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1 80-20 Pareto principle Abandonment Abnormal variability A principle that states that 20% of problem types account for 80%

of all occurrences. A situation when a customer, havin waited in !ueue for some time, leaves the process but before bein served. "npredictable variability that disturbs the state of statistical e!uilibrium of the process by chan in parameters of its distribution in an une#pected way $he simplest form of transformation% the buildin bloc& of a process. $he time re!uired by a typical flow unit to complete the activity once. A statistical principle that states that the standard deviation of the sum of random variables is less than the sum of the individual standard deviations. $he manufacturin system be un in 1810 that introduced the use of interchan eable parts, thereby eliminatin the need to custom fit parts durin assembly. 'iterally, andon means a display board. (n the $oyota Production )ystem, a wor&er is empowered to stop the line by pullin a cord. A display board identifies the station that pulled the cord enablin the supervisor to locate it easily. *esource availability loss as a fraction of scheduled availability. $he avera e number of flow units that flow throu h +into and out of, the process per unit over time. Also called throughput. $he avera e of the flow times across all flow units that e#it the process durin a specific span of time. $he situation in which customers must wait to have their demand satisfied. $he si.e of an order or production in response to the economies of scale. $he process of continually searchin for the best methods, practices, and processes, and adoptin or adaptin the ood features to become /the best of the best.” An event that occurs when resources are prevented from

Activity Activity time A re ation, principle of American system of manufacturin Andon

Availability loss factor Avera e flow rate Avera e flow time -ac&lo -atch -enchmar&in ed

-loc&a e

$he aspect of strate ic plannin that defines the scope of each division or business unit in terms of the attributes of the products that it will offer and the mar&et se ments that it will serve. -loc&in -ottlenec& -uffer -uffer capacity -ull whip effect -usiness process -usiness strate y A situation that occurs because input buffers have only limited capacity to accommodate arrivals waitin to be processed. facilities.ation amon supply chain members. Also called setup. 1apacity utili. An illustration that shows a chain of cause-effect relationships that allows one to find the root-causes of the observed variability% also called fishbone or Ishikawa diagram. A layout of resources where all stations that performs successive operations on a product +or product family. A networ& of activities performed by resources that transform inputs into outputs.ation of $he de ree to which resources are utili. e!uipment.ed. buildin . and information systems.ed by a process% $he ratio of a resource pool throu hput and theoretical capacity of resource pool. 1ellular layout 1han eover . 1apital 1ascadin 1ausal models 1ause-effect dia ram 2i#ed assets such as land. machines.ed accordin to the se!uence of activities. or because additional processin has not been authori. $he phenomenon of upstream variability ma nification that indicates a lac& of synchroni. *epresentin a iven process at several levels of detail simultaneously in a process flow chart. 2orecastin methods that assume data plus other factors influence demand. $he cleanin . or retoolin of e!uipment in order for it to process a different product. resettin .2 producin more flow units because there is no place to store the already processed flow units. )lowest resource pool% also see $heoretical bottlenec& and 0ffective bottlenec&. $he part of the process that stores flow units that have finished with one activity but are waitin for the ne#t activity to start. $he ma#imum number of customers that can wait in !ueue. are rouped to ether and or ani.

product cost. forecastin and replenishment across the supply chain. and *eplenishment +1P2*. A partnership pro ram under which the supplier automatically replenishes its customer inventories based on contractually a reed upon levels. unavoidable aspect of any process. variety. $he lon est path in the flow chart. response time. and !uality 5n oin incremental improvement in process performance. havin initially ordered a fi#ed !uantity. (t is obtained by computin the ratio of the standard deviation to the mean. 1ritical activities 1ritical path 1ycle inventory .3 1hase demand strate y 1hec& sheet 1oefficient of variation A strate y to deal with demand fluctuations whereby a firm produces !uantities to e#actly match demand. A measure of variability relative to its mean. Also see kaizen. plannin . 1ollaborative An initiative in the consumer oods industry desi ned to coordinate Plannin . 1ompetitive product space 1ontinuous improvement 1ontinuous *eplenishment Pro ram +1*P. monitors inventory level continuously and then reorders once available inventory falls to a pre-specified reorder point. 2orecastin . An order policy wherein a process mana er. A tally of the types and fre!uency of problems with a product or a service e#perienced by customers. Activities that lie on the critical path. A run chart of process performance with control limits overlaid to ive it decision-ma&in power. $he aspect of strate ic plannin that defines the businesses in which the corporation will participate and specifies how &ey corporate resources will be ac!uired and allocated to each business. reorder point policy 1ontrol band 1ontrol chart 1ontrol limits 1orporate strate y A representation of the firm4s product portfolio as measured alon four dimensions or product attributes -. $he lower and upper ran e of the control band. A ran e within which any variation is to be interpreted as normal. 1ontinuous review. $he avera e inventory that results from intermittent procurement or production practices.

