphi method, historical analogy, panel consensus, pyramid forecasting.

hypertext markup language (HTML)

A language used to create Web pages that permits the user to create text, hypertext links, and multimedia elements within the page. HTML is not a programming language, but a way to format text.

container

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

linear layout

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

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.

frequently asked questions (FAQs)

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

balanced scorecard™

A list of financial and operational measurements used to evaluate organizational or supply chain performance. The dimensions of the balanced scorecard might include customer perspective, business process perspective, financial perspective, and innovation and learning perspectives. It formally connects overall objectives, strategies, and measurements. Each dimension has goals and measurements.

invoice

A list of goods shipped by the supplier to the buyer stating prices, quantities, and other costs.

mix ticket

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

dispatch list

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

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.

current reality tree (CRT)

A logic-based tool for using cause-and-effect relationships to determine root problems that cause the observed undesirable effects of the system. See: root cause analysis.

fault tree analysis

A logical approach to identify the probabilities and frequencies of events in a system that are most critical to uninterrupted and safe operation. This analysis may include failure mode effects analysis (determining the result of component failure interactions toward system safety) and techniques for human error prediction.

blanket purchase order

A long-term commitment to a supplier for material against which short-term releases will be generated to satisfy requirements. Often blanket orders cover only one item with predetermined delivery dates. Syn: blanket order, standing order.

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.

fixed order quantity

A lot-sizing technique in MRP or inventory management that will always cause planned or actual orders to be generated for a predetermined fixed quantity, or multiples thereof, if net requirements for the period exceed the fixed order quantity.

lot-for-lot

A lot-sizing technique that generates planned orders in quantities equal to the net requirements in each period. See: discrete order quantity.

fixed-period requirements

A lot-sizing technique that sets the order quantity to the demand for a given number of periods. See: discrete order quantity.

machining center

A machine capable of performing a variety of metal, wood, or plastic removal operations on a part, usually operated by numerical control.

master file

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

industry analysis

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

line manager

A manager involved in managing a department that is directly involved in making a product.

functional manager

A manager responsible for a specialized department such as accounting or engineering.

management information system (MIS)

A manual or computerized system that anticipates the wide use of data for management planning and control purposes. Accordingly, the data are organized in a database and are readily available to a variety of management functions.

converter

A manufacturer that changes the products of a basic producer into a variety of industrial and consumer products. An example is a firm that changes steel ingot into bar stock, tubing, or plate. Other converter products are paper, soap, and dyes.

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.

blend order

A manufacturing order to a blending department authorizing it to mix the ingredients of a product. See: assembly order.

fabrication order

A manufacturing order to a component-making department authorizing it to produce component parts. See: batch card, manufacturing order.

assembly order

A manufacturing order to an assembly department authorizing it to put components together into an assembly. See: blend order.

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.

consumer market

A market composed of individuals and families who buy products and services for consumption. See government market, industrial market, institutional market.

differentiated oligopoly

A market in which a few companies produce partially differentiated products or services that are marketed within a given geographical area. Differentiation may be based on quality, features, styling, or services offered along with the product. See: industry structure types.

monopolistic competition

A market in which many competitors offer partially differentiated products or services within a given geographical area. Most competitors focus on market segments where they can meet customers' needs somewhat better than their competitors. See: industry structure types.

government market

A market in which most or all buyers consist of agencies of the federal, state, or local government. See: consumer market, industrial market, institutional market.

institutional market

A market in which most or all customers are one of the following: schools, hospitals, prisons, and other institutions that provide products and services to individuals who are under their care. See: consumer market, government market, industrial market.

industrial market

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

customer relationship management (CRM)

A marketing philosophy based on putting the customer first. The 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. It includes account management, catalog and order entry, payment processing, credits and adjustments, and other functions. Syn: customer relations management.

market segmentation

A marketing strategy in which the total market is disaggregated into submarkets, or segments, sharing some measurable characteristic based on demographics, psychographics, lifestyle, geography, benefits, etc.

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.

matrix

A mathematical array having one, two, and sometimes more dimensions, into which collections of data may be stored and processed.

decision matrix

A matrix used by teams to evaluate problems or possible solutions. After a matrix is drawn to evaluate 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.

generic processing

A means of developing routings or processes for the manufacture of products through a family relationship, usually accomplished by means of tabular data to establish interrelationships. It is especially prevalent in the manufacture of raw material such as steel, aluminum, or chemicals.

decision table

A means of displaying logical conditions in an array that graphically illustrates actions associated with stated conditions.

equipment class

A means to describe a group of equipment with similar characteristics for purposes of planning and scheduling.

level of service

A measure (usually expressed as a percentage) of satisfying demand through inventory or by the current production schedule in time to satisfy the customers' requested delivery dates and quantities. In a make-to-stock environment, level of service is sometimes calculated as the percentage of orders picked complete from stock upon receipt of the customer order, the percentage of line items picked complete, or the percentage of total dollar demand picked complete. In make-to-order and -design-to-order environments, level of service is the percentage of times the customer-requested or acknowledged date was met by shipping complete product quantities. Syn: measure of service, service level.

line efficiency

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

manufacturability

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

consumer price index

A measure of the overall level of prices. It attempts to relate the cost of buying a specific set of goods and services with the cost of buying the same set of goods and services during an earlier time period.

last in, first out (LIFO)

A method of inventory valuation for accounting purposes. The accounting assumption is that the most recently received (last in) is the first to be used or sold (first out) for costing purposes, but there is no necessary relationship with the actual physical movement of specific items. See: average cost systems.

first in, first out (FIFO)

A method of inventory valuation for accounting purposes. The accounting assumption is that the oldest inventory (first in) is the first to be used (first out), but there is no necessary relationship with the actual physical movement of specific items. Syn: first-come-first-served rule. See: average cost system.

efficiency

A measurement (usually expressed as a percentage) of the actual output to the standard output expected. Efficiency measures how well something is performing relative to existing standards; in contrast, productivity measures output relative to a specific input, e.g., tons/labor hour. Efficiency is the ratio of (1) actual units produced to the standard rate of production expected in a time period or (2) standard hours produced to actual hours worked (taking longer means less efficiency) or (3) actual dollar volume of output to a standard dollar volume in a time period. Illustrations of these calculations follow. (1) There is a standard of 100 pieces per hour and 780 units are produced in one eight-hour shift; the efficiency is 780/800 converted to a percentage, or 97.5%. (2) The work is measured in hours and took 8.21 hours to produce 8 standard hours; the efficiency is 8/8.21 converted to a percentage or 97.5 percent. (3) The work is measured in dollars and produces $780 with a standard of $800; the efficiency is $780/$800 converted to a percentage, or 97.5 percent.

forecast accuracy

A measurement of forecast usefulness, often defined as the average difference between the forecast value to the actual value. Syn: sales forecast. See forecast error.

human factors engineering

A merging of those branches of engineering and the behavioral sciences that concern themselves principally with the human component in the design and operation of human-machine systems. Human factors engineering is based on a fundamental knowledge and study of human physical and mental abilities and emotional characteristics.

cumulative system

A method for planning and controlling production that makes use of cumulative MRP, cumulative requirements, and cumulative counts.

enterprise resources planning

A method for the effective planning and control of all resources needed to take, make, ship, and account for customer orders in a manufacturing, distribution, or service company.

manufacturing resource planning (MRP II)

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

kanban

A method of Just-in-Time production that uses standard containers or lot sizes with a single card attached to each. It is a pull system in which work centers signal with a card that they wish to withdraw parts from feeding operations or suppliers. The Japanese word kanban, loosely translated, means card, billboard, or sign. The term is often used synonymously for the specific scheduling system developed and used by the Toyota Corporation in Japan. See: move card, production card, synchronized production.

decision tree

A method of analysis that evaluates alternative decisions in a tree-like structure to estimate values and/or probabilities. Decision trees take into account the time value of future earnings by using a rollback concept. Calculations are started at the far right-hand side, then traced back through the branches to identify the appropriate decision.

hierarchical database

A method of constructing a database that requires that related record types be linked in tree-like structures, where no child record can have more than one physical parent record.

horizontal display

A method of displaying output from a material requirements planning, distribution requirements planning, or other time-phased system in which requirements, scheduled receipts, projected balances, etc., are displayed across the document. Horizontal displays routinely summarize data into time periods or buckets. Ant: vertical display.

incremental analysis

A method of economic analysis in which the cost of a single additional unit is compared to its revenue. When the net contribution of an additional unit is zero, total contribution is maximized.

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.

direct-deduct inventory transaction processing

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

backflush

A method of inventory bookkeeping where the book (computer) inventory of components is automatically reduced by the computer after completion of activity on the component's upper-level parent item based on what should have been used as specified on the bill of material and allocation records. This approach has the disadvantage of a built-in differential between the book record and what is physically in stock. Syn: explode-to-deduct, post-deduct inventory transaction processing. See: pre-deduct inventory transaction processing.

base stock system

A method of inventory control that includes as special cases most of the systems in practice. In this system, when an order is received for any item, it is used as a picking ticket, and duplicate copies, called replenishment orders, are sent back to all stages of production to initiate replenishment of stocks. Positive or negative orders, called base stock orders, are also used from time to time to adjust the level of the base stock of each item. In actual practice, replenishment orders are usually accumulated when they are issued and are released at regular intervals.

discounted cash flow

A method of investment analysis in which future cash flows are converted, or discounted, to their value at the present time. The net present value of an item is estimated to be the sum of all discounted future cash flows.

batch picking

A method of picking orders in which order requirements are aggregated by product across orders to reduce movement to and from product locations. The aggregated quantities of each product are then transported to a common area where the individual orders are constructed. See: discrete order picking, order picking, zone picking.

discrete order picking

A method of picking orders in which the items on one order are picked before the next order is picked. See: batch picking, order picking, zone picking.

computer-aided process planning (CAPP)

A method of process planning in which a computer system assists in the development of manufacturing process plans (defining operation sequences, machine and tooling requirements, cut parameters, part tolerances, inspection criteria, and other items). Artificial intelligence and classification and coding systems may be used in the generation of the process plan.

categorical plan

A method of selecting and evaluating suppliers that considers input from many departments and functions within the buyer's organization and systematically categorizes that input. Engineering, production, quality assurance, and other functional areas evaluate all suppliers for critical factors within their scope of responsibility. For example, engineering would develop a category evaluating suppliers' design flexibility. Rankings are developed across categories, and performance ratings are obtained and supplier selections are made. See: weighted-point plan.

dynamic programming

A method of sequential decision making in which the result of the decision at each stage affords the best possible means to exploit the expected range of likely (yet unpredictable) outcomes in the following decision-making stages.

contribution margin pricing

A method of setting prices based on the contribution margin. It provides a ceiling and a floor between which the price setter operates. The ceiling is the target selling price—what the seller would like to get—and the floor is the total variable costs of the product using traditional accounting.

fixed-location storage

A method of storage in which a relatively permanent location is assigned for the storage of each item in a storeroom or warehouse. Although more space is needed to store parts than in a random-location storage system, fixed locations become familiar, and therefore a locator file may not be needed. See: random-location storage.

bill of batches

A method of tracking the specific multilevel batch composition of a manufactured item. The bill of batches provides the necessary where-used and where-from relationships required for lot traceability.

location audit

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

center-of-gravity approach

A methodology for locating distribution centers at approximately the location representing the minimum transportation costs between the plants, the distribution centers, and the markets.

information system architecture

A model of how the organization operates regarding information. The model considers four factors: (1) organizational functions, (2) communication of coordination requirements, (3) data modeling needs, and (4) management and control structures. The architecture of the information system should be aligned with and match the architecture of the organization.

linear decision rules

A modeling technique using simultaneous equations, e.g., the establishment of aggregate workforce levels, based upon minimizing the total cost of hiring, firing, holding inventory, backorders, payroll, overtime, and undertime.

batch sensitivity factor

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

economic infrastructure

A nation's networks for supporting commerce, including transportation, communications, and finance.

demand

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

annualized contract

A negotiated agreement with a supplier for one year that sets pricing, helps ensure a continuous supply of material, and provides the supplier with estimated future requirements.

graphical evaluation and review technique (GERT)

A network analysis technique that allows for probability distributions of activity durations and also conditions under which some activities may not be carried out. See: critical path method, network analysis, program evaluation and review technique.

centralized computer network

A network in which there is one computer (or possibly more) linked to all others in a given enterprise.

critical path method

A network planning technique for the analysis of a project's completion time used for planning and controlling the activities in a project. By showing each of these activities and their associated times, the critical path, which identifies those elements that actually constrain the total time for the project, can be determined. See: critical chain method, network analysis.

decentralized computer network

A network where there is no central computer or computers linked to all other computers in the group.

