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APICS - Dictionary 14th Edition PDF
APICS - Dictionary 14th Edition PDF
APICS Dictionary
The essential supply chain reference
APICS Dictionary
FOURTEENTH EDITION
Editor
John H. Blackstone Jr., PhD, CFPIM, Jonah’s Jonah
Department of Management
Terry College of Business
University of Georgia
APICS Dictionary
Fourteenth edition—2013
Thirteenth edition—2010
Twelfth edition—2008
Eleventh edition—2005
Tenth edition—2002
Ninth edition—1998
Eighth edition—1995
Seventh edition—1992
Sixth edition—1987
Fifth edition—1982
Fourth edition—1980
Third edition—1970
Second edition—1966
First edition—1963
APICS
8430 West Bryn Mawr Avenue
Suite 1000
Chicago, IL 60631-3439
1-800-444-2742 or +1-773-867-1777
apics.org
Acknowledgements
accessibility—1) In transportation, the facility with which example, the Registrar Accreditation Board accredits
a carrier provides service from one point to another. 2) those organizations that register companies to the ISO
In warehousing, the ability to get to and within the point 9000 Series Standards.A
of storage easily.A
accumulation bin—A place, usually a physical location,
accessorial charges—A bill for services, such as inside used to accumulate all components that go into an as-
deliveries, which are made in addition to transportation sembly before the assembly is sent out to the assembly
A charges.A
accessory—A choice or feature added to the good or
floor. Syn: assembly bin.A
accuracy—The degree of freedom from error or the de-
service offered to the customer for customizing the end gree of conformity to a standard. Accuracy is different
product. An accessory enhances the capabilities of the from precision. For example, four-significant-digit num-
product but is not necessary for the basic function of bers are less precise than six-significant-digit numbers;
the product. In many companies, an accessory means however, a properly computed four-significant-digit
that the choice does not have to be specified before number might be more accurate than an improperly
shipment but can be added at a later date. In other computed six-significant-digit number.A
companies, this choice must be made before shipment.
acid test—Syn: quick asset ratio.A
See: feature.A
acid test ratio—Syn: quick asset ratio.A
accidental death and disability (AD&D)—Insurance that
often is part of an employee benefit package, providing acknowledgment—A communication by a supplier to ad-
payment for either accidental death or disability.A vise a purchaser that a purchase order has been re-
ceived. It usually implies acceptance of the order by the
accident prevention—The application of basic scientific
supplier.A
and technical principles—including education and train-
ing—for the detection, analysis, and minimization of ha- acquisition cost—The cost required to obtain one or
zards, with the objective of avoiding accidents.A more units of an item. It is order quantity times unit
cost. See: ordering cost.A
acclimatization—The physiological, emotional, and be-
havioral adjustment to changes in the environment. action message—An output of a system that identifies
Proper performance depends on adequate acclimatiza- the need for, and the type of action to be taken to cor-
tion to the workplace, including significant mechanical rect, a current or potential problem. Examples of action
features such as seat height and lighting. Heat, cold, messages in an MRP system include release order, re-
humidity, and light are important physiologically.A schedule in, reschedule out, and cancel. Syn: exception
message, action report.A
accountability—Being answerable for, but not necessari-
ly personally charged with, doing the work. action plan—A process to obtain results identified by
Accountability cannot be delegated, but it can be one or more objectives.A
shared.A
action report—Syn: action message.A
accounting—The function of maintaining, analyzing, and
activation—Putting a resource to work.A
explaining the financial records and status of an
organization.A active data gathering—Data gathered when a company
initiates conversation with the customer.A
account manager—A manager who has direct responsi-
bility for a customer’s interest.A active inventory—The raw materials, work in process,
and finished goods that will be used or sold within a
accounts payable—The value of goods and services ac-
given period.A
quired for which payment has not yet been made.A
active load—Work scheduled that may not be on hand.A
accounts receivable—The value of goods shipped or
services rendered to a customer on which payment has active tag—A radio frequency identification tag that
not yet been received. Usually includes an allowance for broadcasts information and contains its own power
bad debts.A source. See: radio frequency identification (RFID).A
accreditation—Certification by a recognized body of the activity—1) In activity-based cost accounting, a task or
facilities, capability, objectivity, competence, and integr- activity, performed by or at a resource, required in pro-
ity of an agency, service, operational group, or individual ducing the organization’s output of goods and services.
to provide the specific service or operation needed. For A resource may be a person, machine, or facility.
Activities are grouped into pools by type of activity and requirements (for both financial and operational sys-
allocated to products. 2) In project management, an tems) based on future demand for products or services
element of work on a project. It usually has an antic- by specific customer needs. Demand for resources is
ipated duration, anticipated cost, and expected re- related to resource availability; capacity overages and
source requirements. Sometimes “major activity” is shortfalls are corrected. Activity-based budgeting de-
used for larger bodies of work.A rives from the outputs of ABP.A
activity analysis—In project management, the identifica-
tion and description of activities within an organization
for the purpose of activity-based costing.A
activity code—In project management, a value that al-
lows filtering or ordering of activities in reports.A
activity definition—The specific work to be performed
A
activity attributes—Multiple features associated with that defines a project deliverable.A
each activity to be performed. These include predeces- activity dictionary—In activity-based cost accounting, a
sor activities, successor activities, and resource set of standard definitions of activities including de-
requirements.A scriptions, business process, function source, cost driv-
activity-based budgeting (ABB)—In activity-based cost ers, and other data important to activity-based
accounting, a budgeting process employing knowledge planning.A
of activities and driver relationships to predict workload activity driver—In activity-based cost accounting, a
and resource requirements in developing a business yardstick of demands placed on an activity by given cost
plan. Budgets show the predicted consumption and objects. Its purpose is to assign activity costs to cost
cost of resources using forecast workload as a basis. objects.A
The company can use performance to budget in eva-
activity duration—The planned difference between the
luating success in setting and pursuing strategic goals;
start and finish dates of a project activity.A
this activity is part of the activity-based planning
process.A activity identifier—A unique alphanumeric code that dif-
ferentiates one project activity from other activities.A
activity-based cost accounting—A cost accounting sys-
tem that accumulates costs based on activities per- activity level—A description of how reactive one activity
formed and then uses cost drivers to allocate these is to changes in the level of another activity or cost
costs to products or other bases, such as customers, object.A
markets, or projects. It is an attempt to allocate over- activity list—A record of planned activities in a project,
head costs on a more realistic basis than direct labor or including an activity description and an activity
machine hours. Syn: activity-based costing, activity- identifier.A
based cost accounting. See: absorption costing.A
activity network diagram—One of the seven new tools of
activity-based costing (ABC)—In activity-based cost ac- quality. A drawing including nodes that represent opera-
counting, a model, by time period, of resource costs tions to be performed and arrows representing prece-
created because of activities related to products or ser- dence relationships. This drawing represents all of the
vices or other items causing the activity to be carried activities to be finished to complete a project. Also
out. Syn: activity-based cost accounting, activity-based known as a critical path diagram or PERT chart.A
costing model.A
activity-on-arc network—Syn: activity-on-arrow network.A
activity-based costing system—A set of activity-based
activity-on-arrow network (AOA)—A project management
cost accounting models that collectively define data on
network in which the passage of time, via activities,
an organization’s resources, activities, drivers, objects,
takes place on the arrows. The start of an activity is
and measurements.A
represented by the tail of the arrow, while the comple-
activity-based management (ABM)—The use of activity- tion of the activity is represented by the tip of the arrow.
based costing information about cost pools and drivers, The sequence of the arrows represents the sequence of
activity analysis, and business processes to identify activities. Arrows are connected by nodes, which are
business strategies; improve product design, manufac- usually circles. Syn: activity-on-arc network, arrow dia-
turing, and distribution; and remove waste from opera- gram method, event-on-arrow network.A
tions. See: activity-based cost accounting.A
activity-on-node network (AON)—A project management
activity-based planning (ABP)—In activity-based cost ac- network in which the passage of time, via activities,
counting, a continuing definition of activity and resource takes place on circles called nodes. Each node contains
a number representing the estimated duration of the compared with demonstrated capacity (practical capaci-
activity it represents. Nodes are connected by arrows ty) or budgeted capacity.A
that give precedence relationships. Syn: event-on-node
AD&D—Abbreviation for accidental death and
network, precedence diagram method.A
disability.A
activity ratio—A financial ratio to determine how an or-
adaptable website—In e-commerce, a site that a visitor
ganization’s resources perform relative to the revenue
can change to customize.A
“official plan.” The five main components of APS sys- and production planning (or for sales and operations
tems are (1) demand planning, (2) production planning, planning) purposes. See: product group forecast.A
(3) production scheduling, (4) distribution planning, and
aggregate inventory—The inventory for any grouping of
(5) transportation planning.A
items or products involving multiple stockkeeping units.
advanced planning system (APS)—Syn: advanced plan- See: base inventory level.A
ning and scheduling.A aggregate inventory management—Establishing the
advanced production system (APS)—Syn: advanced
planning and scheduling.A
overall level (dollar value) of inventory desired and im-
plementing controls to achieve this goal.A A
advance material request—Ordering materials before aggregate lead time—Syn: cumulative lead time.A
the release of the formal product design. This early re- aggregate plan—A plan that includes budgeted levels of
lease is required because of long lead times.A finished goods, inventory, production backlogs, and
advance ship notice (ASN)—An electronic data inter- changes in the workforce to support the production
change (EDI) notification of shipment of product.A strategy. Aggregated information (e.g., product line,
family) rather than product information is used, hence
advertising—Sponsored promotions that are nonper- the name aggregate plan.A
sonal in nature.A
aggregate planning—A process to develop tactical plans
aesthetics—A dimension of product quality that intends to support the organization’s business plan. Aggregate
to appeal to the senses.A planning usually includes the development, analysis,
affidavit—A sworn written statement.A and maintenance of plans for total sales, total produc-
tion, targeted inventory, and targeted customer backlog
affinity diagram—A total quality management tool whe- for families of products. The production plan is the re-
reby employees working in silence generate ideas and sult of the aggregate planning process. Two approaches
later categorize these ideas.A to aggregate planning exist: (1) production planning and
affirmative action—A hiring policy that requires employ- (2) sales and operations planning. See: production
ers to analyze the workforce for underrepresentation of planning, sales and operations planning, sales plan.A
protected classes. It involves recruiting minorities and aggregate production plan (APP)—A long-range plan that
members of protected classes, changing management is used to determine timing and quantity of total future
attitudes or prejudices toward them, removing discrimi- production for a family of products. Syn: long-term pro-
natory employment practices, and giving preferential duction plan.A
treatment to protected classes.A
aggregate reporting—1) Reporting of process hours in
aftermarket—A secondary market for parts and acces- general, allowing the system to assign the actual hours
sories used to repair or enhance an item.A to specific products run during the period based on
after-sale service—Syn: field service.A standards. 2) Also known as gang reporting, the report-
ing of total labor hours.A
agency tariff—Rates for a variety of carriers published in
a single document.A aggregate unit of capacity—Combined capacity unit of
measure when a variety of outputs exist.A
agent—One who acts on behalf of another (the principal)
aggregation—The concept that pooling random variables
in dealing with a third party. Examples include a sales
reduces the relative variance of the resulting aggre-
agent and a purchasing agent.A
gated variable. For example, the relative variance in
agglomeration—Having a common location with a varie- sales of all models of automobiles sold by a firm is less
ty of other companies.A than that for a single model.A
aggregate demand—Demand that is grouped (e.g., all agile manufacturing—The ability to respond quickly to
sedans) for making forecasts or plans. See: aggregate unpredictable changes in customer needs by reconfigur-
forecast.A ing operations.A
aggregate forecast—An estimate of sales, often time- agility—The ability to successfully manufacture and
phased, for a grouping of products or product families market a broad range of low-cost, high-quality products
produced by a facility or firm. Stated in terms of units, and services with short lead times and varying volumes
dollars, or both, the aggregate forecast is used for sales that provide enhanced value to customers through cus-
tomization. Agility merges the four distinctive compe- alternate feedstock—A backup supply of an item that
tencies of cost, quality, dependability, and flexibility.A either acts as a substitute or is used with alternate
equipment.A
AGVS—Abbreviation for automated guided vehicle
system.A alternate operation—Replacement for a normal step in
AI—Abbreviation for artificial intelligence.A the manufacturing process. Ant: primary operation.A
alternate part—When a buyer can purchase similar
A
AIDC—Abbreviation for automatic identification and data
capture.A products from different suppliers. This increases the
buyer’s power as the buyer does not have to rely on just
AIS—Abbreviation for automated information system.A one supplier.A
algorithm—A prescribed set of well-defined rules or alternate routing—A routing that is usually less preferred
processes for solving a problem in a finite number of than the primary routing but results in an identical item.
steps (e.g., the full statement of the arithmetic proce- Alternate routings may be maintained in the computer
dure for calculating the reorder point).A or off-line via manual methods, but the computer soft-
alliance development—Strengthening the capabilities of ware must be able to accept alternate routings for spe-
a key supplier.A cific jobs.A
allocated item—In an MRP system, an item for which a alternate work center—The work center where an opera-
picking order has been released to the stockroom but tion is not normally performed but can be performed.
not yet sent from the stockroom.A Ant: primary work center.A
allocated material—Syn: reserved material.A American customer satisfaction index—A metric cos-
ponsored by the University of Michigan and the
allocation—1) The classification of quantities of items
American Society for Quality that measures the satisfac-
that have been assigned to specific orders but have not
tion of U.S. customers with the goods and services
yet been released from the stockroom to production. It
available to them from both domestic and foreign
is an “uncashed” stockroom requisition. 2) A process
origins.A
used to distribute material in short supply. Syn: assign-
ment. See: reservation.A American National Standards Institute (ANSI)—The par-
allocation costing—Syn: absorption costing.A ent organization of the interindustry electronic inter-
change of the business transaction standard. This
allocative efficiency—The use of resources to produce group is the clearinghouse on U.S. electronic data inter-
those goods and services most wanted by consumers.A change standards.A
allowable cost—A reasonable cost specifically permitted American Society for Quality (ASQ)—Founded in 1946, a
under Federal Acquisition Regulation (FAR) not-for-profit educational organization with more than
requirements.A 100,000 individual and organizational members who
allowance—1) In work measurement, a time value or are interested in quality improvement.A
percentage of time by which the normal time is in- American Standard Code for Information Interchange
creased, or the amount of nonproductive time applied, (ASCII)—Standard seven-bit character code used by
to compensate for justifiable causes or policy require- computer manufacturers to represent 128 characters
ments that necessitate performance time not directly for information interchange among data processing sys-
measured for each element or task. Usually includes tems, communications systems, and other information
irregular elements, incentive opportunity on machine- system equipment. An eighth bit is added as a parity bit
controlled time, minor unavoidable delays, rest time to to check a string of ASCII characters for correct
overcome fatigue, and time for personal needs. 2) In transmission.A
assembly, the minimum clearance or maximum interfe-
rence distance between two adjacent objects.A amortization—The process of recovering (via expensing)
a capital investment over a period of time. See: capital
allowed time—A normal time value increased by appro- recovery.A
priate allowances.A
analog—As applied to an electrical or computer system,
alpha factor—Syn: smoothing constant.A
the capability of representing data in continuously vary-
alpha release—An extremely early version of a product ing physical phenomena (as in a voltmeter) and convert-
released to obtain feedback about its suitability.A ing them into numbers.A
analysis of variance (ANOVA)—A statistical analysis sys- ing sales, planned sales promotion programs, seasonal
tem that estimates what portion of variation in a de- fluctuations, plant shutdowns, and vacations.A
pendent variable is caused by variation in one or more
anticipation order—An order placed before an item has
independent variables. It also produces a number used
been made available for delivery.A
to infer whether any or all of the independent-
dependent variable relationships have statistical signi- anti-dumping duty—An imposed responsibility in which a
ficance (i.e., have not been caused by randomness in company sells imported goods at prices below what is
the data).A
annualized contract—A negotiated agreement with a APP—Abbreviation for aggregate production plan.A
supplier for one year that sets pricing, helps ensure a apparent authority—Authority perceived by a third party
continuous supply of material, and provides the supplier to flow from a principal to an ostensible agent when in
with estimated future requirements.A fact no agency relationship exists.A
annual percentage rate—In finance, the rate of interest appellant—One who appeals a court decision to higher
paid for a loan after compounding is considered. Syn: authority.A
effective interest rate.A
application package—A computer program or set of pro-
annual physical inventory—Syn: physical inventory.A grams designed for a specific application (e.g., inventory
annuity—A stream of fixed payments for a stipulated control, MRP).A
time, yearly or at other intervals.A application service provider (ASP)—A firm that produces
ANOVA—Acronym for analysis of variance.A outsourced services for clients.A
ANSI—Acronym for American National Standards applications software—A computer program or set of
Institute.A programs designed to assist in the performance of a
specific task, such as word processing, accounting, or
anticipated delay report—A report, normally issued by inventory management. See: application system.A
both manufacturing and purchasing to the material
application system—A set of programs of specific in-
planning function, regarding jobs or purchase orders
structions for processing activities needed to compute
that will not be completed on time. This report explains
specific tasks for computer users, as opposed to operat-
why the jobs or purchases are delayed and when they
ing systems that control the computer’s internal opera-
will be completed. This report is an essential ingredient
tions. Examples are payroll, spreadsheets, and word
of the closed-loop MRP system. It is normally a
processing programs. See: application software.A
handwritten report. Syn: delay report.A
application-to-application—The exchange of data be-
anticipation inventories—Additional inventory above ba-
tween computers without reentry of data.A
sic pipeline stock to cover projected trends of increas-
appraisal—1) An evaluation of employee performance. useful in identifying potential problems and improve-
2) In total quality management, the formal evaluation ment opportunities.A
and audit of quality.A
arrow diagram method—Syn: activity-on-arrow network.A
appraisal costs—Those costs associated with the formal
evaluation and audit of quality in the firm. Typical costs artificial intelligence (AI)—1) Computer programs that
include inspection, quality audits, testing, calibration, can learn and reason in a manner similar to humans.
A and checking time.A The problem is defined in terms of states and operators
to generate a search space that is examined for the
appreciation of a currency—An increase in the buying
best solution. In contrast, conventional programming
power of a country’s currency in terms of other coun-
collects and processes data by algorithm or fixed step-
tries’ goods and services.A
by-step procedures. 2) An area in computer science that
approved vendor list (AVL)—A list of parties that have attempts to develop AI computer programs.A
been approved by a company as its suppliers. This list
ASC—Abbreviation for accredited standards
usually is based on product quality and financial stabili-
committee.A
ty of the firm.A
APR—Abbreviation for annual percentage rate.A ASCII—Acronym for American Standard Code for
Information Interchange.A
APS—1) Abbreviation for advanced planning and sche-
duling. 2) Abbreviation for advanced planning system.A ASN—Abbreviation for advance ship notice.A
AQL—Abbreviation for acceptable quality level.A ASP—Abbreviation for application service provider.A
arbitrage—Risk-free buying of an asset in one market ASQ—Abbreviation for American Society for Quality.A
and simultaneous selling of an identical asset at a profit
in another market.A ASQC—Abbreviation for American Society for Quality
Control, now simply American Society for Quality (ASQ).A
arbitration—The process by which an independent third
party is brought in to settle a dispute or to preserve the AS/RS—Abbreviation for automated storage/retrieval
interest of two conflicting parties.A system.A
arithmetic mean—Syn: mean.A assays—Tests of the physical and chemical properties of
arrival—In queuing theory, a unit that arrives for service, a sample.A
such as a person or part.A
assemble-to-order—A production environment where a
arrival date—The date purchased material is due to ar- good or service can be assembled after receipt of a cus-
rive at the receiving site. The arrival date can be input, it tomer’s order. The key components (bulk, semi-finished,
can be equal to the current due date, or it can be calcu- intermediate, subassembly, fabricated, purchased,
lated from the ship date plus transit time. See: due packing, and so on) used in the assembly or finishing
date.A process are planned and usually stocked in anticipation
arrival rate—In queuing theory, the value or distribution of a customer order. Receipt of an order initiates as-
describing how often a person or thing arrives for sembly of the customized product. This strategy is use-
service.A ful where a large number of end products (based on the
selection of options and accessories) can be assembled
arrow—1) In activity-on-arrow networks, the graphic from common components. Syn: finish-to-order. See:
presentation of an activity. The tail of the arrow make-to-order, make-to-stock.A
represents the start of the activity. The head of the ar-
row represents the finish. Unless a timescale is used, assembly—A group of subassemblies and/or parts that
the length of the arrow stem has no relation to the dura- are put together and that constitute a major subdivision
tion of the activity. Length and direction of the arrow are for the final product. An assembly may be an end item
usually a matter of convenience and clarity. 2) In or a component of a higher level assembly.A
activity-on-node networks, an arrow represents a prece-
assembly bin—Syn: accumulation bin.A
dence requirement.A
assembly chart—Overview of a product containing as-
arrow diagram—A technique to determine the relation-
sembly and subassembly operations, materials, and
ships and precedence of different activities and the
components.A
time estimate for project completion. The technique is
assembly lead time—The time that normally elapses be- personnel do not verify the delivery quantity. This tech-
tween the issuance of a work order to the assembly nique is used to eliminate invoices.A
floor and work completion.A
assurance—One of the dimensions of service quality.
assembly line—An assembly process in which equip- The ability of employees to inspire trust and
ment and work centers are laid out to follow the se- confidence.A
quence in which raw materials and parts are assured source of supply—A guaranteed supply source
assembled. See: line, production line.A
associative forecasting—Uses one or more variables audit—An objective comparison of actions to policies
that are believed to affect demand in order to forecast and plans.A
future demand.A audit trail—Tracing the transactions affecting the con-
assortment warehousing—A warehousing technique that tents or origin of a record.A
stores the goods close to the customer to ensure short authentication—In information systems, the act of iden-
customer lead times.A tifying a person or confirming the source of a message.A
assumed receipt—A receiving technique based on the authentication key—In information systems, a key that
assumption that a shipment is as expected. Receiving ensures that data in an electronic business transaction
are not changed. It can also be used as a form of digital automatic relief—A set of inventory bookkeeping me-
signature.A thods that automatically adjusts computerized inventory
records based on a production transaction. Examples of
authorized deviation—Permission for a supplier or the
automatic relief methods are backflushing, direct-
plant to manufacture an item that is not in conformance
deduct, and pre-deduct processing.A
with the applicable drawings or specifications.A
automatic rescheduling—Rescheduling done by the
autodiscrimination—The ability of a bar code reader to
automatic identification and data capture (AIDC)—A set available-to-promise (ATP)—The uncommitted portion of
of technologies that collect data about objects and then a company’s inventory and planned production main-
send these data to a computer without human interven- tained in the master schedule to support customer-
tion. Examples include radio frequency wireless devices order promising. The ATP quantity is the uncommitted
and terminals, bar code scanners, and smart cards.A inventory balance in the first period and is normally cal-
culated for each period in which an MPS receipt is
automatic identification system (AIS)—A system that can
scheduled. In the first period, ATP includes on-hand in-
use various means, including bar code scanning and
ventory less customer orders that are due and overdue.
radio frequencies, to sense and load data in a
Three methods of calculation are used: discrete ATP,
computer.A
cumulative ATP with look-ahead, and cumulative ATP
without look-ahead. See: discrete available-to-promise, average variable cost—The ratio of total variable costs
cumulative available-to-promise.A over units produced.A
available work—Work that is actually in a department AVL—Abbreviation for approved vendor list.A
ready to be worked on as opposed to scheduled work
avoidable cost—A cost associated with an activity that
that may not yet be physically on hand. Syn: live load.A
would not be incurred if the activity was not performed
average chart—A control chart in which the subgroup (e.g., telephone cost associated with vendor support).A
average, X-bar, is used to evaluate the stability of the
process level. Syn: X-bar chart.A
avoidable delay—The delay controlled by a worker and
therefore not allowed in the job standard.A
B
average collection period—Syn: receivables conversion
award audits—Site visits associated with award pro-
period.A
grams such as the Malcolm Baldrige National Quality
average cost per unit—The estimated total cost, includ- Award or similar state-sponsored award programs.A
ing allocated overhead, to produce a batch of goods di-
awareness efficiency—In e-commerce, a measurement
vided by the total number of units produced.A
of how well an organization informs people who have
average cost system—In cost accounting, a method of access to the web that the organization’s website
inventory valuation for accounting purposes. A weighted exists.A
average (based on quantity) of item cost is used to de-
termine the cost of goods sold (income statement) and
inventory valuation (balance sheet). Average cost pro-
vides a valuation between last-in, first-out and first-in,
B
first-out methods. See: first in, first out; last in, first BAC—Acronym for budget at completion.B
out.A backflush—A method of inventory bookkeeping where
average fixed cost—The total fixed cost divided by units the book (computer) inventory of components is auto-
produced. This value declines as output increases.A matically reduced by the computer after completion of
activity on the component’s upper-level parent item
average forecast error—1) The arithmetic mean of the
based on what should have been used as specified on
forecast errors. 2) The exponentially smoothed forecast
the bill of material and allocation records. This ap-
error. See: bias, forecast error.A
proach has the disadvantage of a built-in differential
average inventory—One-half the average lot size plus between the book record and what is physically in
the safety stock, when demand and lot sizes are ex- stock. Syn: explode-to-deduct, post-deduct inventory
pected to be relatively uniform over time. The average transaction processing. See: pre-deduct inventory
can be calculated as an average of several inventory transaction processing.B
observations taken over several historical time periods;
backflush costing—The application of costs based on
for example, 12-month ending inventories may be aver-
the output of a process. Backflush costing is usually as-
aged. When demand and lot sizes are not uniform, the
sociated with repetitive manufacturing environments.B
stock level versus time can be graphed to determine
the average.A backhauling—The process of a transportation vehicle
returning from the original destination point to the point
average outgoing quality (AOQ)—The expected average
of origin. The 1980 Motor Carrier Act deregulated inter-
quality level of outgoing product for a given value of in-
state commercial trucking and thereby allowed carriers
coming product quality.A
to contract for the return trip. The backhaul can be with
average outgoing quality limit (AOQL)—The maximum a full, partial, or empty load. An empty backhaul is
average outgoing quality over all possible levels of in- called deadheading. See: deadhead.B
coming quality for a given acceptance sampling plan
backlog—All the customer orders received but not yet
and disposal specification.A
shipped. Sometimes referred to as open orders or the
average payment period—The average time between order board. See: order backlog, past due order.B
receipt of materials and payment for those materials.A
backorder—An unfilled customer order or commitment.
average total cost—The ratio of total costs (the sum of A backorder is an immediate (or past due) demand
total fixed costs and total variable costs) over units against an item whose inventory is insufficient to satisfy
produced.A the demand. See: stockout.B
back room—In service operations, the part of the opera- lanced scorecard might include customer perspective,
tion that is completed without direct customer contact. business process perspective, financial perspective,
Many service operations contain both back room and and innovation and learning perspectives. It formally
front room operations. See: front room.B connects overall objectives, strategies, and measure-
ments. Each dimension has goals and measurements.B
backroom costs—Indirect costs for operations that do
not add direct value to a product and may or may not be balance-of-stores record—A double-entry record system
tate timely and accurate input of data to a computer than the average. For forecasting purposes, the base
system.B series is superimposed upon the average demand and
trend in demand for the item in question. Syn: base in-
bar coding—A method of encoding data using bar code
dex. See: seasonal index, seasonality.B
for fast and accurate readability.B
bar graph—A graphical method of displaying data by base stock system—A method of inventory control that
grouping observations into specific clusters.B includes, as special cases, most of the systems in prac-
batch number—Syn: lot number.B bespoke—A custom-made product or service. The term
originally was applied to clothing, but now applies to
batch picking—A method of picking orders in which or-
software as well.B
der requirements are aggregated by product across or-
ders to reduce movement to and from product best-in-class—An organization, often from another in-
locations. The aggregated quantities of each product dustry, recognized for excellence in a specific process
are then transported to a common area where the indi- area. See: process benchmarking.B
vidual orders are constructed. See: discrete order pick- best practices—In benchmarking, the measurement or
ing, order picking, zone picking.B performance standard by which similar items are eva-
batch processing—1) A manufacturing technique in luated. Defining a best practice identifies opportunities
which parts are accumulated and processed together in to improve effectiveness. The process of comparing an
a lot. 2) A computer technique in which transactions are actual result to a best practice may be applied to re-
accumulated and processed together or in a lot. Syn: sources, activities, or cost objects.B
batch production.B beta distribution—A type of probability distribution often
batch production—Syn: batch processing.B used to model activity times.B
batch sensitivity factor—A multiplier that is used for the beta release—A version of a product sent to certain cus-
rounding rules in determining the number of batches tomers prior to general release in order to receive feed-
required to produce a given amount of product.B back on product performance.B
batch sheet—In many process industries, a document beta test—A term used to describe the pilot evaluation
that combines product and process definition. See: of a good or service (i.e., “the second evaluation”).B
batch card.B bias—A consistent deviation from the mean in one direc-
baud—The number of bits transmitted per second.B tion (high or low). A normal property of a good forecast
is that it is not biased. See: average forecast error.B
Bayesian analysis—Statistical analysis where uncertain-
ty is incorporated, using all available information to bid—A quotation specifically given to a prospective pur-
choose among a number of alternative decisions.B chaser upon request, usually in competition with other
vendors. See: quotation.B
beginning available balance—Syn: available inventory.B
bid evaluation—A comparison of supplier quotes for a
beginning inventory—A statement of the inventory count product based on price, quality, lead time, delivery per-
at the end of last period, usually from a perpetual inven- formance, and other criteria and, based on that compar-
tory record.B ison, selecting a supplier.B
benchmarking—Comparing a company’s costs, prod- bid pricing—Offering a specific price for each job rather
ucts, and services to that of a company thought to have than setting a standard price that applies for all
superior performance. The benchmark target is often a customers.B
competitor but is not always a firm in the same industry.
bid proposal—The response to the written request from
Seven types of benchmarking have been cited: (1) com-
a potential customer asking for the submission of a qu-
petitive benchmarking, (2) financial benchmarking, (3)
otation or proposal to provide goods or services. The bid
functional benchmarking, (4) performance benchmark-
proposal is in response to a request for proposal (RFP)
ing, (5) process benchmarking, (6) product benchmark-
or request for quote (RFQ).B
ing, and (7) strategic benchmarking. See: competitive
benchmarking, financial benchmarking, functional ben- big data—A collection of data and technology that ac-
chmarking, performance benchmarking, process ben- cesses, integrates, and reports all available data by fil-
tering, correlating, and reporting insights not attainable determine the items for which purchase requisitions
with past data technologies. It describes data and production orders must be released. A variety of
processing beyond the human scale. In the past, data- display formats exist for bills of material, including the
bases tended to be limited—they only had to meet the single-level bill of material, indented bill of material,
demands of human users entering and retrieving data. modular (planning) bill of material, transient bill of
With the emergence of e-commerce and internet search material, matrix bill of material, and costed bill of
engines, database technology is evolving to manage material. 2) A list of all the materials needed to make
humans and computers. Today, with the amount of data
growing by 50 percent each year, it is information tech-
one production run of a product, by a contract
manufacturer, of piece parts/components for its
B
nology that is capable of managing, processing, and customers. The bill of material may also be called the
finding value.B formula, recipe, or ingredients list in certain process
industries.B
big Q, little q—A term used to contrast the difference
between managing for quality in all business processes bill-of-material accuracy—The degree to which a list of
and products (big Q) and managing for quality in a li- specified items conforms to administrative specifica-
mited capacity—traditionally in only factory products and tions and with correct quantities.B
processes (little q).B
bill-of-material explosion—The process of determining
bilateral contract—An agreement wherein each party component identities, quantities per assembly, and
makes a promise to the other party.B other parent/component relationship data for a parent
bill-back—A penalty given to the supplier because a late item. Explosion may be single level, indented, or
delivery or poor quality resulted in extra costs.B summarized.B
billing and collection costs—In transportation, the costs bill-of-material processor—A computer program for
related to issuing invoices or bills. These amounts can maintaining and retrieving bill-of-material information.B
be reduced by combining shipments in an order to limit bill-of-material structuring—The process of organizing
transportation frequency.B bills of material to perform specific functions.B
bill of activities—In activity-based cost accounting, a bill of operations—Syn: routing.B
summary of activities needed by a product or other cost
object. The bill of activities includes volume and cost of bill of resources—A listing of the required capacity and
each activity.B key resources needed to manufacture one unit of a se-
lected item or family. Rough-cut capacity planning uses
bill of batches—A method of tracking the specific multi- these bills to calculate the approximate capacity re-
level batch composition of a manufactured item. The bill quirements of the master production schedule.
of batches provides the necessary where-used and Resource planning may use a form of this bill. Syn: bill
where-from relationships required for lot traceability.B of capacity. See: bill of labor, capacity planning using
bill of capacity—Syn: bill of resources.B overall factors, product load profile, resource profile,
rough-cut capacity planning, routing.B
bill of distribution—Syn: distribution network structure.B
bin—1) A storage device designed to hold small discrete
bill of labor—A structured listing of all labor require-
parts. 2) A shelving unit with physical dividers separat-
ments for the fabrication, assembly, and testing of a
ing the storage locations.B
parent item. See: bill of resources, capacity bill proce-
dure, routing.B bin location file—A file that specifically identifies the lo-
cation where each item in inventory is stored.B
bill of lading (uniform)—A carrier’s contract and receipt
for goods the carrier agrees to transport from one place bin reserve system—Syn: two-bin inventory system.B
to another and to deliver to a designated person. In
bin tag—1) A type of perpetual inventory record, de-
case of loss, damage, or delay, the bill of lading is the
signed for storekeeping purposes, maintained at the
basis for filing freight claims.B
storage area for each inventory item. 2) An identifying
bill of material (BOM)—1) A listing of all the marking on a storage location.B
subassemblies, intermediates, parts, and raw materials
bin transfer—An inventory transaction to move a quanti-
that go into a parent assembly showing the quantity of
ty from one valid location (bin) to another valid location
each required to make an assembly. It is used in
(bin).B
conjunction with the master production schedule to
bin trips—Usually, the number of transactions per blend off—In process industries, the rework of material
stockkeeping unit per unit of time.B by introducing a small percentage into another run of
the same product.B
bit—Acronym for binary digit. It can have only the values
0 or 1.B blend order—A manufacturing order to a blending de-
black belt—In six sigma, team leader for process im- partment authorizing it to mix the ingredients of a prod-
provement. Responsibilities include defining, measur- uct. See: assembly order.B
blanket routing—A routing that lists groups of operations blocked operations—A group of operations identified
needed to produce a family of items. The items may separately for instructions and documentation but re-
have small differences in size, but they use the same ported as one.B
sequence of operations. Specific times or tools for each
blocking—The condition requiring a work center that has
individual item can be included.B
parts to process to remain idle as long as the queue to
bleeding edge—An innovative process that may be un- which the parts would be sent is full or kanbans autho-
usual enough to pose a risk to the customer or client.B rizing production are not present.B
blemish—An imperfection that is severe enough to be blocking bug—A defect that prevents a thorough investi-
noticed but should not cause any real impairment with gation as to the cause, or that prevents shipment of a
respect to intended normal or reasonably foreseeable product.B
use. See: defect, imperfection, nonconformity.B
block scheduling—An operation scheduling technique
blend formula—An ingredient list for a product in where each operation is allowed a “block” of time, such
process industries. See: batch card, manufacturing or- as a day or a week.B
der, mix ticket.B
block stacking—A storage method in which pallets, cas-
blending—The process of physically mixing two or more
es, or cartons are stacked upwards from the floor to
lots or types of material to produce a homogeneous lot.
whatever practical height is available without the use of
Blends normally receive new identification and require
shelves.B
testing.B
block system—A system for selecting items to be cycle
blending department—In process industries, the name
counted by a group or block of numbers.B
of the department where the ingredients are mixed.