A strate y in which part of a process is delayed in order to reduce the need for safety inventory. $he brea&down of labor into its components and the distribution of labor amon people and machines to increase efficiency of production. transportin material.6 1ycle inventory 1ycle service level 7elayed differentiation 7emand mana ement strate ies 7ivision of labor 7ue date !uotation 0conomic order !uantity 0conomies of scale 0ffective bottlenec& 0ffective capacity of a process 0ffective capacity of a resource unit 0veryday low pricin +07'P. 0veryday low purchase prices +07'PP. $he process of periodically monitorin the actual process performance.ed durin its net availability that is if there were no periods of resource idleness. investi atin causes of the observed discrepancy between the two. 2ill rate 2ishbone 7ia ram 2i#ed order cost . 2eedbac& control $he avera e inventory arisin from a specific batch si.e that minimi. $he practice of promisin a time frame within which the product will be delivered after an order has been placed. Also called postponement. $he administrative cost of processin an order. everyday low prices with no temporary discounts. Actions by a firm that attempt to influence demand pattern. comparin it to planned levels of performance. $he resource pool with least effective capacity. $he effective capacity of the effective bottlenec&. A process e#hibits economies of scale when the avera e unit cost of output decreases with volume.e $he probability that there will be no stoc&out within an order cycle Also called service level. $he retail practice of char in constant. )ee cause-effect dia ram. everyday low prices with no temporary discounts. $he optimal order si. $he ma#imum flow rate of a resource unit if it were fully utili. $he wholesale practice of char in total fi#ed and variable costs. $he fraction of total demand satisfied from inventory on hand. and ta&in corrective actions to eliminate those causes.

e. A method of hi h-volume production that allows differences in products. $his process supports a focused strate y. A type of process architecture that uses speciali.ational resources by processin activity or /function. in /departments. A type of process desi n that roups or ani. Also called process layout. or an output unit such as a finished product.ed within a process view.ation 2unctional strate y .. A business process that is committed to a limited.8 receivin the product+s.. $he item bein analy. con ruent set of ob:ectives in terms of demand and supply. $he total time that a flow unit spends within process boundaries. A process and or ani. re ardless of order si. 2ocused process 2ocused strate y 2orecastin 2orward buyin 2unctional layout 2unctional speciali. $he number of flow units that flow throu h a specific point in the process per unit of time.ational structure where people are speciali. $he process of predictin the future. 0#amples of flow units include an input unit such as a customer order. $he ratio between theoretical flow time and the avera e flow time that indicates the amount of waitin time associated with the process. A process in which products all fall within a small re ion of the competitive product space. A flow unit can also be the financial value of the input or output. $he part of strate ic plannin that defines the purpose of mar&etin . meanin each individual is dedicated to a specific tas&. +$he other or ani.ational structure is product specialization.ed by function. 2i#ed setup cost 2le#ible 9anufacturin )ystem +29). and inspectin the delivery. $he ta&in advanta e of price discounts to purchase for future needs.ed resources to produce a low variety of products at hi h volumes. 2le#ible mass production 2low rate 2low shop 2low time 2low time efficiency 2low unit $he time and materials re!uired to setup a process A repro rammable manufacturin system capable of producin a lar e variety of parts..