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.

group classification code

A part of a material classification technique that provides for designation of characteristics by successively lower order groups of code. Classification may denote function, type of material, size, shape, etc.

equal protection clause

A part of the Fourteenth Amendment to the U.S. Constitution requiring similar treatment of citizens in similar circumstances.

composite part

A part that represents operations common to a family or group of parts controlled by group technology. Tools, jigs, and dies are used for the composite part; therefore, any parts of that family can be processed with the same operations and tooling. The goal here is to reduce setup costs.

labor productivity

A partial productivity measure, the rate of output of a worker or group of workers per unit of time compared to an established standard or rate of output. Labor productivity can be expressed as output per unit of time or output per labor hour. See: machine productivity, productivity.

machine productivity

A partial productivity measure. The rate of output of a machine per unit of time compared with an established standard or rate of output. Machine productivity can be expressed as output per unit of time or output per machine hour. See: labor productivity, productivity.

management by objectives (MBO)

A participative goal-setting process that enables the manager or supervisor to construct and communicate the goals of the department to each subordinate. At the same time, the subordinate is able to formulate personal goals and influence the department's goals.

limited partnership

A partnership having two types of partners: (1) limited partners contribute assets to the company without participating in management and (2) general partners manage the company and are responsible for all debts.

business cycle

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

job status

A periodic report showing the plan for completing a job (usually the requirements and completion date) and the progress of the job against that plan.

distribution planner

A person who plans inventories and schedules replenishment shipments for the distribution centers.

Just-in-Time (JIT)

A philosophy of manufacturing based on planned elimination of all waste and on continuous improvement of productivity. It encompasses the successful execution of all manufacturing activities required to produce a final product, from design engineering to delivery, and includes all stages of conversion from raw material onward. The primary elements of Just-in-Time are to have only the required inventory when needed; to improve quality to zero defects; to reduce lead times by reducing setup times, queue lengths, and lot sizes; to incrementally revise the operations themselves; and to accomplish these activities at minimum cost. In the broad sense, it applies to all forms of manufacturing—job shop, process, and repetitive—and to many service industries as well. Syn: short-cycle manufacturing, stockless production, zero inventories.

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.

integrating mechanism

A physical, organizational, or informational entity that allows people and functions to interact freely by transcending boundaries.

accumulation bin

A place, usually a physical location, used to accumulate all components that go into an assembly before the assembly is sent out to the assembly floor. Syn: assembly bin.

budget

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

firm planned order (FPO)

A planned order that can be frozen in quantity and time. The computer is not allowed to change it automatically; this is the responsibility of the planner in charge of the item that is being planned. This technique can aid planners working with MRP systems to respond to material and capacity problems by firming up selected planned orders. In addition, firm planned orders are the normal method of stating the master production schedule. See: planning time fence.

closed-loop feedback system

A planning and control system that monitors system progress toward the plan and has an internal control and replanning capability.

focused factory

A plant established to focus the entire manufacturing system on a limited, concise, manageable set of products, technologies, volumes, and markets precisely defined by the company's competitive strategy, technology, and economics. See: cellular manufacturing.

count point

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

intranet

A privately owned network that makes use of Internet technology and applications to meet the needs of an enterprise. It resides entirely within a department or company, providing communication and access to information, similar to the Internet, with Web pages, and so on for internal use only.

cut-off control

A procedure for synchronizing cycle counting and transaction processing.

business process reengineering (BPR)

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

failure mode effects and criticality analysis (FMECA)

A procedure that is performed after a failure mode effects analysis to classify each potential failure effect according to its severity and probability of occurrence.

failure mode analysis (FMA)

A procedure to determine which malfunction symptoms appear immediately before or after a failure of a critical parameter in a system. After all the possible causes are listed for each symptom, the product is designed to eliminate the problems.

mixed-flow scheduling

A procedure used in some process industries for building process train schedules that start at an initial stage and work toward the terminal process stages. This procedure is effective for scheduling where several bottleneck stages may exist. Detailed scheduling is done at each bottleneck stage.

continuous replenishment

A process by which a supplier is notified daily of actual sales or warehouse shipments and commits to replenishing these sales (by size, color, and so on) without stockouts and without receiving replenishment orders. The result is a lowering of associated costs and an improvement in inventory turnover. See: vendor-managed inventory.

contingency planning

A process for creating a document that specifies alternative plans to facilitate project success if certain risk events occur.

in-control process

A process in which the statistical measure being evaluated is in a state of statistical control (i.e., the variations among the observed sampling results can be attributed to a constant system of chance causes). Ant: out-of-control process.

job analysis

A process of gathering (by observation, interview, or recording systems) significant task-oriented activities and requirements about work required of -employees.

aggregate planning

A process to develop tactical plans to support the organization's business plan. Aggregate planning usually includes the development, analysis, and maintenance of plans for total sales, total production, targeted inventory, and targeted customer backlog for families of products. The production plan is the result of the aggregate planning process. Two approaches to aggregate planning exist—production planning and sales and operations planning. See: production planning, sales and operations planning, sales plan.

design for quality

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

machine center

A production area consisting of one or more machines (and, if appropriate for capacity planning, the necessary support personnel) that can be considered as one unit for capacity requirements planning and detailed scheduling.

expeditor

A production control person whose primary duty is expediting.

make-to-stock

A production environment where products can be and usually are finished before receipt of a customer order. Customer orders are typically filled from existing stocks, and production orders are used to replenish those stocks. See: assemble-to-order, make-to-order.

hybrid production method

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.

intelligent agent

A program that regularly gathers information without the owner being present.

employee stock ownership plan (ESOP)

A program to encourage workers to purchase stock of the company, generally tied into the compensation/benefits package. The intention is to give workers a feeling of participation in the management and direction of the company.

activity-on-node network (AON)

A project management network in which the passage of time, via activities, takes place on circles called nodes. Each node contains a number representing the estimated duration of the activity it represents. Nodes are connected by arrows that give precedence relationships. Syn: event-on-node network, precedence diagram method.

independent project

A project which, whether or not it is accepted, does not eliminate other projects from eligibility. See: contingent project, mutually exclusive project.

coupon

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

file transfer protocol (FTP)

A protocol used to transfer files over the Internet.

first-article inspection

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

lot

A quantity produced together and sharing the same production costs and specifications. See: batch.

constant

A quantity that has a fixed value. Ant: variable.

bid

A quotation specifically given to a prospective purchaser upon request, usually in competition with other vendors. See: quotation.

absentee rate

A ratio comparing the number of employee-days lost with the total number of available employee-days of employment during some base period, usually one month.

assumed receipt

A receiving technique based on the assumption that a shipment is as expected. Receiving personnel do not verify the delivery quantity. This technique is used to eliminate invoices.

batch bill of materials

A recipe or formula in which the statement of quantity per is based on the standard batch quantity of the parent. Syn: batch formula.

exception report

A report that lists or flags only those items that deviate from the plan.

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 and explaining 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. Syn: delay report.

capacity constraint resource (CCR)

A resource that is not a constraint but will become a constraint unless scheduled carefully.

cost analysis

A review and an evaluation of actual or anticipated cost data.

configuration audit

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

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.

blanket routing

A routing that lists groups of operations needed to produce a family of items. The items may have small differences in size, but they use the same sequence of operations. Specific times or tools for each individual item can be included.

40/30/30 rule

A rule that identifies the sources of scrap, rework, and waste as 40% product design, 30% manufacturing processing, and 30% from suppliers.

gapped schedule

A schedule in which every piece in a lot is finished at one work center before any piece in the lot can be processed at the succeeding work center; the movement of material in complete lots, causing time gaps between the end of one operation and the beginning of the next. It is a result of using a batched schedule at each operation (work center), where process batch and transfer batch are assumed to be the same or equal. Syn: gap phasing, straight-line schedule. Ant: overlapped schedule.

interrelationship diagram

A technique used to define how factors relate to one another. Complex multivariable problems or desired outcomes can be displayed with their interrelated factors. The logical and often causal relationships between the factors can be illustrated.

fault isolation

A technique used to identify the cause of a defect.

final assembly schedule (FAS)

A schedule of end items to finish the product for specific customers' orders in a make-to-order or assemble-to-order environment. It is also referred to as the finishing schedule because it may involve operations other than just the final assembly; also, it may not involve assembly, but simply final mixing, cutting, packaging, etc. The FAS is prepared after receipt of a customer order as constrained by the availability of material and capacity, and it schedules the operations required to complete the product from the level where it is stocked (or master scheduled) to the end-item level.

finite scheduling

A scheduling methodology where work is loaded into work centers such that no work center capacity requirement exceeds the capacity available for that work center. See: drum-buffer-rope, finite forward scheduling.

forward scheduling

A scheduling technique where the scheduler proceeds from a known start date and computes the completion date for an order, usually proceeding from the first operation to the last. Dates generated by this technique are generally the earliest start dates for operations. Syn: forward pass. Ant: back scheduling.

broadcast system

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

bar code

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

customer/order fulfillment process

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

ISO 14000 Series Standards

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

manufacturing

A series of interrelated activities and operations involving the design, material selection, planning, production, quality assurance, management, and marketing of discrete consumer and durable goods.

industry

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

manufacturing instruction

A set of detailed instructions for carrying out a manufacturing process. It is usually referenced by the routing and thus can simplify the content of the routing.

econometric model

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

ISO 9000

A set of five individual but related international standards on quality management and quality assurance developed to help companies effectively document the quality system elements to be implemented to maintain an efficient quality system. The standards were issued by an international organization representing more than 100 nations and are supported by most national standards organizations.

cross-functional team

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

automatic relief

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

four P's

A set of marketing tools to direct the business offering to the customer. The four P's are product, price, place, and promotion.

benchmark measures

A set of measurements (or metrics) that is used to establish goals for improvements in processes, functions, products, and so on Benchmark measures are often derived from other firms that display "best in class" achievement.

baseline measures

A set of measurements (or metrics) that seeks to establish the current or starting level of performance of a process, function, product, firm, and so on. Baseline measures are usually established before implementing improvement activities and programs.

financial leverage management ratios

A set of measurements of the degree to which a firm is financing assets with fixed-charge instruments such as debt or preferred stock.

focus group

A set of people who are interviewed together for the purpose of collecting marketing data.