See: final assembly department.B blowthrough—Syn: phantom bill of material.B
blueprint—In engineering, a line drawing showing the bottom-up planning—Planning for resource require-
physical characteristics of a part.B ments by starting at the bottom of the bill of material or
services, estimating the resources required to produce
blue sky—Goodwill associated with the acquisition of a
each product or service, and then adding the resources
company asset.B
up.B
body of knowledge—The knowledge in a given area that
a person is expected to understand to be certified as a bottom-up replanning—In MRP, the process of using
practitioner.B
boilerplate—The standard terms and conditions on a
pegging data to solve material availability or other prob-
lems. This process is accomplished by the planner (not
the computer system), who evaluates the effects of
B
purchase order or other document.B possible solutions. Potential solutions include com-
BOM—Abbreviation for bill of material.B pressing lead time, cutting order quantity, substituting
material, and changing the master schedule.B
bona fide—Latin for “in good faith.”B
bounded—The adjustment of a shop order quantity of a
bond—A long-term debt of a firm.B
parent to use the remaining units of a component, raw
bond (performance)—A guarantee of satisfactory work material, or lot.B
completion that is executed in connection with a con-
tract and that secures the performance and fulfillment Box-Jenkins model—A forecasting method based on re-
of all the undertakings, covenants, terms, conditions, gression and moving average models. The model is
and agreements contained in the contract.B based not on regression of independent variables, but
on past observations of the item to be forecast at vary-
bonded warehouse—Buildings or parts of buildings des- ing time lags and on previous error values from fore-
ignated by the U.S. Secretary of the Treasury for storing casting. See: forecast.B
imported merchandise, operated under U.S. Customs
supervision.B BPM—Abbreviation for business process management.B
booked orders—Demand that has been confirmed. See: BPR—Abbreviation for business process reengineering.B
customer order, demand, order penetration point.B bracketed recall—Recall from customers of suspect lot
bookings—The value of all sales after discounts and re- numbers plus a specified number of lots produced be-
bates have been applied.B fore and after the suspect ones.B
book inventory—An accounting definition of inventory brainstorming—A technique that teams use to generate
units or value obtained from perpetual inventory ideas on a particular subject. Each person on the team
records rather than by actual count.B is asked to think creatively and write down as many
ideas as possible. The ideas are not discussed or re-
book value—The accounting value of an asset.B
viewed until after the brainstorming session.B
Boolean algebra—A form of algebra that, like ordinary
algebra, represents relationships and properties with branch and bound—Operations research models for de-
symbols. However, Boolean algebra also has classes, termining optimal solutions based on the enumeration
propositions, on-off circuit elements, and operators of subsets of possible solutions, which implicitly enume-
(and, or, not, except, if, then). Boolean algebra is useful rate all possible solutions.B
in defining the logic of a complex system.B branch warehouse—Syn: distribution center.B
bottleneck—A facility, function, department, or resource branch warehouse demand—Syn: warehouse demand.B
whose capacity is less than the demand placed upon it.
For example, a bottleneck machine or work center ex- branding—The use of a name, term, symbol, or design,
ists where jobs are processed at a slower rate than they or a combination of these, to identify a product.B
are demanded. Syn: bottleneck operation.B brand loyalty—The tendency of some consumers to stay
bottleneck operation—Syn: bottleneck.B with a preferred product in spite of a competitor’s
advantages.B
bottom-up estimating—A method of estimation that
involves disaggregating a piece of work into brand manager—The person in charge of the marketing
components, estimating each component requirement, program for a given brand. Syn: product manager.B
and adding the resulting times and/or costs to arrive at
brand name—A word or combination of words used to
the estimate for the whole.B
identify a product and differentiate it from other prod-
ucts; the verbal part of a trademark, in contrast to the broadcast system—A sequence of specific units to be
pictorial mark; a trademark word.B assembled and completed at a given rate. This se-
quence is communicated to supply and assembly activi-
brand plan—Syn: market plan.B
ties to perform operations and position material so that
brand recognition—The degree to which customers rec- it merges with the correct assembled unit.B
ognize a particular brand identity and associate it with a
browser—Software used on the web to retrieve and dis-
particular product line relative to other available
B brands.B
breadman—In kanban, an arrangement in which the
play documents on-screen, connect to other sites using
hypertext links, display images, and play audio files.B
B7—Abbreviation for the basic seven tools of quality.B
customer does not specify the quantity to be delivered
on a specific basis, but instead gives the supplier a set B2B—Abbreviation for business-to-business
of guidelines. The delivery person determines the quan- commerce.B
tity according to these rules.B
B2C—Abbreviation for business-to-consumer sales.B
break-bulk—Dividing truckloads of homogeneous items
bubble chart—A diagram that attempts to display the
into smaller, more appropriate quantities for use.B
interrelationships of systems, functions, or data in a se-
break-bulk warehousing—A form of cross-docking in quential flow. It derives its name from the circular sym-
which the incoming shipments are from a single source bols used to enclose the statements on the chart.B
or manufacturer.B
bucket—A time period, usually a week.B
breakdown maintenance—Remedial maintenance that
bucketed system—An MRP, DRP, or other time-phased
occurs when equipment fails and must be repaired on
system in which all time-phased data are accumulated
an emergency or priority basis. Syn: irregular mainten-
into time periods called buckets. If the period of accu-
ance, reactive maintenance.B
mulation is one week, then the system is said to have
break-even analysis—A study of the number of units, or weekly buckets.B
amount of time, required to recoup an investment.B
bucketless system—An MRP, DRP, or other time-phased
break-even chart—A graphical tool showing the total va- system in which all time-phased data are processed,
riable cost and fixed cost curve along with the total rev- stored, and usually displayed using dated records rather
enue curve. The point of intersection is defined as the than defined time periods (buckets).B
break-even point (i.e., the point at which total revenues
budget—A plan that includes an estimate of future costs
exactly equal total costs). See: total cost curve.B
and revenues related to expected activities. The budget
break-even point—The level of production or the volume serves as a pattern for and a control over future
of sales at which operations are neither profitable nor operations.B
unprofitable. The break-even point is the intersection of
budget at completion (BAC)—The total planned budget
the total revenue and total cost curves. See: total cost
for a project.B
curve.B
budgeted capacity—The volume/mix of throughput on
break-even time—The total elapsed time of a technology
which financial budgets were set and overhead/burden
transfer beginning with a scientific investigation and
absorption rates established.B
ending when the profits from a new product offset the
cost of its development.B budgeted cost of work performed—In project manage-
ment, this term has been replaced with the term earned
breeder bill of material—A bill of material that
value.B
recognizes and plans for the availability and usage of
by-products in the manufacturing process. The breeder budgeted cost of work scheduled—In project manage-
bill allows for complete by-product MRP and product/by- ment, this term has been replaced with the term
product costing.B planned value.B
bricks and mortar—A company that sells through a phys- buffer—1) A quantity of materials awaiting further
ical location. Ant: clicks and mortar (selling over the processing. It can refer to raw materials, semifinished
internet).B stores or hold points, or a work backlog that is
purposely maintained behind a work center. 2) In the
broadband—A coaxial cable offering several channels
theory of constraints, buffers can be time or material
for text, voice, and/or video transmission.B
and support throughput and/or due date performance.
Buffers can be maintained at the constraint, convergent bundling—Combining two or more products or services
points (with a constraint part), divergent points, and into a single transaction.B
shipping points.B
burden—Syn: overhead.B
buffer management—In the theory of constraints, a burden rate—A cost, usually in dollars per hour, that is
process in which all expediting in a shop is driven by normally added to the cost of every standard production
what is scheduled to be in the buffers (constraint, ship- hour to cover overhead expenses.B
ping, 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,
burn rate—The rate at which a company consumes
cash. It can be used to determine when more cash
B
the causes of items missing from the buffer are identi- must be raised.B
fied, and the frequency of occurrence is used to priorit- business clusters—When businesses locate in close
ize improvement activities.B proximity for competition purposes.B
buffer stock—Syn: safety stock.B business cycle—A period of time marked by long-term
fluctuations in the total level of economic activity.
build cycle—The time period between a major setup and
Measures of business cycle activity include the rate of
a cleanup. It recognizes cyclical scheduling of similar
unemployment and the level of gross domestic
products with minor changes from one product/model
product.B
to another.B
business environment—Syn: operating environment.B
build-up forecasts—A qualitative forecasting technique
in which individuals who are familiar with specific mar- business intelligence—Information collected by an or-
ket segments estimate the demand within these seg- ganization on customers, competitors, products or ser-
ments. The overall forecast then is obtained by vices, and processes. Business intelligence provides
calculating the sum of the forecasts for these organizational data in such a way that the organization-
segments.B al knowledge filters can easily associate with this data
and turn it into information for the organization.
bulk issue—Parts issued from stores to work-in-process Persons involved in business intelligence processes
inventory, but not based on a job order. They are issued may use application software and other technologies to
in quantities estimated to cover requirements of indi- gather, store, analyze, and provide access to data, and
vidual work centers and production lines. The issue may present that data in a simple, useful manner. The soft-
be used to cover a period of time or to fill a fixed-size ware aids in business performance management and
container.B aims to help consumers make better business deci-
bulk packing—Placing several small packages in a larger sions by offering them accurate, current, and relevant
container to prevent damage or theft.B information. Some businesses use data warehouses
because they are a logical collection of information ga-
bulk storage—Large-scale storage for raw materials, in- thered from various operational databases for the pur-
termediates, or finished products. Each vessel normally pose of creating business intelligence.B
contains a mixture of lots and materials that may be
business judgment rule—Under common law, an ab-
replenished and withdrawn for use or pack-out
sence of liability for corporate directors and officers if
simultaneously.B
they have used rational business judgment and have no
bullwhip effect—An extreme change in the supply posi- conflict of interest.B
tion upstream in a supply chain generated by a small
business market—Syn: industrial market.B
change in demand downstream in the supply chain.
Inventory can quickly move from being backordered to business plan—1) A statement of long-range strategy
being excess. This is caused by the serial nature of and revenue, cost, and profit objectives usually accom-
communicating orders up the chain with the inherent panied by budgets, a projected balance sheet, and a
transportation delays of moving product down the cash flow (source and application of funds) statement.
chain. The bullwhip effect can be eliminated by syn- A business plan is usually stated in terms of dollars and
chronizing the supply chain.B grouped by product family. The business plan is then
translated into synchronized tactical functional plans
bundle—One or more unassembled items shipped to-
through the production planning process (or the sales
gether as a set of items.B
and operations planning process). Although frequently
stated in different terms (dollars versus units), these largely over the internet. It includes traditional brick and
tactical plans should agree with each other and with the mortar businesses that also offer products online and
business plan. See: long-term planning, strategic plan. businesses that trade exclusively electronically.B
2) A document consisting of the business details (organ-
business unit—A division or segment of an organization
ization, strategy, and financing tactics) prepared by an
generally treated as a separate profit-and-loss center.B
entrepreneur to plan for a new business.B
buyer—An individual whose functions may include sup-
C
CAIT—Abbreviation for computer-aided inspection and livered. Capable-to-promise employs a finite-scheduling
test.C model of the manufacturing system to determine when
calculated capacity—Syn: rated capacity.C an item can be delivered. It includes any constraints
that might restrict the production, such as availability of
calculated usage—The determination of usage of com- resources, lead times for raw materials or purchased
ponents or ingredients in a manufacturing process by parts, and requirements for lower-level components or
multiplying the receipt quantity of a parent by the quan- subassemblies. The resulting delivery date takes into
tity per of each component or ingredient in the bill or consideration production capacity, the current manufac-
recipe, accommodating standard yields.C turing environment, and future order commitments. The
calendar time—The passage of days or weeks as in the objective is to reduce the time spent by production
definition of lead time or scheduling rules, in contrast planners in expediting orders and adjusting plans be-
with running time.C cause of inaccurate delivery-date promises.C
calendar unit—The smallest unit of time in a project capacity—1) The capability of a system to perform its
plan.C expected function. 2) The capability of a worker,
machine, work center, plant, or organization to produce
calibration—The comparison of a measurement instru- output per time period. Capacity required represents
ment or system of unverified accuracy with a measure- the system capability needed to make a given product
ment instrument or system of a known accuracy to mix (assuming technology, product specification, etc.).
detect any variation from the required performance As a planning function, both capacity available and
specification.C capacity required can be measured in the short term
calibration frequency—The interval in days between tool- (capacity requirements plan), intermediate term (rough-
ing calibrations.C cut capacity plan), and long term (resource
requirements plan). Capacity control is the execution
call center—A facility housing personnel who respond to
through the I/O control report of the short-term plan.
customer phone queries. These personnel may provide
Capacity can be classified as budgeted, dedicated,
customer service or technical support. Call center ser-
demonstrated, productive, protective, rated, safety,
vices may be in-house or outsourced.C
standing, or theoretical. See: capacity available,
CAM—Acronym for computer-aided manufacturing.C capacity required. 3) Required mental ability to enter
into a contract.C
campaign—A series of batches of the same product run
together (back to back).C capacity available—The capability of a system or re-
source to produce a quantity of output in a particular
cancellation charge—A fee charged by a seller to cover
time period. Syn: available capacity. See: capacity,
its costs associated with a customer’s cancellation of
available time.C
an order. If the seller has started engineering work, pur-
chased raw materials, or started manufacturing opera- capacity bill procedure—A rough-cut capacity planning
tions, these charges could also be included in the method that takes into account any shifts in product
cancellation charge.C mix. Bill of material and routing information are required
with direct labor-hour or machine-hour data available
can-order point—An ordering system used when multiple
for each operation. See: bill of labor.C
items are ordered from one vendor. The can-order point
is a point higher than the original order point. When any capacity buying—A purchasing practice whereby a com-
one of the items triggers an order by reaching the must- pany commits to a supplier for a given amount of its ca-
order point, all items below their can-order point are al- pacity per unit of time. Subsequently, schedules for
so ordered. The can-order point is set by considering the individual items are given to the supplier in quantities to
additional holding cost that would be incurred should match the committed level of capacity. Syn: buying
the item be ordered early.C capacity.C
capacity-constrained resource (CCR)—A resource that is range time horizon. Personnel costs include hiring and
not a constraint but will become a constraint unless training of direct laborers, supervisors, and support per-
scheduled carefully. Any resource that, if its capacity is sonnel in the areas related to the capacity increase.
not carefully managed, is likely to compromise the Equipment purchases to increase capacity are also
throughput of the organization. (Also called capacity considered. In contrast, costs related to decreasing ca-
constraint resource.)C pacity include layoffs, the fixed overhead spread over
fewer units, the impact of low morale, and the ineffi-
capacity in small amounts to attempt to respond to mum weight. Since carload rates usually include mini-
changing demand in the marketplace.C mum rates per unit of volume, the higher LCL (less than
carload) rate may be less expensive for a heavy but rel-
capacity utilization—Goods produced, or customers
atively small shipment.C
served, divided by total output capacity.C
carrier—A company that provides air, sea, or land trans-
capital—Money or resources used to invest in assets
portation services.C
that produce products.C
capital asset—A physical object that is held by an organ-
ization for its production potential and that costs more
carrying cost—The cost of holding inventory, usually de-
fined as a percentage of the dollar value of inventory
per unit of time (generally one year). Carrying cost de-
C
than some threshold value.C
pends mainly on the cost of capital invested as well as
capital budgeting—Actions relating to the planning and such costs of maintaining the inventory as taxes and
financing of capital outlays for such purposes as the insurance, obsolescence, spoilage, and space occupied.
purchase of new equipment, the introduction of new Such costs vary from 10 percent to 35 percent annual-
product lines, and the modernization of plant facilities.C ly, depending on type of industry. Carrying cost is ulti-
mately a policy variable reflecting the opportunity cost
capital expenditure—Money invested in a long-term as-
of alternative uses for funds invested in inventory. Syn:
set, one that is expected to last longer than one year.
holding costs.C
The investment is expected to generate a stream of fu-
ture benefits.C cartel—A group of companies that agree to cooperate,
rather than compete, in producing a product or service,
capital-intensive—A situation in which the largest ex-
thus limiting or regulating competition.C
penditure in an operation is capital as opposed to labor.
See: labor-intensive.C cascaded systems—Multistage operations. The input to
each stage is the output of a preceding stage, thereby
capital rationing—In financial management, the process
causing interdependencies among the stages.C
of apportioning capital expenditures among prospective
projects to conserve limited investment funds.C cascading yield loss—The condition where yield loss
happens in multiple operations or tasks, resulting in a
capital recovery—1) Charging periodically to operations
compounded yield loss. Syn: cumulative yield. See:
amounts that will ultimately equal the amount of capital
composite yield.C
expenditure. See: amortization, depletion, depreciation.
2) The replacement of the original cost of an asset plus CASE—Acronym for computer-assisted software
interest. 3) The process of regaining the net investment engineering.C
in a project by means of revenue in excess of the cost cash budget—A budget based on planned cash receipts
from the project. (Usually implies amortization of prin- and disbursements of a plant, division, or firm.C
cipal plus interest on the diminishing unrecovered
balance.)C cash conversion cycle—1) In retailing, the length of time
between the sale of products and the cash payments
capital structure—The combination of permanent short- for a company’s resources. 2) In manufacturing, the
term debt, long-term debt, preferred stock, and com- length of time from the purchase of raw materials to the
mon equity used to finance a firm.C collection of accounts receivable from customers for the
CAPP—Acronym for computer-aided process planning.C sale of products or services.C
carcass—A nonserviceable item obtained from a cus- cash cow—A highly profitable product in a low-growth
tomer which is intended for use in remanufacturing.C market. See: growth-share matrix.C
cargo—A product shipped in an aircraft, railroad car, cash discount—A price break offered for the early pay-
ship, barge, or truck.C ment of an invoice.C
cargo container capacity—The inside usable cubic vo- cash flow—The net flow of dollars into or out of the pro-
lume of a container.C posed project. The algebraic sum, in any time period, of
all cash receipts, expenses, and investments. Also
carbon footprint—A measure of carbon emissions from a called cash proceeds or cash generated.C
person, organization, building, or operation.C
cash flow management—Syn: funds flow management.C
carload lot—A shipment that qualifies for a reduced
cash flow statement—Syn: funds flow statement.C
freight rate because it is greater than a specified mini-
cash spin or free cash spin—The advantage of reducing sification occurring in a sample. Syn: count chart, num-
inventory in the supply chain and reallocating the saved ber defective chart.C
capital in a more profitable direction.C
CCR—Abbreviation for capacity-constrained resource.C
cash-to-cash cycle time—An indicator of how efficiently a
cell—A manufacturing or service unit consisting of a
company manages its assets to improve cash flow.
number of workstations and the materials transport
Inventory days + accounts receivable days – accounts
mechanisms and storage buffers that interconnect
category management—In marketing, an organizational centralized computer network—A network in which there
structure giving managers responsibility for planning is one computer (or possibly more) linked to all others in
and implementing marketing systems for certain prod- a given enterprise.C
uct lines.C centralized dispatching—The organization of the dis-
causal forecast—A type of forecasting that uses cause- patching function into one central location. This struc-
and-effect associations to predict and explain relation- ture often involves the use of data collection devices for
ships between the independent and dependent va- communication between the centralized dispatching
riables. An example of a causal model is an function, which usually reports to the production control
econometric model used to explain the demand for department, and the shop manufacturing
housing starts based on consumer base, interest rates, departments.C
personal incomes, and land availability.C centralized inventory control—Inventory decision making
for all stockkeeping units exercised from one office or
cause-and-effect diagram—A tool for analyzing process
department for an entire company.C
dispersion. It is also referred to as the Ishikawa diagram
(because Kaoru Ishikawa developed it) and the fish- centralized marketing system—An organizational struc-
bone diagram (because the complete diagram resem- ture in which a central marketing group manages func-
bles a fish skeleton). The diagram illustrates the main tionally divided areas, such as advertising, sales, and
causes and subcauses leading to an effect (symptom). marketing research.C
The cause-and-effect diagram is one of the seven tools
centralized purchasing—A system in which all purchas-
of quality. Syn: fishbone chart, Ishikawa diagram.C
ing decisions are made from a corporate purchasing
caveat emptor—A Latin phrase meaning “Let the buyer office.C
beware.” (i.e., the purchase is at the buyer’s risk.)C
central limit theorem—A theorem that states that a dis-
c chart—A control chart for evaluating the stability of a tribution consisting of sample means can be assumed
process in terms of the count of events of a given clas- to be normally distributed, even if the population from
which the samples are drawn is not normally high level of professional knowledge in production and
distributed.C inventory management.C
central point scheduling—A variant of scheduling that Certified Purchasing Manager—1) Certification from The
employs both forward and backward scheduling, start- Institute for Supply Management (ISM), formerly NAPM.
ing from the scheduled start date of a particular This is no longer being tested (C.P.M.). 2) Certification
operation.C from the American Purchasing Society (CPM).C
central processing unit (CPU)—The electronic processing
unit of a computer, where mathematical calculations
certified supplier—A status awarded to a supplier who
consistently meets predetermined quality, cost, delivery, C
are performed.C financial, and count objectives. Incoming inspection
may not be required.C
central storage—Using a central location for storing all
inventory items in order to obtain more control of inven- Certified Supply Chain Professional—The APICS designa-
tory and to improve inventory record accuracy.C tion that recognizes a high level of professional know-
CEP—Abbreviation for cost equalization point.C ledge in supply chain management.C
certificated carrier—A regulated for-hire air carrier that ceteris paribus—Latin for all other things being the
provides service under an operating certificate.C same.C
of problems that will affect the operating environment ing production to meet demand. Companies may com-
and service delivery to the users.C bine chase and level production schedule methods.
Syn: chase strategy, chase-demand strategy.C
change order—A formal notification that a purchase or-
der or shop order must be modified in some way. This chase strategy—Syn: chase production method.C
change can result from modifications such as a revised
check digit—A digit added to each number in a coding
quantity, date, or customer specification; an engineer-
system that allows for detection of errors in the record-
chargeback provisions—Contractual terms specifying city driver—A delivery person who drives a local route, as
how a company may charge a supplier for failure to opposed to long-haul route.C
perform.C claim—A charge made against a company because of
charge ticket—A document used for receiving goods and loss or damage.C
charging those goods to an operating cost center.C classification—The designation of the job function that
chart of accounts—In accounting, a list of general ledger an employee is assigned to and is proficient in—for ex-
accounts used to track costs, revenues, assets, liabili- ample, assembler, machinist, or welder.C
ties, and so on by category.C classification of defects—The delineation of possible
chase-demand strategy—Syn: chase production defects on a unit, classified by seriousness: critical (A),
method.C major (B), minor (C), or incidental (D).C
chase production method—A production planning me- clean technology—A technical measure taken to reduce
thod that maintains a stable inventory level while vary- or eliminate at the source the production of any nuis-
ance, pollution, or waste and to help save raw mate- that feedback is provided by the execution processes so
rials, natural resources, and energy.C that the planning can be kept valid at all times.C
cleanup—The neutralizing of the effects of production closed period—The accounting time period for which the
just completed. It may involve cleaning residues, sanita- adjusting and closing entries have been posted. Ant:
tion, equipment refixturing, and so on.C open period.C
closely held—A description of an organization owned by
C
clearinghouse—An entity restricted to providing services
such as settling accounts.C a small number of people.C
clicks and mortar—Refers to a brick and mortar compa- CMI—Abbreviation for co-managed inventory.C
ny that also has succeeded in making online sales. Ant: CNC—Abbreviation for computer numerical control.C
bricks and mortar.C
co-design—Syn: participative design/engineering.C
clickstream—The way a customer moves through a
co-destiny—The evolution of a supply chain from intra-
website.C
organizational management to interorganizational
client—In information systems, a software program that management.C
is used to contact and obtain data from a server pro-
coefficient of correlation—A value used to express the
gram on another computer. Each client program is de-
relationship between two variables, whether there is a
signed to work with one or more specific kinds of server
strong or weak correlation. The coefficient of correlation
programs, and each server requires a specific kind of
varies from 0 to 1 with values close to 0 indicating no
client. A browser is one type of client.C
relationship, or a weak relationship, and values close to
client/server system—A distributed computing system in 1 indicating a strong relationship. The existence of a
which work is assigned to the computer best able to relationship does not prove causality.C
perform it from among a network of computers.C coefficient of determination—Used to measure the ex-
CLIN—Abbreviation for contract line items number.C pected accuracy of a forecast; measures the variation in
one variable due to a different variable.C
clock card—Syn: time card.C
coefficient of variation—In statistics, the ratio of the
closed-loop feedback system—A planning and control standard deviation to the mean for a particular
system that monitors system progress toward the plan process.C
and has an internal control and replanning capability.C
COFC—Abbreviation for container on a railroad flatcar.C
closed-loop MRP—A system built around material re-
cold chain—A term referring to the storage, transfer, and
quirements planning that includes the additional plan-
supply chain of temperature-controlled products.
ning processes of production planning (sales and
Industries in the cold chain include food and agricul-
operations planning), master production scheduling,
ture, pharmaceuticals, and chemicals.C
and capacity requirements planning. Once this planning
phase is complete and the plans have been accepted collaboration—Joint work among people to achieve
as realistic and attainable, the execution processes common business objectives.C
come into play. These processes include the manufac- collaborative forecasting—The process for collecting and
turing control processes of input-output (capacity) mea- reconciling information from within and outside the or-
surement, detailed scheduling and dispatching, as well ganization to come up with a single projection of
as anticipated delay reports from both the plant and demand.C
suppliers, supplier scheduling, and so on. The term
collaborative planning—Syn: collaborative planning, fo-
closed loop implies not only that each of these
recasting, and replenishment.C
processes is included in the overall system, but also
collaborative planning, forecasting, and replenishment commodity buying—Grouping like parts or materials un-
(CPFR)—1) A collaboration process whereby supply der one buyer’s control for the procurement of all re-
chain trading partners can jointly plan key supply chain quirements to support production.C
activities from production and delivery of raw materials
commodity procurement strategy—The purchasing plan
to production and delivery of final products to end cus-
for a family of items. This would include the plan to
tomers. Collaboration encompasses business planning,
manage the supplier base and solve problems.C
sales forecasting, and all operations required to reple-
company culture—A system of values, beliefs, and be- composite part—A part that represents operations
haviors inherent in a company. To optimize business common to a family or group of parts controlled by
performance, top management must define and create group technology. Tools, jigs, and dies are used for the
the necessary culture.C composite part; therefore, any parts of that family can
be processed with the same operations and tooling. The
compensation—The pay and benefits given for services
goal here is to reduce setup costs.C
rendered to an organization.C
concentration—The percentage of an active ingredient confirming order—A purchase order issued to a supplier,
within the whole. For example, a 40 percent solution of listing the goods or services and terms of an order
hydrochloric acid.C placed orally or otherwise before the usual purchase
document.C
concept phase—In project management, the first phase
in which a project is defined and the scope is planned.C confiscation—The taking of property without adequate
compensation for it.C
concurrency—Syn: resource contention.C
conflict of interest—Any business activity, personal or
concurrent design—Syn: participative design/ company-related, that interferes with a company’s goals
engineering.C or that entails unethical or illegal actions.C
concurrent engineering—Syn: participative design/ en- conformance—An affirmative indication or judgment
gineering.C that a product or service has met the requirements of a
relevant specification, contract, or regulation.C
conference room pilot—Simulation of all business
processes from end-to-end within the new information conformance perspective—A measure of how closely a
system in a controlled environment.C product or service performs to its intended quality.C
confidence interval—The range on either side of an es- connectivity—The ability to communicate effectively with
timated value from a sample that is likely to contain the supply chain partners to facilitate interorganization syn-
true value for the whole population.C chronization.C
confidence level—The probability that a particular value consideration—In contract law, an obligation that is to
lies between an upper and a lower bound—the confi- the detriment of one party (promisee) or to the benefit
dence limits.C of the other party (promisor).C
consignor—The originator of a shipment of freight.C hausted in the production or sale of a good or service.
Syn: consumable tooling, supplies; expendables.C
consolidation—Packages and lots that move from sup-
pliers to a carrier terminal and are sorted and then consumable tooling, supplies—Syn: consumables.C
combined with similar shipments from another suppli-
consumer—A person who purchases a good or service
er’s container load or truckload for travel to a final des-
for his or her own use (not for resale). See: customer.C
tination. See: milk run.C
C
consumer durable goods—A division of durable goods
consolidation warehouses—Collection points that re- for items intended for consumer use, such as refrigera-
ceive less-than-truckload (LTL) shipments from regional tors, as opposed to industrial goods, such as fork lifts.
sources and then ships in cargo load or truckload quan- See: durable goods.C
tities to a manufacturing facility.C
consumer market—A market composed of individuals
consolidator—A company that groups together various and families who buy products and services for con-
shipments or orders to facilitate movement.C sumption. See: government market, industrial market,
consortia trade exchanges (CTX)—An online market- institutional market.C
place, usually owned by a third party, that allows mem- consumer price index—A measure of the overall level of
bers to trade with each other. This site lowers members prices. It attempts to relate the cost of buying a specific
search costs and enables lower prices for the buyer.C set of goods and services with the cost of buying the
consortium—A group of companies that work together to same set of goods and services during an earlier time
jointly produce a product, service, or project.C period.C
constant—A quantity that has a fixed value. Ant: consumer’s risk (ß)—For a given sampling plan, the
variable.C probability of acceptance of a lot, the quality of which
has designated numerical value representing a level
constrained optimization—Achieving the best possible
that is worse than some threshold value. See: type II
solution to a problem in terms of a specified objective
error.C
function and a given set of constraints.C
consumer surplus—The difference between the highest
constraint—1) Any element or factor that prevents a sys- price a consumer is willing to pay for a good or service
tem from achieving a higher level of performance with and the price actually paid.C
respect to its goal. Constraints can be physical, such as
a machine center or lack of material, but they can also consuming the forecast—The process of reducing the
be managerial, such as a policy or procedure. 2) One of forecast by customer orders or other types of actual
a set of equations that cannot be violated in an optimi- demands as they are received. The adjustments yield
zation procedure.C the value of the remaining forecast for each period. Syn:
forecast consumption.C
constraint accounting—Syn: theory of constraints
accounting.C consumption—The amount of each bill-of-material com-
ponent used in the production process to make the
constraint-oriented finite loading—A finite loading tech- parent.C
nique that plans orders around bottleneck work centers.