An illustration that depicts inventory fluctuation over time. written ∆R+t. =ei:un&a =isto ram (deal process (nflow rate (n-process inventory (nputs )ee 'evel Production. and customers in need of service. A process that achieves synchroni. $he total number of flow units present within process boundaries. Also called turnover ratio. written ∆R+t. Any tan ible or intan ible items that flow into the process from the environment and are transformed% they include raw materials. (t is the reciprocal avera e of flow time. $he difference between instantaneous inflow rate and outflow rate. component parts. Also called pipeline inventory.. An inventory classification% flow units that are bein processed.ations. (ntelli ent Automation whereby the ability to detect errors is (nputs inventory (nstantaneous inventory accumulation rate (nstantaneous inventory build-up rate (nterarrival time (n-transit inventory (nventory (nventory build-up dia ram (nventory holdin cost (nventory turns (shi&awa 7ia ram >ido&a .the three main functions of or ani.< operations and finance -. $he time between consecutive customer arrivals. )ee cause-effect dia ram. ener y. A cate ory of in-process inventory% flow units bein transported. $he ratio of throu hput to avera e inventory. data. Also see work-in-process inventory and in-transit inventory.ation at the lowest possible cost.. $he avera e rate of customer arrivals per unit of time. A bar plot that displays the fre!uency distribution of an observed performance characteristic. $he financial cost of carryin inventory two main components of which are physical holding cost and the opportunity cost of capital. Also called instantaneous inventory build-up rate. An inventory classification% flow units that are waitin to be in processin $he difference between instantaneous inflow rate and outflow rate. Also called instantaneous inventory accumulation rate.

ed. it means production of only necessary flow units in necessary !uantities at necessary times. (mprovement by continuously identifyin and eliminatin sources of waste in a process such as inventory. =uman resource assets such as en ineers. $he total flow unit re!uirement durin replenishment lead time.en @anban 'abor 'ead time 'ead time demand 'evel production 'evel-production strate y 'ittle4s 'aw 'oad batchin 'ot si. $he maintenance of a constant processin rate when demand fluctuates seasonally and thus the buildin of inventories in periods of low demand and the depletin of inventories when demand is hi h. $he phenomenon of a resource processin several flow units simultaneously% the number of units processed simultaneously is called the load batch. (n the conte#t of manufacturin . (t states that average inventory e!uals average throughput times average flow time. (t is a card attached to an output flow unit in the buffer between customer and supplier processes and lists the customer process. the supplier process. 'ower ran e of the control limits. An action ta&en only when it becomes necessary to do so. operators. waitin time. @ai. . $he law that describes the relationship amon the three performance measures.e 'ower 1ontrol 'imit +'1'. or defective parts. $he si nalin device formali. $he time la between the arrival of the replenishment and the time the order was placed. hi h-variety products. Also called setup batch.? automatically built into the machine. parts description and production !uantity. $he number of units processed consecutively after a setup.ed by $oyota that allows the customer to inform the supplier of its need. >ob shop >ust-in-$ime A type of process architecture that uses fle#ible resources to produce low volumes of customi. A production schedule where small !uantities of different products are produced fre!uently to match with customer demand% also called Hei unka. customer service representatives and sales staff.

Process activities lin&ed so that the output of one becomes an input into another. $he process of comparin e#pected costs and benefits of purchasin each incremental unit. Also called product operations. processin lead times. $he difference between the unit price of the product and unit mar inal cost of procurement $he difference between unit mar inal cost of procurement and its salva e value. Produce in response to customer orders. A plot of hi h. and levels of inventories at those stations. 9a&e-to-order 9a&e-to-stoc& 9anufacturin 9ar inal analysis 9ar&et-driven strate y 9ass production 9aterial *e!uirements Plannin +9*P. $he process of producin oods. A measure of e#pected a re ate monetary ain or loss that is computed by discountin all e#pected future cash inflows and outflows to their present value. based on the product structure +/bills of materials. bac&wards to determine parts re!uirements at intermediate stations." $he production of products in lar e +massive. avera e. 5ne of two approaches to strate ic fit wherein a firm starts with &ey competitive priorities and then develops processes to support them.. $he actual time durin which a resource is available for processin flow units% $he difference between the scheduled availability and resource availability loss of a resource unit. !uantities. 9ulti-vari chart Aet availability of a resource Aet mar inal benefit Aet mar inal cost Aet present value 'ower ran e of acceptable performance.. A basic model of decision ma&in under uncertainty whereby the decision ma&er balances the e#pected costs of orderin too much with the e#pected costs of orderin too little to determine the optimal order !uantity Aetwor& of activities and buffers Aewsvendor problem . and low values of performance measurement sampled over time. often throu h an intermediate buffer. +$he other approach to strate ic fit is process-driven strategy.8 'ower )pecification +'). Produce in anticipation of customer orders. A plannin tool usin which the end-product demand forecasts are /e#ploded.