lot control

A set of procedures (e.g., assigning unique batch numbers and tracking each batch) used to maintain lot integrity from raw materials, from the supplier through manufacturing to consumers.

application system

A set of programs of specific instructions for processing activities needed to compute specific tasks for computer users, as opposed to operating systems that control the computer's internal operations. Examples are payroll, spreadsheets, and word processing programs.

date effectivity

A technique used to identify the effective date of a configuration change. A component change is controlled by effective date within the bill of material for the unchanged parent part number.

free alongside ship (FAS)

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

material requirements planning (MRP)

A set of techniques that uses bill of material data, inventory data, and the master production schedule to calculate requirements for materials. It makes recommendations to release replenishment orders for material. Further, because it is time-phased, it makes recommendations to reschedule open orders when due dates and need dates are not in phase. Time-phased MRP begins with the items listed on the MPS and determines (1) the quantity of all components and materials required to fabricate those items and (2) the date that the components and material are required. Time-phased MRP is accomplished by exploding the bill of material, adjusting for inventory quantities on hand or on order, and offsetting the net requirements by the appropriate lead times.

containerization

A shipment method in which commodities are placed in containers, and after initial loading, the commodities per se are not rehandled in shipment until they are unloaded at the destination.

carload lot

A shipment that qualifies for a reduced freight rate because it is greater than a specified minimum weight. Since carload rates usually include minimum rates per unit of volume, the higher LCL (less than carload) rate may be less expensive for a heavy but relatively small shipment.

check sheet

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

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.

hybrid EDI

A situation in which only one trading partner is EDI enabled, while the other continues to use paper and fax. Usually the EDI-enabled partner would have electronic documents converted to fax.

external factory

A situation where suppliers are viewed as an extension of the firm's manufacturing capabilities and capacities. The same practices and concerns that are commonly applied to the management of the firm's manufacturing system should also be applied to the management of the external factory.

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. Syn: special cause. See: common causes.

container on a flatcar (COFC)

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

leading indicator

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

field

A specified area of a record used for a particular category of data.

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.

loose standard

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

global strategy

A strategy that focuses on improving worldwide performance through the sales and marketing of common goods and services with minimum product variation by country. Its competitive advantage grows through selecting the best locations for operations in other countries. See: multinational strategy.

annuity

A stream of fixed payments for a stipulated time, yearly or at other intervals.

byte

A string of 8 bits used to represent a single character in a computer code.

data hierarchy

A structure of relationships between data elements (or records) that can be expressed in a treelike structure. All of the subordinate data segments in a multilevel structure are dependent on the keys of the parent data segments. All of the relationships between records are one to many.

bill of labor

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

house of quality (HOQ)

A structured process that relates customer-defined attributes to the product's technical features needed to support and generate these attributes. This technique achieves this mapping by means of a six-step process: (1) identification of customer attributes; (2) identification of supporting technical features; (3) correlation of the customer attributes with the supporting technical features; (4) assignment of priorities to the customer requirements and technical features; (5) evaluation of competitive stances and competitive products; and (6) identification of those technical features to be used (deployed) in the final design of the product. HOQ is part of the quality function deployment (QFD) process and forces designers to consider customer needs and the degree to which the proposed designs satisfy these needs. See: customer-defined attributes, quality function deployment.

dock-to-stock inventory

A supplier-customer relationship where specified quality and packaging requirements are met before the product is released. The product is then received directly into the customer's inventories. See: point-of-use inventory, stockless purchasing.

demand chain management

A supply chain inventory management approach that concentrates on demand pull rather than supplier push inventory models.

closed-loop MRP

A system built around material requirements planning that includes the additional planning processes of production planning (sales and operations planning), master production scheduling, and capacity requirements planning. Once this planning phase is complete and the plans have been accepted as realistic and attainable, the execution processes come into play. These processes include the manufacturing control processes of input-output (capacity) measurement, detailed scheduling and dispatching, as well as anticipated delay reports from both the plant and suppliers, supplier scheduling, and so on. The term closed loop implies not only that each of these processes is included in the overall system, but also that feedback is provided by the execution processes so that the planning can be kept valid at all times.

block system

A system for selecting items to be cycle counted by a group or block of numbers.

direct numerical control (DNC)

A system in which sets of numerical control machines are connected to a computer, allowing direct control of machines by the computer without use of external storage media.

methods-time measurement (MTM)

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

hypertext

A system of relating information without using menus or hierarchies.

company culture

A system of values, beliefs, and behaviors inherent in a company. To optimize business performance, top management must define and create the necessary culture.

focus forecasting

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

electronic bill presentation and payment (eBPP)

A system that connects the bill issuer, bill payer, and the payer's bank to facilitate electronic payment. Payment is usually by credit card.

control system

A system that has as its primary function the collection and analysis of feedback from a given set of functions for the purpose of controlling the functions. Control may be implemented by monitoring or systematically modifying parameters or policies used in those functions, or by preparing control reports that initiate useful action with respect to significant deviations and exceptions.

modular system

A system-design method that recognizes that different levels of experience exist in organizations and develops the system to provide for segments or modules to be installed at a rate compatible with the user's ability to implement the system.

flowcharting

A systems analysis tool that graphically presents a procedure. Symbols are used to represent operations, data, transportations, inspections, storages, delays, and equipment.

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.

leveraged buyout (LBO)

A takeover of a company using borrowed funds where assets of the acquired company are used as partial collateral for the loan.

good

A tangible product, merchandise, or ware.

duty

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

back scheduling

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

input/output control

A technique for capacity control where planned and actual inputs and planned and actual outputs of a work center are monitored. Planned inputs and outputs for each work center are developed by capacity requirements planning and approved by manufacturing management. Actual input is compared to planned input to identify when work center output might vary from the plan because work is not available at the work center. Actual output is also compared to planned output to identify problems within the work center. Syn: input/output analysis, production monitoring. See: capacity control.

design review

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

lot-size inventory management interpolation technique (LIMIT)

A technique for looking at the lot sizes for groups of similar products to determine the effect economic lot sizes will have on the total inventory, total setup costs, and machine availability.

computer numerical control (CNC)

A technique in which a machine tool controller uses a computer or microprocessor to store and execute numerical instructions.

material-dominated scheduling (MDS)

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

brainstorming

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

arrow diagram

A technique to determine the relationships and precedence of different activities and the time estimate for project completion. The technique is useful in identifying potential problems and improvement opportunities.

factory within a factory

A technique to improve management focus and overall productivity by creating autonomous business units within a larger physical plant. Syn: plant within a plant.

IIE

Abbreviation for Institute of Industrial Engineers.

80-20

A term referring to the Pareto principle. The principle suggests that most effects come from relatively few causes; that is, 80% of the effects (or sales or costs) come from 20% of the possible causes (or items). See: ABC classification.

big Q, little q

A term used to contrast the difference between managing for quality in all business processes and products (big Q) and managing for quality in a limited capacity—traditionally in only factory products and processes (little q).

beta test

A term used to describe the pilot evaluation of a good or service, i.e., "the second evaluation."

form-fit-function

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

fitness for use

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

Maslow's hierarchy of needs

A theory that human needs are arranged in an order, or hierarchy, of importance. The hierarchy includes physiological, safety, social, esteem, and self-actualization needs.

capacity requirements plan

A time-phased display of present and future load (capacity required) on all resources based on the planned and released supply authorizations (i.e., orders) and the planned capacity (capacity available) of these resources over a span of time. See: load profile.

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.

checklist

A tool used to ensure that important steps or actions in an operation have been taken. Checklists contain items that are important or relevant to an issue or situation.

equivalent units

A translation of inventories into equivalent finished goods units or of inventories exploded back to raw materials for period end valuation of inventories. An equivalent unit can be the sum of several partially completed units. Two units 50% completed are equivalent to one unit 100% completed.

automated guided vehicle system (AGVS)

A transportation network that automatically routes one or more material handling devices, such as carts or pallet trucks, and positions them at predetermined destinations without operator intervention.

diagnostic journey and remedial journey

A two-phase investigation used by teams to solve chronic quality problems. In the first phase—the diagnostic journey—the team journeys from the symptom of a chronic problem to its cause. In the second phase—the remedial journey—the team journeys from the cause to its remedy.

economic order quantity

A type of fixed order quantity model that determines the amount of an item to be purchased or manufactured at one time. The intent is to minimize the combined costs of acquiring and carrying inventory. The basic formula is <br><center><img border="0' src="http://members.apics.org/Publications/dictionary/images/eoq.gif"><br></center> where d = annual demand, c = average cost of order preparation, i = annual inventory carrying cost percentage, and u = unit cost. Syn: economic lot size, minimum cost order quantity. See: total cost curve.

causal forecast

A type of forecasting that uses cause-and-effect associations to predict and explain relationships between the independent and dependent variables. An example of a causal model is an econometric model used to explain the demand for housing starts based on consumer base, interest rates, personal incomes, and land availability.

min-max system

A type of order point replenishment system where the "min" (minimum) is the order point, and the "max" (maximum) is the "order up to" inventory level. The order quantity is variable and is the result of the max minus available and on-order inventory. An order is recommended when the sum of the available and on-order inventory is at or below the min.

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.

lot number

A unique identification assigned to a homogeneous quantity of material. Syn: batch number, mix -number.

material lot

A uniquely identifiable amount of a material. This describes the actual quantity or amount of material available, its current state, and its specific property values.

AQL

Abbreviation for acceptable quality level.

AOA

Abbreviation for activity-on-arrow network.

man-hour

A unit of measure representing one person working for one hour. The combination of "n" people working for "h" hours produces nh man-hours. Frequent qualifications to the definition include (1) designation of work effort as normal effort; (2) designation of time spent as actual hours.

critical process parameters

A variable or a set of variables that dominates the other variables. Focusing on these variables will yield the greatest return in investment in quality control and improvement.

endogenous variable

A variable whose value is determined by relationships included within the model.

exogenous variable

A variable whose values are determined by considerations outside the model in question.

cost-ratio plan

A variation of the weighted-point plan of supplier evaluation and selection. The cost ratio is obtained by dividing the bid price by the weighted scores determined by the weighted-point plan. This procedure determines the true costs by taking into account compensating factors. Suppliers are selected and/or evaluated based on the lowest cost ratio.

control board

A visual means of showing machine loading or project planning, usually a variation of the basic Gantt chart. Syn: dispatch(ing) board, planning board, schedule board. See: schedule chart.

engineering drawings

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

intermediately positioned warehouse

A warehouse located between customers and manufacturing plants to provide increased customer service and reduced distribution cost.

distribution center

A warehouse with finished goods and/or service items. A company, for example, might have a manufacturing facility in Philadelphia and distribution centers in Atlanta, Dallas, Los Angeles, San Francisco, and Chicago. Distribution center is synonymous with the term branch warehouse, although the former has become more commonly used recently. When a warehouse serves a group of satellite warehouses, it is usually called a regional distribution center. Syn: branch warehouse, field warehouse.

hazardous waste

A waste such as chemicals or nuclear material that is hazardous to humans or animals and requires special handling.