The objective is to maximize total production through- contact efficiency—A measure of how well an organiza-
put. Orders in small lot sizes aggregate into large lot tion transforms website hits into visits.C
sizes at the constraint and then load forward. Prior op- contactless—Using radio frequency identification or sim-
erations are then backward-scheduled, and down- ilar technologies to record data about an item electroni-
stream operations are forward-scheduled. See: drum- cally without physical contact with the item.C
buffer-rope, order-oriented finite loading.C
container—A large box in which commodities to be
constraints management—The practice of managing re- shipped are placed.C
sources and organizations in accordance with the
container design—The characteristics of the product
theory of constraints (TOC) principles. See: theory of
that make it transportable with ease of handling and
constraints.C
stowability. Container concepts include packaging,
constraint theory—Syn: theory of constraints.C monetary density, and physical density.C
consumables—Supplies or materials (such as paint, containerization—A shipment method in which commod-
cleaning materials, or fuel) that are consumed or ex- ities are placed in containers, and after initial loading,
the commodities per se are not rehandled in shipment continuous process improvement (CPI)—A never-ending
until they are unloaded at the destination.C effort to expose and eliminate root causes of problems:
small-step improvement as opposed to big-step im-
container on a flatcar (COFC)—A specialized form of con-
provement. Syn: continuous improvement. See:
tainerization in which rail, motor, and sea transport
kaizen.C
coordinate.C
content management applications—Supports the evolu- continuous production—A production system in which
contract date—The date when a contract is accepted by control chart—A graphic comparison of process perfor-
all parties.C mance data with predetermined computed control lim-
its. The process performance data usually consist of
contract labor—Self-employed individuals or firms con-
groups of measurements selected in regular sequence
tracted by an organization to perform specific services
of production that preserve the order. The primary use
on an intermittent or short-term basis.C
of control charts is to detect assignable causes of varia-
contract line items number (CLIN)—Specific items that tion in the process as opposed to random variations.
are priced separately on a contract.C
itiate useful action with respect to significant deviations corporate culture—The set of important assumptions
and exceptions.C that members of the company share. It is a system of
shared values about what is important and beliefs
convergent point—An operation in a production process
about how the company works. These common assump-
where multiple materials/parts/components are
tions influence the ways the company operates.C
combined into a single component. An assembly
operation is an example of a convergent point.C corporate purchasing cards—Syn: procurement credit
cost center—The smallest segment of an organization cost object—In activity-based cost accounting, anything
for which costs are collected and formally reported, typ- for which a separate cost measurement is desirable.
ically a department. The criteria in defining cost centers This may include a product, a customer, a project, or
are that the cost be significant and that the area of re- other work unit.C
sponsibility be clearly defined. A cost center is not nec-
cost object driver—In activity-based cost accounting, a
essarily identical to a work center; normally, a cost
numerical measure of the demand placed on one cost
center encompasses more than one work center, but
this may not always be the case.C
cost pool—In activity-based cost accounting, an aggre- value items, although properties other than value can
gation of resources assigned to activities or activities influence the frequency.C
assigned to cost objects. Items may be aggregated or
count-per-unit chart—Syn: U chart.C
disaggregated depending on how the data are to be
used.C count point—A point in a flow of material or sequence of
operations at which parts, subassemblies, or assem-
cost-ratio plan—A variation of the weighted-point plan of
blies are counted as being complete. Count points may
crew-size standard—A labor estimate of the number of eration, or at an operation where key components are
workers necessary to complete the required output for a consumed.C
given shift.C
critical processes—Processes that have large potential
critical activity—Any activity on the critical path of a for loss—either money, property, or human life.C
project; an activity with no slack time (i.e., any delay in critical process parameters—A variable or a set of va-
the activity will delay project completion). See: critical riables that dominates the other variables. Focusing on
path, critical path method.C
critical path activity—In project management, any activi- cross-docking—The concept of packing products on the
ty on a network’s critical path as determined by the crit- incoming shipments so they can be easily sorted at in-
ical path method.C termediate warehouses or for outgoing shipments
based on final destination. The items are carried from
critical path lead time—Syn: cumulative lead time.C the incoming vehicle docking point to the outgoing ve-
critical path method (CPM)—A network planning tech- hicle docking point without being stored in inventory at
nique for the analysis of a project’s completion time the warehouse. Cross-docking reduces inventory in-
used for planning and controlling the activities in a vestment and storage space requirements. Syn: direct
project. By showing each of these activities and their loading.C
associated times, the critical path, which identifies cross-functional integration—Thread that weaves the
those elements that actually constrain the total time for entire organization and manufacturing process into one
the project, can be determined. See: critical chain me- fabric in which each of the different parts serves and
thod, network analysis, critical activity, critical path.C supports the whole. See: integrated enterprise.C
critical point backflush—Backflush performed at a spe- cross-functional organization—Organization where
cific point in the manufacturing process, at a critical op- groups of directors, executives, and managers with a
diversity of skills and backgrounds work on problems work ethics, education, religion, and consumer and eco-
outside the bounds of their functional responsibilities. logical factors.C
See: integrated enterprise.C
cumulative available-to-promise—A calculation based on
cross-functional team—A set of individuals from various the available-to-promise (ATP) figure in the master
departments assigned a specific task such as imple- schedule. Two methods of computing the cumulative
menting new computer software. See: core team.C available-to-promise are used, with and without look-
cumulative system—A method for planning and control- customer-as-participant—A service system that contains
ling production that makes use of cumulative MRP, cu- a high level of customer involvement in part of the ser-
mulative requirements, and cumulative counts.C vice delivery.C
cumulative trauma disorder—An occupational injury be- customer-as-product—A service system designed to ac-
lieved to be caused by repetitive motions such as typing tually perform the service on the customer, such as in
or twisting.C health care or hair salons.C
ty checks to facilitate order processing, “cleaning up” total that were supposed to be shipped in that time pe-
orders before placing a demand on the manufacturing riod. Syn: customer service level, fill rate, order-fill ratio,
system. Syn: configuration system, sales order - percent of fill. Ant: stockout percentage. 2) In a make-
configuration.C to-order company, it is usually some comparison of the
number of jobs or dollars shipped in a given time period
customer partner—A customer organization with which a
(e.g., a week) compared with the number of jobs or dol-
company has formed a customer-supplier partnership.
lars that were supposed to be shipped in that time
C See: outpartnering.C
customer partnership—Syn: customer-supplier
partnership.C
period.C
customer service representative (CSR)—Personnel as-
signed to customer relations who answer customer
customer profitability—Estimating the profit retained on questions and who provide technical support.C
business with a specific customer.C
customer share—In marketing, a measurement (usually
customer relationship management (CRM)—A marketing a percentage) of how many potential customers are at-
philosophy based on putting the customer first. The col- tracted to a brand. It is a measurement of the recogni-
lection and analysis of information designed for sales tion of the brand in the marketplace and the
and marketing decision support (as contrasted to en- predisposition of the customer to buy the brand when
terprise resources planning information) to understand presented with a choice of competing brands.C
and support existing and potential customer needs. It
customer-supplier partnership—A long-term relationship
includes account management, catalog and order entry,
between a buyer and a supplier characterized by team-
payment processing, credits and adjustments, and oth-
work and mutual confidence. The supplier is considered
er functions. Syn: customer relations management.C
an extension of the buyer’s organization. The partner-
customer relations management (CRM)—Syn: customer ship is based on several commitments. The buyer pro-
relationship management.C vides long-term contracts and uses fewer suppliers. The
customer satisfaction—The results of delivering a good supplier implements quality assurance processes so
or service that meets customer requirements.C that incoming inspection can be minimized. The suppli-
er also helps the buyer reduce costs and improve prod-
customer segmentation—The practice of dividing a cus-
uct and process designs. Syn: customer partnership.
tomer base into groups of individuals that are similar in
See: outpartnering.C
specific ways relevant to marketing. Traditional segmen-
tation focuses on identifying customer groups based on customer surveys—Devices such as interviews or ques-
demographics and attributes such as attitude and psy- tionnaires that aim to collect user data and preferences
chological profiles.C about product or service characteristics.C
customer service—1) The ability of a company to ad- customer tolerance time—Syn: demand lead time.C
dress the needs, inquiries, and requests from custom- custom product—A product that is made to meet the
ers. 2) A measure of the delivery of a product to the requirements of specific customers.C
customer at the time the customer specified.C
customs broker—A person who manages the paperwork
customer service level—Syn: customer service ratio.C required for international shipping and tracks and
customer service life cycle—In information systems, a moves the shipments through the proper channels.C
model that describes the relationship with a customer custom service—A service that is created to meet the
as having four phases: requirements, acquisition, own- requirements of specific customers.C
ership, and retirement.C
cut-off control—A procedure for synchronizing cycle
customer service management process—A process that counting and transaction processing.C
enables a business to offer post-purchase service and
cwt—Abbreviation for hundredweight.C
information to the customer.C
cybercash—The technology that enables online accep-
customer service ratio—1) A measure of delivery per-
tance of credit cards, approving customers for payment
formance of finished goods, usually expressed as a per-
before delivery is made.C
centage. In a make-to-stock company, this percentage
usually represents the number of items or dollars (on cybermarketing—Any type of internet-based promotion.
one or more customer orders) that were shipped on Many marketing managers use the term to refer to any
schedule for a specific time period, compared with the type of computer-based marketing.C
cybernetics—The study of control processes in mechani- when material enters a production facility until it exits.
cal, biological, electrical, and information systems.C Syn: throughput time.C
cybernetic system—The information flow or information cyclical component—A component of demand, usually
system (electronic, mechanical, logical) that controls an describing the impact of the business cycle on demand.
industrial process.C See: decomposition, time series analysis.C
cyclical demand—Demand influenced by the increases
D
cyberspace—A common name encompassing both the
internet and other forms of electronic communication.C and decreases in the economy over time.C
data dictionary—1) A catalog of requirements and speci- DBMS—Abbreviation for database management
fications for an information system. 2) A file that stores system.D
facts about the files and databases for all systems that
DBR—Abbreviation for drum-buffer-rope.D
are currently being used or for the software involved.D
D chart—A control chart for evaluating a process in
data element—A group of characters that defines an
terms of a demerit (or quality score); for example, a
item at a basic level. Syn: data field.D
weighted sum of counts of various classified noncon-
data integrity—Assurance that data accurately reflects debenture—A bond that is backed by the general credit
the environment it is representing.D of the issuing firm.D
data mining—The process of studying data to search for deblend—The further processing of a product to adjust
previously unknown relationships. This knowledge is specific physical and chemical properties to within spe-
then applied to achieving specific business goals.D cification ranges.D
data normalization—A database maintenance term used debt—An amount owed to creditors. It is generally equal
in the context of relational databases, which helps to to the total assets in a company less the equity. See:
minimize the duplication of information or safeguard liabilities.D
the database against certain types of logical or struc-
debt-to-equity ratio—The amount of bonds and preferred
tural data anomalies. It is often used when merging da-
stocks relative to the owners’ equity position. The debt
ta from one or more databases.D
to equity ratio is a measurement of the use of borrowed
data transfer—The movement by electronic means of funds to leverage owners’ equity.D
data from one location to another. The data can take
decentralized authority—The process of dispersing
the form of voice, text, image, or others. The movement
decision-making governance to staff people below the
is accomplished by communication links between
executive level of an organization.D
computers and a variety of input/output devices.D
decentralized computer network—A network where
data warehouse—A repository of data that has been
there is no central computer or computers linked to all
specially prepared to support decision-making applica-
other computers in the group.D
tions. Syn: decision-support data. See: information data
warehouse.D decentralized dispatching—The organization of the dis-
patching function into individual departmental
date code—A label on products with the date of produc-
dispatchers.D
tion. In food industries, it is often an integral part of the
lot number.D decentralized inventory control—Inventory decision mak-
ing exercised at each stocking location for SKUs at that
date effectivity—A technique used to identify the effec-
location.D
tive date of a configuration change. A component
change is controlled by effective date within the bill of decentralized purchasing—When purchasing decisions
material for the unchanged parent part number.D are made locally and not at a central location.D
days of supply—Inventory-on-hand metric converted decision matrix—A matrix used by teams to evaluate
from units to how long the units will last. For example, if problems or possible solutions. After a matrix is drawn
there are 2,000 units on hand and the company is us- to evaluate possible solutions, for example, the team
ing 200 per day, than there are 10 days of supply.D lists the solutions in the far left vertical column. Next,
the team selects criteria to rate the possible solutions,
days outstanding—A term used to imply the amount of
writing them across the top row. Third, each possible
an asset or liability measured in days of sales. For ex-
solution is rated on a scale of 1 to 5 for each criterion
ample, accounts payable days are the typical number of
and the rating recorded in the corresponding grid.
days that a firm delays payments of invoices to its
Finally, the ratings of all the criteria for each possible
suppliers.D
solution are added to determine its total score. The total
score is then used to help decide which solution de- production rate of the supplying operation do not con-
serves the most attention.D strain production or use rates of the next operation.D
decision theory—A systematic approach to making deci- decoupling inventory—An amount of inventory kept be-
sions, particularly when uncertainty is present.D tween entities in a manufacturing or distribution net-
decisions under certainty—Simple decisions that as- work to create independence between processes or
sume complete information and no uncertainty con- entities. The objective of decoupling inventory is to dis-
nected with the analysis of decisions.D
decisions under risk—Decision problems in which the
connect the rate of use from the rate of supply of the
item. See: buffer.D D
analyst elects to consider several possible futures, the decoupling points—The locations in the product struc-
probabilities of which can be estimated.D ture or distribution network where inventory is placed to
create independence between processes or entities.
decisions under uncertainty—Decisions for which the
Selection of decoupling points is a strategic decision
analyst elects to consider several possible futures, the
that determines customer lead times and inventory in-
probabilities of which cannot be estimated.D
vestment. See: control points.D
decision-support data—Syn: data warehouse.D
decryption—Transformation of encrypted text into a
decision support system (DSS)—A computer system de- readable format.D
signed to assist managers in selecting and evaluating
courses of action by providing a logical, usually quantit- dedicated capacity—A work center that is designated to
ative, analysis of the relevant factors.D produce a single item or a limited number of similar
items. Equipment that is dedicated may be special
decision table—A means of displaying logical conditions equipment or may be grouped general-purpose equip-
in an array that graphically illustrates actions asso- ment committed to a composite part.D
ciated with stated conditions.D
dedicated contract carrier—A third-party hauler that
decision tree—A method of analysis that evaluates
works exclusively for a single customer.D
alternative decisions in a tree-like structure to estimate
values and/or probabilities. Decision trees take into dedicated equipment—Equipment whose use is re-
account the time value of future earnings by using a stricted to specific operations on a limited set of
rollback concept. Calculations are started at the far components.D
right-hand side, then traced back through the branches
dedicated line—A production line permanently confi-
to identify the appropriate decision.D
gured to run well-defined parts, one piece at a time,
decision variables—The variables that will be changed to from station to station.D
find the optimal solution in an optimization problem.D
de-expedite—The reprioritizing of jobs to a lower level of
declared value—The value of goods declared on a bill of activity. All extraordinary actions involving these jobs
lading, used to determine a freight rate or limit the car- stop.D
rier’s liability.D
defamation—Injury to another’s reputation by a public
decomposition—A method of forecasting where time se-
utterance: print (libel) or oral (slander).D
ries data are separated into up to three components:
trend, seasonal, and cyclical; where trend includes the default—The action that will be taken by a computer
general horizontal upward or downward movement over program when the user does not specify a variable
time; seasonal includes a recurring demand pattern parameter.D
such as day of the week, weekly, monthly, or quarterly;
defect—A good’s or service’s nonfulfillment of an in-
and cyclical includes any repeating, nonseasonal pat-
tended requirement or reasonable expectation for use,
tern. A fourth component is random, that is, data with
including safety considerations. There are four classes
no pattern. The new forecast is made by projecting the
of defects: Class 1, Very Serious, leads directly to se-
patterns individually determined and then combining
vere injury or catastrophic economic loss; Class 2,
them. See: cyclical component, random component,
Serious, leads directly to significant injury or significant
seasonal component, trend component.D
economic loss; Class 3, Major, is related to major prob-
decoupling—Creating independence between supply lems with respect to intended normal or reasonably fo-
and use of material. Commonly denotes providing in- reseeable use; and Class 4, Minor, is related to minor
ventory between operations so that fluctuations in the problems with respect to intended normal or reasonably
foreseeable use. See: blemish, imperfection, delivery lead time—The time from the receipt of a cus-
nonconformity.D tomer order to the delivery of the product. Syn: delivery
cycle.D
defects per million opportunities—The quantity of de-
fects per one million defect opportunities—a potential delivery policy—The company’s goal for the time to ship
problem that is important to the customer.D the product after the receipt of a customer’s order. The
policy is sometimes stated as “our quoted delivery
D
defects per unit—The average number of blemishes on time.”D
a particular product (e.g., a television cabinet).D
delivery reliability—A performance criterion that meas-
deficiency—Failure to meet quality standards.D ures how consistently goods and services are delivered
on, or before, the promised time.D
define-measure-analyze-design-verify—A six sigma
process that outlines the steps needed to create a delivery schedule—The required or agreed time or rate
completely new business process or product at six sig- of delivery of goods or services purchased for a future
ma quality levels.D period.D
demand curve—A graphic description of the relationship forecasts and reconciles volume and mix variations in
between price and quantity demanded in a market, as- the forecast.D
suming that all other factors stay the same. Quantity
demand planning—The process of combining statistical
demanded of a product is measured on the horizontal
forecasting techniques and judgment to construct de-
axis for an array of different prices measured on the
mand estimates for products or services (both high and
vertical axis.D
low volume; lumpy and continuous) across the supply
demand deposits—Deposits that can be withdrawn on
demand or paid to a third party by check.D
chain from the suppliers' raw materials to the consum-
er's needs. Items can be aggregated by product family,
geographical location, product life cycle, and so forth, to
D
demand-driven supply network—A situation where a determine an estimate of consumer demand for fi-
customer purchase initiates real-time information flows nished products, service parts, and services. Numerous
through the supply chain which then causes movement forecasting models are tested and combined with
of product through the network.D judgment from marketing, sales, distributors, warehous-
demand during lead time—The quantity of a product ex- ing, service parts, and other functions. Actual sales are
pected to be withdrawn from stock or to be consumed compared with forecasts provided by various models
during its replenishment lead time when usage is at the and judgments to determine the best integration of
forecasted rate. See: expected demand.D techniques and judgment to minimize forecast error.
See: demand management.D
demand filter—A standard that is set to monitor sales
data for individual items in forecasting models. It is demand pull—The triggering of material movement to a
usually set to be tripped when the demand for a period work center only when that work center is ready to be-
differs from the forecast by more than some number of gin the next job. In effect, it shortens or eliminates the
mean absolute deviations.D queue from in front of a work center, but it can cause a
queue at the end of a previous work center. Demand
demand forecasting—Forecasting the demand for a par- pull also can occur within a supply chain, in which case
ticular good, component, or service.D it often is called a demand chain.D
demand forecast updating—Recomputing a forecast af- demand rate—A statement of requirements in terms of
ter deleting the oldest data and adding data that oc- quantity per unit of time (hour, day, week, month,
curred since the last forecast revision.D etc.).D
demand lead time—The amount of time potential cus- demand risk—The risk that declining economic activity
tomers are willing to wait for the delivery of a good or a substantially reduces the demand for a firm’s products
service. Syn: customer tolerance time.D or services.D
demand management—1) The function of recognizing demand segmentation—Categorizing demand types into
all demands for goods and services to support the mar- groups that share similar characteristics (e.g., govern-
ketplace. It involves prioritizing demand when supply is ment, large customers, seasonal products). Similar
lacking. Proper demand management facilitates the segments can be treated alike in business or capacity
planning and use of resources for profitable business planning.D
results. 2) In marketing, the process of planning, ex- demand shaping—The practice of using the four Ps
ecuting, controlling, and monitoring the design, pricing, (product, pricing, placement, and promotion) and other
promotion, and distribution of products and services to market variables to influence the demand of a product
bring about transactions that meet organizational and or service so that the demand better matches the avail-
individual needs. Syn: marketing management. See: able supply. See: four Ps.D
demand planning.D
demand-side analysis—Techniques such as market
demand management process—A process that weighs research, surveys, focus groups, and performance/cost
both customer demand and a firm’s output capabilities, modeling used to identify emerging technologies.D
and tries to balance the two. Demand management is
demand time fence (DTF)—1) That point in time inside
made up of planning demand, communicating demand,
of which the forecast is no longer included in total de-
influencing demand, and prioritizing demand.D
mand and projected available inventory calculations;
demand manager—Person who assists sales and mar- inside this point, only customer orders are considered.
keting in the development and maintenance of sales Beyond this point, total demand is a combination of ac-
tual orders and forecasts, depending on the forecast fied loading or unloading time. See: detention,
consumption technique chosen. 2) In some contexts, express.D
the demand time fence may correspond to that point in
denied party list—A list of organizations that are unau-
the future inside which changes to the master schedule
thorized to submit a bid for an activity.D
must be approved by an authority higher than the mas-
ter scheduler. Note, however, that customer orders may density—A measure of the weight of an item compared
still be promised inside the demand time fence without to its volume. Because density can influence the num-
description by brand—A method to identify a product or products. This process is associated with green manu-
service required; requesting by brand usually means the facturing.D
product or service provides some advantage over other
design for service—Simplification of parts and
brands.D
processes to improve the after-sale service of a product.
description by market grade/industry standard—A Syn: design for maintainability.D
method to identify a product or service required when design for six sigma—An approach to designing products
there is a high level of understanding between user and
supplier.D
and processes that attempts to ensure the firm can
provide products or services that meet six sigma quality
levels. These quality levels correspond to approximately
D
description by performance characteristics—A method
to identify a product or service by specifying the perfor- 3.4 defects per million opportunities.D
mance required.D design for the environment (DFE)—Considering health,
description by specification—A method to identify a safety, and environmental aspects of a product during
product or service required by communicating its cha- the design and development phase of product
racteristics in detail.D development.D
deseasonalized data—Data from which seasonality has design for the supply chain—Enhancement of a firm’s
been removed using annual moving averages.D product design in consideration of the issues that will
arise in the supply chain, from raw materials to the final
deshi—A Japanese word meaning student.D stage of the product’s life cycle.D
design—The conversion of a need or innovation into a designing in quality vs. inspecting in quality—Syn: pre-
product, process, or service that meets both the enter- vention vs. detection.D
prise and customer expectations. The design process
design of experiments (DOE)—1) A process for structur-
consists of translating a set of functional requirements
ing statistically valid studies in any science. 2) A quality
into an operational product, process, or service.D
management technique used to evaluate the effect of
design changeover flexibility—The capability of the exist- carefully planned and controlled changes to input
ing production system to accommodate and introduce a process variables on the output variable. The objective
large variety of major design changes quickly.D is to improve production processes.D
design cycle—The interval of time between the start of design phase—One of the six sigma phases of quality. It
the design process of one model and the completion of involves improvement project identification and selec-
the design process for the model.D tion. See: design-measure-analyze-improve-control
process.D
design engineering—The discipline consisting of process
engineering and product engineering.D design review—A technique for evaluating a proposed
design to ensure that the design (1) is supported by
design for maintainability—Syn: design for service.D
adequate materials and materials that are available on
design for manufacturability—Simplification of parts, a timely basis, (2) will perform successfully during use,
products, and processes to improve quality and reduce (3) can be manufactured at low cost, and (4) is suitable
manufacturing costs.D for prompt field maintenance.D
design for manufacture and assembly (DFMA)—A prod- design simplification—A process of reducing the number
uct development approach that involves the manufac- of pieces in a product or machine, eliminating features
turing function in the initial stages of product design to that are seldom needed, and eliminating steps in the
ensure ease of manufacturing and assembly. See: early production process.D
manufacturing involvement.D design-to-order—Syn: engineer-to-order.D
design for quality—A product design approach that uses destructive testing—Inspection that renders the in-
quality measures to capture the extent to which the de- spected part inoperable.D
sign meets the needs of the target market (customer
attributes), as well as its actual performance, aesthet- detailed planning and control—The planning of a project
ics, and cost. See: total quality engineering.D in the short term, covering the present time up until a
few weeks out.D
design for remanufacture—Products developed in a
detailed scheduling—Syn: operations scheduling.D
manner that allows components to be used in other
detail file—A file that contains manufacturing, routing, or petition—focusing on making a product or service
specification details. See: master file.D unique.D
detention—Carrier charges and fees applied when truck digital cash or money—An electronic currency equivalent
trailers are retained beyond a specified loading or un- of currency or coins.D
loading time. See: demurrage, express.D
dimensions of quality—An aspect of quality that is speci-
deterioration—Product spoilage, damage to the pack- fied to enhance the ability to define quality. The most
direct marketing—Communicating directly with consum- discount—An allowance or deduction granted by the sel-
ers in an effort to elicit a response or a transaction.D ler to the buyer, usually when the buyer meets certain
stipulated conditions that reduce the price of the prod-
direct material—Material that becomes a part of the fi-
ucts purchased. A quantity discount is an allowance de-
nal product in measurable quantities.D
termined by the quantity or value of the purchase. A
direct materials cost—The acquisition cost of all mate- cash discount is an allowance extended to encourage
rials used directly in the finished product.D payment of an invoice on or before a stated date. A
direct materials purchasing—Purchasing from suppliers
on a contractual basis for a fixed period of time or
trade discount is a deduction from an established price
for goods or services made by the seller to those en-
D
amount of product. For job shops, the purchasing con- gaged in certain businesses. See: price break.D
tract can be only for one job. For repetitive manufactur- discounted cash flow—A method of investment analysis
ing, the materials are usually purchased on contracts in which future cash flows are converted, or discounted,
that last for a model run or at least a year.D to their value at the present time. The net present value
direct numerical control (DNC)—A system in which sets of an item is estimated to be the sum of all discounted
of numerical control machines are connected to a com- future cash flows.D
puter, allowing direct control of machines by the com- discount period—The time allowed a customer to re-
puter without use of external storage media.D ceive a cash discount for timely payment of an invoice.D
direct offset—Similar to bartering, trading goods or ser- discount rate—The rate of interest charged to commer-
vices for related goods or services or agreeing on co-
cial banks by a central banking authority.D
production.D
discrete available-to-promise—A calculation based on
direct sales—Sales from the manufacturer to the ulti-
the available-to-promise figure in the master schedule.
mate consumer without going through a distributor or
For the first period, the ATP is the sum of the beginning
retailer.D
inventory plus the MPS quantity minus backlog for all
direct store delivery (DSD)—A shipment that bypasses periods until the item is master scheduled again. For all
the customer’s warehouse and goes directly from the other periods, if a quantity has been scheduled for that
manufacturer’s plant to the retail store.D time period then the ATP is this quantity minus all cus-
tomer commitments for this and other periods until
direct truck shipment—Shipment made without any ad-
another quantity are scheduled in the MPS. For those
ditional stops, such as for loading or changing trucks.D
periods where the quantity scheduled is zero, the ATP is
disability—A limitation of capability that limits function- zero (even if deliveries have been promised). The prom-
ing within a plant or a company.D ised customer commitments are accumulated and
disassembly bill of material—In remanufacturing, a bill shown in the period where the item was most recently
of material used as a guide for the inspection in the scheduled. Syn: incremental available-to-promise. See:
teardown and inspection process. On the basis of in- available-to-promise.D
spection, this bill is modified to a bill of repair defining discrete issue—Syn: direct-deduct inventory transaction
the actual repair materials and work required. Syn: processing.D
teardown bill of material. See: repair bill of material.D
discrete manufacturing—The production of distinct
disbursement—The physical issuance and reporting of items such as automobiles, appliances, or computers.D
the movement of raw material, components, or other
items from a stores room or warehouse. Taking a part discrete order picking—A method of picking orders in
out of inventory. See: issue.D which the items on one order are picked before the next
order is picked. See: batch picking, order picking, zone
disbursement list—Syn: picking list.D picking.D
disciplinary action—An action taken to enforce com-
discrete order quantity—An order quantity that
pliance with organizational rules and policies.D
represents an integer number of periods of demand.
discontinuous demand—A demand pattern that is cha- Most MRP systems employ discrete order quantities.
racterized by large demands interrupted by periods with See: fixed-period requirements, least total cost, least
no demand, as opposed to a continuous or steady (e.g., unit cost, lot-for-lot, part period balancing, period order
daily) demand. Syn: lumpy demand.D quantity, Wagner-Whitin algorithm.D
discrete variable—A variable, such as number of de- distressed goods—Products that are damaged or close
fects, that can take on only certain values (such as in- to their expiration date and cannot be sold at full
tegers). See: continuous variable.D price.D
discussion list—A group of people who have all signed distributed inventory—Maintaining inventory in a variety
up on a listserver to participate via email in the discus- of locations to provide better customer service.D
sion of a given topic.D
D
distributed numerical control—An approach to auto-
diseconomies of scale—Occurs when more outputs are
mated machining in which each machine tool has its
required than the efficient quantity that the facility is
own dedicated microcomputer or computer numerical
designed to produce; this causes an increase in unit
control (CNC). Each machine tool’s CNC is connected
cost.D
via a network with a minicomputer that handles distri-
disintermediation—The process of eliminating an inter- buted processing between the host mainframe comput-
mediate stage or echelon in a supply chain. Total supply er and the CNC. This minicomputer handles part
chain operating expense is reduced, total supply chain program transfers and machine status data collection.
inventory is reduced, total cycle time is reduced, and This approach is considered more advanced than direct
profits increase among the remaining echelons. See: numerical control, in which several machine tools are
echelon.D tied directly to a central computer.D
dispatch(ing) board—Syn: control board.D distributed systems—Computer systems in multiple lo-
dispatcher—1) A production control person whose pri- cations throughout an organization, working in a coop-
mary function is dispatching. 2) A transportation worker erative fashion, with the system at each location
who sends out and tracks cars, buses, trucks, railcars, primarily serving the needs of that location but also able
and other vehicles.D to receive and supply information from other systems
within a network.D
dispatching—The selecting and sequencing of available
jobs to be run at individual workstations and the as- distribution—1) The activities associated with the
signment of those jobs to workers.D movement of material, usually finished goods or service
parts, from the manufacturer to the customer. These
dispatching rule—The logic used to assign priorities to
activities encompass the functions of transportation,
jobs at a work center.D
warehousing, inventory control, material handling, order
dispatch list—A listing of manufacturing orders in priority administration, site and location analysis, industrial
sequence. The dispatch list, which is usually communi- packaging, data processing, and the communications
cated to the manufacturing floor via paper or electronic network necessary for effective management. It in-
media, contains detailed information on priority, loca- cludes all activities related to physical distribution, as
tion, quantity, and the capacity requirements of the well as the return of goods to the manufacturer. In
manufacturing order by operation. Dispatch lists are many cases, this movement is made through one or
normally generated daily and oriented by work center. more levels of field warehouses. Syn: physical distribu-
Syn: work center schedule, priority report.D tion. 2) The systematic division of a whole into discrete
dispersion—The scattering of the observations of a fre- parts having distinctive characteristics.D
quency distribution around its average.D
distribution by value—Syn: ABC classification.D
dispute resolution—The process of arbitration or media-
distribution center—A location used to store inventory.
tion to settle arguments without going to court.D
Decisions driving warehouse management include site
distinctive competency—A sustainable advantage that a selection, number of facilities in the system, layout, and
company has over its competitors. distributed data methods of receiving, storing, and retrieving goods.D
processing (DDP)—A data processing organizational
concept under which computer resources of a company distribution channel—The distribution route, from raw
are installed at more than one location with appropriate materials through consumption, along which products
communication links. Processing is performed at the travel. See: channels of distribution, marketing
user’s location generally on a smaller computer and channel.D
under the user’s control and scheduling, as opposed to
distribution cost—Those items of cost related to the ac-
processing for all users being done on a large, centra-
tivities associated with the movement and storage of
lized computer system.D
finished products. Distribution costs can include inven-
tory costs, transportation costs, and order processing (warehouse space, workforce, money, trucks, freight
costs.D cars, etc).D
distribution curve—A graphic display of numerous data distribution system—A group of interrelated facilities—
points showing the mean and frequency of occurrences manufacturing and one or more levels of warehousing—
of observations on a chart. See: normal distribution linking the production, storage, and consumption activi-
curve.D ties for spare parts and finished goods inventory. See:
ventories. See: point-of-use inventory, stockless driver—1) In activity-based cost accounting, an opera-
purchasing.D tion that influences the quantity of work required and
cost of an activity. Syn: cost driver. 2) In the theory of
dock-to-stock time—Syn: put-away time.D
constraints, an underlying cause that is responsible for
Dodge-Romig tables—Information about the correct several observed effects.D
sample size and maximum defective quantity in a sam-
drop-dead date—The last possible date to apply influ-
ple to satisfy lot acceptance; a quality control
D measurement.D
DOE—Abbreviation for design of experiments.D
ence to a future activity.D
drop ship—To take the title of the product but not ac-
tually handle, stock, or deliver it (i.e., to have one sup-
dog—A slang term used to refer to a low-growth, low- plier ship directly to another or to have a supplier ship
market-share product. See: growth-share matrix.D directly to the buyer’s customer).D
double-declining-balance depreciation—A type of accele- drum—In the theory of constraints, the constraint is
rated depreciation. See: depreciation.D viewed as a drum, and nonconstraints are like soldiers
in an army who march in unison to the drumbeat; the
double order point system—A distribution inventory resources in a plant should perform in unison with the
management system that has two order points. The drumbeat set by the constraint.D
smallest equals the original order point, which covers
demand during replenishment lead time. The second drum-buffer-rope (DBR)—The theory of constraints me-
order point is the sum of the first order point plus nor- thod for scheduling and managing operations that have
mal usage during manufacturing lead time. It enables an internal constraint or capacity-constrained
warehouses to forewarn manufacturing of future reple- resource.D
nishment orders.D drum schedule—The detailed production schedule for a
double-sampling plan—A way to control quality by taking resource that sets the pace for the entire system. The
one sample and making an accept or reject decision, drum schedule must reconcile the customer require-
and, if the decision cannot be made, taking a second ments with the system’s constraint(s).D
sample and making the accept or reject decision by DSD—Abbreviation for direct store delivery.D
combining the results of both samples.D
DSS—Abbreviation for decision support system.D
double smoothing—Syn: second-order smoothing.D
DTF—Abbreviation for demand time fence.D
downgrade—The substitution of a product of lower quali- dual-card kanban system—Syn: two-card kanban
ty, value, or status for another either in planning or in system.D
fact.D
dual sourcing—A method for sourcing requirements by
download—The process of transferring data or programs using a few suppliers for the same products or services.
from one computer to another (and usually saving to a See: multisourcing, multiple sourcing, single sourcing.D
disk).D
due date—The date when purchased material or produc-
downstream—Used as a relative reference within a firm tion material is due to be available for use. Syn: ex-
or supply chain to indicate moving in the direction of the pected receipt date. See: arrival date.D
end customer.D
due date rule—A dispatching rule that directs the se-
downstream operation—The tasks subsequent to the quencing of jobs by the earliest due date.D
task currently being planned or executed.D
dummy activity—In activity-on-arrow diagramming, an
downtime—Time when a resource is scheduled for op- activity with zero duration used to express a precedence
eration but is not producing for reasons such as main- relationship that can’t otherwise be diagrammed. It is
tenance, repair, or setup.D shown graphically with a dashed arrow.D
drawback—A refund of customs duties paid on material dumping—Selling goods below costs in selected
imported and later exported.D markets.D
dunnage—The packing material used to protect a prod- earliest start date—The earliest date an operation or or-
uct from damage during transport.D der can start. It may be restricted by the current date,
material availability, or management-specified “maxi-
durability—1) A measurement of time or amount of use
mum advance.”E
before a product needs repair or replacement. 2) One of
the eight dimensions of quality that refers to the length earliness—If a job is finished before its due date, the
of a product’s economic life.D difference between its completion date and the due
durable goods—Generally, any goods whose continuous
serviceability is likely to exceed three years (e.g., trucks,
date. See: lateness, tardiness.E
E
in a balance-of-stores record.E
earned volume—Syn: earned hours.E cimal, and C = unit cost. Syn: economic lot size, mini-
mum cost order quantity. See: total cost curve.E
earnings before interest and taxes (EBIT)—Syn: net op-
erating income.E economic value added—In managerial accounting, the
net operating profit earned above the cost of capital for
earnings before taxes (EBT)—Earnings before interest
a profit center.E
and taxes minus interest charges.E
economy of scale—A phenomenon whereby larger vo-
E
EBIT—Acronym for earnings before interest and taxesE
lumes of production reduce unit cost by distributing
eBPP—Abbreviation for electronic bill presentment and fixed costs over a larger quantity. See: economy of
payment.E scope.E
EBT—Abbreviation for earnings before taxes.E economy of scope—Using one versatile plant to produce
e-cash—An electronic system that provides for deposits many different products at a lower cost than making
and withdrawals of digital money. It permits a payer us- each product in different plants at a higher cost. See:
ing it to remain anonymous.E economy of scale.E
echelon—A level of supply chain nodes. For example, a ECR—Abbreviation for efficient consumer response.E
supply chain with two independent factory warehouses EDD—Abbreviation for earliest due date.E
and nine wholesale warehouses delivering product to
350 retail stores is a supply chain with three echelons EDI—Abbreviation for electronic data interchange.E
between the factory and the end customer. One echelon EDIFACT—Abbreviation for EDI for administration, com-
consists of the two independent factory warehouses, merce, and transport.E
one echelon consists of the nine wholesale ware-
EDI for administration, commerce, and transport
houses, and one echelon consists of the 350 retail
(EDIFACT)—A set of United Nations rules for electronic
stores. Each echelon adds operating expense, holds in-
data interchange. These are international guidelines
ventory, adds to the cycle time, and expects to make a
and standards for the electronic exchange of data re-
profit. See: disintermediation.E
garding trade.E
e-commerce—Abbreviation for electronic commerce.E
EDT—An abbreviation for electronic data transfer.E
econometric model—A set of equations intended to be
edutainment—Mixing entertainment and education
used simultaneously to capture the way in which de-
elements to make learning more fun.E
pendent and independent variables are interrelated.E
EEO—Abbreviation for equal employment opportunity.E
econometric modeling—The process of developing eco-
nometric models. See: econometric model.E EEOC—Abbreviation for Equal Employment Opportunity
Commission.E
economic indicator—An index of total business activities
at the regional, national, and global levels.E EF—Abbreviation for early finish date.E
economic infrastructure—A nation’s networks for sup- effective capacity—Syn: rated capacity.E
porting commerce, including transportation, communi- effective date—The date on which a component or an
cations, and finance.E operation is to be added or removed from a bill of ma-
economic life—The time until a product is scrapped—not terial or an assembly process. The effective dates are
because it is unusable but because repairs are becom- used in the explosion process to create demands for
ing too expensive to justify further use.E the correct items. Normally, bills of material and routing
systems provide for an effectivity start date and stop
economic lot size—Syn: economic order quantity.E
date, signifying the start or stop of a particular relation-
economic order quantity (EOQ)—A type of fixed order ship. Effectivity control also may be by serial number
quantity model that determines the amount of an item rather than date. Syn: effectivity, effectivity date.E
to be purchased or manufactured at one time. The in-
effective interest rate—Syn: annual percentage rate.E
tent is to minimize the combined costs of acquiring and
carrying inventory. The basic formula is: effectivity—Syn: effective date.E
quantity effectivity date—Syn: effective date.E
where A = annual usage in units, S = ordering costs in efficiency—A measurement (usually expressed as a
dollars, i = annual inventory carrying cost rate as a de- percentage) of the actual output to the standard output
expected. Efficiency measures how well something is electronic commerce application—A computer interface
performing relative to existing standards; in contrast, between two organizations that is used to carry out
productivity measures output relative to a specific input business transactions electronically.E
(e.g., tons/labor hour). Efficiency is the ratio of (1)
electronic communities—Communities of people who
actual units produced to the standard rate of production
communicate exclusively electronically.E
expected in a time period or (2) standard hours
produced to actual hours worked (taking longer means electronic data interchange (EDI)—The paperless (elec-
less efficiency) or (3) actual dollar volume of output to a
standard dollar volume in a time period. Illustrations of
tronic) exchange of trading documents, such as pur-
chase orders, shipment authorizations, advanced E
these calculations follow. (1) There is a standard of 100 shipment notices, and invoices, using standardized
pieces per hour and 780 units are produced in one document formats.E
eight-hour shift; the efficiency is 780/800 converted to
electronic document—The electronic representation of a
a percentage, or 97.5 percent. (2) The work is
document that can be printed.E
measured in hours and took 8.21 hours to produce 8
standard hours; the efficiency is 8/8.21 converted to a electronic form—An electronic version of a paper form.