and ad:ustin it in li ht of the observation. $he consolidation of all of a firm4s stoc& into one location from which it services all customers. cycle Plant . 0#amples include finished products. and satisfied customers. )tatistically predictable variability. $he for one return on the funds invested in inventory rather than in alternative pro:ects. (t includes both structural variability and stochastic variability. An inventory classification% processed flow units that have not yet e#ited process boundaries A bar chart that plots fre!uencies of problem-type occurrence in decreasin order. $he inventory represented by outstandin orders not yet delivered. 5pportunity cost 5utputs 5utputs inventory Pareto chart Physical centrali. cash. processed information. A measure of a firm4s product offerin s in the competitive product spaceC the smallest curve that contains all industry positions. operatin it.ation Physical holdin cost Pipeline inventory Plan-7o-1hec&-Act +P71A. material. a service unit. Any tan ible or intan ible items that flow from the process bac& into the environment. $he measure of how well a firm mana es its processes. $he aspect of strate ic plannin that confi ures and develops business processes that best enable a firm to produce and deliver the products specified by the business strate y. Also called in-transit inventory. inspectin its output. -usiness processes that desi n. Any sin ly owned. such as a manufacturin site. $he out-of-poc&et e#pense of storin inventory A cate ory of in-process inventory% flow units bein transported. independently mana ed and operated facility. ener y.B Aon-value-addin activities Aormal variability 5n-order inventory 5perational effectiveness 5perations 5perations frontier 5perations strate y Activities that are re!uired by a firm4s process that do not directly increase the value of a flow unit. it involves plannin the process. A tool to implement continuous improvement. or a stora e warehouse. produce and deliver oods and services.

)cheduled maintenance activities for resources. Any or ani. $he aspect of process mana ement that is focused on continually ensurin that in the short run. flow units. the actual process performance conforms to the planned performance. A set of mana erial policies that specifies how a process should be operated over time and which resources should be allocated over time to Process cost Process desi n Process efficiency Process fle#ibility Process flow chart Process flow mana ement . A raphical representation of a process that identifies the inputs.. Also called delayed differentiation.ation or any part of an or ani. outputs. 7esi n of a part. $he se!uential relationships that determine which activity must be finished before another can be in. $he ma#imum sustainable flow rate of a process% the ability of a process to meet customer specifications. resources allocated to activities. 9ista&e Proofin . A strate y in which part of a process is delayed in order to reduce the need for safety inventory.10 Plant-within-a-plant +PDP. product. $he total cost incurred in producin and deliverin outputs. $he system of selectin the process architecture that best develops the competencies that will meet customer e#pectations. $he sharin of available inventory amon various sources of demand. or a process that prevents mista&es its user from ma&in a mista&e. and information structure.ation that transforms inputs into outputs. Process performance measured in terms of total processin cost. $he sharin of available capacity amon various sources of demand +or arrivals. networ& of activities and buffers.. each devoted to its own specific mission by performin a process that focuses strictly on that mission. Po&a Eo&e Poolin capacity Poolin inventory Postponement Precedence relationships Preventive maintenance Process Process capacity Process control A plant in which the entire facility is divided into several /mini-plants. $he ability of the process to produce and deliver desired product variety.

$he total time needed to transform a flow unit from input to output. $he avera e time re!uired by a server to process a customer% also called activity time A batch size arisin in procurement.flow time. Also called functional layout. +$he other approach to strate ic fit is market-driven strategy. $o ether. $he ability of the process to produce and deliver !uality products. and location re!uirements. $he ability of the process to meet customer demand in terms of their !uantity.11 the activities. A type of process desi n in which the location of resources is dictated Process plannin Process !uality Process synchroni." A system that consists of information and material flows of multiple products throu h a se!uence of interconnected paths $he rate at which customers are processed by a server% also called service rate. !uality.. 5ne of two approaches to strate ic fit wherein a firm starts with a iven set of process competencies and then identifies which mar&et position is best supported by those processes. these measures -. in /departments. $he properties of a product that customers consider important.ational resources by processin activity or /function. A type of process desi n that roups or ani. (dentifyin internal measures that trac& process competence and specifyin the mana erial policies that improve process competence alon desired dimensions. flow rate and inventory F capture the essence of process flow. Also see flow time.ation Process-driven strate y Processin networ& Processin rate Processin time Procurement batch Product attributes Product cost Product delivery response time Product layout . $he total cost that a customer incurs in order to own and e#perience the product. Process flow measures Process flow time Process layout (nternal measures of process performance that mana ers can control. $he total time that a customer must wait before receivin a product for which heGshe has e#pressed a need to the provider. time.