Cp

A widely used process capability index. It is calculated by dividing the difference between the upper specification limit (USL) and the lower specification limit (LSL) by 6 times the standard deviation (s). or <br><br><center><img border="0" src="http://members.apics.org/Publications/dictionary/images/cp.gif"><br><br></center>

Cpk

A widely used process capability index. It is expressed as <br><br><center><img border="0" src="http://members.apics.org/Publications/dictionary/images/cpk.gif"><br><br></center> where m is the mean and s is the standard deviation.

brand name

A word or combination of words used to identify a product and differentiate it from other products; the verbal part of a trademark, in contrast to the pictorial mark; a trademark word.

dedicated capacity

A work center that is designated to produce a single item or a limited number of similar items. Equipment that is dedicated may be special equipment or may be grouped general-purpose equipment committed to a composite part.

gateway work center

A work center that performs the first operation of a particular routing sequence.

flexible workforce

A workforce whose members are cross-trained and whose work rules permit assignment of individual workers to different tasks.

hold order

A written order directing that certain operations or work be interrupted or terminated pending a change in design or other disposition of the material. Syn: stop work order.

ASQ

Abbreviation for American Society for Quality.

EDIFACT

Abbreviation for EDI for administration, commerce, and transport.

EPA

Abbreviation for Environmental Protection Agency.

ECU

Abbreviation for European currency unit.

FTC

Abbreviation for Federal Trade Commission.

ASCII

Acronym for American Standard Code for Information Interchange.

CIRM

Acronym for Certified in Integrated Resource Management.

JIT

Acronym for Just-in-Time.

ANOVA

Acronym for analysis of variance.

bit

Acronym for binary digit. It can have only the values 0 or 1.

CAD

Acronym for computer-aided design.

GAAP

Acronym for generally accepted accounting principles.

GUI

Acronym for graphical user interface, pronounced "gooey."

LIFO

Acronym for last in, first out.

LAN

Acronym for local area network.

LIMIT

Acronym for lot-size inventory management interpolation technique.

MAP

Acronym for manufacturing automation protocol.

MAD

Acronym for mean absolute deviation.

capital budgeting

Actions relating to the planning and financing of capital outlays for such purposes as the purchase of new equipment, the introduction of new product lines, and the modernization of plant facilities.

international logistics

All functions concerned with the movement of materials and finished goods on a global scale.

liabilities

An accounting/financial term (balance sheet classification of accounts) representing debts or obligations owed by a company to creditors. Liabilities may have a short-term time horizon, such as accounts payable, or a longer-term obligation, such as mortgage payable or bonds payable. See: assets, balance sheet, owner's equity.

assets

An accounting/financial term (balance sheet classification of accounts) representing the resources owned by a company, whether tangible (cash, inventories) or intangible (patent, goodwill). Assets may have a short-term time horizon, such as cash, accounts receivable, and inventory or a long-term value, such as equipment, land, and buildings. See: balance sheet, liabilities, owner's equity.

backlog

All the customer orders received but not yet shipped. Sometimes referred to as open orders or the order board. Syn: order backlog. See: past due order.

external environment

All the factors that exist outside the boundary of the organization that have the possibility of affecting any part of the organization. Syn: organizational environment. See: internal environment.

current assets

An accounting/financial term (balance sheet classification of accounts) representing the short-term resources owned by a company, including cash, accounts receivable, and inventories. See: assets, balance sheet.

disciplinary action

An action taken to enforce compliance with organizational rules and policies.

hypermedia

An addition to hypertext to include sound, pictures, and/or music.

conformance

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

contract

An agreement between two or more competent persons or companies to perform or not to perform specific acts or services or to deliver merchandise. A contract may be oral or written. A purchase order, when accepted by a supplier, becomes a contract. Acceptance may be in writing or by performance, unless the purchase order requires acceptance in writing.

joint venture

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

distributed numerical control

An approach to automated machining in which each machine tool has its own dedicated microcomputer or computer numerical control (CNC). Each machine tool's CNC is connected via a network with a minicomputer that handles distributed processing between the host mainframe computer and the CNC. This minicomputer handles part program transfers and machine status data collection. This approach is considered more advanced than direct numerical control, in which several machine tools are tied directly to a central computer.

feeder workstations

An area of manufacture whose products feed a subsequent work area.

duty-free zone

An area where merchandise is brought into the country for further work to be done. Duty is paid only on the items brought in, normally at a lower rate than finished goods, and paid only at the time of sale.

foreign trade zone (FTZ)

An area within a country that is treated as foreign territory by the U.S. Customs Service. Goods can be landed, stored, and processed within an FTZ without incurring any import duties or domestic taxes.

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.

flextime

An arrangement in which employees are allowed to choose work hours as long as the standard number of work hours is worked.

Malcolm Baldrige National Quality Award

An award established by Congress in 1987 to raise awareness of quality management and to recognize U.S. companies that have implemented successful quality management systems. Up to four awards may be given annually in each of three categories: manufacturing company, service company, and small business. The award is named after the late Secretary of Commerce Malcolm Baldrige, a proponent of quality management. The U.S. Commerce Department's National Institute of Standards and Technology manages the award and the American Society for Quality (ASQ) administers it. Syn: Baldrige Award.

Deming Prize

An award given annually to organizations that, according to the award guidelines, have successfully applied companywide quality control based on statistical quality control and will keep up with it in the future. Although the award is named in honor of W. Edwards Deming, its criteria are not specifically related to Deming's teachings. There are three separate divisions for the award: the Deming Application Prize, the Deming Prize for Individuals, and the Deming Prize for Overseas Companies. The award process is overseen by the Deming Prize Committee of the Union of Japanese Scientists and Engineers in Tokyo.

manufacturing volume strategy

An element of manufacturing strategy that includes a series of assumptions and predictions about long-term market, technology, and competitive behavior in the following areas: (1) the predicted growth and variability of demand, (2) the costs of building and operating different sized plants, (3) the rate and direction of technological improvement, (4) the likely behavior of competitors, and (5) the anticipated impact of international competitors, markets, and sources of supply. It is the sequence of specific volume decisions over time that determines an organization's long-term manufacturing volume strategy.

cost engineer

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

group technology (GT)

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

forecast

An estimate of future demand. A forecast can be constructed using quantitative methods, qualitative methods, or a combination of methods, and it can be based on extrinsic (external) or intrinsic (internal) factors. Various forecasting techniques attempt to predict one or more of the four components of demand: cyclical, random, seasonal, and trend. See: Box-Jenkins model, exponential smoothing forecast, extrinsic forecasting method, intrinsic forecasting method, moving average forecast, qualitative forecasting method, quantitative forecasting method.

event

An event is an identifiable point in time among a set of related activities. Graphically, an event can be represented by two approaches: (1) in activity-on-node networks, it is represented by a node; (2) in activity-on-arc networks, the event is represented by the arc.

diversification strategy

An expansion of the scope of the product line to exploit new markets. A key objective of a diversification strategy is to spread the company's risk over several product lines in case there should be a downturn in any one product's market.

funnel experiment

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

bullwhip effect

An extreme change in the supply position upstream in a supply chain generated by a small change in demand downstream in the supply chain. Inventory can quickly move from being backordered to being excess. This is caused by the serial nature of communicating orders up the chain with the inherent transportation delays of moving product down the chain. The bullwhip effect can be eliminated by synchronizing the supply chain.

feature code

An identifying code assigned to a distinct product feature that may contain one or more specific part number configurations.

blemish

An imperfection that is severe enough to be noticed but should not cause any real impairment with respect to intended normal or reasonably foreseeable use. See: defect, imperfection, nonconformity.

indicator

An index of business activities.

economic indicator

An index of total business activities at the regional, national, and global levels.

leverage-capital structure ratio

An indicator of whether or not a company has the ability to retire its long-term debts.

cycle counter

An individual who is assigned to do cycle counting.

buyer

An individual whose functions may include supplier selection, negotiation, order placement, supplier follow-up, measurement and control of supplier performance, value analysis, and evaluation of new materials and processes. In some companies, the functions of order placement and supplier follow-up are handled by the supplier scheduler.

departmental stocks

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

gauge

An instrument for measuring or testing.

goodwill

An intangible item that is only recorded on a company's books as the result of a purchase. Generally, it is inseparable from the enterprise but makes the company more valuable, for example, a good reputation.

inventory receipt

An inventory record transaction that records the receipt or arrival of inventory into physical stores by increasing the inventory on-hand balance by the received quantity. Often associated with receipt of a purchase or production order quantity.

hybrid inventory system

An inventory system combining features of the fixed reorder quantity inventory model and the fixed reorder cycle inventory model. Features of the fixed reorder cycle inventory model and the fixed reorder quantity inventory model can be combined in many different ways. For example, in the order point-periodic review combination system, an order is placed if the inventory level drops below a specified level before the review date; if not, the order quantity is determined at the next review date. -Another hybrid inventory system is the optional replenishment model. See: fixed reorder cycle inventory model, fixed reorder quantity inventory model, optional replenishment model, order point system.

bin transfer

An inventory transaction to move a quantity from one valid location (bin) to another valid location (bin).

contribution relativities

An investment by one stakeholder may benefit others in the supply chain.

maintenance, repair, and overhaul (MRO)

An item for reprocessing in the remanufacturing industry.

model number

An item number for a finished good. This number may encompass other parts, such as a user's manual.

commodity

An item that is traded in commerce. The term usually implies an undifferentiated product competing primarily on price and availability.

cumulative trauma disorder

An occupational injury believed to be caused by repetitive motions such as typing or twisting.

inflation

An ongoing rise in the overall level of prices. Inflation reduces the purchasing power of money.

joint order

An order on which several items are combined to obtain volume or transportation discounts.

floating order point

An order point that is responsive to changes in demand or to changes in lead time.

minimum order quantity

An order quantity modifier, applied after the lot size has been calculated, that increases the order quantity to a preestablished minimum.

maximum order quantity

An order quantity modifier, applied after the lot size has been calculated, that limits the order quantity to a preestablished maximum.

discrete order quantity

An order quantity that represents an integer number of periods of demand. Most MRP systems employ discrete order quantities. See: fixed-period requirements, least total cost, least unit cost, lot-for-lot, part period balancing, period order quantity, Wagner-Whitin algorithm.

demand-based order quantity

An order system using forecast or derived demand for one or more future periods (rather than a fixed quantity as in economic order quantity).

can-order point

An ordering system used when multiple items are ordered from one vendor. The can-order point is a point higher than the original order point. When any one of the items triggers an order by reaching the must-order point, all items below their can-order point are also ordered. The can-order point is set by considering the additional holding cost that would be incurred should the item be ordered early.

best-in-class

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

functional organizational structure

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

centralized marketing system

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

matrix organizational structure

An organizational structure in which two (or more) channels of command, budget responsibility, and performance measurement exist simultaneously. For example, both product and functional forms of organization could be implemented simultaneously, that is, the product and functional managers have equal authority and employees report to both managers.

hybrid organizational structure

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

backorder

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

blocked operation

An upstream work center that is not permitted to produce because of a full queue at a downstream work center or because no kanban authorizes production.

conflict of interest

Any business activity, personal or company-related, that interferes with a company's goals or that entails unethical or illegal actions.

automated data capture system

Any device such as a bar-code reader or optical character reader that mechanizes the entry of information into an information system.

constraint

Any element or factor that prevents a system from achieving a higher level of performance with respect to its goal. Constraints can be physical, such as a machine center or lack of material, but they can also be managerial, such as a policy or procedure.

expansion

Any increase in the capacity of a plant, facility, or unit, usually by added investment. The scope of this increase extends from the elimination of problem areas to the complete replacement of an existing facility with a larger one.

dynamic lot sizing

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

data

Any representations, such as alphabetic or numeric characters, to which meaning can be assigned.

channels of distribution

Any series of firms or individuals that participates in the flow of goods and services from the raw material supplier and producer to the final user or consumer. See: distribution channel.

countertrade

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

cybermarketing

Any type of Internet-based promotion. Many marketing managers use the term to refer to any type of computer-based marketing.

enterprise

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

item

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

cost control

Applying procedures that monitor the progress of manufacturing operations against authorized budgets, and taking action to achieve minimal costs.

ergonomics

Approach to job design that focuses on the interactions between the human operator and such traditional environmental elements as atmospheric contaminants, heat, light, sound, and all tools and equipment.

analog

As applied to an electrical or computer system, the capability of representing data in continuously varying physical phenomena (as in a voltmeter) and converting them into numbers.

mean time for failures (MTFF)

Average time for failure of a nonrepairable product (expected life) or average time to first failure of a repairable product. See: reliability.

many-to-many communication

Communication that enables many people to exchange information with many other people.

distributed systems

Computer systems in multiple locations throughout an organization, working in a cooperative fashion, with the system at each location primarily serving the needs of that location but also able to receive and supply information from other systems within a network.

lower control limit (LCL)

Control limit for points below the central line in a control chart.

block control

Control of the production process in groups, or "blocks," of shop orders for products undergoing the same basic processes.

joint replenishment

Coordinating the lot sizing and order release decision for related items and treating them as a family of items. The objective is to achieve lower costs because of ordering, setup, shipping, and quantity discount economies. This term applies equally to joint ordering (family contracts) and to composite part (group technology) fabrication scheduling. Syn: joint replenishment system.