percentage or 97.5 percent. (3) The work is measured These forms eliminate the cost of printing, storing, and
in dollars and produces $780 with a standard of $800; distributing paper forms.E
the efficiency is $780/$800 converted to a percentage,
electronic funds transfer (EFT)—A computerized system
or 97.5 percent.E
that processes financial transactions and information
efficiency variance—In cost accounting, the difference about these transactions or performs the exchange of
between the actual volume of a resource used and the value between two parties.E
budgeted volume, multiplied by the budgeted or stan-
electronic invoice presentment and payment (EIPP)—
dard price.E
Accepting and sending invoices and payments over the
efficient consumer response (ECR)—Replenishment internet.E
through a distribution network based on point-of-sale
electronic mail (email)—A technology for handling mail
information.E
electronically.E
e-form—Abbreviation for electronic form.E
electronic market—An internet-based market where
EFT—Abbreviation for electronic funds transfer.E most sales occur electronically.E
EI—Abbreviation for employee involvement.E electronic product codes (EPCs)—Codes that are used
80-20—A term referring to the Pareto principle. The with RFID tags to carry information on the product that
principle suggests that most effects come from relative- will support warranty programs.E
ly few causes; that is, 80 percent of the effects (or sales
electronic publishing—Representation of text and mul-
or costs) come from 20 percent of the possible causes
timedia documents electronically.E
(or items). See: ABC classification.8
electronic signature—An authentication that validates a
EIPP—Abbreviation for electronic invoice presentment
transaction by means of an authorization code to identi-
and payment.E
fy an individual or group.E
elasticity of demand (supply)—The ratio of the percen-
tage change in quantity demanded (supplied) to the email—Acronym for electronic mail.E
percentage change in price.E embezzlement—The fraudulent taking of another’s
e-learning—Training or schooling done online.E property while acting in a fiduciary capacity.E
electronic bill presentment and payment (eBPP)—A sys- empathy—A dimension of service quality referring to car-
tem that connects the bill issuer, bill payer, and the ing, individualized attention from a service firm.E
payer’s bank to facilitate electronic payment. Payment empirical—Pertaining to a statement or formula based
is usually by credit card.E upon experience or observation rather than on deduc-
electronic commerce (e-commerce)—The use of com- tion or theory.E
puter and telecommunication technologies to conduct
employee assistance program (EAP)—Employer-provided
business via electronic transfer of data and
service aimed at helping employees and their families
documents.E
with personal and work-related problems. Examples in-
clude financial counseling and chemical-dependency endogenous variable—A variable whose value is deter-
rehabilitation programs.E mined by relationships included within the model.E
E sponsibility to the employee. Empowerment allows the end-user computing—Use of computer resources by
employee to take on responsibility for tasks normally non-information-system personnel to enter, retrieve,
associated with staff specialists. Examples include al- manipulate, or print data.E
lowing the employee to make scheduling, quality, enforced problem solving—The methodology of inten-
process design, or purchasing decisions.E tionally restricting a resource (e.g., inventory, storage
employee involvement (EI)—The concept of using the space, number of workers) to expose a problem that
experience, creative energy, and intelligence of all em- must then be resolved.E
ployees by treating them with respect, keeping them engineering change—A revision to a drawing or design
informed, and including them and their ideas in released by engineering to modify or correct a part. The
decision-making processes appropriate to their areas of request for the change can be from a customer or from
expertise. Employee involvement focuses on quality and production, quality control, another department, or a
productivity improvements. Syn: people involvement.E supplier. Syn: engineering change notice, engineering
employee stock ownership plan (ESOP)—In the United change order.E
States, a program that encourages workers to purchase engineering change notice—Syn: engineering change.E
company stock—generally tied into the compensation/
benefits package. The intention is to give workers a feel- engineering change order—Syn: engineering change.E
ing of participation in the management and direction of engineering characteristics—The technical features de-
the company.E signed into a product.E
empowerment—A condition whereby employees have engineering drawings—A visual representation of the
the authority to make decisions and take action in their dimensional characteristics of a part or assembly at
work areas without prior approval. For example, an op- some stage of manufacture.E
erator can stop a production process if a problem is de-
engineering order—Syn: experimental order.E
tected, or a customer service representative can send
out a replacement product if a customer calls with a engineering standard—Design or test guidelines in-
problem.E tended to promote the design, production, and test of a
part, component, or product in a manner that promotes
encryption—Changing readable words into another form,
standardization, ease of maintenance, consistency,
called a cipher, which hides the text’s meaning.E
adequacy of test procedures, versatility of design, ease
ending inventory—A statement of on-hand quantities or of production and field service, and minimization of the
the dollar value of a SKU at the end of a period, often number of different tools and special tools required.E
determined by a physical inventory.E
engineer-to-order—Products whose customer specifica-
end item—A product sold as a completed item or repair tions require unique engineering design, significant cus-
part; any item subject to a customer order or sales fore- tomization, or new purchased materials. Each customer
cast. Syn: end product, finished good, finished product. order results in a unique set of part numbers, bills of
See: good.E material, and routings. Syn: design-to-order.E
back-office applications, data warehouses, and external EOQ = 1—Reducing setup time and inventory to the
data sources. Advanced EPM systems can support point where it is economically sound to produce in
many performance methodologies, such as the ba- batches with a size of one. Often EOQ = 1 is an ideal to
lanced scorecard.E strive for, like zero defects.E
enterprise resources management—The planning, ex- EOQ tables—Tables listing several ranges of monthly
ecution, control, and measurement functions required usages in dollars and the appropriate order size in dol-
to effectively operate an enterprise.E
enterprise resources planning (ERP)—Framework for
organizing, defining, and standardizing the business
lars or monthly usage for each usage range.E
equivalent units—A translation of inventories into equiv- actions to break an assumption and hence solve (eva-
alent finished goods units or of inventories exploded porate) the problem can be determined.E
back to raw materials for period end valuation of inven-
event—An event is an identifiable point in time among a
tories. An equivalent unit can be the sum of several par-
set of related activities. Graphically, an event can be
tially completed units. Two units 50 percent completed
represented by two approaches: (1) in activity-on-node
are equivalent to one unit 100 percent completed.E
networks, it is represented by a node; (2) in activity-on-
executive sales and operations planning—The portion of expected demand during lead time—Syn: demand dur-
sales and operations planning that defines executive ing lead time.E
decision-making processes to balance supply and de-
expected life—The average length of time a product re-
mand at the volume level in families, fully integrates
mains in service or in a serviceable condition.E
financial planning and operational planning, and that
provides a forum for establishing and linking high-level expected receipt date—Syn: due date.E
strategic plans with day-to-day operations. See: sales
E
expected value—The average value that would be ob-
and operations planning.E served in taking an action an infinite number of times.
exemplar—A particularly strong practice that should be The expected value of an action is calculated by multip-
imitated.E lying the outcome of the action by the probability of
achieving the outcome.E
exempt—Generally, a classification of employees/jobs
for which compensation is not determined by extending expedite—To rush or chase production or purchase or-
the recorded hours worked by an hourly rate (e.g., pay is ders that are needed in less than the normal lead time;
specified at an annual or monthly rate). Exempt to take extraordinary action because of an increase in
employees include most professionals, administrative relative priority. Syn: stockchase.E
and management personnel, and sales representatives. expeditor—A production control person whose primary
Specifically, the term refers to and is fully defined by the duty is expediting.E
U.S. Department of Labor Fair Labor Standards Act,
expendables—Syn: consumables.E
which regulates minimum wages and overtime for
nonexempt employees. See: exempt positions, expense—Expenditures of short-term value, including
nonexempt positions.E depreciation, as opposed to land and other fixed capi-
tal. See: overhead.E
exempt carrier—A for-hire carrier that is free from eco-
nomic regulation.E expensed stocks—Syn: floor stocks.E
exempt employee—A person filling an exempt position. experience curve—Syn: learning curve.E
See: exempt positions.E experience curve pricing—The average cost pricing me-
exempt positions—Positions that do not require the thod, but using an estimate of future average costs,
payment of overtime because they meet the tests of based on an experience (learning) curve.E
executive, supervisory, or administrative activity, as de- experimental design—A formal plan that details the spe-
fined under the Fair Labor Standards Act.E cifics for conducting an experiment, such as which sta-
exit interview—An interview given to an employee who is tistical techniques and responses, factors, levels,
leaving the company. The purpose is to find out why a blocks, and treatments, are to be used.E
person is leaving, what was liked and disliked about the experimental order—An order generated by the laborato-
job and the company, and what changes would make ry, research and development, or engineering group
the department and the company a better place to that must be run through regular production facilities
work.E with potential future product or market development as
exogenous variable—A variable whose values are de- a project or team goal. Syn: engineering order, laborato-
termined by considerations outside the model in ry order, pilot order, R&D order.E
question.E experimental research—A form of research (sometimes
expansion—Any increase in the capacity of a plant, facil- used in marketing research) where matched sets of
ity, or unit, usually by added investment. The scope of people are controlled for certain variables (such as in-
this increase extends from the elimination of problem come, age, and so on) while other variables (such as
areas to the complete replacement of an existing facility products offered) are varied to test research questions.
with a larger one.E See: marketing research.E
expected completion quantity—The planned quantity of expert system—A type of artificial intelligence computer
a manufacturing order after expected scrap.E system that mimics human experts by using rules and
heuristics rather than deterministic algorithms.E
expected demand—The quantity expected to be con-
explode—To perform a bill-of-material explosion.E
sumed during a given time period when usage is at the
forecast rate. See: demand during lead time.E explode-to-deduct—Syn: backflush.E
explosion—Syn: requirements explosion. Ant: pose of goods, that induces the buyer to buy and on
implosion.E which the seller intends the buyer to depend.E
explosion level—Syn: low-level code.E extended enterprise—The notion that supply chain part-
ners form a larger entity. See: supply chain community.E
exponential distribution—A continuous probability distri-
bution where the probability of occurrence either steadi- extensible markup language (XML)—This language facili-
E
ly increases or decreases. The steady increase case tates direct communication among computers on the
(positive exponential distribution) is used to model phe- internet. Unlike the older hypertext markup language
nomena such as customer service level versus cost. (HTML), which provides HTML tags giving instructions to
The steady decrease case (negative exponential distri- a web browser about how to display information, XML
bution) is used to model phenomena such as the weight tags give instructions to a web browser about the cate-
given to any one time period of demand in exponential gory of information.E
smoothing.E
external customer—A person or organization that rece-
exponential smoothing forecast—A type of weighted ives a good, a service, or information but is not part of
moving average forecasting technique in which past ob- the organization supplying it. See: customer, internal
servations are geometrically discounted according to customer.E
their age. The heaviest weight is assigned to the most
external environment—All the factors that exist outside
recent data. The smoothing is termed exponential be-
the boundary of the organization that have the possibili-
cause data points are weighted in accordance with an
ty of affecting any part of the organization. See: internal
exponential function of their age. The technique makes
environment, organizational environment.E
use of a smoothing constant to apply to the difference
between the most recent forecast and the critical sales external factory—A situation where suppliers are viewed
data, thus avoiding the necessity of carrying historical as an extension of the firm’s manufacturing capabilities
sales data. The approach can be used for data that ex- and capacities. The same practices and concerns that
hibit no trend or seasonal patterns. Higher order expo- are commonly applied to the management of the firm’s
nential smoothing models can be used for data with manufacturing system should also be applied to the
either (or both) trend and seasonality.E management of the external factory.E
export broker—A party that introduces the buyer to the external failure costs—The costs related to problems
seller and eventually withdraws, getting a fee for servic- found after the product reaches the customer. This
es rendered.E usually includes such costs as warranty and returns.E
export compliance—Cooperating with export rules re- externality—The costs or benefits of a firm’s activities
garding packaging and documentation.E borne or received by others.E
export license—A document received from a governmen- external setup time—The time associated with elements
tal agency authorizing a certain quantity of an export to of a setup procedure performed while the process or
be sent to a given country.E machine is running. Ant: internal setup time.E
exports—Products produced in one country and sold in extranet—A network connection to a partner’s network
another.E using secure information processing and internet proto-
cols to do business.E
exposures—The number of times per year that the sys-
tem risks a stockout. The number of exposures is ar- extrapolation—Estimation of the future value of some
rived at by dividing the lot size into the annual usage.E data series based on past observations. Statistical fore-
casting is a common example. Syn: projection.E
express—1) Carrier payment to its customers when
ships, rail cars, or trailers are unloaded or loaded in less extrinsic forecasting method—A forecast method on a
than the time allowed by contract and returned to the correlated leading indicator, such as estimating furni-
carrier for use. See: demurrage, detention. 2) The use of ture sales based on housing starts. Extrinsic forecasts
priority package delivery to achieve overnight or second- tend to be more useful for large aggregations, such as
day delivery.E total company sales, than for individual product sales.
Ant: intrinsic forecast method. See: quantitative fore-
express warranty—A positive representation, made by a
casting technique.E
seller, concerning the nature, character, use, and pur-
fabrication—Manufacturing operations for making com- failure costs—A term used within the cost of poor quality
ponents, as opposed to assembly operations.F model to include both internal and external failure
costs. See: cost of poor quality, external failure costs,
fabrication level—The lowest production level. The only
components at this level are parts (as opposed to as-
semblies or subassemblies). These parts are either pro-
internal failure costs.F
FAS—1) Abbreviation for final assembly schedule. 2) fee—The charge for the use of the contractor’s organiza-
Abbreviation for free alongside ship.F tion for the period and to the extent specified in the
contract.F
fast-tracking—A project schedule compression tech-
nique that overlaps (or performs in parallel) activities feedback—The flow of information back into the control
that would ordinarily be performed sequentially.F system so that actual performance can be compared
with planned performance.F
fault isolation—A technique used to identify the cause of
F a defect.F
final assembly schedule (FAS)—A schedule of end items finish-to-finish—In project management, a network re-
to finish the product for specific customers’ orders in a quirement that activity A must be finished before sub-
make-to-order or assemble-to-order environment. It is sequent activity B can finish. See: logical relationship.F
also referred to as the finishing schedule because it
finish-to-order—Syn: assemble-to-order.F
may involve operations other than the final assembly;
also, it may not involve assembly (e.g., final mixing, cut- finish-to-start—In project management, a network re-
ting, packaging). The FAS is prepared after receipt of a quirement that activity A must be finished before activi-
customer order as constrained by the availability of ma-
terial and capacity, and it schedules the operations re-
ty B can start. See: logical relationship.F
finite forward scheduling—An equipment scheduling
F
quired to complete the product from the level where it is technique that builds a schedule by proceeding sequen-
stocked (or master scheduled) to the end-item level.F tially from the initial period to the final period while ob-
financial accounting—The use of generally accepted ac- serving capacity limits. A Gantt chart may be used with
counting principles to prepare reports to external agen- this technique. See: finite loading.F
cies, such as investors and governmental agencies.F finite loading—Assigning no more work to a work center
financial benchmarking—Comparing one company’s fi- than the work center can be expected to execute in a
nancial results with that of another company. This type given time period. The specific term usually refers to a
of benchmarking need not involve direct contact be- computer technique that involves calculating shop prior-
tween the initiator company and the target company, as ity revisions in order to level load operation by opera-
many financial records are publicly available. See: ben- tion. Syn: finite scheduling. See: drum-buffer-rope.F
chmarking.F finite scheduling—Syn: finite loading.F
financial forecasting—Estimating a firm’s future finan- firewall—A device used to control access to a company’s
cial statements.F data from the internet or other outside sources.F
financial leverage management ratios—A set of mea- firm fixed-price contract—A contract in which the seller
surements of the degree to which a firm is financing as- is paid a set price without regard to costs. Syn: fixed-
sets with fixed-charge instruments such as debt or price contract.F
preferred stock.F
firm master production schedule—A part of the master
financial management—The function concerned with production schedule in which changes can occur only
ensuring the availability of funds for research and de- rarely.F
velopment, operations, and marketing.F
firm offer—A written offer to buy or sell goods that will
finish date—The time of completion of a project or activi- be held open for a stipulated period.F
ty. It may be planned, actual, early, late, baseline, or
target.F firm planned order (FPO)—A planned order that can be
frozen in quantity and time. The computer is not allowed
finished good—Syn: end item.F to change it automatically; this is the responsibility of
finished goods inventory—Those items on which all the planner in charge of the item that is being planned.
manufacturing operations, including final test, have This technique can aid planners working with MRP sys-
been completed. These products are available for tems to respond to material and capacity problems by
shipment to the customer as either end items or repair firming up selected planned orders. In addition, firm
parts. Syn: finished products inventory. See: goods.F planned orders are the normal method of stating the
master production schedule. See: planning time fence.F
finished good waivers—Approvals for deviation from
normal product specifications.F first-article inspection—A quality check on the first com-
ponent run after a new setup has been completed. Syn:
finished product—Syn: end item.F
first-piece inspection.F
finished products inventory—Syn: finished goods
first-come-first-served rule—A dispatching rule under
inventory.F
which the jobs are sequenced by their arrival times.
finishing lead time—1) The time that is necessary to See: first-in, first-out.F
finish manufacturing a good after receipt of a customer
first expiry first out (FEFO)—A picking methodology as-
order. 2) The time allowed for completing the good
suring that the usage shelf life of items is optimized.
based on the final assembly schedule.F
Years ago, first in, first out (FIFO) was satisfactory as the
shelf-life days for items often didn’t vary and FIFO often five-forces model of competition—A methodology for
coincided with the expiry dates. However, re-testing is analyzing competitive pressures in a market and as-
frequently done to extend shelf-life dates on some lots sessing the strength and importance of each of those
or batches, while other lots may have typical shelf-life pressures.F
dates shortened because of quality or processes. Thus,
five Ms—The branches of a cause and effect (fishbone)
FEFO was introduced by software vendors to provide
diagram: manpower, methods, materials, machines,
this picking methodology for use with shelf-life con-
F trolled items.F
first in, first out (FIFO)—A method of inventory valuation
and measurements.F
automatically places an order whenever inventory is where the costs of frequent movement of the product
reviewed.F are very high.F
fixed-location storage—A method of storage in which a fixed-price contract—Syn: firm fixed-price contract.F
relatively permanent location is assigned for the storage
of each item in a storeroom or warehouse. Although fixed-price-incentive-fee contract—A contract in which
more space is needed to store parts than in a random- the seller is paid a set price and can earn an additional
location storage system, fixed locations become famili-
ar, and therefore a locator file may not be needed. See:
random-location storage.F
profit if certain stipulations are met.F
flag of convenience—A ship registered in a nation with flexible machine center (FMC)—An automated system,
low taxes and lax safety regulations. Liberia and which usually consists of computer numerical control
Panama are two favorite flags of convenience.F machines with robots loading and unloading the parts
conveyed into, and through, the system. Its purpose is
flatbed—A type of truck trailer that has a floor but no
to provide quicker throughput, changeovers, setups,
enclosure. Sideboards or tie-downs are used to prevent
and so forth to enable the manufacturing of multiple
cargo from falling off.F
products.F
FMECA—Abbreviation for failure mode effects and criti- al, random, seasonal, and trend. Syn: sales forecast.
cality analysis.F See: Box-Jenkins model, exponential smoothing fore-
cast, extrinsic forecasting method, intrinsic forecasting
FMS—Abbreviation for flexible manufacturing system.F
method, moving average forecast, qualitative forecast-
FOB—Abbreviation for free on board.F ing method, quantitative forecasting method.F
FOB destination—The supplier pays for transportation to forecast accuracy—A measurement of forecast useful-
F
the buyer’s location, where the buyer takes possession ness, often defined as the average difference between
of the goods.F the forecast value to the actual value. Syn: sales fore-
FOB origination—The buyer takes possession of the cast. See: forecast error.F
goods at the supplier’s location, and the buyer must forecast bias—Tendency of a forecast to systematically
provide transportation.F miss the actual demand (consistently either high or
focused factory—A plant established to focus the entire low).F
manufacturing system on a limited, concise, managea-
forecast consumption—Syn: consuming the forecast.F
ble set of products, technologies, volumes, and markets
precisely defined by the company’s competitive strate- forecast error—The difference between actual demand
gy, technology, and economics. See: cellular and forecast demand, stated as an absolute value or as
manufacturing.F a percentage. See: average forecast error, forecast ac-
curacy, mean absolute deviation, tracking signal.F
focused low-cost strategy—Targeting a market with a
low-cost product line in order to lower the cost of sales forecast horizon—The period of time into the future for
and increase gross margin.F which a forecast is prepared.F
focus forecasting—A system that allows the user to si- forecasting—The business function that attempts to
mulate the effectiveness of numerous forecasting tech- predict sales and use of products so they can be pur-
niques, enabling selection of the most effective one.F chased or manufactured in appropriate quantities in
focus group—A set of people who are interviewed to- advance.F
gether for the purpose of collecting marketing data.F forecast interval—The time unit for which forecasts are
focus-group research—A form of research (frequently prepared, such as week, month, or quarter. Syn: fore-
used in marketing research) where data are gathered by cast period.F
interviewing consumers in groups of 6 to 10 at a time forecast management—The process of making, check-
(the focus group). See: marketing research.F ing, correcting, and using forecasts. It also includes de-
focus strategy—Targeting a narrow market with specia- termination of the forecast horizon.F
lized goods or services.F forecast mean absolute percentage of error (FMAPE)—
follow-up—Monitoring of job progress to see that opera- The absolute error divided by actual demand for “n” pe-
tions are performed on schedule or that purchased ma- riods. Where absolute error is the variation between the
terial or products will be received on schedule.F actual demand and the forecast for the period ex-
pressed as a positive value (without regard for sign).F
force field analysis—A technique for analyzing the forces
that will aid or hinder an organization in reaching an ob- forecast period—Syn: forecast interval.F
jective. An arrow pointing to an objective is drawn down
foreign freight forwarder—An entity that picks up goods
the middle of a piece of paper. The factors that will aid
at the production site and coordinates transport to the
the objective’s achievement (called the driving forces)
foreign customer’s location.F
are listed on the left side of the arrow; the factors that
will hinder its achievement (called the restraining foreign trade zone (FTZ)—Areas supervised by U.S.
forces) are listed on the right side of the arrow.F Customs and Border Protection that are considered to
be outside U.S. territory. Material in the zone is not sub-
forecast—An estimate of future demand. A forecast can
ject to duty taxes, which are payable when the material
be constructed using quantitative methods, qualitative
is moved outside the zone for consumption. There is no
methods, or a combination of methods, and it can be
limit on the time material may remain in the zone.
based on extrinsic (external) or intrinsic (internal) fac-
Internationally, similar areas are called free trade
tors. Various forecasting techniques attempt to predict
zones.F
one or more of the four components of demand: cyclic-
forensic procurement—Analyzing root cause-and-effect for operations. See: forward pass. Ant: back
troubleshooting.F scheduling.F
formal culture—The visible segment of the organization- Fourier series—A form of analysis useful for forecasting.
al culture, such as policies and procedures, mission The model is based on fitting sine waves with increasing
statement, and dress codes. See: informal culture.F frequencies and phase angles to a time series.F
F
4PL—Abbreviation for fourth-party logistics.F
ters of data for computer input, storage, or output.F
four Ps—A set of marketing tools to direct the business
form-fit-function—A term used to describe the process of offering to the customer. The four Ps are product, price,
designing a part or product to meet or exceed the per- place, and promotion.F
formance requirements expected by customers.F
14 Points—W. Edwards Deming’s 14 management prac-
formula—A statement of ingredient requirements. A tices to help companies increase their quality and prod-
formula may also include processing instructions and uctivity: (1) create constancy of purpose for improving
ingredient sequencing directions. Syn: formulation, products and services; (2) adopt the new philosophy; (3)
recipe.F cease dependence on inspection to achieve quality; (4)
end the practice of awarding business on price alone;
formulation—Syn: formula.F
instead, minimize total cost by working with a single
form utility—The value created by changing a good’s supplier; (5) improve constantly and forever every
form through a production process.F process for planning, production, and service; (6) insti-
tute training on the job; (7) adopt and institute leader-
forty-foot equivalent unit—A measure of container ca-
ship; (8) drive out fear; (9) break down barriers between
pacity that is equivalent to two 20-foot equivalency
staff areas; (10) eliminate slogans, exhortations, and
units; that is, a unit equivalent to 40-feet long, 8-feet
targets for the workforce; (11) eliminate numerical quo-
wide, and approximately 8-feet high.F
tas for the workforce and numerical goals for manage-
40/30/30 rule—A rule that identifies the sources of ment; (12) remove barriers that rob people of pride of
scrap, rework, and waste as 40 percent product design, workmanship and eliminate the annual rating or merit
30 percent manufacturing processing, and 30 percent system; (13) institute a vigorous program of education
from suppliers.4 and self-improvement for everyone; and (14) put every-
body in the company to work to accomplish the trans-
forward buying—The practice of buying materials in a
formation. Syn: Deming’s 14 Points.F
quantity exceeding current requirements but not beyond
the point that the long-term need exists.F fourth-party logistics (4PL)—Fourth-party logistics differs
from third-party logistics in the following ways: (1) the
forward flow scheduling—A procedure for building
4PL organization is often a separate entity formed by a
process train schedules that starts with the first stage
joint venture or other long-term contract between a
and proceeds sequentially through the process struc-
client and one or more partners; (2) the 4PL organiza-
ture until the last stage is scheduled.F
tion is an interface between the client and multiple lo-
forward integration—Process of buying or owning ele- gistics services providers; (3) ideally, all aspects of the
ments of the production cycle and the channel of distri- client’s supply chain are managed by the 4PL organiza-
bution forward toward the final customer. See: vertical tion; and, (4) it is possible for a major 3PL organization
integration.F to form a 4PL organization within its existing structure.
See: third-party logistics.F
forward pass—In the critical path method of project
management, working from the first node to the last four-wall inventory—Syn: wall-to-wall inventory.F
node calculating early start times and early finish times
FPO—Abbreviation for firm planned order.F
as well as the project’s duration. See: forward schedul-
ing, backward pass, critical path method.F franchise extension—The placement of a brand name
on products outside the company’s present sphere of
forward scheduling—A scheduling technique where the
activity.F
scheduler proceeds from a known start date and com-
putes the completion date for an order, usually proceed- free alongside ship (FAS)—A term of sale indicating the
ing from the first operation to the last. Dates generated seller is liable for all changes and risks until the goods
by this technique are generally the earliest start dates sold are delivered to the port on a dock that will be used
by the vessel. Title passes to the buyer when the seller fringe benefits—Employer-granted compensations that
has secured a clean dock or ship’s receipt of goods.F are not directly tied to salary.F
free float—In the critical path method of project man- front room—The place where the customer comes into
agement, the amount of time that a given activity can contact with the service operation. Many service opera-
be delayed without delaying an immediately subsequent tions contain front room and back room operations.
activity’s early start time. See: float, independent float, See: back room.F
F total float.F
free on board (FOB)—The terms of sale that identify
where title passes to the buyer.F
frozen master production schedule—The parts of a mas-
ter production schedule that should not be changed or
should be changed rarely.F
free slack—The amount of time by which the completion frozen zone—In forecasting, the periods where no
of an activity in a project network can increase without changes can be made to work orders based on changes
delaying the start of the next activity.F in demand. This provides stability to the master produc-
tion schedule.F
free trade zone (FTZ)—The international term for what is
known in the United States as a foreign trade zone. See: FRT—Abbreviation for future reality tree.F
foreign trade zone.F
FTC—Abbreviation for Federal Trade Commission.F
freight bill—A freight carrier’s invoice for a shipment.F
FTP—Abbreviation for file transfer protocol.F
freight carriers—Companies that move cargo via truck,
FTZ—Abbreviation for foreign trade zone.F
rail, air, or sea.F
Full-Baldrige approach—A quality award program mod-
freight charge—The rate established for the transporta-
eled after the Malcolm Baldrige National Quality Award
tion of freight.F
and using the same criteria.F
freight collect—The freight and charges to be paid by the
full cost pricing—Establishing price at some markup
consignee.F
over the full cost (absorption costing). Full costing in-
freight consolidation—The grouping of shipments to ob- cludes direct manufacturing as well as applied
tain reduced costs or improved utilization of the trans- overhead.F
portation function. Consolidation can occur by market
full pegging—The ability of a system to automatically
area grouping, grouping according to scheduled delive-
trace requirements for a given component all the way
ries, or using third-party pooling services such as public
up to its ultimate end item, customer, or contract num-
warehouses and freight forwarders.F
ber. Syn: contract pegging.F
freight equalization—The practice by more distant sup-
fully qualified domain name—The complete, registered
pliers of absorbing the additional freight charges to
address (URL) of an internet site.F
match the freight charges of a supplier geographically
closer to the customer. This is done to eliminate the functional benchmarking—Benchmarking a single func-
competitive advantage of lower freight charges that the tion within an organization rather than the entire organ-
nearest supplier has.F ization. See: benchmarking.F
freight forwarder—The “middle man” between the carri- functionality—The degree to which a product achieves
er and the organization shipping the product. Often its designed purpose.F
combines smaller shipments to take advantage of lower functional layout—A facility configuration in which opera-
bulk costs.F tions of a similar nature or function are grouped togeth-
frequency distribution—A table that indicates the fre- er; an organizational structure based on departmental
quency with which data fall into each of any number of specialty (e.g., saw, lathe, mill, heat treat, press). Syn:
subdivisions of the variable. The subdivisions are usual- job shop layout, process layout.F
ly called classes.F functional manager—A manager responsible for a spe-
frequency of repair—Syn: repair factor.F cialized department, such as accounting or
engineering.F
frequently asked questions (FAQs)—A list of commonly
asked questions pertaining to a website (or perhaps functional organization—A hierarchical organization in
software, hardware, and so on) along with the answers which each individual has one clear superior and staff
to these questions.F areas are well defined.F
functional organizational structure—An organizational (1) develop, expand, and complete the solution and (2)
structure based on functional specialization, such as identify and solve or prevent new problems created by
sales, engineering, manufacturing, finance, and implementing the solution.F
accounting.F
futures—Contracts for the sale and delivery of commodi-
functional requirements—Syn: critical characteristics.F ties at a future time, made with the intention that no
commodity be delivered or received immediately.F
functional silo—A view of an organization where each
department is operated independently of the others.