A batch size arisin in production. Huality of conformance Huality of desi n Hueue len th formula *ate of return . =ow well the actual product conforms to the chosen desi n specifications. $he reward that an investor demands for acceptin payment delayed by one period of time. $he price a specific customer is willin to pay for a product. $he avera e fraction of arrivals bloc&ed from enterin the process because the input buffer is full. +$he other or ani.12 by the processin re!uirements of the product. and variability.ation. tri ers production.or functional specialization. A process and or ani. A process where input availability. number of servers..ational structure where people are speciali.. A tool used to match processes to products proposed by =ayes and Dheelwri ht +1B?B. A formula for the avera e !ueue len th as a function of the utili.ation $he de ree of e#cellence of a product% how well a product performs. $he choice between manufacturin oods with hi her variety at a lower rate of productivity or manufacturin oods with low variety at a hi her rate of productivity. as opposed to customer need. Product !uality Product speciali. $he ran e of choices offered to the customer to meet her needs. =ow well product specifications aim to meet customer re!uirements. $he number of customers who enter the process but abandon it before bein served. A conceptual framewor& that can be used to translate customers4 functional re!uirements of a product into concrete desi n specifications. meanin each individual is dedicated to a specific product-line. A process where the si nal to produce is tri ered by the customer so that each station produces only on demand from its customer station.ational structure is process. Product value Product variety Production batch Productivity dilemma Product-process matri# Proportion abandonin Proportion bloc&ed Pull Push Huality function deployment +H27.ed by product.

facilities. (nventories of inputs maintained to insulate the process and continue operation despite supply shorta es. A cate ory of factors that affect process capacity in which the resource is available but is not processin units. $an ible assets that help transform inputs to outputs in a process. !uality. machines. and information systems% and labor. which includes people such as en ineers. operators. Also called safety inventories. buildin . e!uipment. (nventories maintained to insulate the process 2rom disruptions in supply or uncertainty in demand. 0#amples of factors include starvation and bloc&a e. service and speed. *esource pool *esource poolin *esource unit *esources *eturn on total assets *obust desi n *un chart )afety capacity )afety inventories )afety stoc& . A common financial measure that shows how well a firm uses its assets to earn income for the sta&eholders who are financin it. 9a&in separate resource pools fle#ible to handle tas&s performed by each other. Also called safety stock. A cate ory of factors that affect process capacity in which the resource itself is not available for processin . and sales staff. 0ach unit in a resource pool. which includes fi#ed assets such as land. $hey are usually divided into two cate oriesC capital. A collection of interchan eable resources that can perform an identical set of activities. $he e#cess processin capacity available to handle customer inflows. A plot of some measure of process performance monitored over time. *eorder point *esource availability loss *esource brea&down *esource idleness $he available inventory at the time a reorder is placed. $he unavailability of a resource for processin due to e!uipment malfunctionin or wor&er absenteeism. $he desi nin of a product in such a way that its actual performance will not suffer despite any variability in the production process or in the customer4s operatin environment. customer service representatives.13 *een ineerin 2undamental rethin&in and radical redesi n of business processes in order to achieve dramatic improvements in critical contemporary measures of performance such as cost.