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.

indirect costs

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

lateness

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

lot splitting

Dividing a lot into two or more sublots and simultaneously processing each sublot on identical (or very similar) facilities as separate lots, usually to compress lead time or to expedite a small quantity. Syn: operation splitting.

break-bulk

Dividing truckloads of homogeneous items into smaller, more appropriate quantities for use.

fringe benefits

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

attractability efficiency

In e-commerce, a measure of how well an organization persuades people who are aware of its Web site to actually use the site. See: conversion efficiency.

conversion efficiency

In e-commerce, a measure of how well an organization transforms visits to its Web site into customer orders. See: attractability efficiency.

chart of accounts

In accounting, a list of general ledger accounts used to track costs, revenues, assets, liabilities, and so on by category.

common-size income statement

In accounting, an income statement having values expressed as a percentage of sales rather than dollar values.

activity-based planning (ABP)

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

bill of activities

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

allocated item

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

activation

In constraint management, the use of nonconstraint resources to make parts or products above the level needed to support the system constraint(s). The result is excessive work-in-process inventories or finished goods inventories, or both. In contrast, the term utilization is used to describe the situation in which nonconstraint resource(s) usage is synchronized to support the needs of the constraint.

cost variance

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

lot cost

In cost accounting, those costs associated with processing a common lot or quantity of parts having the same specifications.

economic value added

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

customer share

In marketing, a measurement (usually a percentage) of how many potential customers are attracted to a brand. It is a measurement of the recognition of the brand in the marketplace and the predisposition of the customer to buy the brand when presented with a choice of competing brands.

blending department

In process industries, the name of the department where the ingredients are mixed. See: final assembly department.

blend off

In process industries, the rework of material by introducing a small percentage into another run of the same product.

earned value method

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

logical relationship

In project management, a dependency between two activities or between a milestone and an activity. The four possible relationships are (1) finish-to-start—activity A must be finished before activity B can start; (2) finish-to-finish—activity A must be finished before activity B can finish; (3) start-to-start—activity A must start before activity B can start; and (4) start-to-finish—activity A must start before activity B can finish.

finish-to-start

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

finish-to-finish

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

integrated change control

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

milestone

In project management, an important event in a project, usually the realization of a significant deliverable.

critical path activity

In project management, any activity on a network's critical path as determined by the critical path method.

cost estimating

In project management, creating an approximation of the resources and associated costs needed to complete a project.

independent float

In project management, the amount of float on an activity that does not affect float on preceding or succeeding activities. See: float, free float, total float.

duration

In project management, the length of time an activity is estimated to require.

current finish time

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

current start date

In project management, the present estimate of an activity's start date.

earned value

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

budgeted cost of work performed

In project management, this term has been replaced with the term earned value.

budgeted cost of work scheduled

In project management, this term has been replaced with the term planned value.

estimate of error

In statistics, a measure of dispersion. See: standard deviation, standard error, variance.

bandwidth

In telecommunications, a measurement of how much data can be moved along a communications channel per unit of time, usually measured in bits per second.

heijunka

In the Just-in-Time philosophy, an approach to level production throughout the supply chain to match the planned rate of end product sales.

free float

In the critical path method of project management, the amount of time that a given activity can be delayed without delaying an immediately subsequent activity's early start time. See: float, independent float, total float.

early finish date (EFD)

In the critical path method of project management, the earliest time at which a given activity is estimated to be completed. This date can change as the project is executed.

backward pass

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

fixed-position layout

In the fixed-position layout, the position of the product is fixed. Materials, equipment, and workers are transported to and from the product or customer. Fixed-position layouts are used in industries where the products are very bulky, massive, or heavy, and movement is problematic.

future reality tree (FRT)

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

evaporating cloud

In the theory of constraints, a logic-based tool for surfacing assumptions related to a conflict or problem. Once the assumptions are surfaced, actions to break an assumption and hence solve (evaporate) the problem can be determined.

material constraint

In the theory of constraints, a material constraint exists when the availability of material is less than or equal to the amount needed to maintain the planned product flow and to satisfy market demand.

critical chain method

In the theory of constraints, a network planning technique for the analysis of a project's completion time, used for planning and controlling project activities. The critical chain, which determines project duration, is based on technological and resource constraints. Strategic buffering of paths and resources is used to increase project completion success. See: critical chain, critical path method.

buffer management

In the theory of constraints, a process in which all expediting in a shop is driven by what is scheduled to be in the buffers (constraint, shipping, and assembly buffers). By expediting this material into the buffers, the system helps avoid idleness at the constraint and missed customer due dates. In addition, the causes of items missing from the buffer are identified, and the frequency of occurrence is used to prioritize improvement activities.

five focusing steps

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

control points

In the theory of constraints, strategic locations in the logical product structure for a 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 instructions 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.

drum

In the theory of constraints, the constraint is viewed as a drum, and nonconstraints are like soldiers in an army who march in unison to the drumbeat; the resources in a plant should perform in unison with the drumbeat set by the constraint.

drum schedule

In the theory of constraints, the detailed master production schedule for the plant that sets the pace for the entire system. The drum must reconcile the customer requirements with the system's constraints.

drum-buffer-rope

In the theory of constraints, the generalized process used to manage resources to maximize throughput. The drum is the rate or pace of production set by the system's constraint. The buffers establish the protection against uncertainty so that the system can maximize throughput. The rope is a communication process from the constraint to the gating operation that checks or limits material released into the system to support the constraint. See: finite scheduling, synchronized production.

critical chain

In the theory of constraints, the longest route through a project network considering both technological precedence and resource contention constraints in completing the project. Where no resource contention exists the critical chain would be the same as the critical path. See: critical path.

defamation

Injury to another's reputation by a public utterance: print (libel) or oral (slander).

consigned stocks

Inventories, generally of finished goods, that are in the possession of customers, dealers, agents, and so on, but remain the property of the manufacturer by agreement with those in possession. Syn: consignment inventory. See: consignment.

decentralized inventory control

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

inventory ordering system

Inventory models for the replenishment of inventory. Independent demand inventory ordering models include but are not limited to fixed reorder cycle, fixed reorder quantity, optional replenishment, and hybrid models. Dependent demand inventory ordering models include material requirements planning, kanban, and drum-buffer-rope.

lead-time inventory

Inventory that is carried to cover demand during the lead time.

distribution inventory

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

inventory returns

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

maintenance, repair, and operating supplies (MRO)

Items used in support of general operations and maintenance such as maintenance supplies, spare parts, and consumables used in the manufacturing process and supporting operations.

marquis partners

Key strategic relationships. By partnering with big players, via equity offerings if necessary, a company creates barriers to entry into supply chain relationships for competitors.

bulk storage

Large-scale storage for raw materials, intermediates, or finished products. Each vessel normally contains a mixture of lots and materials that may be replenished and withdrawn for use or pack-out simultaneously.

common law

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

functional test

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

inspection

Measuring, examining, testing, or gauging one or more characteristics of a good or service and comparing the results with specified requirements to determine whether conformity is achieved for each characteristic.

input/output devices

Modems, terminals, or various pieces of equipment whose designed purpose relates to manual, mechanical, electronic, visual, or audio entry to and from the computer's processing unit.

follow-up

Monitoring of job progress to see that operations are performed on schedule or that purchased material or products will be received on schedule.

import/export license

Official authorization issued by a government allowing the shipping or delivery of a product across national boundaries.

cycle stock

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

average inventory

One-half the average lot size plus the safety stock, when demand and lot sizes are expected to be relatively uniform over time. The average can be calculated as an average of several inventory observations taken over several historical time periods; e.g., 12-month ending inventories may be averaged. When demand and lot sizes are not uniform, the stock level versus time can be graphed to determine the average.

Internet operations

Operations performed over the Internet encompassing such things as e-mail, telnet, newsgroups, file transfer protocol, and the World Wide Web.

branch and bound

Operations research models for determining optimal solutions based on the enumeration of subsets of possible solutions, which implicitly enumerate all possible solutions.

equal runout quantities

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

consolidation

Packages and lots that move from suppliers to a carrier terminal and are sorted and then combined with similar shipments from other suppliers for travel to their final destination. See: milk run.

due process clause

Parts of the Fifth Amendment and Fourteenth Amendment to the U.S. Constitution guaranteeing citizens fundamental fairness in dealing with their government.

disposable income

Personal income less personal taxes.

customer service representative (CSR)

Personnel assigned to customer relations who answer customer questions and who provide technical support.

empirical

Pertaining to a statement or formula based upon experience or observation rather than on deduction or theory.

marginal pricing

Pricing products at a markup over the marginal cost of producing the next item. Marginal costs generally include the variable cost of producing and selling an additional item.

exports

Products produced in one country and sold in another.

floor-ready merchandise

Products shipped by a supplier having all needed tags, prices, security devices, and so on already in place.

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.

manufacturing execution systems

Programs and systems that participate in shop floor control, including programmed logic controllers and process control computers for direct and supervisory control of manufacturing equipment; process information systems that gather historical performance information, then generate reports; graphical displays; and alarms that inform operations personnel what is going on in the plant currently and a very short history into the past. Quality control information is also gathered and a laboratory information management system may be part of this configuration to tie process conditions to the quality data that are generated. Thereby, cause-and-effect relationships can be determined. The quality data at times affect the control parameters that are used to meet product specifications either dynamically or off line.

in-process waiver requests

Requests for waivers on normal production procedures because of deviations in materials, equipment, or quality metrics, where normal product specifications are maintained.

clerical/administration

Several related activities necessary for the organization's operation, generally including but not limited to the following: updating records and files based on receipts, shipments, and adjustments; maintaining labor and equipment records; and performing locating, order consolidation, correspondence preparation, and similar activities.

cost estimation

Specification of the relationship between cost and the underlying cost drivers.

advertising

Sponsored promotions that are nonpersonal in nature.

load leveling

Spreading orders out in time or rescheduling operations so that the amount of work to be done in sequential time periods tends to be distributed evenly and is achievable. Although both material and labor are ideally level loaded, specific businesses and industries may load to one or the other exclusively (e.g., service industries). Syn: capacity smoothing, level loading. See: level schedule.

islands of automation

Stand-alone pockets of automation (robots, CAD/CAM systems, numerical control machines) that are not connected into a cohesive system.