Each group is referred to as a silo. See: silo effect.F
future value—A present payment’s value at some point
in the future valued at a given interest rate.F G
functional silo syndrome—Suboptimization of an organi- future worth—1) The equivalent monetary value at a
zation’s goals due to members of specific functions de- designated future date based on the time value of
veloping more loyalty to the function’s group goals than money. 2) The monetary sum, at a given future time,
to the organization’s goals.F that is equivalent to one or more sums at given earlier
times when interest is compounded at a given rate.
functional strategy—A strategy that is built from the
See: time value of money.F
business strategy for the various business functions,
such as finance, marketing, and production. See: stra- fuzzy logic—A field of logic based on “fuzzy sets,” that is,
tegic planning.F sets in which membership is probabilistic rather than
deterministic.F
functional systems design—The development and defi-
nition of the business functions to be accomplished by
a computer system (i.e., preparing a statement of the
proposed computer system’s data input, data manipula-
G
tion, and information output in common business terms GAAP—Acronym for generally accepted accounting
that can be reviewed, understood, and approved by a principles.G
user organization). This statement, after approval, pro-
vides the basis for the computer system’s design.F gain sharing—A method of incentive compensation
where employees share collectively in savings from
functional test—Measure of a production component’s productivity improvements. Syn: gain sharing plans.G
ability to work as designed to meet a level of
performance.F gain sharing plans—Syn: gain sharing.G
funds flow management—The planning, execution, and GAMP—Acronym for generally accepted manufacturing
control of cash receipts and disbursements with the ob- practices.G
jective of maintaining the cash balance at a preset posi- G&A—Abbreviation for general and administrative
tive value. Syn: cash flow management.F expenses.G
funds flow statement—A financial statement showing Gantt chart—The earliest and best-known type of plan-
the flow of cash and its timing into and out of an organi- ning and control chart, especially designed to show
zation or project. Syn: cash flow statement, statement graphically the relationship between planned perfor-
of cash flows.F mance and actual performance over time. Named after
funnel experiment—An experiment that demonstrates its originator, Henry L. Gantt, the chart is used for (1)
the effects of tampering. Marbles are dropped through machine loading, in which one horizontal line is used to
a funnel in an attempt to hit a flat-surfaced target be- represent capacity and another to represent load
low. The experiment shows that adjusting a stable against that capacity; or (2) monitoring job progress, in
process to compensate for an undesirable result or an which one horizontal line represents the production
extraordinarily good result will produce output that is schedule and another parallel line represents the actual
worse than if the process had been left alone. See: progress of the job against the schedule in time. Syn:
tampering.F job progress chart, milestone chart.G
future order—An order entered for shipment at some gap—When the actual performance level is not equal to
future date.F the expected performance level.G
gap analysis—A tool designed to assess the distance
future reality tree (FRT)—In the theory of constraints, a
that exists between a service that is offered and cus-
logic-based tool for constructing and testing potential
tomer expectations.G
solutions before implementation. The objectives are to
gapped schedule—A schedule in which every piece in a nication between marketing and manufacturing, top
lot is finished at one work center before any piece in the management control of the production planning process
lot can be processed at the succeeding work center; the (sales and operations planning process), systems capa-
movement of material in complete lots, causing time ble of validly translating high-level plans into detailed
gaps between the end of one operation and the begin- schedules, and so on. Today GAMP includes such para-
ning of the next. It is a result of using a batched sche- digms as just-in-time, theory of constraints, total quality
dule at each operation (work center), where process management, business process reengineering, and
mance indicators organizations can use to measure and graphical evaluation and review technique (GERT)—A
report their human rights, labor, environment, and anti- network analysis technique that allows for probability
corruption practices and outcomes.G distributions of activity durations and also conditions
under which some activities may not be carried out.
global sourcing—Using international sources for
See: critical path method, network analysis, program
supplies.G
evaluation and review technique.G
G
global strategy—A strategy that focuses on improving
graphical forecasting methods—The use of visual infor-
worldwide performance through the sales and market-
mation to predict sales patterns, it typically involves
ing of common goods and services with minimum prod-
plotting information in a graphical form. It is relatively
uct variation by country. Its competitive advantage
easy to convert a spreadsheet into a graph that conveys
grows through selecting the best locations for opera-
the information visually. Trends and patterns of data
tions in other countries. See: multinational strategy.G
are easier to spot, and extrapolation of previous de-
global supply chains—Supply chains that include inter- mand can be used to predict future demands.G
national partners or markets.G graphical user interface (GUI)—A connection between
glocalization—A combination of "globalization" and "loca- the computer and the user employing a mouse and
lization." When used in a supply chain context, glocaliza- icons so that the user makes selections by pointing at
tion is a form of postponement where a product or icons and clicking the mouse.G
service is developed for distribution globally but is mod- gravity models—An approach used for locating facilities
ified to meet the needs of a local market. The modifica- at the “center of gravity.” Gravity is determined by the
tions are made to conform with local laws, customs, product of the masses of two bodies divided by the
cultures or preferences.G square of the distance between them. In gravity models,
GNP—Abbreviation for gross national product.G the population of each neighborhood in the region is
used as the mass, and driving time is used as the
going concern value—The value of the firm as a whole, distance.G
rather than the sum of the values of the separate
gray box design—A situation in which the supplier and
parts.G
client jointly design a product or service. See: black box
go/no-go—The state of a unit or product. Two design.G
parameters are possible: go (conforms to specification)
green belt—A manager or team member who has been
and no-go (does not conform to specification).G
trained in six sigma improvement methods and will
good—A tangible product, merchandise, or ware.G have full-time responsibilities for process and quality
improvement.G
goodness of fit—The degree to which a model complies
with observed data.G green field—The initiation of a new process where no
similar initiatives have previously existed.G
goodwill—An intangible item that is only recorded on a
company’s books as the result of a purchase. Generally, green logistics—A purchasing firm has the responsibility
it is inseparable from the enterprise but makes the to properly dispose of packaging supplies received with
company more valuable, for example, a good items ordered.G
reputation.G green manufacturing—A method of producing a good or
government market—A market in which most or all buy- service that minimizes external cost and pollution. It in-
ers consist of agencies of federal, state, or local gov- cludes design for reuse, design for disassembly, and
ernments. See: consumer market, industrial market, design for remanufacture. See: environmentally respon-
institutional market.G sible business.G
green marketing—In advertising, promoting products
GPS—Abbreviation for global positioning system.G
because of their environmental sensitivity.G
grades—The sublabeling of items to identify their partic-
green reverse logistics—The responsibility of the suppli-
ular makeup and to separate one lot from other produc-
er to dispose of packaging materials or environmentally
tion lots of the same item.G
sensitive materials such as heavy metals.G
grandfather clause—A provision that exempts existing
green supply chain—A supply chain that considers envi-
entities from a newly created regulation.G
ronmental impacts on its operations and takes action
along the supply chain to comply with environmental group layout—A layout in which machine groups are ar-
safety regulations and communicate this to customers ranged to process families of parts with similar charac-
and partners. See: environmentally responsible teristics.G
business.G
group replacement—Replacing an entire set of compo-
GRI—Abbreviation for Global Reporting Initiative.G nents, whether failed or not, all at one time (e.g., replac-
ing all the light bulbs in a ceiling fixture).G
grid technique—A quantitative model used for locating
H
teristics by successively lower order groups of code.
Classification may denote function, type of material,
size, shape, and so forth.G
handling cost—The cost involved in the movement of
group decision support system (GDSS)—The software
material. In some cases, the handling cost depends on
designed to support groups in unstructured decision
the size of the inventory.H
making by supporting brainstorming, conflict resolution,
voting, and other techniques.G hansei—A Japanese word meaning reflection.H
grouping—Matching like operations and running them hard automation—Use of specialized machines to man-
together sequentially, thereby taking advantage of a ufacture and assemble products. Each machine is nor-
common setup.G mally dedicated to one function, such as milling.H
hard copy—A printed report, message, or special riods beyond some time fence such that, if the hedge is
listing.H not needed, it can be rolled forward before major re-
sources must be committed to produce the hedge and
hardware—1) In manufacturing, relatively standard
put it in inventory. A product mix hedge is an approach
items such as nuts, bolts, washers, or clips. 2) In data
where several interrelated optional items are over-
processing, the computer and its peripherals.H
planned. Sometimes, using a planning bill, the sum of
harmonic smoothing—An approach to forecasting based the percent mix can exceed 100 percent by a defined
on fitting some set of sine and cosine functions to the
historical pattern of a time series. Syn: seasonal
amount, thus triggering additional hedge planning. 3) In
purchasing, any purchase or sale transaction having as
H
harmonics.H its purpose the elimination of the negative aspects of
harmonized system classification codes—An interna- price fluctuations. See: market hedge, option overplan-
tionally standardized description of goods that uses a ning, planning bill of material, safety stock, time fence,
system of numbers to provide increasingly detailed two-level master.H
classification and descriptions.H hedge inventory—A form of inventory buildup to buffer
against some event that may not happen. Hedge inven-
hash total—A control process used to ensure that all
tory planning involves speculation related to potential
documents in a group are present or processed. In
labor strikes, price increases, unsettled governments,
practice, the arithmetic sum of data not normally added
and events that could severely impair a company’s stra-
together is found, the checking (audit) process adds the
tegic initiatives. Risk and consequences are unusually
same data, and a comparison is made. If the sums do
high, and top management approval is often required.H
not agree, an error exists. Example: the last digit of
every part number in an assembly is added, and the last hedging—The practice of entering into contracts on a
digit of the sum becomes the last digit of the assembly. commodity exchange to protect against future fluctua-
If the last digit of an assembly is not the same as the tions in the commodity. This practice allows a company
sum of the last digit of the components’ sum, the as- to isolate profits to the value-added process rather than
sembly must be missing a part or must have the wrong to uncontrolled pricing factors. See: speculative
combination of parts.H buying.H
Hawthorne effect—A study at the Hawthorne Western heel—In the process industry, an item used in the manu-
Electric plant from 1927 to 1932 systematically im- facture of itself. For example, in the manufacture of
proved working conditions and productivity improved. plastic, the ingredients will include the parent as well as
Then, when it systematically worsened working condi- the components.H
tions, productivity improved. From this study, it was de- heijunka—In just-in-time philosophy, an approach to lev-
termined that concern by management generally factors el production throughout the supply chain to match the
into improved productivity.H planned rate of end product sales.H
hazardous waste—Waste, such as chemicals or nuclear helper application—Software that assists the browser
material, that is hazardous to humans or animals and when audio, video, or large images are requested.H
requires special handling.H
heuristics—A form of problem solving in which the re-
hazmat—Hazardous material defined by environmental sults or rules have been determined by experience or
laws and legal precedents. A product has been defined intuition instead of by optimization. Heuristics can be
as hazardous by regulations that impose stiff fines if the used in such areas as forecasting; lot sizing; or deter-
regulations are ignored.H mining production, staff, or inventory levels.H
hedge—1) An action taken in an attempt to shield the hierarchical database—A method of constructing a da-
company from an uncertain event such as a strike, price tabase that requires that related record types be linked
increase, or currency reevaluation. 2) In master sche- in tree-like structures, where no child record can have
duling, a scheduled quantity to protect against uncer- more than one physical parent record.H
tainty in demand or supply. The hedge is similar to
high-level language (HLL)—Relatively sophisticated
safety stock, except that a hedge has the dimension of
computer language that allows users to employ a nota-
timing as well as amount. A volume hedge or market
tion with which they are already familiar. For example:
hedge is carried at the master schedule or production
COBOL (business), ALGOL (mathematical and scientific),
plan level. The master scheduler plans excess quanti-
FORTRAN, BASIC, Java, and Visual Basic.H
ties over and above the demand quantities in given pe-
hi-low—A forklift truck with a standing operator.H HOQ—Abbreviation for house of quality.H
histogram—A graph of contiguous vertical bars horizontal dependency—The relationship between the
representing a frequency distribution in which the components at the same level in the bill of material, in
groups or classes of items are marked on the x axis and which all must be available at the same time and in suf-
the number of items in each class is indicated on the y ficient quantity to manufacture the parent assembly.
axis. The pictorial nature of the histogram lets people See: vertical dependency.H
hold order—A written order directing that certain opera- hoshin kanri—See hoshin planning.H
tions or work be interrupted or terminated pending a
hoshin planning—Breakthrough planning. A Japanese
change in design or other disposition of the material.
strategic planning process in which a company develops
Syn: stop work order.H
up to four vision statements that indicate where the
hold points—Stockpoints for semifinished inventory.H company should be in the next five years. Company
goals and work plans are developed based on the vision
holonic network—1) A network of autonomous, distri-
statements. Periodic audits are then conducted to mon-
buted human or computer systems with the capability
itor progress.H
to act in an integrated manner. 2) A network of compa-
nies dynamically interacting to act as one system. Each host computer—Any computer on a network that is a
company or holon has a different process and core repository for services available to other computers on
competency. Virtual enterprises are created by organiz- the network. It is common to have one host machine
ing the holons, to take advantage of core provide several services such as the World Wide Web.H
competencies.H
housekeeping—The manufacturing activity of identifying
homogeneous product—A product that is effectively and maintaining an orderly environment for preventing
identical from producer to producer.H errors and contamination in the manufacturing
honeycombing—The practice of removing a pallet of process.H
merchandise where the space is not exhausted in an house of quality (HOQ)—A structured process that re-
orderly fashion, resulting in a vacant space not usable lates customer-defined attributes to the product’s tech-
for storage of other items. This is one of the hidden nical features needed to support and generate these
costs of warehousing.H attributes. This technique achieves this mapping by
honeycomb loss—The usable empty storage space in a means of a six-step process: (1) identification of cus-
stack due to storage of only a single stockkeeping unit tomer attributes; (2) identification of supporting tech-
in the stack to permit better access.H nical features; (3) correlation of the customer attributes
with the supporting technical features; (4) assignment
hopper cars—Rail cars that permit bulk commodities to
of priorities to the customer requirements and technical
be loaded at the top and removed from the bottom of
features; (5) evaluation of competitive stances and
the car. Some hopper cars have permanent tops that
competitive products; and (6) identification of those
provide protection from bad weather.H
technical features to be used (deployed) in the final de-
sign of the product. HOQ is part of the quality function inventory model, optional replenishment model, order
deployment (QFD) process and forces designers to con- point system.H
sider customer needs and the degree to which the pro-
hybrid layout—This layout combines two or more layout
posed designs satisfy these needs. See: customer-
types.H
defined attributes, quality function deployment.H
hybrid manufacturing process—Syn: hybrid production
hub—A large manufacturer or retailer doing business
I
method.H
with many trading partners.H
hybrid organizational structure—An organizational struc-
hub-and-spoke systems—In warehousing, a system that
ture that embodies multiple organizational forms (func-
has a hub (or center point) where sorting or transfers
tional, product, or geographical) simultaneously. For
occur, and the spokes are outlets serving the destina-
example, some functions may be centralized (such as
tions related to the hub.H
finance and accounting), whereas others may be dupli-
human factors engineering—A merging of those cated geographically (such as sales).H
branches of engineering and the behavioral sciences
hybrid production method—A production planning me-
that concern themselves principally with the human
thod that combines the aspects of both the chase and
component in the design and operation of human-
level production planning methods. Syn: hybrid manu-
machine systems. Human factors engineering is based
facturing process, hybrid strategy. See: chase produc-
on a fundamental knowledge and study of human phys-
tion method, level production method, production
ical and mental abilities and emotional characteristics.H
planning method.H
human-machine interface—The location where data is
hybrid purchasing organization—A mix of the centralized
transferred from a worker to a computer, or vice-versa.H
and decentralized purchasing format—usually decentra-
human relations movement—A movement started in the lized at the corporate level and centralized at the busi-
early 1900s among managers who believed that em- ness unit level.H
ployees are humans who should be treated with respect
hybrid strategy—Syn: hybrid production method.H
in the workplace.H
hypermedia—An addition to hypertext to include sound,
human resources—The portion or department of a com-
pictures, or music.H
pany that sets personnel policies and practices.H
hypertext—A system of relating information without us-
human resource utilization—Using labor to its fullest po-
ing menus or hierarchies.H
tential to maximize product or service output.H
hypertext links—Links contained within text connecting
hundredweight (cwt)—One hundred pounds.H
to other websites or other pages on the current site.H
hurdle rate—The minimum acceptable rate of return on
hypertext markup language (HTML)—A language used to
a project.H
create web pages that permits the user to create text,
hybrid EDI—A situation in which only one trading partner hypertext links, and multimedia elements within the
is EDI-enabled, while the other continues to use paper page. HTML is not a programming language, but a way
and fax. Usually the EDI-enabled partner would have to format text.H
electronic documents converted to fax.H
hypertext transfer protocol (HTTP)—A protocol that tells
hybrid inventory system—An inventory system combining computers how to communicate with each other. Most
features of the fixed reorder quantity inventory model internet addresses begin with http://.H
and the fixed reorder cycle inventory model. Features of
hypothesis testing—Use of statistical models to test
the fixed reorder cycle inventory model and the fixed
conclusions about a population or universe based on
reorder quantity inventory model can be combined in
sample information.H
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 be-
fore the review date; if not, the order quantity is deter- I
mined at the next review date. Another hybrid inventory
ICC—Abbreviation for Interstate Commerce
system is the optional replenishment model. See: fixed
Commission.I
reorder cycle inventory model, fixed reorder quantity
ideal quality—A term used by Genichi Taguchi to refer to import/export license—Official authorization issued by a
the target value of a particular measure. Loss to society government allowing the shipping or delivery of a
increases with the square of the deviation of an actual product across national boundaries.I
product from this ideal point.I
import merchant—Purchasing agent who buys and takes
idle capacity—The available capacity that exists on non- the title for goods and then resells them.I
constraint resources beyond the capacity required to
imports—Products bought in one country and produced
incentive rate—In transportation, a discounted rate de- than once, under every subassembly in which it is
signed to convince a shipper to ship a higher volume in used.I
a particular load.I
indented tracking—The following of all lot numbers of
income—Syn: profit.I intermediates and ingredients consumed in the manu-
facture of a given batch of product down through all le-
income statement—A financial statement showing the vels of the formula.I
I
net income for a business over a given period of time.
See: balance sheet, funds flow statement.I indented where-used—A listing of every parent item, and
the respective quantities required, as well as each of
incoming business—The number of orders, the dollar their respective parent items, continuing until the ulti-
value of orders, or the quantity of units that have been mate end item or level-0 item is referenced. Each of
received on orders from customers. This volume is par- these parent items calls for a given component item in
ticularly important to the forecaster, who must compare a bill-of-material file. The component item is shown
incoming business against the forecast rather than closest to the left margin of the listing, with each parent
against actual shipments when actual shipments do not indented to the right, and each of their respective par-
reflect true customer demand. This situation may exist ents indented even further to the right.I
because of back-ordered items, bottlenecks in the ship-
independent action—In transportation, the publication
ping room, and so forth.I
of a freight rate that differs from that of the rate bureau
in-control process—A process in which the statistical to which the publisher is a member. This is a permitted
measure being evaluated is in a state of statistical con- action.I
trol (i.e., the variations among the observed sampling
independent demand—The demand for an item that is
results can be attributed to a constant system of
unrelated to the demand for other items. Demand for
chance causes). Ant: out-of-control process.I finished goods, parts required for destructive testing,
incoterms—Short for International Commercial Terms; and service parts requirements are examples of inde-
created to simplify international transactions.I pendent demand. See: dependent demand.I
incremental analysis—A method of economic analysis in independent demand item management models—
which the cost of a single additional unit is compared to Models for the management of items whose demand is
its revenue. When the net contribution of an additional not strongly influenced by other items managed by the
unit is zero, total contribution is maximized.I same company. These models can be characterized as
follows: (1) stochastic or deterministic, depending on
incremental available-to-promise—Syn: discrete the variability of demand and other factors; (2) fixed
available-to-promise.I quantity, fixed cycle, or hybrid (optional replenishment).
See: fixed reorder cycle inventory model, fixed reorder
incremental cost—1) Cost added in the process of fi-
quantity inventory model, optional replenishment
nishing an item or assembling a group of items. If the
model.I
cost of the components of a given assembly equals $5
and the additional cost of assembling the components independent float—In project management, the amount
is $1, the incremental assembly cost is $1, while the of float on an activity that does not affect float on pre-
total cost of the finished assembly is $6. 2) Additional ceding or succeeding activities. See: float, free float,
cost incurred as a result of a decision.I total float.I
incremental utilization heuristic—Using a worker’s full independent project—A project which, whether or not it
capacity by adding one task at a time (in priority order) is accepted, does not eliminate other projects from eli-
up to the maximum capacity, or waiting for the utiliza- gibility. See: contingent project, mutually exclusive
tion to fall and then adding more tasks.I project.I
independent trading exchange—A business-to-business
indented bill of material—A form of multilevel bill of ma-
marketplace ownership model. These are public sites
terial. It exhibits the highest-level parents closest to the
often used for indirect materials and commodity pur-
left margin, and all the components going into these
chases where the price is the primary factor and where
parents are shown indented toward the right. All subse-
any buyers and sellers for a particular market meet to
quent levels of components are indented farther to the
gain access to a wider market to find the best deals.
right. If a component is used in more than one parent
See: public marketplaces.I
within a given product structure, it will appear more
index—A value, expressed as a percentage, giving the industry—A set of companies providing a product or ser-
relationship of a measurement to a base value. A result vice where each company’s offering is a close substi-
of 100 would be average while numbers greater than tute for its competitors’ offerings.I
100 would be above average and those less than 100
industry analysis—A major study of an industry; its major
would be below average.I
competitors, customers, and suppliers; and the focus
indicator—An index of business activities.I and driving forces within that industry.I
to make information access more convenient and cohe- input—Work arriving at a work center or production
rent. See: data warehouse.I facility.I
information distribution—Making needed data available input control—Management of the release of work to a
to stakeholders in a timely manner.I work center or production facility.I
information flow profile—A graph of the performance of input/output analysis—Syn: input/output control.I
information flow compared to some set of performance
I
input/output control (I/O)—A technique for capacity
criteria.I control where planned and actual inputs and planned
information system—Interrelated computer hardware and actual outputs of a work center are monitored.
and software along with people and processes designed Planned inputs and outputs for each work center are
for the collection, processing, and dissemination of in- developed by capacity requirements planning and
formation for planning, decision making, and control.I approved by manufacturing management. Actual input
is compared to planned input to identify when work
information system architecture—A model of how the
center output might vary from the plan because work is
organization operates regarding information. The model
not available at the work center. Actual output is also
considers four factors: (1) organizational functions, (2)
compared to planned output to identify problems within
communication of coordination requirements, (3) data
the work center. Syn: input/output analysis. See:
modeling needs, and (4) management and control
capacity control.I
structures. The architecture of the information system
should be aligned with and match the architecture of input/output devices—Modems, terminals, or various
the organization.I pieces of equipment whose designed purpose relates to
manual, mechanical, electronic, visual, or audio entry to
information technology—The technology of computers, and from the computer’s processing unit.I
telecommunications, and other devices that integrate
data, equipment, personnel, and problem-solving me- input rate capacity—Measurement that takes rates of
thods in planning and controlling business activities. different inputs and transforms them into a common
Information technology provides the means for collect- unit to measure the input. See: capacity utilization.I
ing, storing, encoding, processing, analyzing, transmit- insourcing—Using the firm’s internal resources to pro-
ting, receiving, and printing text, audio, or video vide goods and services. See: make-or-buy decision.I
information.I
inspection—Measuring, examining, testing, or gauging
information visibility—How extensive information is one or more characteristics of a good or service and
shared throughout a firm and with other stakeholders.I comparing the results with specified requirements to
infrastructural elements—Elements of a strategy includ- determine whether conformity is achieved for each cha-
ing decision rules, policies, personnel guidelines, and racteristic.I
organizational structure.I inspection order—An authorization to an inspection de-
partment or group to perform an inspection operation.I
ingredient—In the process industries, the raw material
or component of a mixture. See: component.I inspection ticket—Frequently used as a synonym for an
inspection order; more properly a reporting of an in-
initial public offering (IPO)—A firm’s first sale of common
spection function performed.I
stock.I
instantaneous receipt—The receipt of an entire lot-size
innovation risk—The risk of losing customers because
quantity in a very short period of time.I
another firm creates more innovative products.I
Institute for Supply Management (ISM)—A nonprofit so-
innovative products—Products that tend to have a high
ciety for purchasing managers and others, formerly the
profit margin, be unique, have less competition, and
National Association of Purchasing Management
have dynamic demand.I
(NAPM).I
in-process inventory—Syn: work in process.I
Institute of Industrial Engineers (IIE)—A nonprofit educa-
in-process waiver requests—Requests for waivers on tional organization with members interested in the field
normal production procedures because of deviations in of industrial engineering.I
materials, equipment, or quality metrics, where normal
institutional market—A market in which most or all cus-
product specifications are maintained.I
tomers are one of the following: schools, hospitals, pris-
ons, and other institutions that provide products and interactive—A characteristic of those applications where
services to individuals who are under their care. See: a user communicates with a computer program via a
consumer market, government market, industrial terminal, entering data and receiving responses from
market.I the computer.I
I
intangible—One distinguishing feature of pure services.
time to the user is similar to the actual timing of the
Pure services cannot be inventoried or carried in stock
business or physical process. See: interactive system.I
for long periods of time.I
interactive customer care—A generic term for a variety
intangible costs—Those costs that are difficult to quanti-
of services provided over the internet. These services
fy such as the cost of poor quality or of high employee
include customer service and technical support.I
turnover.I
interactive scheduling—Computer scheduling where the
integrated carrier—A company that provides a variety of
process is either automatic or manually interrupted to
transportation services including ground, sea, air car-
allow the scheduler the opportunity to review and
riage, and freight forwarding.I
change the schedule.I
integrated change control—In project management, a
interactive system—Refers to those computer applica-
system under which any changes are coordinated
tions in which a user communicates with a computer
across the entire project.I
program via a system, entering data and receiving res-
integrated enterprise—A business or organization made ponses from the computer. See: interactive computer
up of individuals who have acquired the knowledge and system.I
skills to work with others to make the organization a
interarrival time—Time between the arrival of two se-
greater success than the sum of each individual’s out-
quential customers or events.I
put. Integration includes increased communication and
coordination between individuals and within and across interest—1) Financial share in a project or enterprise. 2)
teams, functions, processes, and organizations over Periodic compensation for lending money. 3) In an
time. See: cross-functional integration.I economy study, synonymous with required return, ex-
pected profit, or charge for the use of capital. 4) The
integrated internet marketing (I2M)—The use of internet
cost for the use of capital. Sometimes referred to as the
facilities to sell products, influence stakeholder atti-
time value of money.I
tudes, and improve the company’s image.I
interest rate—The ratio of the interest payment to the
integrated logistics—Syn: service response logistics.I
principal for a given unit of time. It is usually expressed
integrated logistics service providers—Organizations as a percentage of the principal.I
that provide one or many logistics services to a custom-
interleaving—Assigning multiple tasks to be performed
er for a fee.I
concurrently, often the assignment of multiple picking
integrated resource management (IRM)—Syn: resource orders to a single picker to pick concurrently.I
management.I
intermediately positioned warehouse—A warehouse lo-
integrated services digital network (ISDN)—Emerging cated between customers and manufacturing plants to
international standard for using public phone lines to provide increased customer service and reduced distri-
transmit voice and data over the same line.I bution cost.I
intermodal marketing companies (IMCs)—Organizations staff to execute procurement activities that add value to
that are the intermediary for shippers and intermodal the overall supply chain. Such tasks as local supplier
rail carriers.I development, contract negotiations, quality audits, and
best practice operations provide reduced dependence
intermodal transport—1) Shipments moved by different
on third parties and improve overall efficiency and
types of equipment combining the best features of each
costs.I
mode. 2) The use of two or more different carrier modes
in the through movement of a shipment.I
internal controls—The policies and procedures, the do-
cumentation, and the plan for an organization that au-
international standards—Standards established by in-
ternational standards-setting organizations to promote
interoperability among operating environments.I
I
thorize transactions, safeguard assets, and maintain internet—A worldwide network of computers belonging
the accuracy of financial records.I to businesses, governments, and universities that
internal customer—The recipient (person or department) enables users to share information in the form of files
of another person’s or department’s output (good, ser- and to send electronic messages and have access to a
vice, or information) within an organization. See: cus- tremendous store of information.I
tomer, external customer.I internet operations—Operations performed over the in-
internal environment—The chosen domain or scope of ternet encompassing such things as email, telnet, new-
activities within which an organization operates, for ex- sgroups, file transfer protocol, and the World Wide
ample, the tasks associated with goods or services to Web.I
be delivered by the organization. See: external environ- internet service provider (ISP)—A business or organiza-
ment, organizational environment.I tion that sells access to the internet and related servic-
internal failure costs—The cost of things that go wrong es to consumers. For a monthly fee, the service provider
before the product reaches the customer. Internal fail- offers a software package, username, password, and
ure costs usually include rework, scrap, downgrades, access to the internet (via various technologies such as
reinspection, retest, and process losses.I dial-up and DSL), which enables users to browse the
World Wide Web and USENET and send and receive
internal rate of return—The rate of compound interest at
email. The ISP may also provide a combination of ser-
which the company’s outstanding investment is repaid
vices, including internet transit, domain name registra-
by proceeds from the project.I
tion and hosting, web hosting, and colocation.I
internal setup time—The time associated with elements
of a setup procedure performed while the process or interoperation time—The time between the completion
machine is not running. Ant: external setup time.I of one operation and the start of the next.I
internal supply chain—A structure for sharing informa- interplant demand—One plant’s need for a part or prod-
tion within a firm and creating an atmosphere for coop- uct that is produced by another plant or division within
eration between functions to strengthen the firm.I the same organization. Although it is not a customer
order, it is usually handled by the master production
international company—Company that uses production scheduling system in a similar manner. See: interplant
sharing and sells its products in a different country.I transfer.I
international logistics—All functions concerned with the
interplant transfer—The shipment of a part or product by
movement of materials and finished goods on a global
one plant to another plant or division within the corpo-
scale.I
ration. See: interplant demand, transfer pricing.I
International Organization for Standardization (ISO)—
interpolation—The process of finding a value of a func-
Group of cooperating institutes from 155 countries
tion between two known values. Interpolation may be
working to develop and publish international standards.
performed numerically or graphically.I
It acts as a bridge between public and private sectors.I
interrelationship digraph—A technique used to define
international procurement office (IPO)—Establishes a
how factors relate to one another. Complex multivaria-
global presence for a company by providing localized
ble problems or desired outcomes can be displayed
supply management services in a region that is strateg-
with their interrelated factors. The logical and often
ically important. This management approach is a long-
causal relationships between the factors can be
term commitment that takes advantage of a region's
illustrated.I
language and cultural capabilities to use trusted local
interrogate—Retrieve information from computer files by inventory accounting—The branch of accounting dealing
use of predefined inquiries or unstructured queries with valuing inventory. Inventory may be recorded or va-
handled by a high-level retrieval language.I lued using either a perpetual or a periodic system. A
perpetual inventory record is updated frequently or in
interrupt—A break in the normal flow of a computer rou-
real time, while a periodic inventory record is counted or
tine such that the flow can be resumed from that point
measured at fixed time intervals (e.g., every two weeks
at a later time. An interrupt is usually caused by a signal
or monthly). Inventory valuation methods of LIFO, FIFO,
in-transit inventory—Material moving between two or inventory buffer—Inventory used to protect the through-
more locations, usually separated geographically; for put of an operation or the schedule against the negative
example, finished goods being shipped from a plant to a effects caused by delays in delivery, quality problems,
distribution center.I delivery of incorrect quantity, and so on. Syn: inventory
cushion. See: fluctuation inventory, safety stock.I
in-transit lead time—The time between the date of
shipment (at the shipping point) and the date of receipt inventory control—The activities and techniques of
(at the receiver’s dock). Orders normally specify the maintaining the desired levels of items, whether raw
date by which goods should be at the dock. materials, work in process, or finished products. Syn:
Consequently, this date should be offset by in-transit material control.I
lead time for establishing a ship date for the supplier.I inventory conversion period—The time period needed to
intrastate commerce—Moving people or materials be- produce and sell a product, measured from procure-
tween points within a single state.I ment of raw materials to the sale of the product.I
intrinsic forecast method—A forecast based on internal inventory costs—Costs associated with ordering and
factors, such as an average of past sales. Ant: extrinsic holding inventory. See: carrying costs, ordering cost.I
forecast.I
inventory cushion—Syn: inventory buffer.I
inventory—1) Those stocks or items used to support
inventory cycle—The length of time between two con-
production (raw materials and work-in-process items),
secutive replenishment shipments.I
supporting activities (maintenance, repair, and operat-
ing supplies), and customer service (finished goods and inventory diversion—The shipment of parts against a
spare parts). Demand for inventory may be dependent project or contract other than the original project or con-
or independent. Inventory functions are anticipation, tract for which the items were purchased.I
hedge, cycle (lot size), fluctuation (safety, buffer, or re- inventory drivers—Those conditions that would lead a
serve), transportation (pipeline), and service parts. 2) All company to hold inventory.I
the money currently tied up in the system. As used in
theory of constraints, inventory refers to the equipment, inventory effectiveness index—A system to identify non-
fixtures, buildings, and so forth that the system owns— value-adding inventory and make it visible and provide a
as well as inventory in the forms of raw materials, work- process to measure non-value adding inventory and sell
in-process, and finished goods.I or write it off to keep working capital in control.I
inventory investment—The dollars that are in all levels of inventory shrinkage—Losses of inventory resulting from
inventory.I scrap, deterioration, pilferage, and so forth.I
inventory issue—1) Items released from an inventory inventory tax—Tax based on the value of inventory on
location for use or sale. 2) The inventory record transac- hand at a particular time.I
tion reducing the inventory balance by the amount
inventory turnover—The number of times that an inven-
released.I
tory cycles, or “turns over,” during the year. A frequently
inventory management—The branch of business man-
agement concerned with planning and controlling
inventories.I
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
I
inventory optimization software—A computer application divided into an annual cost of sales of $21 million
having the capability of finding optimal inventory strate- means that inventory turned over seven times. Syn: in-
gies and policies related to customer service and return ventory turns, turnover. See: inventory velocity.I
on investment over several echelons of a supply chain.I inventory turns—Syn: inventory turnover.I
inventory ordering system—Inventory models for the rep- inventory usage—The value or the number of units of an
lenishment of inventory. Independent demand inventory inventory item consumed over a period of time.I
ordering models include but are not limited to fixed
inventory valuation—The value of the inventory at either
reorder cycle, fixed reorder quantity, optional reple-
its cost or its market value. Because inventory value
nishment, and hybrid models. Dependent demand in-
can change with time, some recognition is taken of the
ventory ordering models include material requirements
age distribution of inventory. Therefore, the cost value
planning, kanban, and drum-buffer-rope.I
of inventory is usually computed on a FIFO basis, LIFO
inventory planner—Syn: material planner (first basis, or a standard cost basis to establish the cost of
definition).I goods sold.I
inventory planning—The activities and techniques of de- inventory velocity—The speed with which inventory
termining the desired levels of items, whether raw ma- passes through an organization or supply chain at a
terials, work in process, or finished products including given point in time as measured by inventory turnover.
order quantities and safety stock levels. Syn: material See: inventory turnover.I
planning.I
inventory visibility—The extent to which inventory infor-
inventory policy—A statement of a company’s goals and mation is shared within a firm and with supply chain
approach to the management of inventories.I partners.I
inventory pooling—The act of holding inventory in a sin- inventory write-off—A deduction of inventory dollars from
gle location instead of multiple locations.I the financial statement because the inventory is of less
inventory receipt—An inventory record transaction that value. An inventory write-off may be necessary because
records the receipt or arrival of inventory into physical the value of the physical inventory is less than its book
stores by increasing the inventory on-hand balance by value or because the items in inventory are no longer
the received quantity. Often associated with receipt of a usable.I
purchase or production order quantity.I invitation for bid (IFB)—Syn: request for proposal.I
inventory record—A history of the inventory transactions invoice—A list of goods shipped by the supplier to the
of a specific material.I buyer stating prices, quantities, and other costs.I
inventory reserve—An accounting deduction from earn- involuntary services—Services that are not sought by
ings to fairly and reasonably represent the value of in- customers. These include hospitals and prisons.I
ventoried assets on a balance sheet. The inventory
reserve is used to make up for the fact that all inventory I/O—Abbreviation for input/output control.I
will not be sold at the cost to the firm.I IPO—1) Abbreviation for initial public offering. 2)
inventory returns—Items returned to the manufacturer Abbreviation for international procurement office.I
as defective, obsolete, overages, and so forth. An inven- IRM—Abbreviation for integrated resource
tory item record transaction records the return or re- management.I
ceipt into physical stores of materials from which the
irregular maintenance—Syn: breakdown maintenance.I
item may be scrapped.I
ISDN—Abbreviation for integrated services digital ISO 31000—A standard adopted by the International
network.I Standards Organization that outlines principles and a
set of guidelines to manage risk in any endeavor. The
Ishikawa diagram—Syn: cause-and-effect diagram.I
standard includes guidelines for understanding risk, de-
islands of automation—Stand-alone pockets of veloping a risk management policy, integrating risk
automation (e.g., robots, CAD/CAM systems, numerical management into organizational processes (including
control machines) that are not connected into a accountability and responsibility), and establishing in-
I cohesive system.I
ISO—Abbreviation for International Organization for
ternal and external risk communication processes. ISO
31000 is not a management system standard and is
Standardization.I not intended or appropriate for certification purposes or
regulatory or contractual use.I
ISO certification—In quality management, denotes that a
company has obtained an ISO9000 quality standard. ISO 26000—An international standard adopted by the
Also, it is the process by which a firm achieves such cer- International Standards Organization to assist organiza-
tification.I tions in contributing to sustainable development beyond
ISO 14000 Series Standards—A series of generic envi- legal compliance through a common understanding of
ronmental management standards developed by the social responsibility. ISO 26000 is not a management
International Organization of Standardization, which system standard and is not intended or appropriate for
provide structure and systems for managing environ- certification purposes or regulatory or contractual use.I
mental compliance with legislative and regulatory re-
ISP—An abbreviation for internet service provider.I
quirements and affect every aspect of a company’s
environmental operations.I I2M—Abbreviation for integrated internet marketing.I
isolation—The determination of the location of a failure issue—1) The physical movement of items from a stock-
through the use of accessory support and diagnostic ing location. See: disbursement. 2) Often, the transac-
equipment.I tion reporting of this activity.I
ISO 9000—A set of international standards on quality
issue cycle time—The time required to generate a requi-
management and quality assurance developed to help
sition for material, pull the material from an inventory
companies effectively document the quality system
location, and move it to its destination.I
elements to be implemented to maintain an efficient
quality system. The standards, initially published in item—Any unique manufactured or purchased part, ma-
1987, are not specific to any particular industry, terial, intermediate, subassembly, or product.I
product, or service. The standards were developed by
the International Organization for Standardization, item demand—Demand disaggregated into specific con-
known as ISO, a specialized international agency for figurations of goods or services. See: item.I
standardization composed of the national standards
item master file—A file containing all item master
bodies of 91 countries. The standards underwent major
records for a product, product line, plant, or company.