the avera e inflow rate is the same )catter plot )cheduled availability )easonal inventories )erver order discipline )ervice operations )ervice rate )etup )etup batch )in le 9inute 0#chan e of 7ie +)907. $he law states that the total safety inventory re!uired to provide a specified level of service increases by the s!uare root of the number of locations in which it is held. (t is the re!uirement that the avera e inflow rate should be strictly less than the avera e processin rate to ensure a stable process. A process in which. $he amount of time that a resource unit is scheduled for operation. $he cleanin .. A raph showin how a controllable process variable affects the resultin product characteristic. in order to ensure that a firm will be able to meet the promised date. A system by which the chan eover times can be reduced to less than 10 minutes. $he number of units processed consecutively after a setup. (nventories that act as buffers to absorb seasonal fluctuations of supply and demand. resettin . A process that produces only 2 defective units per billion produced. (t is necessary to limit delays or !ueues. A service process in which each customer is processed by one server and all tas&s performed by that server are combined into a sin le activity. )ee processin rate. Also called changeover. Processes that deliver services. $he se!uence in which waitin customers are served. Also called lot size. )in le-phase service process )i# )i ma )lac& time of an activity )!uare root law )tability condition )table process . $he e#tent to which an activity could be delayed without affectin process flow time. in the lon run.16 )afety time $he time mar in that should be allowed over and above the e#pected time to deliver service. or retoolin of e!uipment in order for it to process a different product.

)tarvation )tatistical !uality control )tochastic variability )trate ic fit $he forced idleness of resources due to the unavailability of necessary inputs. etc. $he sum of the theoretical capacities of all the resource units in that pool. An entire networ& of interconnected facilities of diverse ownership with flows of information and materials between them. wholesalers. the process per unit over time. activities. $he avera e number of flow units that flow throu h +into and out of. (t can include raw materials suppliers. Also called average flow rate. distributors. finished oods producers. A resource pools with minimum theoretical capacity.ed +without idle periods. A mana ement approach that relies on samplin of flow units and statistical theory to ensure the !uality of the process. A raph displayin the avera e flow time of a process as a function of capacity utili. with its own set of inputs.ation. =avin consistency between the competitive advanta e that a firm see&s and the process architecture and mana erial policies that it uses to achieve that advanta e.18 as the avera e outflow rate. $he minimum amount of inventory necessary to maintain a process throu hput rate in e!uilibrium. $he theoretical capacity of the theoretical bottlenec&. Activities that are e#ploded into a set of sub-activities that is then considered a process in its own ri ht. resource availability loss and time lost to setups. )ub-process )upply chain $heoretical bottlenec& $heoretical capacity of a process $heoretical capacity of a resource pool $heoretical capacity of a resource unit $heoretical flow time $heoretical inventory $hrou hput $hrou hput delay curve . $he unpredictable or random variability e#perienced by service processes. $he ma#imum sustainable flow rate of the resource unit if it were fully utili. $he minimum amount of time re!uired for processin a typical flow unit without any waitin .. outputs. and retailers.

a decreasin of one aspect to increase another. $hose activities that increase the economic value of a flow unit because the customer values them.1< $ime-series analyses $rade promotion $rade-off $ransfer batch $urnover ratio $ype ( 0rror $ype (( 0rror "nit load of a resource unit "pper 1ontrol 'imit +'1'. Daste Dor& content of an activity . $he ratio of throu hput to avera e inventory. "pper ran e of acceptable performance. producin in !uantities too lar e or too small. A situation when process performance falls outside the control band even with normal variability. A form of price discount wherein a discount is offered for only a short period of time. A situation when process performance measure falls within the control band. for e#ample. Also called inventory turns. producin inefficiently. (t measures the total amount of time re!uired to perform an activity durin the transformation of a flow unit. A system in which inventory poolin in a networ& of locations is facilitated usin information re ardin availability of oods and subse!uent transshipment of oods between locations to satisfy demand.ation 2orecastin methods that rely solely on past data. $he amount of time re!uired by the resource to process each flow unit. A batch size arisin in transportation or movement. "pper )pecification +"). producin defective products. Iirtual centrali. 5n the operations frontier. Ialue-addin activities Iendor 9ana ed (nventory +I9(. even thou h there is an assi nable cause of abnormal variability. and deliverin products too early or too late. A partnership pro ram under which the supplier decides the inventory levels to be maintained at its customer locations and arran es for replenishments to maintain these levels. $he failure to match customer demand most economically by. (t is the reciprocal avera e of flow time. $he activity time multiplied by the avera e number of visits at that activity. "pper ran e of the control limits.

.1? Dor&-in-process inventory A cate ory of in-process inventory% flow units bein processed in a manufacturin or service operation.