American Standard Code for Information Interchange (ASCII)

Standard seven-bit character code used by computer manufacturers to represent 128 characters for information interchange among data processing systems, communications systems, and other information system equipment. An eighth bit is added as a parity bit to check a string of ASCII characters for correct transmission.

level production schedule

Syn: level schedule.

load projection

Syn: load profile.

batch number

Syn: lot number.

mix number

Syn: lot number.

explosion level

Syn: low-level code.

manufacturing representative

Syn: manufacturer's representative.

M-day calendar

Syn: manufacturing calendar.

manufacturing cycle

Syn: manufacturing lead time.

co-design

Syn: participative design/engineering.

concurrent design

Syn: participative design/engineering.

blowthrough

Syn: phantom bill of material.

material list

Syn: picking list.

constraint theory

Syn: theory of constraints.

four-wall inventory

Syn: wall-to-wall inventory.

load center

Syn: work center.

material yield

Syn: yield.

backward scheduling

Syn: back scheduling.

explode-to-deduct

Syn: backflush.

baseload demand

Syn: base demand.

basic stock

Syn: base inventory level.

base index

Syn: base series.

batch formula

Syn: batch bill of materials.

batch production

Syn: batch processing.

bill of capacity

Syn: bill of resources.

blanket order

Syn: blanket purchase order.

available capacity

Syn: capacity available.

buying capacity

Syn: capacity buying.

holding costs

Syn: carrying costs.

fill rate

Syn: customer service ratio.

cycle inventory

Syn: cycle stock.

lightless plant

Syn: dark factory.

finished product

Syn: end item.

manufacturing progress curve

Syn: learning curve.

measure of service

Syn: level of service.

JIT master schedule

Syn: level schedule (second definition).

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.

methods analysis

That part of methods engineering normally involving an examination and analysis of an operation or a work cycle broken down into its constituent parts to improve the operation, eliminate unnecessary steps, and/or establish and record in detail a proposed method of performance.

marketing channel

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

APICS—The Educational Society for Resource Management

The Educational Society for Resource Management—Founded in 1957 as the American Production and Inventory Control Society, APICS is a not-for-profit educational organization consisting of 70,000 members in the production/operations, materials, and integrated resource management areas.

Federal Trade Commission (FTC)

The United States governmental agency charged with protecting businesses and consumers from unfair business practices. It also regulates advertising and promotion at the national level.

liquidity

The ability of a firm to pay debts as they come due.

full pegging

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

fault tolerance

The ability of a system to avoid or minimize the disruptive effects of defects by using some form of redundancy or extra design margins.

material flexibility

The ability of the transformation process to handle unexpected variations in material inputs.

connectivity

The ability to communicate effectively with supply chain partners to facilitate interorganization synchronization.

capacity simulation

The ability to do rough-cut capacity planning using a simulated master production schedule or material plan rather than live data.

mix flexibility

The ability to handle a wide range of products or variants by using equipment having short setup times.

lot traceability

The ability to identify the lot or batch number of product in terms of one or all of the following: its composition, purchased parts, manufacturing date, or shipped items. In certain regulated industries, lot traceability may be a legislative requirement.

agility

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

book value

The accounting value of an asset.

cumulative sum

The accumulated total of all forecast errors, both positive and negative. This sum will approach zero if the forecast is unbiased. Syn: sum of deviations.

data collection

The act of compiling data for recording, analysis, or distribution.

cost reduction

The act of lowering the cost of goods or services by securing a lower price, reducing labor costs, etc. In cost reduction, the item usually is not changed, but the circumstances around which the item is secured are changed, as opposed to value analysis, in which the item itself is actually changed to produce a lower cost.

default

The action that will be taken by a computer program when the user does not specify a variable parameter.

inventory planning

The activities and techniques of determining the desired levels of items, whether raw materials, work in process, or finished products including order quantities and safety stock levels. Syn: material planning.

inventory control

The activities and techniques of maintaining the desired levels of items, whether raw materials, work in process, or finished products. Syn: material control.

market share

The actual portion of current market demand that a company or product achieves.

bounded

The adjustment of a shop order quantity of a parent to use the remaining units of a component, raw material, or lot.

lot size

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

debt-to-equity ratio

The amount of bonds and preferred stocks relative to the owners' equity position. The debt to equity ratio is a measurement of the use of borrowed funds to leverage owners' equity.

consumption

The amount of each bill-of-material component used in the production process to make the parent.

load

The amount of planned work scheduled for and actual work released to a facility, work center, or operation for a specific span of time. Usually expressed in terms of standard hours of work or, when items consume similar resources at the same rate, units of production. Syn: workload.

cost allocation

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

critical characteristics

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

master route sheet

The authoritative route process sheet from which all other format variations and copies are derived.

move order

The authorization to move a particular item from one location to another.

component availability

The availability of component inventory for the manufacture of a specific parent order or group of orders or schedules.

experience curve pricing

The average cost pricing method, but using an estimate of future average costs, based on an experience (learning) curve.

expected life

The average length of time a product remains in service or in a serviceable condition.

mean absolute deviation (MAD)

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

mean time between failures (MTBF)

The average time interval between failures for repairable product for a defined unit of measure (e.g., operating hours, cycles, miles). See: reliability.

expected value

The average value that would be observed in taking an action an infinite number of times. The expected value of an action is calculated by multiplying the outcome of the action by the probability of achieving the outcome.

capacity available

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

idle capacity

The capacity generally not used in a system of linked resources. Idle capacity consists of protective capacity and excess capacity. See: excess capacity, productive capacity, protective capacity.

capacity required

The capacity of a system or resource needed to produce a desired output in a particular time period. Syn: required capacity. See: capacity.

demurrage

The carrier charges and fees applied when rail freight cars and ships are retained beyond a specified loading or unloading time. See: detention, express.

general and administrative expenses (G and A)

The category of expenses on the income statement that includes the costs of general managers, computer systems, research and development, and others.

mainframe

The central computer system of large organizations, often having over a gigabyte (one billion bytes) of random access memory (RAM).

maintainability

The characteristic of equipment design and installation that provides the ability for the equipment to be repaired easily and efficiently. See: serviceability.

customer-defined attributes

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

internal environment

The chosen domain or scope of activities within which an organization operates, for example, the tasks associated with goods or services to be delivered by the organization. See: external environment.

capital structure

The combination of permanent short-term debt, long-term debt, preferred stock, and common equity used to finance a firm.

five why's

The common practice in TQM is to ask "why" five times when confronted with a problem. By the time the answer to the fifth "why" is found, the ultimate cause of the problem is identified. Syn: five W's. See: root cause analysis.

direct delivery

The consignment of goods directly from the supplier to the buyer, frequently used where a third party acts as intermediary between supplier and buyer.

contribution

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

consumer surplus

The difference between the highest price a consumer is willing to pay for a good or service and the price actually paid.

lost time factor

The complement of utilization, that is one minus the utilization factor. It is the percentage of time lost to machine, tool, and worker unavailability. It can be calculated as the planned hours minus actual hours used, divided by the planned hours. See: balance delay, utilization.

cross-docking

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

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 processes appropriate to their areas of expertise. Employee involvement focuses on quality and productivity improvements. Syn: people involvement.

marketing mix

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

blocking

The condition requiring a work center that has parts to process to remain idle as long as the queue to which the parts would be sent is full or kanbans authorizing production are not present.

cascading yield loss

The condition where yield loss happens in multiple operations or tasks, resulting in a compounded yield loss. Syn: cumulative yield. See: composite yield.

benchmarking

The continuous process of measuring the company's products, services, costs, and practices. Two types of benchmarking exist—competitive, a comparison against your industry best, and process, a comparison of a process to the best-in-class. See: competitive benchmarking, performance benchmarking, process benchmarking.

design

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

carrying cost

The cost of holding inventory, usually defined as a percentage of the dollar value of inventory per unit of time (generally one year). Carrying cost depends mainly on the cost of capital invested as well as such costs of maintaining the inventory as taxes and insurance, obsolescence, spoilage, and space occupied. Such costs vary from 10% to 35% annually, depending on type of industry. Carrying cost is ultimately a policy variable reflecting the opportunity cost of alternative uses for funds invested in inventory. Syn: holding costs.

cost of capital

The cost of maintaining a dollar of capital invested for a certain period, normally one year. This cost is normally expressed as a percentage and may be based on factors such as the average expected return on alternative investments and current bank interest rate for borrowing.

marginal cost of capital

The cost of the next dollar, after taxes, that a firm expects to raise for investment.

internal failure cost

The cost of things that go wrong before the product reaches the customer. Internal failure costs usually include rework, scrap, downgrades, reinspection, retest, and process losses.

acquisition cost

The cost required to obtain one or more units of an item. It is order quantity times unit cost. See: ordering cost.

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.

effective date

The date on which a component or an operation is to be added or removed from a bill of material or an assembly process. The effective dates are used in the explosion process to create demands for the correct items. Normally, bills of material and routing systems provide for an effectivity start date and stop date, signifying the start or stop of a particular relationship. Effectivity control also may be by serial number rather than date. Syn: effectivity, effectivity date.

arrival date

The date purchased material is due to arrive at the receiving site. The arrival date can be input, it can be equal to the current due date, or it can be calculated from the ship date plus transit time. Syn: expected receipt date. See: due date.

contract date

The date when a contract is accepted by all parties.

due date

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

current liabilities

The debts owed by a company and expected to be paid within 12 months. See: liabilities, balance sheet.

manufacturing process development

The definition and implementation of an execution system for making a part, good, or service that is consistent with the objectives of the firm.

market penetration

The degree to which a product has been accepted by the marketplace. Syn: market reach.

brand recognition

The degree to which customers recognize a particular brand identity and associate it with a particular product line relative to other available brands.

avoidable delay

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

independent demand

The demand for an item that is unrelated to the demand for other items. Demand for finished goods, parts required for destructive testing, and service parts requirements are examples of independent demand. See: dependent demand.

marketing

The design, pricing, promotion, and distribution of goods to create transactions with businesses and consumers.

isolation

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

calculated usage

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

gate review

The formal review process between the major phases of a new product introduction effort. The determination to continue or to stop the project is formally made at each review point or gate.

capacity requirements planning (CRP)

The function of establishing, measuring, and adjusting limits or levels of capacity. The term capacity requirements planning in this context refers to the process of determining in detail the amount of labor and machine resources required to accomplish the tasks of production. Open shop orders and planned orders in the MRP system are input to CRP, which through the use of parts routings and time standards translates these orders into hours of work by work center by time period. Even though rough-cut capacity planning may indicate that sufficient capacity exists to execute the MPS, CRP may show that capacity is insufficient during specific time periods. See: capacity planning.

capacity management

The function of establishing, measuring, monitoring, and adjusting limits or levels of capacity in order to execute all manufacturing schedules; i.e., the production plan, master production schedule, material requirements plan, and dispatch list. Capacity management is executed at four levels: resource requirements planning, rough-cut capacity planning, capacity requirements planning, and input/output control.

freight consolidation

The grouping of shipments to obtain reduced costs or improved utilization of the transportation function. Consolidation can occur by market area grouping, grouping according to scheduled deliveries, or using third-party pooling services such as public warehouses and freight forwarders.

gross national product (GNP)

The market value of all goods and services produced in a nation in a given year.