revision in 2008 and now include ISO 9000:2008
See: master file.I
(definitions), ISO 9001:2008 (requirements), and ISO
9004:2008 (continuous improvement). See: ISO/TS item master record—Syn: item record.I
16949, QS 9000.I
item number—A number that serves to uniquely identify
ISO 9000:2000—A certification process requiring a
an item. Syn: part number, product number, stock code,
third-party audit that defines in broad terms what must
stock number.I
be done to manage company quality and to document
these quality processes. It recently was updated by ISO item record—The “master” record for an item. Typically,
9000:2008.I it contains identifying and descriptive data and control
ISO/TS 16949—A standard written by the International values (lead times, lot sizes, etc.) and may contain data
Automotive Task Force that applies only to automotive on inventory status, requirements, planned orders, and
companies. It includes quality management system; costs. Item records are linked by bill of material records
management responsibility; resource management; (or product structure records), thus defining the bill of
product realization; and measurement, analysis, and material. Syn: item master record, part master record,
improvement. See: QS 9000.I part record.I
J dissatisfaction.J
job enrichment—An increase in the number of tasks that
Java—A general-purpose computer language created by an employee performs and an increase in the control
Sun Microsystems.J over those tasks. It is associated with the design of jobs
and especially the production worker’s job. Job enrich-
jidoka—The Japanese term for the practice of stopping
the production line when a defect occurs.J
jig—A device that holds a piece of work in a desired po-
ment is an extension of job enlargement.J
job grade—A form of job evaluation that assigns jobs to
predetermined job classifications according to the job’s
J
sition and guides the tool or tools that perform the ne-
relative worth to the organization. Pay scales are usually
cessary operations. See: fixture.J
set for each job grade.J
jishuken—A Japanese word meaning voluntary study
job lot—A specific quantity of a part or product that is
groups.J
produced at one time.J
JIT—Acronym for just in time.J
job order—Syn: manufacturing order.J
JIT master schedule—Syn: level schedule (second
job order costing—Syn: job costing.J
definition).J
JIT supplier environment—To effectively participate as a job progress chart—Syn: Gantt chart.J
supplier under just in time (JIT), a company must supply job rotation—The practice of an employee periodically
components and subassemblies in exact quantities, de- changing job responsibilities to provide a broader pers-
livery time, and quality. Shipments are made within nar- pective and a view of the organization as a total system,
row time windows that are rigidly enforced. Virtually to enhance motivation, and to provide cross-training.J
every component must be delivered on time and be
job sequencing rules—A set of priorities and conditions
within specifications.J
that specify the order in which jobs are processed be-
job—1) The combination of tasks, duties, and responsi- cause of scarce resources.J
bilities assigned to an individual employee and usually
job shop—1) An organization in which similar equipment
considered his or her work assignment. 2) The contents
is organized by function. Each job follows a distinct
of a work order.J
routing through the shop. 2) A type of manufacturing
job analysis—A process of gathering (by observation, process used to produce items to each customer’s spe-
interview, or recording systems) significant task- cifications. Production operations are designed to han-
oriented activities and requirements about work re- dle a wide range of product designs and are performed
quired of employees.J at fixed plant locations using general-purpose equip-
jobbing—Syn: job shop.J ment. Syn: jobbing. See: intermittent production, project
manufacturing.J
job costing—A cost accounting system in which costs
are assigned to specific jobs. This system can be used job shop layout—Syn: functional layout.J
with either actual or standard costs in the manufactur- job shop scheduling—The production planning and con-
ing of distinguishable units or lots of products. Syn: job trol techniques used to sequence and prioritize produc-
order costing.J tion quantities across operations in a job shop.J
job description—A formal statement of duties, qualifica- job status—A periodic report showing the plan for com-
tions, and responsibilities associated with a particular pleting a job (usually the requirements and completion
job.J date) and the progress of the job against that plan.J
job design—The function of describing a job with respect job ticket—Syn: time ticket.J
to its content and the methods to be used. Criteria,
joint order—An order on which several items are com-
such as the degree of job specialization, job enrich-
bined to obtain volume or transportation discounts.J
ment, and job enlargement are useful in designing work
content.J joint rate—A rate for a route involving two or more carri-
ers to move a shipment.J
job enlargement—An increase in the number of tasks
that an employee performs. Job enlargement is asso- joint replenishment—Coordinating the lot sizing and or-
ciated with the design of jobs, particularly production der release decision for related items and treating them
as a family of items. The objective is to achieve lower minating waste in machinery, labor, or production me-
costs because of ordering, setup, shipping, and quantity thods. See: continuous process improvement.K
discount economies. This term applies equally to joint
kaizen blitz®—A rapid improvement of a limited process
ordering (family contracts) and to composite part (group
area, for example, a production cell. Part of the im-
technology) fabrication scheduling. Syn: joint reple-
provement team consists of workers in that area. The
nishment system.J
objectives are to use innovative thinking to eliminate
kit—1) The components of a parent item that have been rate. The variance is unfavorable if the actual hours ex-
pulled from stock and readied for movement to a pro- ceed the standard hours. Syn: labor usage variance.L
duction area. 2) A group of repair parts to be shipped
labor grade—A classification of workers whose capability
with an order. Syn: kitted material, staged material.K
indicates their skill level or craft. See: skill-based com-
kitted material—Syn: kit.K pensation, skills inventories.L
kitting—The process of constructing and staging kits.K labor-intensive—When an operation has more expendi-
movement of specific items. See: average cost lead management tool—A tool used by sales personnel
systems.L that helps them follow a specified sales process to
close deals.L
late finish date (LF)—In the critical path method of
project management, the last date upon which a given lead time—1) A span of time required to perform a
activity can be completed without delaying the comple- process (or series of operations). 2) In a logistics con-
tion date of the project.L text, the time between recognition of the need for an
layoff—The process by which employees that are not lean—Syn: lean production.L
needed for some extended amount of time are given lean enterprise—A group of individuals, functions, and
notice that their services are not needed. Benefits may sometimes legally separate but operationally synchro-
or may not continue in a layoff.L nized organizations. The value stream defines the lean
layout—Physical arrangement of resources or centers of enterprise. The objectives of the lean enterprise are to
economic activity (machines, groups of people, worksta- correctly specify value to the ultimate customer, and to
tions, storage areas, aisles, etc.) within a facility. analyze and focus the value stream so that it does eve-
Layouts include product (linear or line), functional (job rything from product development and production to
shop or process), cellular, and fixed position.L sales and service in a way that actions that do not
create value are removed and actions that do create
LBO—Abbreviation for leveraged buyout.L value proceed in a continuous flow as pulled by the cus-
LCL—1) Abbreviation for less than carload (lot ship- tomer. Lean enterprise differs from a “virtual corpora-
ment). 2) Abbreviation for lower control limit.L tion” in which the organizational membership and
structure keeps changing.L
LDI—Abbreviation for logistics data interchange.L
lean manufacturing—Syn: lean production.L
lead capacity strategy—A capacity strategy in which, as
demand increases and is expected to increase, capacity lean metric—A metric that permits a balanced evalua-
is added prior to the realization of demand.L tion and response—quality without sacrificing quantity
objectives. The types of metrics are financial, behavior-
leading indicator—A specific business activity index that
al, and core-process performance.L
indicates future trends. For example, housing starts is a
leading indicator for the industry that supplies builders’ lean production—A philosophy of production that em-
hardware.L phasizes the minimization of the amount of all the re-
sources (including time) used in the various activities of
lead logistics providers (LLPs)—Organizations that over-
the enterprise. It involves identifying and eliminating
see the third-party logistics operations of their clients.L
non-value-adding activities in design, production, supply
chain management, and dealing with customers. Lean too expensive to replace. It often runs on antiquated
producers employ teams of multiskilled workers at all hardware.L
levels of the organization and use highly flexible, in-
legal environment—The governmental restrictions
creasingly automated machines to produce volumes of
placed on an organization regarding the goods and
products in potentially enormous variety. It contains a
services provided by the business, for example,
set of principles and practices to reduce cost through
environmental regulations, export/import restrictions,
the relentless removal of waste and through the simpli-
fication of all manufacturing and support processes.
Syn: lean, lean manufacturing.L
safety regulations, and mandated deregulations.L
lessee—An entity to which a lease is given.L L
learning curve—A curve reflecting the rate of improve- lessor—An entity which gives a lease.L
ment in time per piece as more units of an item are less-than-carload (LCL)—Either a small shipment that
made. A planning technique, the learning curve is par- does not fill the railcar or a shipment of not enough
ticularly useful in project-oriented industries in which weight to qualify for a carload quantity rate discount.L
new products are frequently phased in. The basis for
less-than-truckload (LTL)—Either a small shipment that
the learning curve calculation is that workers will be
does not fill the truck or a shipment of not enough
able to produce the product more quickly after they get
weight to qualify for a truckload quantity (usually set at
used to making it. Syn: experience curve, manufacturing
about 10,000 lbs.) rate discount, offered to a general
progress curve.L
commodity trucker.L
learning management system—A software system for
letter of credit—An assurance by a bank that payment
delivering and managing education and training within
will be made as long as the sales terms agreed to by the
an organization.L
buyer and seller are met. This method of payment for
learning organization—1) Group of people who have wo- sales contracts provides a high degree of protection for
ven a continuous, enhanced capacity to learn into the the seller.L
corporate culture. 2) An organization in which learning level—Every part or assembly in a product structure is
processes are analyzed, monitored, developed, and assigned a level code signifying the relative level in
aligned with competitive goals.L which that part or assembly is used within the product
lease—A rental agreement lasting an extended period.L structure. Often times the end items are assigned level
0 with the components and subassemblies going into it
least changeover cost—Determining the lowest cost of
assigned to level 1 and so on. The MRP explosion
making machine changeovers between jobs by se-
process starts from level 0 and proceeds downward one
quencing the jobs accordingly.L
level at a time.L
least-squares method—A method of curve fitting that level-demand strategy—A strategy of keeping capacity
selects a line of best fit through a plot of data to minim- level and not variable with demand.L
ize the sum of squares of the deviations of the given
points from the line. See: regression analysis.L leveling—Syn: resource leveling.L
level loading—Syn: load leveling.L
least total cost—A dynamic lot-sizing technique that cal-
culates the order quantity by comparing the setup (or level of effort—In project management, support activity
ordering) costs and the carrying cost for various lot siz- (e.g., customer liaison) that is not easily measured by
es and selects the lot size where these costs are most discrete accomplishment. It usually has a uniform work
nearly equal. See: discrete order quantity, dynamic lot rate.L
sizing.L
level of service—A measure (usually expressed as a per-
least unit cost—A dynamic lot-sizing technique that adds centage) of satisfying demand through inventory or by
ordering cost and inventory carrying cost for each trial the current production schedule in time to satisfy the
lot size and divides by the number of units in the lot customers’ requested delivery dates and quantities. In
size, picking the lot size with the lowest unit cost. See: a make-to-stock environment, level of service is some-
discrete order quantity, dynamic lot sizing.L times calculated as the percentage of orders picked
complete from stock upon receipt of the customer or-
leg—A portion of a complete trip.L
der, the percentage of line items picked complete, or
legacy systems—A computer application program that is the percentage of total dollar demand picked complete.
old and interfaces poorly with other applications but is In make-to-order and design-to-order environments, lev-
el of service is the percentage of times the customer- terial, and environmental inputs and outputs.
requested or acknowledged date was met by shipping Sometimes called cradle-to-grave analysis, LCA includes
complete product quantities. Syn: measure of service, raw material extraction through materials processing,
service level. See: cycle service level.L manufacture, distribution, use, repair and maintenance,
and disposal or recycling.L
level production method—A production planning method
that maintains a stable production rate while varying life cycle analysis—A quantitative forecasting technique
level schedule—1) In traditional management, a produc- life cycle costing—In evaluating alternatives, the consid-
tion schedule or master production schedule that gene- eration of all costs—including acquisition, operation,
rates material and labor requirements that are as and disposition costs—that will be incurred over the en-
evenly spread over time as possible. Finished goods in- tire time of product ownership.L
ventories buffer the production system against seasonal life testing—The simulation of a product’s life under con-
demand. See: level production method. 2) In JIT, a level trolled real-world conditions to see if it holds up and
schedule (usually constructed monthly) in which each performs as required.L
day’s customer demand is scheduled to be built on the
LIFO—Acronym for last in, first out.L
day it will be shipped. A level schedule is the output of
the load-leveling process. Syn: JIT master schedule, lev- lighter—A short-haul flat-bottomed barge.L
el production schedule. See: load leveling.L
lightless plant—Syn: dark factory.L
level strategy—Syn: level production method.L
LIMIT—Acronym for lot-size inventory management in-
leverage-capital structure ratio—An indicator of whether terpolation technique.L
or not a company has the ability to retire its long-term
limited access—Securing inventory, usually in a locked
debts.L
environment, to protect it from theft and to help im-
leveraged buyout (LBO)—A takeover of a company using prove inventory count accuracy.L
borrowed funds where assets of the acquired company
limited liability company—In the United States, a busi-
are used as partial collateral for the loan.L
ness organization that, as with a corporation, enjoys li-
leveraging purchase volume—Buying in large quantities mited liability yet is not a taxable entity.L
to take advantage of volume price or shipping
limited life material—Material having a finite shelf life.L
discounts.L
LF—Abbreviation for late finish date.L limited partnership—A partnership having two types of
partners: (1) limited partners contribute assets to the
liabilities—An accounting/financial term (balance sheet company without participating in management and (2)
classification of accounts) representing debts or general partners manage the company and are respon-
obligations owed by a company to creditors. Liabilities sible for all debts.L
may have a short-term time horizon, such as accounts
payable, or a longer-term obligation, such as mortgage limiting operation—The operation with the least capacity
payable or bonds payable. See: assets, balance sheet, in a series of operations with no alternative routings.
debt, owner’s equity.L The capacity of the total system can be no greater than
the limiting operation, and as long as this limiting condi-
licensing—Paying a fee for permission to manufacture tion exists, the total system can be effectively sche-
and sell a product created by another.L duled by scheduling the limiting operation and providing
life cycle analogy method—A method for forecasting the this operation with proper buffers. See: protective ca-
life cycle of a new product or service, including the in- pacity, protective inventory.L
troduction, growth, maturity, and decline phases. In ad-
line—1) A specific physical space for the manufacture of
dition to time frames, this qualitative technique tries to
a product that in a flow shop layout is represented by a
estimate demand levels.L
straight line. In actuality, this may be a series of pieces
life cycle assessment (LCA)—Understanding the human of equipment connected by piping or conveyor systems.
and environmental aspects and impacts during the life 2) A type of manufacturing process used to produce a
of a product, process, or service, including energy, ma- narrow range of standard items with identical or highly
similar designs. Production volumes are high, produc- work through that assembly line at the planned line
tion and material handling equipment is specialized, rate.L
and all products typically pass through the same se-
line efficiency—A measure of actual work content versus
quence of operations. See: assembly line.L
cycle time of the limiting operation in a production line.
linear decision rules—A modeling technique using simul- Line efficiency (percentage) is equal to the sum of all
taneous equations (e.g., the establishment of aggregate station task times divided by the longest task time mul-
workforce levels) based upon minimizing the total cost
of hiring, firing, holding inventory, backorders, payroll,
overtime, and undertime.L
tiplied by the number of stations. In an assembly line
layout, the line efficiency is 100 percent minus the bal-
ance delay percentage.L
L
linearity—1) Production at a constant quantity. 2) Use of line functions—Areas involved in daily operations.
resources at a level rate, typically measured daily or Logistics line functions include inventory control, order
more frequently.L processing, warehousing and packaging.L
linear layout—A layout of various machines in one line haul costs—Basic costs of carrier operation to move
straight line. This type of layout makes it difficult to real- a container of freight, including driver's wages and
locate operations among workers and machinery.L usage depreciation. These vary with the cost per mile,
the distance shipped, and the weight moved.L
linear production—Actual production to a level schedule,
so that a plotting of actual output versus planned out- line item—One item on an order, regardless of quantity.L
put forms a straight line, even when plotted for a short line loading—The loading of a production line by multip-
segment of time.L lying the total pieces by the rate per piece for each item
linear programming—Mathematical models for solving to come up with a finished schedule for the line.L
linear optimization problems through minimization or line manager—A manager involved in managing a de-
maximization of a linear function subject to linear con- partment that is directly involved in making a product.L
straints. For example, in blending gasoline and other
petroleum products, many intermediate distillates may line manufacturing—Repetitive manufacturing per-
be available. Prices and octane ratings as well as upper formed by specialized equipment in a fixed sequence.L
limits on capacities of input materials that can be used line scrap—The worth of work in process and raw mate-
to produce various grades of fuel are given. The prob- rials scrapped because of faulty processing as a per-
lem is to blend the various inputs in such a way that (1) centage of the total value of production at standard
cost will be minimized (profit will be maximized), (2) cost.L
specified optimum octane ratings will be met, and (3)
the need for additional storage capacity will be line of balance planning—A project planning technique
avoided.L using a lead-time offset chart and a chart of required
final assembly completions to graph a third bar chart
linear regression—A statistical data technique that ex- showing the number of each component that should be
presses a variable as a linear function of an indepen- completed to date. This bar chart forms a descending
dent variable. Linear regression can be used to develop line, and aggregate component completions are then
forecasting models.L plotted against this line of balance. This is a crude form
of material planning.L
linear trend forecasting—Using simple linear regression
to estimate future trends.L line of credit—A contract that enables a company to bor-
row funds at any time up to a predetermined limit.L
line balancing—1) The balancing of the assignment of
the tasks to workstations in a manner that minimizes link—The transportation method used in a logistics sys-
the number of workstations and minimizes the total tem to connect the nodes of the system.L
amount of idle time at all stations for a given output
liquidity—The ability of a firm to pay debts as they come
level. In balancing these tasks, the specified time re-
due.L
quirement per unit of product for each task and its se-
quential relationship with the other tasks must be liquidity ratio—Financial ratios that are indicators of a
considered. See: uniform plant loading. 2) A technique firm’s ability to retire short-term financial obligations.L
for determining the product mix that can be run down
listserv—Syn: listserver.L
an assembly line to provide a fairly consistent flow of
list server—Software running on a web-accessed com- sure that when the record shows an item’s location, it
puter that facilitates electronic discussions by emailing is, in fact, in that location.L
submissions from one member to all other members of
location grid—A layout of a warehouse used to improve
the discussion group. Syn: listserv.L
inventory management and cycle counting.L
live load—Syn: available work.L
location tag—A bar-coded sign situated at a warehouse
load—The amount of planned work scheduled for and location. The location number can be read or scanned.L
log normal distribution—A continuous probability distri- lot-for-lot—A lot-sizing technique that generates planned
bution where the logarithms of the variable are normally orders in quantities equal to the net requirements in
distributed.L each period. See: discrete order quantity.L
longest-task-time (LTT) heuristic—The method of attach- lot number—A unique identification assigned to a ho-
ing additional jobs to a workstation based on priority mogeneous quantity of material. Syn: batch number,
order, with the longest task scheduled first.L mix number.L
long-term planning—Business planning that addresses
the strategic needs of the organization. See: business
lot number control—Assignment of unique numbers to
each instance of receipt and carrying forth that number L
plan, resource planning.L into subsequent manufacturing processes so that, in
long-term production plan—Syn: aggregate production review of an end item, each lot consumed from raw ma-
plan.L terials through end item can be identified as having
been used for the manufacture of this specific end item
long ton—Two thousand two hundred and forty pounds.L lot.L
loose standard—A standard time greater than that re- lot number traceability—Tracking parts by lot numbers
quired by a qualified worker with normal skill and to a group of items. This tracking can assist in tracing
effort.L quality problems to their source. A lot number identifies
loss leader pricing—Pricing some products below cost to a designated group of related items manufactured in a
attract customers into the store, in the expectation that single run or received from a vendor in a single
they will buy other items as well.L shipment.L
loss to society—According to Genichi Taguchi, a loss to lot operation cycle time—The length of time required
society occurs whenever a dimension of a product dif- from the start of setup to the end of cleanup for a pro-
fers from its target value. This loss increases with the duction lot at a given operation, including setup, pro-
square of the deviation from the target. According to duction, and cleanup.L
this concept, a loss to society occurs even though a di- lot size—The amount of a particular item that is ordered
mension is within tolerance—as long as the dimension from the plant or a supplier or issued as a standard
is not exactly on the target. For example, a loss to socie- quantity to the production process. Syn: order quantity.L
ty might occur because an assembly made of compo-
nents that are within specification, but not exactly on lot-size code—A code that indicates the lot-sizing tech-
target, wears out faster than an assembly comprised of nique selected for a given item. Syn: order policy code.L
components that are all exactly on the target.L lot-size inventory—Inventory that results whenever
lost sale—A potential sale that was not completed, quantity price discounts, shipping costs, setup costs, or
usually due to lack of availability of the item in similar considerations make it more economical to pur-
question.L chase or produce in larger lots than are needed for im-
mediate purposes.L
lost time factor—The complement of utilization, that is
one minus the utilization factor. It is the percentage of lot-size inventory management interpolation technique
time lost to machine, tool, and worker unavailability. It (LIMIT)—A technique for looking at the lot sizes for
can be calculated as the planned hours minus actual groups of similar products to determine the effect eco-
hours used, divided by the planned hours. See: balance nomic lot sizes will have on the total inventory, total se-
delay, utilization.L tup costs, and machine availability.L
lot—A quantity produced together and sharing the same lot-size system—Syn: fixed reorder quantity inventory
production costs and specifications. See: batch.L model.L
lot control—A set of procedures (e.g., assigning unique lot sizing—The process of, or techniques used in, deter-
batch numbers and tracking each batch) used to main- mining lot size. See: order policy.L
tain lot integrity from raw materials, from the supplier
lot splitting—Dividing a lot into two or more sublots and
through manufacturing to consumers.L
simultaneously processing each sublot on identical (or
lot cost—In cost accounting, those costs associated with very similar) facilities as separate lots, usually to com-
processing a common lot or quantity of parts having the press lead time or to expedite a small quantity. Syn: op-
same specifications.L eration splitting.L
lot tolerance percent defective (LTPD)—Expressed in machine breakdown, maintenance, teardown, setup,
percent defective, the poorest quality in an individual lot and other factors.M
that should be accepted. Note: The LTPD is used as a
machine flexibility—In work-cell design, choosing be-
basis for some inspection systems and is commonly as-
tween general-purpose machinery versus special-
sociated with a value for a small consumer’s risk.L
purpose machinery, so that the lowest cost and most
lot traceability—The ability to identify the lot or batch adaptability is achieved.M
maintenance, repair, and operating (MRO) supplies— management—The functions of planning, organizing,
Items used in support of general operations and main- and controlling the transformation process and its utility
tenance such as maintenance supplies, spare parts, in providing a good or service to customers.M
and consumables used in the manufacturing process
management by objectives (MBO)—A participative goal-
and supporting operations.M
setting process that enables the manager or supervisor
maintenance, repair, and overhaul (MRO)—An item for to construct and communicate the goals of the depart-
reprocessing in the remanufacturing industry.M
planners or other authorized persons. Syn: planner in- external environmental forces; corporate strategy;
tervention. Ant: automatic rescheduling.M business unit strategy; other functional strategies
(marketing, engineering, finance, etc.); product
manufacturability—A measure of the design of a product
selection; product/process design; product/process
or process in terms of its ability to be produced easily,
technology; and management competencies. Often
consistently, and with high quality.M
refers to whether a company, plant, product, or service
manufacturer’s agent—Syn: manufacturer’s is make-to-stock, make-to-order, or assemble-to-order.
M representative.M
manufacturer’s representative—One who sells goods for
Syn: production environment.M
job order, manufacturing authorization, production or- ing company. Ideally, it addresses operational planning
der, production release, run order, shop order, work or- in units, financial planning in dollars, and has a simula-
der. See: assembly parts list, batch card, blend order, tion capability to answer what-if questions. It is made up
fabrication order, mix ticket, work order.M of a variety of processes, each linked together: business
planning, production planning (sales and operations
manufacturing order reporting—Syn: production report-
planning), master production scheduling, material re-
ing and status control.M
quirements planning, capacity requirements planning,
manufacturing philosophy—The set of guiding principles,
driving forces, and ingrained attitudes that helps com-
and the execution support systems for capacity and ma-
terial. Output from these systems is integrated with fi-
M
municate goals, plans, and policies to all employees nancial reports such as the business plan, purchase
and that is reinforced through conscious and subcons- commitment report, shipping budget, and inventory pro-
cious behavior within the manufacturing organization.M jections in dollars. Manufacturing resource planning is a
direct outgrowth and extension of closed-loop MRP.M
manufacturing planning and control system (MPC)—A
closed-loop information system that includes the plan-
manufacturing strategy—A collective pattern of deci-
ning functions of production planning (sales and opera- sions that acts upon the formulation and deployment of
tions planning), master production scheduling, material
manufacturing resources. To be most effective, the
requirements planning, and capacity requirements
manufacturing strategy should act in support of the
planning. Once the plan has been accepted as realistic, overall strategic direction of the business and provide
execution begins. The execution functions include input-
for competitive advantages (edges).M
output control, detailed scheduling, dispatching, antic-
ipated delay reports (department and supplier), and manufacturing volume strategy—An element of manu-
supplier scheduling. A closed-loop MRP system is one facturing strategy that includes a series of assumptions
example of a manufacturing planning and control and predictions about long-term market, technology,
system.M and competitive behavior in the following areas: (1) the
manufacturing process—The series of operations per- predicted growth and variability of demand, (2) the
formed upon material to convert it from the raw materi- costs of building and operating different sized plants,
al or a semifinished state to a state of further (3) the rate and direction of technological improvement,
completion. Manufacturing processes can be arranged (4) the likely behavior of competitors, and (5) the antic-
in a process layout, product layout, cellular layout, or ipated impact of international competitors, markets,
fixed-position layout. Manufacturing processes can be and sources of supply. It is the sequence of specific vo-
planned to support make-to-stock, make-to-order, lume decisions over time that determines an organiza-
assemble-to-order, and so forth, based on the strategic tion’s long-term manufacturing volume strategy.M
use and placement of inventories. See: production
many-to-many communication—Communication that
process, transformation process.M
enables many people to exchange information with
manufacturing process development—The definition many other people.M
and implementation of an execution system for making
a part, good, or service that is consistent with the objec- MAP—Acronym for manufacturing automation
tives of the firm.M protocol.M
manufacturing progress curve—Syn: learning curve.M MAPE—Abbreviation for mean absolute percent error.M
manufacturing ramp-up—The final phase of new product MAPI method—1) A procedure for equipment replace-
and process development, whereby the new product ment analysis sponsored by the Machinery and Allied
moves from pilot production to full-scale Products Institute. 2) A method of capital investment
manufacturing.M analysis that has been formulated by the Machinery and
manufacturing release—The issuance of a manufactur- Allied Products Institute. This method uses a fixed for-
ing order into the factory.M mat and provides charts and graphs to facilitate calcu-
lations. A prominent feature of this method is that it
manufacturing representative—Syn: manufacturer’s rep- explicitly includes obsolescence.M
resentative.M
mapping—Drawing the organization’s processes or rela-
manufacturing resource planning (MRP II)—A method for
tionships that form a business process.M
the effective planning of all resources of a manufactur-
margin—A ratio of an organization’s operating profit to marketing channel—That set of organizations through
revenues, measuring management’s ability to control which a good or service passes in going from a raw
operating expenses.M state to the final consumer. See: channels of distribu-
tion, distribution channel.M
marginal analysis—A decision rule that optimality occurs
where incremental revenue equals incremental cost.M marketing cost analysis—The study and evaluation of
marginal cost—The incremental costs incurred when the the relative profitability or costs of different marketing
marginal pricing—Pricing products at a markup over the marketing mix—The concept that marketing strategy se-
marginal cost of producing the next item. Marginal costs lects product, price, promotion, and channel targets in
generally include the variable cost of producing and sell- selected markets.M
ing an additional item.M
marketing research—The systematic gathering, record-
marginal product—In economics, the additional quantity ing, and analyzing of data about problems relating to
of total output following from a one-unit increase in va- the marketing of goods and services. Such research
riable input. See: law of diminishing marginal returns.M may be undertaken by impartial agencies or by busi-
marginal revenue—The incremental sales dollars re- ness firms or their agents. Marketing research includes
ceived when the level of output of some operation is several types: (1) market analysis (product potential is a
increased by one unit.M type) is the study of the size, location, nature, and cha-
racteristics of markets, (2) sales analysis (or research)
marginal utility—The additional usefulness and enjoy-
is the systematic study and comparison of sales (or
ment received from consuming one more unit of a good
consumption) data, (3) consumer research (motivation
or service.M
research is a type) is concerned with the discovery and
market—A set of buyers and sellers exchanging prod- analysis of consumer attitudes, reactions, and prefe-
ucts. Prices tend to equalize through ongoing ex- rences. Syn: market research.M
changes between buyers and sellers. Markets include
marketing strategy—The basic plan marketing expects
institutional markets, government markets, industrial
to use to achieve its business and marketing objectives
markets, and consumer markets. See: consumer mar-
in a particular market. This plan includes marketing ex-
ket, government market, industrial market, institutional
penditures, marketing mix, and marketing allocation.M
market.M
market boundary—The boundary where the laid-down market penetration—The degree to which a product has
cost for two companies is equal. Laid-down cost is been accepted by the marketplace. Syn: market
product cost plus unit transportation cost.M reach.M
market demand—In marketing, the total demand that market plan—The output of the market planning
would exist within a defined customer group in a given process. The market plan includes the current market
geographical area during a particular time period given position, opportunity and issue analysis, marketing ob-
a known marketing program.M jectives and strategies, action plans, programs,
projects, budgets, and pro forma profit and loss state-
market dominance—When a firm has very little
ment and management controls. Syn: brand plan, prod-
competition.M
uct plan.M
market driven—Responding to customers’ needs.M
market planning—The process of developing market
market hedge—Scheduling or holding an inventory plans for products and services. This process is com-
quantity greater than the expected demand because of posed of the following phases—identification; research
expected inaccuracy or volatility in the forecasted de- and analysis of market opportunities; selection of target
mand. See: hedge.M markets; development of marketing strategies; devel-
marketing—The design, pricing, promotion, and distribu- opment of the marketing plans, programs, and projects;
tion of goods to create transactions with businesses and management, execution, and control of the market
and consumers.M plans, programs, and projects.M
market-positioned strategy—A location strategy that fo- vice characteristics, and many other options when PCs
cuses on the customer by placing warehouses closer to are assembled on one line and at low cost.M
the customer. See: product-positioned strategy.M
mass marketing—The strategy of sending the same
market-positioned warehouse—Warehouse positioned message to all potential customers.M
to replenish customer inventory assortments and to af- mass production—High-quantity production characte-
ford maximum inbound transport consolidation econo- rized by specialization of equipment and labor. See:
mies from inventory origin points with relatively short-
haul local delivery.M
continuous production.M
master black belt—In six sigma, quality expert capable
M
market reach—Syn: market penetration.M of implementing strategic quality efforts including
market research—Syn: marketing research.M teaching other facilitators (black belts) the quality appli-
cations within all levels of the organization.M
market segment—A group of potential customers shar-
master budget—The document that consolidates all
ing some measurable characteristics based on demo-
other budgets of an organization into an overall plan,
graphics, psychographics, lifestyle, geography, benefits,
including the projection of a cash flow statement and an
and so forth.M
operating statement for the budget period as well as a
market segmentation—A marketing strategy in which balance sheet for the end of the budget period. Syn:
the total market is disaggregated into submarkets, or static budget.M
segments, that share some measurable characteristic
master file—A main reference file of information, such
based on demographics, psychographics, lifestyle, geo-
as the item master file or work center file. See: detail
graphy, benefits, and so forth.M
file, item master file.M
market share—The actual portion of current market de- master pack—A large, protective box used to contain
mand that a company or product achieves.M smaller boxes. This reduces materials handling
market strategy—The marketing plan to support the activities.M
business strategy.M master planning—A group of business processes that
market surveys—Questionnaires designed to get feed- includes the following activities: demand management
back from potential customers about demand for a (which includes forecasting and order servicing); pro-
product or service.M duction and resource planning; and master scheduling
(which includes the master schedule and the rough-cut
market targeting—The process of developing measure- capacity plan).M
ments of the desirability of given market segments and
master planning of resources—A grouping of business
deciding in which market segments to compete.M
processes that includes the following activities: demand
market value-added—In financial management, the sur- management, which includes the forecasting of sales,
plus of a firm’s equity over the capital that has been in- the planning of distribution, and the servicing of cus-
vested in the firm.M tomer orders; sales and operations planning, which in-
cludes sales planning, production planning, inventory
marks and numbers—Identifying agents placed on
planning, backlog planning, and resource planning;
products or containers used to identify a shipment or its
master scheduling, which includes the preparation of
parts.M
the master production schedule and the rough-cut ca-
marquis partners—Key strategic relationships. By part- pacity plan.M
nering with big players, via equity offerings if necessary,
master production schedule (MPS)—The master produc-
a company creates barriers to entry into supply chain
tion schedule is a line on the master schedule grid that
relationships for competitors.M
reflects the anticipated build schedule for those items
mass customization—The creation of a high-volume assigned to the master scheduler. The master schedu-
product with large variety so that a customer may speci- ler maintains this schedule, and in turn, it becomes a
fy an exact model out of a large volume of possible end set of planning numbers that drives material require-
items while manufacturing cost is low due to large vo- ments planning. It represents what the company plans
lume. An example is a personal computer order in which to produce expressed in specific configurations, quanti-
the customer may specify processor speed, memory ties, and dates. The master production schedule is not
size, hard disk size and speed, removable storage de- a sales item forecast that represents a statement of
demand. The master production schedule must take material class—A means to describe a grouping of mate-
into account the forecast, the production plan, and oth- rials with similar characteristics for planning and sche-
er important considerations such as backlog, availability duling purposes.M
of material, availability of capacity, and management
material constraint—Usually a misnomer. Material
policies and goals. See: master schedule.M
shortages are rarely the constraint, rather temporary
master route sheet—The authoritative route process material shortages hinder effective constraint
master schedule—The master schedule is a format that material control—Syn: inventory control.M
includes time periods (dates), the forecast, customer material definition—A definition of the properties and
orders, projected available balance, available-to- characteristics of a substance. material-dominated
promise, and the master production schedule. The mas- scheduling (MDS)—A technique that schedules mate-
ter schedule takes into account the forecast; the pro- rials before processors (equipment or capacity). This
duction plan; and other important considerations such technique facilitates the efficient use of materials. MDS
as backlog, availability of material, availability of capaci- can be used to schedule each stage in a process flow
ty, and management policies and goals. See: master scheduling system. MRP systems use material-
production schedule.M dominated scheduling logic. See: processor-dominated
master schedule item—A part number selected to be scheduling.M
planned by the master scheduler. The item is deemed material-dominated scheduling (MDS)—A technique that
critical in its impact on lower level components or re- schedules materials before processors (equipment or
sources such as skilled labor, key machines, or dollars. capacity). This technique facilitates the efficient use of
Therefore, the master scheduler, not the computer, materials. MDS can be used to schedule each stage in
maintains the plan for these items. A master schedule a process flow scheduling system. MRP systems use
item may be an end item, a component, a pseudo num- material-dominated scheduling logic. See: processor-
ber, or a planning bill of material.M dominated scheduling.M
master scheduler—Often the job title of the person material flexibility—The ability of the transformation
charged with the responsibility of managing, establish- process to handle unexpected variations in material
ing, reviewing, and maintaining a master schedule for inputs.M
select items. Ideally, the person should have substantial
product, plant, process, and market knowledge because material index—The total of raw material weights di-
the consequences of this individual’s actions often have vided by final product weight.M
a great impact on customer service, material, and ca- material list—Syn: picking list.M
pacity planning. See: master production schedule.M
material lot—A uniquely identifiable amount of a materi-
master scheduling—The process where the master al. This describes the actual quantity or amount of ma-
schedule is generated and reviewed and adjustments terial available, its current state, and its specific
made to the master production schedule to ensure con- property values.M
sistency with the production plan. The master produc-
material planner—1) The person normally responsible
tion schedule (the line on the grid) is the primary input
for managing the inventory levels, schedules, and avail-
to the material requirements plan. The sum of the mas-
ability of selected items, either manufactured or pur-
ter production schedules for the items within the prod-
chased. Syn: inventory planner. 2) In an MRP system,
uct family must equal the production plan for that
the person responsible for reviewing and acting on or-
family.M
der release, action, and exception messages from the
match capacity strategy—A capacity strategy that strikes system. Syn: parts planner, planner.M
a balance between the lead and lag capacity strategies
material planning—Syn: inventory planning.M
by adding capacity at approximately the rate of actual
demand increase.M material receipt inspection—The receiving department
compares the incoming material to the purchase order
material analyst—The person assigned responsibility for
to verify that the correct material and quantity have
and identification of the planning requirements for spe-
been received. The material is then inspected for quality
cific items and responsibility for each order.M
and general condition. A material receipt report is pre-
pared and copies are distributed to the appropriate de- cost and is balanced against the operating costs of the
partments such as purchasing and accounting.M facility.M
material release—The introduction of parts into a pro- materials handling system—The system of transporta-
duction process.M tion that receives, moves, and delivers materials during
the production or distribution process.M
material requirements plan—The result from the
process of material requirements planning.M materials handling time—The time necessary to move
material requirements planning (MRP)—A set of tech-
niques that uses bill of material data, inventory data,
materials from one work center to the next work center.
This time includes waiting for the materials handling M
and the master production schedule to calculate re- equipment and actual movement time.M
quirements for materials. It makes recommendations to materials management—The grouping of management
release replenishment orders for material. Further, be- functions supporting the complete cycle of material
cause it is time-phased, it makes recommendations to flow, from the purchase and internal control of produc-
reschedule open orders when due dates and need tion materials to the planning and control of work in
dates are not in phase. Time-phased MRP begins with process to the warehousing, shipping, and distribution
the items listed on the MPS and determines (1) the of the finished product.M
quantity of all components and materials required to
material specification—An explanation of the characte-
fabricate those items and (2) the date that the compo-
ristics of material to be produced or purchased.M
nents and material are required. Time-phased MRP is
accomplished by exploding the bill of material, adjusting materials requisition—1) An authorization that identifies
for inventory quantities on hand or on order, and offset- the items and quantities to be withdrawn from invento-
ting the net requirements by the appropriate lead ry. 2) An authorization that identifies the items and
times.M quantities to be included in a purchase order. Syn: pro-
duction materials requisition.M
material requisition—This is the first step to placing a
replenishment order; initiated by the material user.M materials system—Connecting material flows contained
in a production system.M
material review board (MRB)—An organization within a
company, often a standing committee, that determines material sublot—A uniquely identifiable subset of a ma-
the resolution or disposition of items that have ques- terial lot containing quantity and location. A sublot may
tionable quality or other attributes.M be a single item.M
materials—The components that are processed by an material usage variance—The difference between the
operation.M planned or standard requirements for materials to pro-
material safety data sheet (MSDS)—A document that is duce a given item and the actual quantity used for a
part of the materials information system and accompa- particular instance of manufacture.M
nies the product. Prepared by the manufacturer, the material yield—Syn: yield.M
MSDS provides information regarding the safety and
materiel—A term, used more frequently in nonmanufac-
chemical properties and (if necessary) the long-term
turing organizations, to refer to the equipment, appara-
storage, handling, and disposal of the product. Among
tus, and supplies used by an organization.M
other factors, the MSDS describes the hazardous com-
ponents of a product; how to treat leaks, spills, and mathematical programming—The general problem of
fires; and how to treat improper human contact with the optimizing a function of several variables subject to a
product.M number of constraints. If the function and constraints
are linear in the variables and a subset of the con-
materials efficiency—A concept that addresses the effi-
straints restricts the variables to be nonnegative, a li-
ciency with which materials are obtained, converted,
near programming problem exists.M
and shipped in the overall purchasing, production, and
distribution process. It can be considered as a compa- matrix—A mathematical array having one, two, and
nion concept to labor efficiency, and it is potentially sometimes more dimensions, into which collections of
more significant as the materials portion of cost of data may be stored and processed.M
goods sold continues to grow.M
matrix bill of material—A chart made up from the bills of
materials handling—Movement and storage of goods material for a number of products in the same or similar
inside the distribution center. This represents a capital families. It is arranged in a matrix with components in
columns and parents in rows (or vice versa) so that re- mean absolute deviation (MAD)—The average of the ab-
quirements for common components can be summa- solute values of the deviations of observed values from
rized conveniently.M some expected value. MAD can be calculated based on
observations and the arithmetic mean of those observa-
matrix diagram—A graphical technique used to analyze
tions. An alternative is to calculate absolute deviations
the relationship between two related groups of ideas.M
of actual sales data minus forecast data. These data
matrix organizational structure—An organizational struc- can be averaged in the usual arithmetic way or with ex-
functional forms of organization could be implemented mean absolute percent error (MAPE)—A measure of sta-
simultaneously, that is, the product and functional tistical variation in a forecast. Computed by dividing
managers have equal authority and employees report to each absolute forecast error by the actual demand,
both managers.M multiplying that by 100 to get the absolute percentage
error, and computing the average.M
maverick spending—A term used when employees or
managers purchase from nonqualified suppliers, by- mean squared error (MSE)—A measure of statistical var-
passing established purchasing procedures.M iation in a forecast. Computed by squaring the forecast
errors and then taking the average of the sum of the
maximum allowable cost—In service organizations, the squared errors.M
limit of reimbursement allowed by an agency for the
cost of a supply item.M mean time between failures (MTBF)—The average time
interval between failures for repairable product for a
maximum demonstrated capacity—The highest amount defined unit of measure (e.g., operating hours, cycles,
of actual output produced in the past when all efforts miles). See: reliability.M
have been made to optimize the resource; for instance,
overtime, additional personnel, extra hours, extra shifts, mean time for failures (MTFF)—Average time for failure
reassignment of personnel, or use of any related of a nonrepairable product (expected life) or average
equipment. Maximum demonstrated capacity is the time to first failure of a repairable product. See:
most one could ever expect to produce in a short period reliability.M
of time but represents a rate that cannot be maintained mean time to repair (MTTR)—The average time that it
over a long period of time. See: demonstrated takes to repair a product.M
capacity.M
measurement ton—A measurement equivalent to 40
maximum inventory—The planned maximum allowable cubic feet. It is a factor in water transportation rate-
inventory for an item based on its planned lot size and setting.M
target safety stock.M
measure of service—Syn: level of service.M
maximum order quantity—An order quantity modifier,
applied after the lot size has been calculated, that limits measure phase—A phase in the six sigma design-
the order quantity to a pre-established maximum.M measure-analyze-improve-control process during which
current performance is evaluated. See: design-measure-
MBO—Abbreviation for management by objectives.M analyze-improve-control process.M
MBNQA—Abbreviation for the Malcolm Baldrige National measures constraint—A common misnomer. Bad
Quality Award.M measures are not the constraint. Rather, bad measures
MBWA—Abbreviation for management by walking hinder effective constraint management by inhibiting
around.M the ability to fully exploit and/or subordinate to the
constraint.M
M-day calendar—Syn: manufacturing calendar.M
median—The middle value in a set of measured values
M-days—Available manufacturing days excluding holi-
when the items are arranged in order of magnitude. If
days and weekends.M
there is no single middle value, the median is the mean
MDS—Abbreviation for material-dominated of the two middle values.M
scheduling.M
mediation—The introduction of a neutral third party who
mean—The arithmetic average of a group of values. Syn: attempts to provide alternatives to issues causing con-
arithmetic mean.M flict that have not been put forth by either party or to
change the way the parties perceive the situation. It is middleware—Software that interconnects incompatible
often used in collective bargaining to reach an applications software and databases from various trad-
agreement.M ing partners into decision-support tools such as ERP.M
mental model—A paradigm of how the world works milestone—In project management, an important event
formed by a person’s experiences and assumptions.M in a project, usually the realization of a significant
deliverable.M
M
merchants—Buyers who purchase for the purpose of
reselling.M milestone chart—Syn: Gantt chart.M
misguided capacity plans—Plans for capacity utilization families must be forecasted. Even though the appropri-
that are based on erroneous data or assumptions.M ate level of units is forecasted for a given product line,
an inaccurate mix forecast can create material shortag-
mission—The overall goal(s) for an organization set with-
es and inventory problems.M
in the parameters of the business scope.M
mission statement—The company statement of mix number—Syn: lot number.M
purpose.M
M
mix ticket—A listing of all the raw materials, ingredients,
mistake-proofing—Syn: failsafe work methods, poka- components, and such that are required to perform a
yoke.M mixing, blending, or similar operation. This listing is of-
ten printed on a paper ticket, which also may be used
mix—A breakdown of the total demand or production
as a turnaround document to report component quanti-
that identifies different products in an aggregate de-
ties actually used, final quantity actually produced, etc.
mand or production run.M
This term is often used in batch process or chemical
mix control—The control of the individual items going industries. See: assembly parts list, batch card, blend
through the plant.M formula, manufacturing order.M
mixed-flow scheduling—A procedure used in some modal split—The breakdown of use of transportation
process industries for building process train schedules modes. Statistics used for the calculation include
that start at an initial stage and work toward the ter- passenger-miles, ton-miles, and revenue.M
minal process stages. This procedure is effective for
mode—The most common or frequent value in a group
scheduling where several bottleneck stages may exist.
of values.M
Detailed scheduling is done at each bottleneck stage.M
mixed loads—A load having both regulated and exempt model—A representation of a process or system that
items in the same vehicle.M attempts to relate the most important variables in the
system in such a way that analysis of the model leads to
mixed manufacturing—Make-to-stock and make-to-order insights into the system. Frequently, the model is used
manufacturing using a single plant and set of to anticipate the result of a particular strategy in the
equipment.M real system.M
mixed-model assembly line—An assembly line with more
model number—An item number for a finished good.
than one type of model passing through it.M
This number may encompass other parts, such as a us-
mixed-model production—Making several different parts er’s manual.M
or products in varying lot sizes so that a factory produc-
modem—A device that converts digital signals to analog
es close to the same mix of products that will be sold
signals (and vice versa) so they can be sent over phone
that day. The mixed-model schedule governs the mak-
lines.M
ing and the delivery of component parts, including those
provided by outside suppliers. The goal is to build every modification flexibility—The capability of the transforma-
model every day, according to daily demand.M tion process to quickly implement minor product design
mixed-model scheduling—The process of developing changes.M
one or more schedules to enable mixed-model produc- modular architecture—A type of product architecture
tion. The goal is to achieve a day’s production each day. where the functional pieces correspond to physical
See: mixed-model production.M pieces. The different physical pieces have their own
mixed production strategy—Syn: hybrid production me- function, and there is little interaction between them.M
thod. See: chase production method, level production modular bill of material—A type of planning bill that is
method.M arranged in product modules or options. It is often used
mix flexibility—The ability to handle a wide range of in companies where the product has many optional fea-
products or variants by using equipment that has short tures (e.g., assemble-to-order companies such as au-
setup times.M tomobile manufacturers). See: pseudo bill of material.M
mix forecast—Forecast of the proportion of products modular design strategy—The strategy of planning and
that will be sold within a given product family, or the designing products so that components or subassem-
proportion of options offered within a product line. blies can be used in current and future products or as-
Product and option mix as well as aggregate product sembled to produce multiple configurations of a
product. Automobiles and personal computers are ex- outbound stockpoint) and taken to a point of use (usual-
amples of modular designs.M ly an inbound stockpoint). It authorizes the movement
of one part number between a single pair of work cen-
modularization—In product development, the use of
ters. The card circulates between the outbound stock-
standardized parts for flexibility and variety. Permits
point of the supplying work center and the inbound
product development cost reductions by using the same
stockpoint of the using work center. Syn: move signal.
item(s) to build a variety of finished goods. This is the
See: kanban.M
first step in developing a planning bill of material
process.M movement inventory—A type of in-process inventory that
arises because of the time required to move goods from
M
modular system—A system architecture design in which
one place to another.M
related tasks are grouped in self-contained packages.
Each package, or module, of tasks performs all of the move order—The authorization to move a particular item
tasks related to a specific function and advances in from one location to another.M
functions can be implemented without affecting other move signal—Syn: move card.M
packages or modules because of the loose coupling
with other modules. One example is a multitiered archi- move ticket—A document used in dispatching to author-
tecture in which application business rules are sepa- ize or record movement of a job from one work center to
rated from the data management rules. Another another. It may also be used to report other information,
example is a client-server architecture in which user in- such as the actual quantity or the material storage
terface tasks are separated from the application soft- location.M
ware. See: open system architecture.M move time—The time that a job spends in transit from
module—A self-contained unit of a computer program one operation to another in the plant.M
that communicates with other parts of the program moving average—An arithmetic average of a certain
solely through inputs and outputs.M number (n) of the most recent observations. As each
molds—Tools for plastic or chemical production. A mold new observation is added, the oldest observation is
is the term used for the tools that shape plastic or other dropped. The value of n (the number of periods to use
soft material parts.M for the average) reflects responsiveness versus stability
in the same way that the choice of smoothing constant
monitoring—The process of comparing actual to planned does in exponential smoothing. There are two types of
progress.M moving average, simple and weighted. See: simple mov-
monopolistic competition—A market in which many ing average, weighted moving average.M
competitors offer partially differentiated products or moving average forecast—A forecasting technique that
services within a given geographical area. Most compet- uses a simple moving average or a weighted moving
itors focus on market segments where they can meet average projected forward as a forecast.M
customers’ needs somewhat better than their competi-
MPC—Abbreviation for manufacturing planning and
tors. See: industry structure types.M
control.M
monopoly—Sole control of a market by a company. In
MPS—Abbreviation for master production schedule.M
the United States, a monopoly is a violation of Article 2
of the Sherman Act.M MRB—Abbreviation for material review board.M
Monte Carlo simulation—A subset of digital simulation MRO—1) Abbreviation for maintenance, repair, and op-
models based on random or stochastic processes.M erating. 2) Abbreviation for maintenance, repair, and
overhaul.M
motion study—A type of methods study focused on ther-
bligs, basic hand and body movements. See: therblig.M MRP—Abbreviation for material requirements
planning.M
move—The physical transportation of inventory from one
location to another within a facility. Movements are MRP nervousness—See: nervousness.M
usually made under the direction and control of the in- MRP II—Abbreviation for manufacturing resource
ventory system.M planning.M
move card—In a just-in-time context, a card or other sig- MSDS—Abbreviation for material safety data sheet.M
nal indicating that a specific number of units of a par-
MSE—Abbreviation for mean squared error.M
ticular item are to be taken from a source (usually an
MTBF—Abbreviation for mean time between failures.M multilinear regression analysis—Model used for fore-
casting with more than one independent variable.M
MTFF—Abbreviation for mean time for failures.M
MTM—Abbreviation for methods-time measurement.M multimedia—An interactive combination of two or more
of the following: text, graphics, video, audio, and anima-
MTTR—Abbreviation for mean time to repair.M tion all controlled by a personal computer.M
muda (waste)—In lean manufacturing, costs are re-
M
multimedia files—Digitized image, video, and audio files
duced by reducing waste within a system. There are
that can be retrieved and converted to a form usable by
seven categories of waste: (1) overproduction—excess
a human.M
or too early, (2) waiting—queuing delays, (3) transporta-
tion—unneeded movements, (4) processing—poor multimodal solutions—Transportation plans that involve
process design, (5) motion—activities that do not add multiple means of transportation and coordinate the
value, (6) inventory—stock that is sitting is accumulating physical and information requirements.M
cost without necessarily providing value, (7) defective
multinational corporation—A company with capital in-
units—scrap or rework.M
vestments in more than a single country.M
multiactivity chart—Shows how workers interact with
each other, or with machines, for different activities.M multinational strategy—A strategy that focuses on op-
portunities to achieve cross-business and cross-country
multicountry strategy—A strategy in which each country
coordination, thereby enabling economies of scope and
market is self-contained. Customers have unique prod-
an improved competitive position with regard to reduc-
uct expectations that are addressed by local production
ing costs, cross-country subsidization, and so on, to out-
capabilities. Syn: multidomestic strategy.M
compete rivals. See: global strategy. multiphase sys-
multicriteria decision models—Models that enable deci- tem—Syn: multiple-phase queuing system.M
sion makers to evaluate various alternatives across
multiple-channel queuing system—A waiting line system
several decision criteria.M
that has parallel waiting lines with queues.M
multicurrency—Having the capability to handle orders
using monies from several countries for billing multiple-factor productivity—A measure of the productiv-
purposes.M ity of two or more inputs, especially labor, capital costs,
energy, and material. See: single-factor productivity.M
multidomestic strategy—Syn: multicountry strategy.M
multiple-item lot-sizing models—Processes or systems
multifactor productivity—A productivity score that meas-
used to determine the total replenishment order quanti-
ures output levels relative to more than one input, such
ty for a group of related items.M
as labor or capital.M
multiple-phase queuing system—Queuing system that
multilevel bill of material—A display of all the compo-
performs a service in two or more sequential steps
nents directly or indirectly used in a parent, together
when there are several waiting lines. Syn: multiphase
with the quantity required of each component. If a com-
system. See: channel, queuing theory.M
ponent is a subassembly, blend, intermediate, etc., all
its components and all their components also will be multiple regression models—A form of regression analy-
exhibited, down to purchased parts and raw sis where the model involves more than one indepen-
materials.M dent variable, such as developing a forecast of
multilevel master schedule—A master scheduling tech- dishwasher sales based upon housing starts, gross na-
nique that allows any level in an end item’s bill of ma- tional product, and disposable income.M
terial to be master scheduled. To accomplish this, MPS multiple sourcing—Syn: multisourcing. See: dual
items must receive requirements from independent and sourcing.M
dependent demand sources. See: two-level master
schedule.M multiprocessing—The simultaneous use by a computer
of two or more central processing units, with each ex-
multilevel where-used—A display for a component listing
ecuting its own instruction set and each controlled by a
all the parents in which that component is directly used
single operating system.M
and the next higher level parents into which each of
those parents is used, until ultimately all top-level (level multiskilled—Individuals who are capable of carrying out
0) parents are listed.M a variety of tasks.M
multisourcing—Procurement of a good or service from negative float—In project management, the amount of
more than one independent supplier. Syn: multiple time that must be made up on an activity to get the
sourcing. Ant: single sourcing. See: dual sourcing.M project back on schedule. See: float.N
multivariate control chart—A control chart for evaluating negligence—The causing of injury to another by failure
the stability of a process in terms of the levels of two or to use reasonable care.N
more variables or characteristics.M negotiation—The process by which a buyer and a sup-
mura—A Japanese word meaning unevenness or
variability.M
plier agree upon the conditions surrounding the pur-
chase of an item or a service.N N
muri—A Japanese word meaning strain or overburden.M nemawashi—A Japanese word meaning getting a group
to agree on a strategy before beginning to implement
mutually exclusive project—In capital budgeting, a it.N
project that will not be accepted if a competing project
nervousness—The characteristic in an MRP system
is accepted. See: contingent project, independent
when minor changes in higher level (e.g., level 0 or 1)
project.M
records or the master production schedule cause signif-
mystery shoppers—People who pose as customers but icant timing or quantity changes in lower level (e.g., lev-
who are really studying an organization’s service quality el 5 or 6) schedules and orders. Syn: system
to provide feedback to the organization for improve- nervousness.N
ment purposes.M
nesting—The act of combining several small processes
to form one larger process.N
profit is calculated as throughput minus operating method (CPM) and the program evaluation and review
expense.N technique (PERT).N
net requirements—In MRP, the net requirements for a neural network—A software system loosely based on
part or an assembly are derived as a result of applying how the brain works. It tries to simulate the multiple
gross requirements and allocations against inventory on layers of elements called neurons. Each neuron is tied
hand, scheduled receipts, and safety stock. Net re- to several neighbors with a value that signifies the
netting—The process of calculating net requirements.N new product development team—Syn: participative
design/engineering.N
net weight—The weight of an article exclusive of the
weights of all packing materials and containers.N new product introduction—The development and re-
lease of an item that is new to a company’s set of
network—1) The interconnection of computers, termin-
offerings.N
als, and communications channels to facilitate file and
peripheral device sharing as well as effective data newsvendor problem—A problem inventory manage-
communication. 2) A graph consisting of nodes con- ment dealing with determining the single period (e.g.,
nected by arcs.N day or week) order quantity which will minimize the cost
network analysis—In project management, the calcula- of sometimes having too much inventory and some-
tion of early and late start and finish times for those ac- times having too little.N
tivities not yet completed. See: critical path method, NLRB—Abbreviation for National Labor Relations
graphical evaluation and review technique, and pro- Board.N
gram evaluation and review technique (PERT).N
node—In project management, a point connected by ar-
network chain—A route through a chain involving mul- rows in a network.N
tiple network paths, with switching of paths due to re-
source conflicts.N noise—The unpredictable or random difference between
the observed data and the “true process.”N
network diagram—A graphical tool that shows the de-
pendencies between activities in a project, i.e., which nominal capacity—Syn: rated capacity.N
activities precede other activities and which can be
nominal group technique—A technique, similar to
done in parallel.N
brainstorming, used by teams to generate ideas on a
networking—Developing relationships with people who particular subject. Team members are asked to silently
may be able to enhance the performance of duties or come up with as many ideas as possible, writing them
responsibilities.N down. Each member is then asked to share one idea,
net working capital—The current assets of a firm minus which is recorded. After all the ideas are recorded, they
its current liabilities. Syn: working capital.N are discussed and prioritized by the group.N
network logic—Activity dependencies that make up a nominal interest rate—The noninflation-adjusted inter-
project schedule network diagram.N est rate.N
network loop—A network path that crosses the same nominal trading partner—Any organization external to
activity or node twice. A network loop cannot be ana- the firm that provides an essential material or service,
lyzed by the critical path method, critical chain, or other but whose financial success is largely independent of
traditional network schedule analysis techniques.N the financial success of the supply chain community.N
network path—Any continuous series of project activities nomogram—A computational aid consisting of two or
connected by precedence relationships in a project more scales drawn and arranged so that the results of
schedule network diagram.N calculations may be found by the linear connection of
points on them. Historically, it was used for calculating
network planning—A generic term for techniques that
economic lot sizes or sample sizes for work measure-
are used to plan complex projects. Two of the best
ment observations. Also called an alignment chart.N
known network planning techniques are the critical path
nonconforming material—Any raw material, part, com- nonsignificant part number—A part number that is as-
ponent, or product with one or more characteristics that signed to each part but does not convey any information
depart from the specifications, drawing, or other ap- about the part. Nonsignificant part numbers are iden-
proved product description.N tifiers, not descriptors. Ant: significant part number.N
nonconformity—Failure to fulfill a specified requirement. non-value-added—An activity that does not add value to
See: blemish, defect, imperfection.N a product, for example, moving the product from one
nonevident failure—Failure occurring in either a product normal and proper usage—Operation of the equipment
or a production process that is not immediately evident. with a program of regular maintenance in accordance
This may be indicative of a faulty design.N with generally accepted practices and within the rated
capacity and service classification for which it was spe-
nonexempt employee—A person filling a nonexempt po- cified and designed.N
sition. See: nonexempt positions.N
normal distribution—A particular statistical distribution
nonexempt positions—Employees not meeting the test where most of the observations fall fairly close to one
of executive, supervisory, or administrative personnel mean, and a deviation from the mean is as likely to be
who are paid overtime, as defined by the Fair Labor plus as it is to be minus. When graphed, the normal dis-
Standards Act. See: nonexempt employee.N tribution takes the form of a bell-shaped curve.N
nongovernmental organization (NGO)—A legally consti- normalize—To adjust observed data to a standard
tuted organization that operates independently from base.N
any government. The term is usually applied only to or-
normal time—In time study, adjusting the actual time
ganizations that pursue some wider social aim with po-
observed by a factor called pace rating. See: pace
litical aspects, but that are not overtly political
rating.N
organizations such as political parties. These types of
organizations are called civil society organizations and North American Free Trade Agreement (NAFTA)—An
other names in some jurisdictions.N agreement among the United States, Canada, and
Mexico to promote economic prosperity by reducing
nonlinear programming—Programming similar to linear trade barriers.N
programming but incorporating a nonlinear objective
function and linear constraints or a linear objective no-touch exchange of dies (NTED)—The exchange of
function and nonlinear constraints or both a nonlinear dies without human intervention.N
objective function and nonlinear constraints.N np chart—A control chart for evaluating the stability of a
process in terms of the total number of units in a sam-
nonproduction material—Items (indirect materials and
ple in which an event of a given classification occurs.
supplies) in the manufacturing process or in the main-
Syn: number of affected units chart.N
tenance or operation of a facility that do not generally
become part of the final product.N N7—Abbreviation for seven new tools of quality.N
nonrecurring material—Tooling, gauges, and facilities NSN—Abbreviation for national stock number.N
necessary in the manufacturing of the final product and NTED—Abbreviation for no-touch exchange of dies.N
not consumed during manufacturing or shipped with the
final product.N number defective chart—Syn: c chart.N
number of affected units chart—Syn: np chart.N
nonscheduled hours—Hours when a machine is not
generally available to be scheduled for operation; for numerical control (NC)—A means of operating a ma-
example, nights, weekends, holidays, lunch breaks, ma- chine tool automatically by the use of coded numerical
jor repair, and rebuilding.N instructions.N
O
to a serviceable condition (some repair operations do
not occur 100 percent of the time). The factor is
expressed at the operation level in the routing. See:
repair factor, replacement factor.O
O
obeya—A Japanese word meaning “big room," a com-
mand center.O OC curve—Abbreviation for operating characteristic
curve.O
objective function—The goal or function that is to be op-
timized in a model. Most often it is a cost function that OCR—Abbreviation for optical character recognition.O
should be minimized subject to some restrictions or a
OD—Abbreviation for organizational development.O
profit function that should be maximized subject to
some restrictions.O ODD—Abbreviation for earliest operation due date.O
used as the kanban system. An empty square signals to meet that goal of full deliveries and by the delivery
the supplying work center to produce a standard con- date.O
tainer of the item. Syn: single-card kanban system. See:
on-time schedule performance—A measure (percen-
two-card kanban system.O
tage) of meeting the customer’s originally negotiated
100 percent inspection—The act of inspecting or testing delivery request date. Performance can be expressed as
every item in an incoming or outgoing lot.1 a percentage based on the number of orders, line
one less at a time—A process of gradually reducing the
lot size of the number of items in the manufacturing
pipeline to expose, prioritize, and eliminate waste.O
items, or dollar value shipped on time.O
operating characteristic curve (OC curve)—A graph used 2) The performance of any planned work or method as-
to determine the probability of accepting lots as a func- sociated with an individual, machine, process, depart-
tion of the quality level of the lots or processes when ment, or inspection. 3) One or more elements that
using various sampling plans. There are three types: involve one of the following: the intentional changing of
Type A curves, which give the probability of acceptance an object in any of its physical or chemical characteris-
for an individual lot coming from finite production (will tics; the assembly or disassembly of parts or objects;
not continue in the future); Type B curves, which give the preparation of an object for another operation,
patching rule) giving earlier operation due dates higher tems, quality management, production management,
priority.O inventory management, accounting, and other functions
as they affect the operation.O
operation duration—The total time that elapses between
the start of the setup of an operation and the comple- operations plan—Syn: production plan.O
tion of the operation. Syn: operation time.O
operations planning—The planning of activities that
operation list—Syn: routing.O transform inputs into finished goods and services.O
operation number—A sequential number, usually two,
three, or four digits long, such as 010, 020, 030, that
operations process chart—Syn: process chart.O
operation splitting—Syn: lot splitting.O
O
indicates the sequence in which operations are to be
performed within an item’s routing.O operations research—1) The development and applica-
tion of quantitative techniques to the solution of prob-
operation overlapping—Syn: overlapped schedule.O
lems. More specifically, theory and methodology in
operation priority—1) The relative importance an mathematics, statistics, and computing are adapted
operation is given based on its scheduled due date and applied to the identification, formulation, solution,
and/or start date, usually as determined by the back- validation, implementation, and control of decision-
scheduling process. 2) The relative importance a job is making problems. 2) An academic field of study con-
given in a queue of jobs by a priority dispatching cerned with the development and application of quan-
heuristic such as shortest processing time first or least titative analysis to the solution of problems faced by
slack remaining first.O management in public and private organizations. Syn:
operation/process yield—The ratio of usable output management science.O
from a process, process stage, or operation to the input operations scheduling—The actual assignment of start-
quantity, usually expressed as a percentage.O ing or completion dates to operations or groups of op-
operation reporting—The recording and reporting of erations to show when these operations must be done if
every manufacturing (shop order) operation occurrence the manufacturing order is to be completed on time.
on an operation-to-operation basis.O These dates are used in the dispatching function. Syn:
detailed scheduling, order scheduling, shop
operations—The group that produces the goods and/or
scheduling.O
services that a company sells.O
operations sequence—The sequential steps for an item
operation setback chart—A graphical display of the bill
to follow in its flow through the plant. For instance, op-
of materials and lead-time information provided by the
eration 1: cut bar stock; operation 2: grind bar stock;
routing for each part. The horizontal axis provides the
operation 3: shape; operation 4: polish; operation 5:
lead time from raw materials purchase to component
inspect and send to stock. This information is normally
manufacture to assembly of the finished product.O
maintained in the routing file.O
operations finite loading—A finite loading technique that
operations sequence analysis—Method of planning a
aims to minimize possible delays to individual opera-
facility layout by using graphics to determine the place-
tions and, thus, the potential delay of each scheduled
ment of departments.O
order. Eligible operations from an order or a group of
orders are loaded period by period onto a work center operations sequencing—A technique for short-term
or a group of work centers, according to operation-level planning of actual jobs to be run in each work center
priority rules. Syn: operations sequencing. See: based upon capacity (i.e., existing workforce and ma-
constraint-oriented finite loading, drum-buffer-rope, chine availability) and priorities. The result is a set of
order-oriented finite loading.O projected completion times for the operations and simu-
lated queue levels for facilities.O
operation sheet—Syn: routing.O
operation start date—The date when an operation
operations management—1) The planning, scheduling,
should be started so that its order due date can be met.
and control of the activities that transform inputs into
It can be calculated based on scheduled quantities and
finished goods and services. 2) A field of study that fo-
lead times or on the work remaining and the time re-
cuses on the effective planning, scheduling, use, and
maining to complete the job.O
control of a manufacturing or service organization
through the study of concepts from design engineering, operations strategy—The total pattern of decisions that
industrial engineering, management information sys- shape the long-term capabilities of an operation and
their contribution to overall strategy. Operations strate- demand during the review interval plus the replenish-
gy should be consistent with overall strategy. See: stra- ment lead time. The optional replenishment model is
tegic plan.O sometimes called a hybrid system because it combines
certain aspects of the fixed reorder cycle inventory
operation time—The total of setup and run time for a
model and the fixed reorder quantity inventory model.
specific task. Syn: operation duration.O
See: fixed reorder cycle inventory model, fixed reorder
operator flexibility—Training machine workers to per- quantity inventory model, hybrid inventory system, inde-
picked and issued from a stocking location, all at one and ship, billing, and reconciliation of the customer ac-
time, and then moved as a kit to manufacturing before count. Regarding manufacturing orders, order man-
any activity begins. It is most frequently seen in job agement includes order release, routing, manufacture,
shop manufacturing. See: shop floor control.O monitoring, and receipt into stores or finished goods
inventories. Regarding purchasing orders, order man-
order cost—A direct labor cost incurred when a pur-
agement includes order placement, monitoring, receiv-
chaser places an order.O
ing, acceptance, and payment of supplier.O
order cycle—The progression used by a company start-
ing with receipt of a customer’s order and ending with
delivery to that customer.O
order multiples—An order quantity modifier applied after
the lot size has been calculated that increases the order
O
quantity to a predetermined multiple.O
order dating—Syn: order promising.O
order-oriented finite loading—A set of finite loading
order entry—The process of accepting and translating techniques to schedule orders according to order-level
what a customer wants into terms used by the manu- priority rules. The techniques aim to either (1) maximize
facturer or distributor. The commitment should be capacity utilization or (2) deliver a high proportion of on-
based on the available-to-promise (ATP) line in the mas- time orders with low work in process. See: constraint-
ter schedule. This can be as simple as creating shipping oriented finite loading, drum-buffer-rope.O
documents for finished goods in a make-to-stock envi-
order penetration point—The key variable in a logistics
ronment, or it might be a more complicated series of
configuration; the point (in time) at which a product be-
activities, including design efforts for make-to-order
comes earmarked for a particular customer.
products. See: master schedule, order service.O
Downstream from this point, the system is driven by
order entry complete to start manufacture—The average customer orders; upstream processes are driven by
time starting when an order is placed by a customer forecasts and plans. Syn: principle of postponement.
and ending when the manufacturing of that order is See: booked orders.O
completed.O
order picking—Selecting or “picking” the required quan-
order-fill ratio—Syn: customer service ratio.O tity of specific products for movement to a packaging
order fulfillment lead times—The average amount of area (usually in response to one or more shipping or-
time between the customer’s order until the customer ders) and documenting that the material was moved
receives delivery; this includes every manufacturing or from one location to shipping. Syn: order selection. See:
processing step in between.O batch picking, discrete order picking, zone picking.O
ordering cost—Used in calculating order quantities, the order placement—The commitment of a customer to buy
costs that increase as the number of orders placed in- a product and the subsequent administrative and data
creases. It includes costs related to the clerical work of processing steps followed by the supplier.O
preparing, releasing, monitoring, and receiving orders, order point—A set inventory level where, if the total
the physical handling of goods, inspections, and setup stock on hand plus on order falls to or below that point,
costs, as applicable. See: acquisition cost, inventory action is taken to replenish the stock. The order point is
costs.O normally calculated as forecasted usage during the rep-
order interval—The time period between the placement lenishment lead time plus safety stock. Syn: reorder
of orders.O point, statistical order point, trigger level. See: fixed
reorder quantity inventory model.O
order level system—Syn: fixed reorder cycle inventory
model.O order point/order quantity system—Syn: fixed reorder
quantity inventory model.O
order losers—Capabilities of an organization in which
poor performance can cause loss of business. Failure to order point system—The inventory method that places
meet customer expectations with delivery of the product an order for a lot whenever the quantity on hand is re-
is an order loser. See: order qualifiers, order winners.O duced to a predetermined level known as the order
point. Syn: statistical order point system. See: fixed
order management—The planning, directing, monitoring,
reorder quantity inventory model, hybrid system.O
and controlling of the processes related to customer
orders, manufacturing orders, and purchase orders. order policy—A set of procedures for determining the lot
Regarding customer orders, order management in- size and other parameters related to an order. See: lot
cludes order promising, order entry, order pick, pack sizing.O
order policy code—Syn: lot-size code.O is also typically responsible for responding to customer
inquiries and interacting with the master scheduler on
order preparation—All activities relating to the adminis-
availability of products. In some companies, distribution
tration, picking, and packaging of individual customer or
and interplant requirements are handled separately.
work orders.O
See: order entry, order promising.O
order preparation lead time—The time needed to ana-
lyze requirements and open order status and to create order shipment—Activity that extends from the time the
order reporting—Recording and reporting the start and organizational development (OD)—The process of build-
completion of the manufacturing order (shop order) in ing and strengthening core competencies and organiza-
its entirety.O tional capabilities that enable the execution of the
business strategy and provide a sustainable competitive
order scheduling—Syn: operations scheduling.O
advantage over time. Organizational development in-
order selection—Syn: order picking.O cludes staffing the organization, building core compe-
tencies and organizational capabilities, and continuous
order service—The function that encompasses receiving,
improvement initiatives in response to the changing
entering, and promising orders from customers, distri-
business environment.O
bution centers, and interplant operations. Order service
organizational environment—Consists of an external en- out-of-pocket costs—Costs that involve direct payments
vironment (e.g., laws and regulations, technology, econ- such as labor, freight, or insurance, as opposed to de-
omy, competition) and an internal environment (e.g., the preciation, which does not.O
domain of products and services to be provided, the
out of stock—A situation in which there is no inventory
processes to be executed, the organizational structure).
at a location available for sale to the customer. See:
See: external environment, internal environment.O
stockout.O
organization chart—A graphical depiction of relation-
ships between people who work together.O
out of spec—A term used to indicate that a unit does not
meet a given specification.O O
original equipment manufacturer (OEM)—A manufactur- outpartnering—The process of involving the supplier in a
er that buys and incorporates another supplier’s prod- close partnership with the firm and its operations man-
ucts into its own products. Also, products supplied to agement system. Outpartnering is characterized by
the original equipment manufacturer or sold as part of close working relationships between buyers and suppli-
an assembly. For example, an engine may be sold to an ers, high levels of trust, mutual respect, and emphasis
OEM for use as that company’s power source for its ge- on joint problem solving and cooperation. With outpart-
nerator units.O nering, the supplier is viewed not as an alternative
orthogonal arrays—Tools that help maintain indepen- source of goods and services (as observed under out-
dence between different iterations of a product design sourcing) but rather as a source of knowledge, exper-
experiment; introduced to quality analysis by Genichi tise, and complementary core competencies.