maximum demonstrated capacity

The highest amount of actual output produced in the past when all efforts have been made to "optimize" the resource; for instance, overtime, additional personnel, extra hours, extra shifts, reassignment of personnel, or use of any related equipment. Maximum demonstrated capacity is the most one could ever expect to produce in a short period of time but represents a rate that cannot be maintained over a long period of time. See: demonstrated capacity.

marginal cost

The incremental costs incurred when the level of output of some operation or process is increased by one unit.

mediation

The introduction of a neutral third party who attempts to provide alternatives to issues causing conflict that have not been put forth by either party or to change the way the parties perceive the situation. It is often used in collective bargaining to reach an agreement.

base inventory level

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

cumulative lead time

The longest planned length of time to accomplish the activity in question. For any item planned through MRP, it is found by reviewing the lead time for each bill of material path below the item; whichever path adds up to the greatest number defines cumulative lead time. Syn: aggregate lead time, combined lead time, composite lead time, critical path lead time, stacked lead time. See: planning horizon, planning time fence.

fabrication level

The lowest production level. The only components at this level are parts (as opposed to assemblies or subassemblies). These parts are either procured from outside sources or fabricated within the manufacturing organization.

corrective maintenance

The maintenance required to restore an item to a satisfactory condition.

critical failure

The malfunction of those parts that are essential for continual operation or the safety of the user.

management by walking around (MBWA)

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

file structure

The manner in which records are stored within a file, e.g., sequential, random, or index-sequential.

housekeeping

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

master production schedule (MPS)

The master production schedule is a line on the master schedule grid that reflects the anticipated build schedule for those items assigned to the master scheduler. The master scheduler maintains this schedule, and in turn, it becomes a set of planning numbers that drives material requirements planning. It represents what the company plans to produce expressed in specific configurations, quantities, and dates. The master production schedule is not a sales item forecast that represents a statement of demand. The master production schedule must take into account the forecast, the production plan, and other important considerations such as backlog, availability of material, availability of capacity, and management policies and goals. Syn: master schedule.

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.

final assembly department

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

cleanup

The neutralizing of the effects of production just completed. It may involve cleaning residues, sanitation, equipment refixturing, etc.

incoming business

The number of orders, the dollar value of orders, or the quantity of units that have been received on orders from customers. This volume is particularly important to the forecaster, who must compare incoming business against the forecast rather than against actual shipments when actual shipments do not reflect true customer demand. This situation may exist because of back-ordered items, bottlenecks in the shipping room, etc.

crew size

The number of people required to perform an operation. The associated standard time should represent the total time for all crew members to perform the operation, not the net start to finish time for the crew.

exposures

The number of times per year that the system risks a stockout. The number of exposures is arrived at by dividing the lot size into the annual usage.

inventory turnover

The number of times that an inventory cycles, or "turns over," during the year. A frequently used method to compute inventory turnover is to divide the average inventory level into the annual cost of sales. For example, an average inventory of $3 million divided into an annual cost of sales of $21 million means that inventory turned over seven times. Syn: inventory turns, inventory velocity, turnover.

limiting operation

The operation with the least capacity in a series of operations with no alternative routings. The capacity of the total system can be no greater than the limiting operation, and as long as this limiting condition exists, the total system can be effectively scheduled by scheduling the limiting operation and providing this operation with proper buffers. See: protective capacity, protective inventory.

centralized dispatching

The organization of the dispatching function into one central location. This structure often involves the use of data collection devices for communication between the centralized dispatching function, which usually reports to the production control department, and the shop manufacturing departments.

market plan

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

department overhead rate

The overhead rate applied to jobs passing through a department.

dunnage

The packing material used to protect a product from damage during transport.

concentration

The percentage of an active ingredient within the whole, as a 40% solution of hydrochloric acid (HCl).

availability

The percentage of time that a worker or machine is capable of working. The formula is <br><center><img border="0" src="http://members.apics.org/Publications/dictionary/images/availability.gif"><br></center>

controller

The person responsible for financial and managerial accounting within a company. Syn: comptroller.

disbursement

The physical issuance and reporting of the movement of raw material, components, or other items from a stores room or warehouse.

facilities

The physical plant, distribution centers, service centers, and related equipment.

move

The physical transportation of inventory from one location to another within a facility. Movements are usually made under the direction and control of the inventory system.

franchise extension

The placement of a brand name on products outside the company's present sphere of activity.

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.

minimum inventory

The planned lowest amount or level of inventory for an item.

maximum inventory

The planned maximum allowable inventory for an item based on its planned lot size and target safety stock.

expected completion quantity

The planned quantity of a manufacturing order after expected scrap.

funds flow management

The planning, execution, and control of cash receipts and disbursements with the objective of maintaining the cash balance at a preset positive value. Syn: cash flow management.

enterprise resources management

The planning, execution, control, and measurement functions required to effectively operate an enterprise.

equilibrium point

The point in a market where the demand for a product and the supply of that product are exactly equal. If supply were greater, the price would fall. If demand were greater, the price would rise. Free markets tend to move toward their equilibrium point.

freight equalization

The practice by more distant suppliers of absorbing the additional freight charges to match the freight charges of a supplier geographically closer to the customer. This is done to eliminate the competitive advantage of lower freight charges that the nearest supplier has.

job rotation

The practice of an employee periodically changing job responsibilities to provide a broader perspective and a view of the organization as a total system, to enhance motivation, and to provide cross-training.

feedstock

The primary raw material in a chemical or refining process normally received by pipeline or large-scale bulk shipments. Feedstock availability is frequently the controlling factor in setting the production schedule and rate for a process.

backup/restore

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

arbitration

The process by which an independent third party is brought in to settle a dispute or to preserve the interest of two conflicting parties.

backhauling

The process of a transportation vehicle returning from the original destination point to the point of origin. The 1980 Motor Carrier Act deregulated interstate commercial trucking and thereby allowed carriers to contract for the return trip. The backhaul can be with a full, partial, or empty load. An empty backhaul is called deadheading. See: deadhead.

backward integration

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

documentation

The process of collecting and organizing documents or the information recorded in documents. The term usually refers to the development of material specifying inputs, operations, and outputs of a computer system.

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.

kitting

The process of constructing and staging kits.

business planning

The process of constructing the business plan. See: business plan.

bill-of-material explosion

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

capacity planning

The process of determining the amount of capacity required to produce in the future. This process may be performed at an aggregate or product-line level (resource requirements planning), at the master-scheduling level (rough-cut capacity planning), and at the material requirements planning level (capacity requirements planning). See: capacity requirements planning, resource planning, rough-cut capacity planning.

implosion

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

econometric modeling

The process of developing econometric models. See: econometric model.

market planning

The process of developing market plans for products and services. This process is composed of the following phases—identification; research and analysis of market opportunities; selection of target markets; development of marketing strategies; development of the marketing plans, programs, and projects; and management, execution, and control of the market plans, programs, and projects.

market targeting

The process of developing measurements of the desirability of given market segments and deciding in which market segments to compete.

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.

disintermediation

The process of eliminating an intermediate stage or echelon in a supply chain. Total supply chain operating expense is reduced, total supply chain inventory is reduced, total cycle time is reduced, and profits increase among the remaining echelons. See: echelon.

fair-share quantity logic

The process of equitably allocating available stock among field distribution centers. Fair-share quantity logic is normally used when stock available from a central inventory location is less than the cumulative requirements of the field stocking locations. The use of fair-share quantity logic involves procedures that "push" stock out to the field, instead of allowing the field to "pull" in what is needed. The objective is to maximize customer service from the limited available inventory. See: equal runout quantities.

interpolation

The process of finding a value of a function between two known values. Interpolation may be performed numerically or graphically.

computer-aided engineering (CAE)

The process of generating and testing engineering specifications on a computer workstation.

internal customer

The recipient (person or department) of another person's or department's output (good, service, or information) within an organization. See: customer, external customer.

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, ease of manufacture and assembly, ease of testing, better testing procedures, ease of service, decreased cost, and improved aesthetics. See: design for manufacture and assembly, participative design/engineering.

early supplier involvement (ESI)

The process of involving suppliers 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. See: participative design/engineering.

capacity control

The process of measuring production output and comparing it with the capacity requirements plan, determining if the variance exceeds preestablished limits, and taking corrective action to get back on plan if the limits are exceeded. See: input/output control.

blending

The process of physically mixing two or more lots or types of material to produce a homogeneous lot. Blends normally receive new identification and require testing.

amortization

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

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.

mixed-model master schedule

The process of setting and maintaining the master production schedule to support mixed-model production.

data mining

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

download

The process of transferring data or programs from one computer to another (and usually saving to a disk).

master scheduling

The process where the master schedule is generated and reviewed and adjustments made to the master production schedule to ensure consistency with the production plan. The master production schedule (the line on the grid) is the primary input to the material requirements plan. The sum of the master production schedules for the items within the product family must equal the production plan for that family.

discrete manufacturing

The production of distinct items such as automobiles, appliances, or computers.

job shop scheduling

The production planning and control techniques used to sequence and prioritize production quantities across operations in a job shop.

counseling

The providing of basic, technical, and sometimes professional human assistance to employees to help them with personal and work-related problems.

cross-training

The providing of training or experience in several different areas, e.g., training an employee on several machines rather than one. Cross-training provides backup workers in case the primary operator is unavailable.

buyer cycle

The purchasing sequence that generally follows the buyer's product and budget cycles.

confidence interval

The range on either side of an estimated value from a sample that is likely to contain the true value for the whole population.

exchange rate

The rate at which one currency converts to another.

internal rate of return

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

discount rate

The rate of interest charged to commercial banks by a central banking authority.

interest rate

The ratio of the interest payment to the principal for a given unit of time. It is usually expressed as a percentage of the principal.

elasticity of demand (supply)

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

average total cost

The ratio of total costs (the sum of total fixed costs and total variable costs) over units produced.

average variable cost

The ratio of total variable costs over units produced.

manufacturing cycle efficiency

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

component

The raw material, part, or subassembly that goes into a higher level assembly, compound, or other item. This term may also include packaging materials for finished items. See: ingredient, intermediate part.

active inventory

The raw materials, work in process, and finished goods that will be used or sold within a given period.

instantaneous receipt

The receipt of an entire lot-size quantity in a very short period of time.

material receipt inspection

The receiving department compares the incoming material to the purchase order to verify that the correct material and quantity have been received. The material is then inspected for quality and general condition. A material receipt report is prepared and copies are distributed to the appropriate departments such as purchasing and accounting.

dispersion

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

dispatching

The selecting and sequencing of available jobs to be run at individual workstations and the assignment of those jobs to workers.

chain of customers

The sequence of customers who in turn consume the output of each other, forming a chain. For example, individuals are customers of a department store, which in turn is the customer of a producer, who is the customer of a material supplier.

manufacturing process

The series of operations performed upon material to convert it from the raw material or a semifinished state to a state of further completion. Manufacturing processes can be arranged in a process layout, product layout, cellular layout, or fixed-position layout. Manufacturing processes can be planned to support make-to-stock, make-to-order, assemble-to-order, etc., based on the strategic use and placement of inventories. See: production process, transformation process.

manufacturing philosophy

The set of guiding principles, driving forces, and ingrained attitudes that helps communicate goals, plans, and policies to all employees and that is reinforced through conscious and subconscious behavior within the manufacturing organization.

corporate culture

The set of important assumptions that members of the company share. It is a system of shared values about what is important and beliefs about how the company works. These common assumptions influence the ways the company operates.

global measures

The set of measurements that refers to the overall performance of the firm. Net profit, return on investment, and cash flow are examples of financial measures; and throughput, operating expense, and inventory are examples of operational measures.

local measures

The set of measurements that relates to a resource, operation, process, or part and usually has low correlation to global organization measures. Examples are errors per printed page, departmental efficiency, and volume discounts.

life testing

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

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 a work center; normally, a cost center encompasses more than one work center, but this may not always be the case.

cultural environment

The sociocultural factors of the organization's external environment. It includes values, work ethics, education, religion, and consumer and ecological factors.

database management system (DBMS)

The software designed for organizing data and providing the mechanism for storing, maintaining, and retrieving that data on a physical medium (i.e., a database). A DBMS separates data from the application programs and people who use the data and permits many different views of the data.

group decision support system (GDSS)

The software designed to support groups in unstructured decision making by supporting brainstorming, conflict resolution, voting, and other techniques.

inventory velocity

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

boilerplate

The standard terms and conditions on a purchase order or other document.

go/no-go

The state of a unit or product. Two parameters are possible: go (conforms to specification) and no-go (does not conform to specification).

marketing cost analysis

The study and evaluation of the relative profitability or costs of different marketing operations in terms of customers, marketing units, commodities, territories, or marketing activities. Cost accounting is typically used.

cybernetics

The study of control processes in mechanical, biological, electrical, and information systems.

grades

The sublabeling of items to identify their particular makeup and to separate one lot from other production lots of the same item.

downgrade

The substitution of a product of lower quality, value, or status for another either in planning or in fact.

automation

The substitution of machine work for human physical and mental work, or the use of machines for work not otherwise able to be accomplished, entailing a less continuous interaction with humans than previous equipment used for similar tasks.

laid-down cost

The sum of the product and transportation costs. The laid-down cost is useful in comparing the total cost of a product shipped from different supply sources to a customer's point of use.

deposition

The sworn questioning, outside of court, of a potential witness by the other side's attorney.

marketing research

The systematic gathering, recording, and analyzing of data about problems relating to the marketing of goods and services. Such research may be undertaken by impartial agencies or by business firms or their agents. Marketing research includes several types: (1) Market analysis (product potential is a type) is the study of the size, location, nature, and characteristics of markets, (2) Sales analysis (or research) is the systematic study and comparison of sales (or consumption) data, (3) Consumer research (motivation research is a type) is concerned with the discovery and analysis of consumer attitudes, reactions, and preferences. Syn: market research.

information technology

The technology of computers, telecommunications, and other devices that integrate data, equipment, personnel, and problem-solving methods in planning and controlling business activities. Information technology provides the means for collecting, storing, encoding, processing, analyzing, transmitting, receiving, and printing text, audio, or video information.

brand loyalty

The tendency of some consumers to stay with a preferred product in spite of a competitor's advantages.

free on board (FOB)

The terms of sale that identify where title passes to the buyer.

credit period

The time allowed a customer to pay an invoice in full.

discount period

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

internal setup time

The time associated with elements of a setup procedure performed while the process or machine is not running. Ant: external setup time.

external setup time

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

materials handling time

The time necessary to move materials from one work center to the next work center. This time includes waiting for the materials handling equipment and actual movement time.

build cycle

The time period between a major setup and a cleanup. It recognizes cyclical scheduling of similar products with minor changes from one product/model to another.

inventory conversion period

The time period needed to produce and sell a product, measured from procurement of raw materials to the sale of the product.

issue cycle time

The time required to generate a requisition for material, pull the material from an inventory location, and move it to its destination.

assembly lead time

The time that normally elapses between the issuance of a work order to the assembly floor and work completion.

forecast interval

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

idle time

The time when operators or resources (e.g., machines) are not producing product because of setup, maintenance, lack of material, lack of tooling, or lack of scheduling. Syn: wait time.

gross sales

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

cost of sales

The total cost attached (allocated) to units of finished product delivered to customers during the -period.

break-even time

The total elapsed time of a technology transfer beginning with a scientific investigation and ending when the profits from a new product offset the cost of its development.

average fixed cost

The total fixed cost divided by units produced. This value declines as output increases.

gross requirement

The total of independent and dependent demand for a component before the netting of on-hand inventory and scheduled receipts.

manufacturing lead time

The total time required to manufacture an item, exclusive of lower level purchasing lead time. For make-to-order products, it is the length of time between the release of an order to the production process and shipment to the final customer. For make-to-stock products, it is the length of time between the release of an order to the production process and receipt into finished goods inventory. Included here are order preparation time, queue time, setup time, run time, move time, inspection time, and put-away time. Syn: manufacturing cycle, production cycle, production lead time. See: lead time.

demand pull

The triggering of material movement to a work center only when that work center is ready to begin the next job. It 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.

demand uncertainty

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

available-to-promise (ATP)

The uncommitted portion of a company's inventory and planned production maintained in the master schedule to support customer-order promising. The ATP quantity is the uncommitted inventory balance in the first period and is normally calculated for each period in which an MPS receipt is scheduled. In the first period, ATP includes on-hand inventory less customer orders that are due and overdue. Three methods of calculation are used: discrete ATP, cumulative ATP with lookahead, and cumulative ATP without lookahead. See: discrete available-to-promise, cumulative available-to-promise.

activity-based management (ABM)

The use of activity-based costing information about cost pools and drivers, activity analysis, and business processes to identify business strategies; improve product design, manufacturing, and distribution; and remove waste from operations. See: activity-based costing.

computer-aided inspection and test (CAIT)

The use of computer technology in the inspection and testing of manufactured products.

computer-assisted software engineering (CASE)

The use of computerized tools to assist in the process of designing, developing, and maintaining software products and systems.

computer-aided design (CAD)

The use of computers in interactive engineering drawing and storage of designs. Programs complete the layout, geometric transformations, projections, rotations, magnifications, and interval (cross-section) views of a part and its relationship with other parts.

computer-aided manufacturing (CAM)

The use of computers to program, direct, and control production equipment in the fabrication of manufactured items.

financial accounting

The use of generally accepted accounting principles to prepare reports to external agencies, such as investors and governmental agencies.

global marketing

The use of one marketing strategy in all countries in which a company operates, selling a single product worldwide.

allocative efficiency

The use of resources to produce those goods and services most wanted by consumers.

continuous process control

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

accounts payable

The value of goods and services acquired for which payment has not yet been made.

inventory valuation

The value of the inventory at either its cost or its market value. Because inventory value can change with time, some recognition is taken of the age distribution of inventory. Therefore, the cost value of inventory is usually computed on a first-in-first-out (FIFO) basis, last-in-first-out (LIFO) basis, or a standard cost basis to establish the cost of goods sold.

inventory usage

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

common cause variability

The variability in product quality that results from numerous uncontrollable everyday factors, such as temperature, humidity, tool wear, etc. Syn: common causes.

formal culture

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

budgeted capacity

The volume/mix of throughput on which financial budgets were set and overhead/burden absorption rates established.

buyer behavior

The way individuals or organizations behave in a purchasing situation. The customer-oriented concept finds out the wants, needs, and desires of customers and adapts resources of the organization to deliver need-satisfying goods and services.

appraisal costs

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

judgment items

Those inventory items that cannot be effectively controlled by algorithms because of age (new or obsolete product) or management decision (promotional product).

distribution cost

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

finished goods inventory

Those items on which all manufacturing operations, including final test, have been completed. These products are available for shipment to the customer as either end items or repair parts. Syn: finished products inventory. See: goods.

downtime

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

adjudicate

To hear and decide an issue under legal dispute.

explode

To perform a bill-of-material explosion.

lot number traceability

Tracking parts by lot numbers to a group of items. This tracking can assist in tracing quality problems to their source. A lot number identifies a designated group of related items manufactured in a single run or received from a vendor in a single -shipment.

fixed overhead

Traditionally, all manufacturing costs, other than direct labor and direct materials, that continue even if products are not produced. Although fixed overhead is necessary to produce the product, it cannot be directly traced to the final product.

decryption

Transformation of encrypted text into a readable format.

common carrier

Transportation available to the public that does not provide special treatment to any one party and is regulated as to the rates charged, the liability assumed, and the service provided. A common carrier must obtain a certificate of public convenience and necessity from the Federal Trade Commission for interstate traffic. Ant: private carrier.

control number

Typically, the manufacturing order or schedule number used to identify a specific instance or period of production.

hypothesis testing

Use of statistical models to test conclusions about a population or universe based on sample information.

downstream

Used as a relative reference within a firm or supply chain to indicate moving in the direction of the end customer.

14 Points

W. Edwards Deming's 14 management practices to help companies increase their quality and productivity: (1) create constancy of purpose for improving products and services; (2) adopt the new philosophy; (3) cease dependence on inspection to achieve quality; (4) end the practice of awarding business on price alone; instead, minimize total cost by working with a single supplier; (5) improve constantly and forever every process for planning, production, and service; (6) institute training on the job; (7) adopt and institute leadership; (8) drive out fear; (9) break down barriers between staff areas; (10) eliminate slogans, exhortations, and targets for the workforce; (11) eliminate numerical quotas for the workforce and numerical goals for management; (12) remove barriers that rob people of pride of workmanship and eliminate the annual rating or merit system; (13) institute a vigorous program of education and self-improvement for everyone; and (14) put everybody in the company to work to accomplish the transformation. Syn: Deming's 14 Points.

line haul costs

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

indirect labor

Work required to support production in general without being related to a specific product, e.g., floor sweeping.

available work

Work that is actually in a department ready to be worked on as opposed to scheduled work that may not yet be physically on hand. Syn: live load.

aggregate reporting

1) Reporting of process hours in general, allowing the system to assign the actual hours to specific products run during the period based on standards. 2) Also known as gang reporting, the reporting of total labor hours.

adaptive control

1) The ability of a control system to change its own parameters in response to a measured change in operating conditions. 2) Machine control units in which feeds and/or speeds are not fixed. The control unit, working from feedback sensors, is able to optimize favorable situations by automatically increasing or decreasing the machining parameters. This process ensures optimum tool life or surface finish and/or machining costs or production rates.

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.

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 though 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 units 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.

acknowledgment

A communication by a supplier to advise a purchaser that a purchase order has been received. It usually implies acceptance of the order by the supplier.

AI

Abbreviation for artificial intelligence.

accessory

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

activity-based cost accounting (ABC)

A cost accounting system that accumulates costs based on activities performed and then uses cost drivers 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. Syn: activity-based costing, activity-based cost accounting. See: absorption costing.

actual cost system

A cost system that collects costs historically as they are applied to production and allocates indirect costs to products based on the specific costs and achieved volume of the products.

accelerated depreciation

A depreciation method involving high write-offs in the early years of an asset's life and lower write-offs later. This method lowers the value of an asset faster than straight-line depreciation.

activity level

A description of how reactive one activity is to changes in the level of another activity or cost object.

activity ratio

A financial ratio to determine how an organization's resources perform relative to the revenue the resources produce. Activity ratios include inventory turnover, receivables conversion period, fixed-asset turnover, and return on assets.

administrative contracting officer

A government employee who ensures compliance with the terms and conditions of contracts.

account manager

A manager who has direct responsibility for a customer's interest.

activity-on-arrow network (AOA)

A project management network in which the passage of time, via activities, takes place on the arrows. The start of an activity is represented by the tail of the arrow, while the completion of the activity is represented by the tip of the arrow. The sequence of the arrows represents the sequence of activities. Arrows are connected by nodes, which are usually circles. Syn: arrow diagram method, event-on-arrow network.

allowable cost