Taguchi.O Outpartnering is typically found during the early stages
of the product life cycle when dealing with products that
OS&D—Abbreviation for over, short, and damaged.O are viewed as critical to the strategic survival of the
OSHA—Acronym for Occupational Safety and Health firm. See: customer-supplier partnership, supplier part-
Act.O ner, and customer partner.O
OSI—Abbreviation for open systems interconnection.O output—The product being completed by a process or
facility.O
OTED—Abbreviation for one-touch exchange of die.O
output control—A technique for controlling output where
OTIF—Abbreviation for on-time in-full.O actual output is compared to planned output to identify
problems at the work center or facility.O
outbound consolidation—The gathering of a number of
small shipments to a variety of customers into a larger output standard—The expected number of units from a
load, which is then shipped to a point near the custom- process against which actual output will be measured.O
ers where it is broken down for delivery.O
outside shop—Suppliers. This term is used to convey the
outbound logistics—Every process that is involved in the idea that suppliers are an extension of the inside shop
shipping and holding of products after they are com- or the firm’s production facilities.O
pleted until they are received by the customer.O outsourced cost of goods sold—Costs of goods sold that
outbound stockpoint—The designated locations near are not created within the producing company’s manu-
the point of use on a plant floor to which material pro- facturing process. Instead, they are outsourced to
duced is taken until it is pulled to the next operation.O another company and include the costs of purchasing
the service from another company.O
outlier—A data point that differs significantly from other
data for a similar phenomenon. For example, if the av- outsourcing—The process of having suppliers provide
erage sales for a product were 10 units per month, and goods and services that were previously provided inter-
one month the product had sales of 500 units, this nally. Outsourcing involves substitution—the replace-
sales point might be considered an outlier. See: abnor- ment of internal capacity and production by that of the
mal demand.O supplier. See: subcontracting.O
overall equipment effectiveness (OEE)—Measuring the
out-of-control process—A process in which the statistical
effectiveness of all of the equipment of a company
measure being evaluated is not in a state of statistical
based on usage, performance and production quality.O
control (i.e., the variations among the observed sam-
pling results can be attributed to a constant system of overall factors—Syn: capacity planning using overall
chance causes). Ant: in-control process.O factors.O
overhead—The costs incurred in the operation of a over, short, and damaged (OS&D) report—A report sub-
business that cannot be directly related to the individual mitted by a freight agent showing discrepancies in bill-
goods or services produced. These costs, such as light, ing received and actual merchandise received.O
heat, supervision, and maintenance, are grouped in
overstated master production schedule—A schedule
several pools (e.g., department overhead, factory over-
that includes either past due quantities or quantities
head, general overhead) and distributed to units of
that are greater than the ability to produce, given cur-
goods or services by some standard allocation method
overlap quantity—The number of items that need to be pacing process—The process in a production line used
run and sent ahead to the following operation before to signal all other processes in line of the time to pro-
the following “overlap” operation can begin. Syn: offset duce another unit. It generally is the final process, but it
quantity. See: process batch, transfer batch.O does not have to be.P
destination data, as well as other information that may paperless purchasing—A purchasing operation that does
be required.P not employ purchase requisitions or hard-copy purchase
orders. In actual practice, a small amount of paperwork
packing list—A list showing merchandise packed, a copy
usually remains, normally in the form of the supplier
of which is sent to the consignee to help verify the
schedule.P
shipment.P
parallel conversion—A method of system implementa-
packing slip—A document that itemizes in detail the
contents of a particular package, carton, pallet, or con-
tainer for shipment to a customer. The detail includes a
description of the items, the shipper’s or customer’s
tion in which the operation of the new system overlaps
with the operation of the system being replaced. The old
system is discontinued only when the new system is
P
shown to be working properly, thus minimizing the risk
part number, the quantity shipped, and the stockkeep-
and negative consequences of a poor system
ing unit (SKU) of items shipped.P
implementation.P
pack-out department—The department that performs
parallel engineering—Syn: participative design/
the final steps (often including packaging and labeling)
engineering.P
before shipment to the customer. See: final assembly
department.P parallel implementation strategy—A system implemen-
tation technique whereby the current system and the
page—In information systems, an internet document
new system are both executed for some period of time.
containing both text and hypertext links to other pages
The results of the two systems are compared to ensure
that are stored on the server.P
that the new system is executing properly. When a level
paired-cell overlapping loops of cards (POLCA)—A spe- of confidence is built that the new system is executing
cial material control and replenishment system devel- properly, the old system is turned off and the new sys-
oped to be used with quick-response manufacturing in tem becomes the designated business system.P
cellular manufacturing environments. It is a hybrid
parallel schedule—The use of two or more machines or
push-pull system where the push authority to proceed is
job centers to perform identical operations on a lot of
generated by high-level manufacturing resources plan-
material. Duplicate tooling and setup are required.P
ning. See: quick-response manufacturing.P
parameter—A coefficient appearing in a mathematical
pallet—A platform designed to be loaded with packages
expression, each value of which determines the specific
and moved by a forklift. Standard pallet size is 48 inch-
form of the expression. Parameters define or determine
es by 40 inches by 4 inches.P
the characteristics or behavior of something, as when
pallet jack—A type of materials handling equipment that the mean and standard deviation are used to describe a
combines pallets horizontally but has no lifting set of data.P
capability.P
parameter design—Specifying the product characteris-
pallet positions—A calculation that determines the tics and production process that will create the ex-
space needed for the number of pallets for inventory pected product performance.P
storage or transportation based on a standard pallet
parametric estimating—The use of statistical and histor-
size. Pallet dimensions vary around the globe, but are
ical data to estimate activity parameters such as time or
typically a constant in regional markets. The term is fre-
budget.P
quently used to quote storage and transportation
rates.P parent—Syn: parent item.P
pallet rack—A single- or multiple-level structure for sto- parent/child relationship—Refers to the logical linkage
rage used to support high stacking of palletized loads.P between higher and lower level items in the bill of
material.P
pallet ticket—A label to track pallet-sized quantities of
end items produced to identify the specific sublot with parent item—The item produced from one or more com-
specifications determined by periodic sampling and ponents. Syn: parent.P
analysis during production.P
Pareto analysis—Use of the Pareto principle in prioritiz-
panel consensus—A judgmental forecasting technique ing or ranking a range of items to separate the vital few
by which a committee, sales force, or group of experts from the trivial many.P
arrives at a sales estimate. See: Delphi method, man-
Pareto chart—A bar graph that displays the results of a
agement estimation.P
Pareto analysis. It may or may not display the 80-20 var-
iation, but it does show a distinct variation from the few organization is capable of and willing to help guide and
compared to the many.P direct the organization toward agreed-on goals and
objectives.P
Pareto diagram—Syn: Pareto chart.P
Pareto’s law—A concept developed by Vilfredo Pareto, part master record—Syn: item record.P
an Italian economist, that states that a small percen- partnering—The act of one organization committing to a
tage of a group accounts for the largest fraction of the
P
long-term relationship with another organization based
impact, value, and so on. In an ABC classification, for on trust and a shared concept of how to satisfy the
example, 20 percent of the inventory items may consti- customer.P
tute 80 percent of the inventory value. See: ABC classi-
fication, 80-20.P partnership—1) A form of business ownership that is not
organized as a separate legal entity (i.e., unincorpo-
parking lot—A meeting device whereby off-agenda items rated business), but entailing ownership by two or more
are noted for possible inclusion in future agendas. persons. See: corporation, private ownership, public
Often a flip chart or whiteboard is used.P ownership, sole proprietorship. 2) In a supply chain, a
par level—In service operations, the maximum supply relationship based on trust, shared risk, and rewards
volume based on established quotas from previous use aimed toward achieving a competitive advantage.P
for a particular supply item, in a particular department,
part number—Syn: item number.P
for a specified time period.P
part period balancing (PPB)—A dynamic lot-sizing
part—Generally, a material item that is used as a com-
technique that uses the same logic as the least total
ponent and is not an assembly, subassembly, blend,
cost method, but adds a routine called look ahead/look
intermediate, etc.P
back. When the look ahead/look back feature is used, a
part coding and classification—A method used in group lot quantity is calculated, and before it is firmed up, the
technology to identify the physical similarity of parts.P next or the previous period’s demands are evaluated to
part family—A collection of parts grouped for some ma- determine whether it would be economical to include
nagerial purpose.P them in the current lot. See: discrete order quantity,
dynamic lot sizing.P
partial order—Any shipment received or shipped that is
less than the amount ordered.P part record—Syn: item record.P
partial productivity factor—Syn: single-factor parts bank—1) In the narrow sense, an accumulation of
productivity.P inventory between operations that serves to keep a
subsequent operation running although there are inter-
participative design/engineering—A concept that refers
ruptions in the preceding operations. See: buffer. 2) In
to the simultaneous participation of all the functional
the larger sense, a stockroom or warehouse. The impli-
areas of the firm in the product design activity.
cation is that the contents of these areas should be
Suppliers and customers are often also included. The
controlled like the contents of a bank.P
intent is to enhance the design with the inputs of all the
key stakeholders. Such a process should ensure that parts list—A list of parts, materials, and components re-
the final design meets all the needs of the stakeholders quired to make an item. See: single level bill of
and should ensure a product that can be quickly material.P
brought to the marketplace while maximizing quality
parts planner—Syn: material planner.P
and minimizing costs. Syn: co-design, concurrent
design, concurrent engineering, new product parts requisition—An authorization that identifies the
development team, parallel engineering, simultaneous item and quantity required to be withdrawn from an in-
design/engineering, simultaneous engineering, team ventory. Syn: requisition. See: purchase requisition.P
design/ engineering. See: early manufacturing
part standardization—A program for planned elimination
involvement.P
of superficial, accidental, and deliberate differences be-
participative management—A system that encompasses tween similar parts in the interest of reducing part and
various activities of high involvement in which subordi- supplier proliferation.P
nates share a significant degree of decision-making
part type—A code for a component within a bill of ma-
power with their immediate superiors. Participative
terial (e.g., regular, phantom, reference).P
management draws on the rationale that everyone in an
P
customer initiates the use of it.P P:D ratio exceeds 1.00, either a customer’s order will be
delayed or production will start as the result of a fore-
passive tag—A RFID tag which does not send out data
cast (make-to-stock) or an anticipated customer order
and is not self-powered. See: radio frequency identifica-
(make-to-order).P
tion (RFID) tag.P
peak demand—A specific time when the quantity de-
past due order—A line item on an open customer order
manded is greater than all other times.P
that has an original scheduled ship date that is earlier
than the current date. Syn: delinquent order, late order, pegged requirement—A requirement that shows the
order backlog. See: backlog.P next-level parent item (or customer order) as the source
of the demand.P
patent—A legal document giving exclusive rights to the
production, use, sale, or other action regarding a prod- pegging—In MRP and MPS, the capability to identify for
uct or process.P a given item the sources of its gross requirements
and/or allocations. Pegging can be thought of as active
path—In project management, a set of serially related
where-used information. See: requirements
activities in a network diagram.P
traceability.P
path convergence—In project management, the point in
penetration pricing—Introducing a product below its
a network diagram where one or more parallel paths
long-run price to secure entry into a market.P
come together. A delay on any of the parallel paths can
conceivably delay network completion.P people involvement—Syn: employee involvement.P
path divergence—Having parallel network paths exiting PE ratio—Abbreviation for price to earnings ratio.P
from a single node.P perceived quality—One of the eight dimensions of quali-
path float—Syn: float.P ty that refers to a subjective assessment of a product’s
quality based on criteria defined by the observer.P
pattern recognition—Classifying raw data based on ex-
perience or statistical information.P percent chart—Syn: P chart.P
payback—A method of evaluating an investment oppor- percent completed—A comparison of work completed to
tunity that provides a measure of the time required to the current projection of total work.P
recover the initial amount invested in a project.P percent of fill—Syn: customer service ratio.P
payback period—The period of time required for a percent value-added time—The percentage of total cycle
stream of cash flows resulting from a project to equal time that is spent on activities that provide value to the
the project’s initial investment.P product or customer.P
pay for knowledge—A pay restructuring scheme by perfect order—An order in which the “seven Rs” are sa-
which competent employees are rewarded for the know- tisfied: the right product, the right quantity, the right
ledge they acquire before or while working for an organ- condition, the right place, the right time, the right cus-
ization, regardless of whether such knowledge is tomer, the right cost.P
actually being used at any given time.P
performance—1) The degree to which an employee or
pay point—Syn: count point.P group applies skill and effort to an operation or task as
P chart—A control chart for evaluating the stability of a measured against an established standard. 2) One of
process in terms of the percentage of the total number the eight dimensions of quality that refers to product
of units in a sample in which an event of a given classi- attributes pertaining to the functioning of a product
fication occurs over time. P charts are used where it is (e.g., horsepower, signal-to-noise ratio, decibel output).P
difficult or costly to make numerical measurements or performance and event management systems—Systems
where it is desired to combine multiple types of defects that record and measure the performance of key supply
into one measurement. Syn: percent chart.P chain processes. With these data, employees can de-
termine when the key processes have changed and why performance rating—Observation of worker performance
they have changed. These data then are utilized to ad- to rate the productivity of the workers as a percentage
just the existent data.P in terms of the standard or normal worker
performance.P
performance appraisal—Supervisory or peer analysis of
work performance. May be made in connection with performance standard—In a performance measurement
wage and salary review, promotion, transfer, or em- system, the accepted, targeted, or expected value for
P ployee training.P
performance benchmarking—Syn: competitive ben-
the criterion. See: performance criterion, performance
measure, performance measurement system.P
chmarking. See: benchmarking, process performance variance—The difference between a per-
benchmarking.P formance standard and actual performance.P
performance criterion—The characteristic to be meas- performing organization—The enterprise directly in-
ured (e.g., parts per million defective, business profit). volved in the execution of work.P
See: performance measure, performance measurement
system, performance standard.P period capacity—The number of standard hours of work
that can be performed at a facility or work center in a
performance efficiency—A ratio, usually expressed as a
given time period.P
percentage, of the standard processing time for a part
divided by its actual processing time. Setups are ex- period costs—All costs related to a period of time rather
cluded from this calculation to prevent distortion. A tra- than a unit of product (e.g., marketing costs, property
ditional definition includes setup time as part of taxes).P
operation time, but significant distortions can occur as
periodic inventory—A physical inventory taken at some
a result of dependent setups.P
recurring interval (e.g., monthly, quarterly, or annual
performance measure—In a performance measurement physical inventory). See: physical inventory.P
system, the actual value measured for the criterion.
periodic maintenance—Syn: preventive maintenance.P
Syn: performance measurement. See: performance cri-
terion, performance measurement system, performance periodic replenishment—A method of aggregating re-
standard.P quirements to place deliveries of varying quantities at
evenly spaced time intervals, rather than variably
performance measurement—Syn: performance
spaced deliveries of equal quantities.P
measure.P
performance measurement baseline—An approved plan periodic review system—Syn: fixed reorder cycle invento-
used to compare against actual execution to identify ry model.P
variances for management control.P period order quantity—A lot-sizing technique under
performance measurement system—A system for col- which the lot size is equal to the net requirements for a
lecting, measuring, and comparing a measure to a given number of periods (e.g., weeks into the future).
standard for a specific criterion for an operation, item, The number of periods to order is variable, each order
good, service, business, etc. A performance measure- size equalizing the holding costs and the ordering costs
ment system consists of a criterion, a standard, and a for the interval. See: discrete order quantity, dynamic lot
measure. Syn: metrics. See: performance criterion, per- sizing.P
formance measure, performance standard.P perishability—The fact that an item has a limited shelf
performance measurement units—Time, error rates, ac- life and may be fragile and require special handling.P
curacy rates, cost, and other measures of system
permission marketing—Syn: relationship marketing.P
performance.P
perpetual inventory—An inventory recordkeeping system
performance objectives—Measurements that enable the
where each transaction in and out is recorded and a
firm to monitor whether or not the firm’s strategy is be-
new balance is computed.P
ing accomplished. Thus, the measurement should be
aligned to strategy. Performance objectives may differ perpetual inventory record—A computer record or ma-
based on the hierarchical level of the firm (e.g., depart- nual document on which each inventory transaction is
ment, business unit, corporation) and should be aligned posted so that a current record of the inventory is
with the corresponding strategy for that level.P maintained.P
requirements before implementation of ongoing produc- item description, and supplier or procurement
tion. Syn: pilot, walkthrough.P information.P
pipeline inventory—Syn: pipeline stock.P plan make—Establishing plans for action over time that
project appropriation of production resources to meet
pipeline stock—Inventory in the transportation network
production requirements.P
and the distribution system, including the flow through
intermediate stocking points. The flow time through the planned finish date—Syn: scheduled finish date.P
planning—The process of setting goals for the organiza- plan source—Establishing plans for action over time that
tion and choosing various ways to use the organiza- project appropriation of material resources to meet
tion’s resources to achieve the goals.P supply chain requirements.P
planning and control process—A process consisting of plan stability—The percent difference between the pro-
the following steps: plan, execute, measure, and duction that was planned and the production that was
control.P actually completed. The numerator is the difference be-
planogram—A graph or map of allotted shelf space point-of-use inventory—Inventory placed in the produc-
based on an analysis of sales date indicating the best tion process near where it is used. See: dock-to-stock
arrangement of products on a store shelf.P inventory.P
point-of-use storage—Keeping inventory in specified lo- such as ERP information, pictures, and documents.
cations on a plant floor near the operation where it is to Unlike exchanges or marketplaces, portals generally
be used.P can display and aggregate data without integration be-
tween application software.P
point reporting—The recording and reporting of miles-
tone manufacturing order occurrences, typically done at portfolio—In project management, a collection of
checkpoint locations rather than operations and easily projects that are grouped to facilitate management.
predecessor activity—1) In project management, in an prerequisite tree (PRT)—A necessity-based logic diagram
activity-on-arrow network, the activity that enters a that facilitates answering the third question in the
node. 2) In project management, in an activity-on-node change sequence: How do we effect the change? A PRT
network, the node at the tail of the arrow.P shows the relationship between the injections, desirable
effects or ambitious target, and the obstacles that block
pre-deduct inventory transaction processing—A method
the implementation of the injections. A PRT includes the
of inventory bookkeeping where the book (computer)
intermediate objectives required to overcome the ob-
inventory of components is reduced before issue, at the
time a scheduled receipt for their parents or assemblies
is created via a bill-of-material explosion. This approach
stacles and shows the sequence in which they must be
achieved for successful implementation.P
P
has the disadvantage of a built-in differential between present value—The value today of future cash flows. For
the book record and what is physically in stock. See: example, the promise of $10 a year from now is worth
backflush.P something less than $10 in hand today.P
predetermined motion time—An organized body of in- pre-transaction elements—Customer service elements
formation, procedures, techniques, and motion times that pertain to the period before a product or service is
employed in the study and evaluation of manual work sold, including flexibility, customer policies, and mission
elements. It is useful in categorizing and analyzing all statement.P
motions into elements whose unit times are computed
prevention costs—The costs caused by improvement
according to such factors as length, degree of muscle
activities that focus on the reduction of failure and ap-
control, and precision. The element times provide the
praisal costs. Typical costs include education, quality
basis for calculating a time standard for the operations.
training, and supplier certification. Prevention costs are
Syn: synthetic time standard.P
one of four categories of quality costs.P
predetermined time standards—A table of times of basic
prevention vs. detection—A term used to contrast two
motions used to prepare artificial standards (i.e., with-
types of quality activities. Prevention refers to those ac-
out direct observation of a worker). See: therbligs.P
tivities designed to prevent nonconformances in goods
predictable maintenance—Syn: predictive and services. Detection refers to those activities de-
maintenance.P signed to detect nonconformances already in goods and
prediction—An intuitive estimate of demand taking into services. Syn: designing in quality vs. inspecting in
account changes and new factors influencing the mar- quality.P
ket, as opposed to a forecast, which is an objective pro- preventive maintenance—The activities, including ad-
jection of the past into the future.P justments, replacements, and basic cleanliness, that
predictive maintenance—A type of preventive mainten- forestall machine breakdowns. The purpose is to ensure
ance based on nondestructive testing and statistical that production quality is maintained and that delivery
analysis, used to predict when required maintenance schedules are met. In addition, a machine that is well
should be scheduled. Syn: predictable maintenance.P cared for will last longer and cause fewer problems.
Syn: periodic maintenance.P
pre-expediting—The function of following up on open
orders before the scheduled delivery date, to ensure the price—One of the four Ps (product, price, place, and
timely delivery of materials in the specified quantity.P promotion) that constitute the set of tools used to direct
the business offering to the customer. Price is the
preferred stock—A type of stock entitling the owner to amount charged for the product offering. The price set
dividends before common stockholders are entitled to must take into account competition, substitute prod-
them.P ucts, and internal business costs to return a desirable
preferred supplier—The supplier of choice.P product margin. See: four Ps.P
prepaid—A term denoting that transportation charges price analysis—The examination of a seller’s price pro-
have been or are to be paid at the point of shipment by posal or bid by comparison with price benchmarks,
the sender.P without examination and evaluation of all of the sepa-
rate elements of the cost and profit making up the price
pre-receiving—Paying for materials before receipt to
in the bid.P
prepare for incoming products and goods.P
price break—A discount given for paying early, buying in
prerelease—The period of product specification, design,
quantity, and so forth. See: discount.P
and design review.P
price-break model—Syn: quantity discount model.P primary operation—A manufacturing step normally per-
formed as part of a manufacturing part’s routing. Ant:
price discrimination—Selling the same products to dif-
alternate operation.P
ferent buyers at different prices.P
primary process—A process that performs the main
price elasticity—The degree of change in buyer demand
value-added activities of an organization.P
in response to changes in product price. It is calculated
by dividing the percentage of change in quantity bought primary work center—The work center where an opera-
prima facie—Latin for at first sight or on the face of it. priority rules—Simple heuristics used to select the order
Something is presumed to be true.P in which jobs will be processed.P
primary demand—The demand for a category of prod- private carrier—A group that provides transportation ex-
ucts rather than for a specific brand.P clusively within an organization. Ant: common carrier.P
primary location—The designation of a certain storage private key—In information systems, an encryption key
location as the standard, preferred location for an that is known only by the sender and receiver of the
item.P message. See: public key.P
private label—Also known as store or dealer brands, lead time of an order. Interoperation and administrative
these are products that are designed and produced by lead time components are expanded or compressed by
one company, but carry the name of the store that sells a uniform “stretching factor” until no difference exists
them. Oftentimes called generic to the purchaser.P between the schedule of operations obtained by for-
ward and backward scheduling. See: lead time
private ownership—A form of business ownership in
scheduling.P
which the business is either owned by a single person
(i.e., proprietorship) or organized under law as a sepa-
rate legal entity but in which the company stock is not
publicly traded. See: partnership, public ownership.P
problem-solving storyboard—A technique based on the
plan/do/check/action problem-solving process. The
steps being taken and the progress toward the
P
resolution of a problem are continuously planned and
private trading exchange (PTX)—A trade exchange
updated.P
hosted by a single company to facilitate collaborative e-
commerce with its trading partners. As opposed to pub- procedure manual—A formal organization and indexing
lic e-marketplaces, a private exchange provides the of a firm’s procedures. Manuals are usually printed and
host company with control over many factors, including distributed to the appropriate functional areas.P
who may participate (and in what manner), how partici- process—1) A planned series of actions or operations
pants may be connected, and what contents should be (e.g., mechanical, electrical, chemical, inspection, test)
presented (and to whom). The ultimate goal might be to that advances a material or procedure from one stage
improve supply chain efficiencies and responsiveness of completion to another. 2) A planned and controlled
through improved process visibility and collaboration, treatment that subjects materials or procedures to the
advanced integration platforms, and customization ca- influence of one or more types of energy (e.g., human,
pabilities.P mechanical, electrical, chemical, thermal) for the time
private warehouse—A company-owned warehouse.P required to bring about the desired reactions or
results.P
proactive—A strategy of anticipating issues and present-
ing beneficial solutions to the customer.P process average—Expected value of the percentage de-
fective of a given manufacturing process.P
probabilistic demand models—Statistical procedures
process batch—The quantity or volume of output that is
that represent the uncertainty of demand by a set of
to be completed at a workstation before switching to a
possible outcomes (i.e., a probability distribution) and
different type of work or changing an equipment setup.P
that suggest inventory management strategies under
probabilistic demands.P process benchmarking—Benchmarking focused on the
target firm’s business processes, including process
probability—Mathematically, a number between 0 and 1
flows, operating systems, and process technologies.
that estimates the fraction of experiments (if the same
See: benchmarking.P
experiment were being repeated many times) in which a
particular result would occur. This number can be either process capability—Refers to the ability of the process
subjective or based upon the empirical results of expe- to produce parts that conform to (engineering) specifi-
rimentation. It can also be derived for a process to give cations. Process capability relates to the inherent varia-
the probable outcome of experimentation.P bility of a process that is in a state of statistical control.
See: Cp, Cpk, process capability analysis.P
probability and impact matrix—A matrix combining two
dimensions of risk: (1) likelihood of occurrence and (2) process capability analysis—A procedure to estimate the
impact if it happens.P parameters defining a process. The mean and standard
deviation of the process are estimated and compared to
probability distribution—A table of numbers or a ma-
the specifications, if known. This comparison is the ba-
thematical expression that indicates the frequency with
sis for calculating capability indexes. In addition, the
which each of all possible results of an experiment
form of the relative frequency distribution of the charac-
should occur.P
teristic of interest may be estimated. Syn: capability
probability tree—A graphic display of all possible out- study. See: process capability.P
comes of an event based on the possible occurrences process capability index—The value of the tolerance
and their associated probabilities.P specified for the characteristic divided by the process
probable scheduling—A variant of scheduling that con- capability. There are several types of process capability
siders slack time to increase or decrease the calculated indices, including the widely used Cpk and Cp.P
process chart—A chart that represents the sequence of for outsourcing, and designs a structure for the activi-
work or the nature of events in process. It serves as a ties of the process that remain to improve productivity.P
basis for examining and possibly improving the way the
process flowchart—Syn: flow process chart.P
work is carried out. Syn: operations process chart. See:
flow process chart, process flow.P process flow diagram—A graphical and progressive re-
presentation of the various steps, events, and tasks
process control—1) The function of maintaining a
P
that make up an operations process. This diagram pro-
process within a given range of capability by feedback,
vides the viewer with a picture of what actually occurs
correction, and so forth. 2) The monitoring of instru-
when a product is manufactured or a service is
mentation attached to equipment (valves, meters, mix-
performed.P
ers, liquid, temperature, time, etc.) from a control room
to ensure that a high-quality product is being produced process flow production—A production approach with
to specification.P minimal interruptions in the actual processing in any
one production run or between production runs of simi-
process control chart—Syn: control chart.P
lar products. Queue time is virtually eliminated by inte-
process controllers—Computers designed to monitor the grating the movement of the product into the actual
manufacturing cycle during production, often with the operation of the resource performing the work.P
capability to modify conditions, to bring the production
back to within prescribed ranges.P process flow scheduling—A generalized method for
planning equipment usage and material requirements
process costing—A cost accounting system in which the that uses the process structure to guide scheduling cal-
costs are collected by time period and averaged over all culations. It is used in flow environments common in
the units produced during the period. This system can process industries.P
be used with either actual or standard costs in the
manufacture of a large number of identical units.P process focused—A type of manufacturing organization
in which both plant and staff management responsibili-
process decision program chart—A technique used to ties are delineated by production process. A highly cen-
show alternate paths to achieving given goals. tralized staff coordinates plant activities and
Applications include preparing contingency plans and intracompany material movements. This type of organi-
maintaining project schedules.P zation is best suited to companies whose dominant
orientation is to a technology or a material and whose
process design—The design of the manufacturing
manufacturing processes tend to be complex and capi-
method.P
tal intensive. See: product focused, process-focused
process engineering—The discipline of designing and organization.P
improving the manufacturing equipment and production
process-focused organization—An organization that is
process to support the manufacture of a product line.
oriented toward executing linked activities that consti-
See: manufacturing engineering.P
tute a given end-to-end business process with a given
process flexibility—The design of the manufacturing sys- set of resources. Responsibilities of the members of the
tem, including operators and machinery, that allows organization are oriented toward the performance of the
quick changeovers to respond to near-term changes in process that creates the product or service and not to-
product volume and mix. A necessary tool in lean and ward a product or functional silo. See process focused,
just in time.P product focused.P
process flow—The sequence of activities that when fol- process-focused production—This type of factory opera-
lowed results in a product or service deliverable. See tion requires frequent machine changeover and pro-
flow process chart, process chart.P duces small batches of unique products that flow along
different paths.P
process flow analysis—A procedure to evaluate the ef-
fectiveness of a sequence of business activities. The process hours—The time required at any specific opera-
analysis determines which elements of the flow are tion or task to process the product.P
value-added and eliminates those that are not, deter-
process improvement—The activities designed to identi-
mines which parts of the process can be automated,
fy and eliminate causes of poor quality, process varia-
evaluates activities as to whether they contribute to the
tion, and non-value-added activities.P
core competencies of the business or are candidates
process industries—The group of manufacturers that and machines and sketches of setups and semifinished
produce products by mixing, separating, forming, dimensions.P
and/or performing chemical reactions. Paint
process steps—The operations or stages within the
manufacturers, refineries, and breweries are examples
manufacturing cycle required to transform components
of process industries.P
into intermediates or finished goods. From a larger
process integration—Coordinating operations and con- perspective, the operations or stages within any busi-
solidating data to simplify processes and increase
efficiency.P
ness required to turn inputs into outputs.P
process stocks—Raw ingredients or intermediates avail- P
process layout—Syn: functional layout.P able for further processing into marketable products.P
process list—A list of operations and procedures in the process time—The time during which the material is be-
manufacture of a product. It may also include a state- ing changed, whether it is a machining operation or an
ment of material requirements.P assembly. Syn: residence time.P
process manufacturing—Production that adds value by process train—A representation of the flow of materials
mixing, separating, forming, and/or performing through a process industry manufacturing system that
chemical reactions. It may be done in either batch or shows equipment and inventories. Equipment that per-
continuous mode. See: project manufacturing.P forms a basic manufacturing step, such as mixing or
packaging, is called a process unit. Process units are
process map—A diagram of the flow of a production
combined into stages, and stages are combined into
process or service process through the production
process trains. Inventories decouple the scheduling of
system. Standardized symbols are used to designate
processing, flow directions, branching decisions, sequential stages within a process train.P
input/output, and other aspects of the process.P process yield—See: yield.P
processor-dominated scheduling—A technique that procurement—The business functions of procurement
schedules equipment (processor) before materials. This planning, purchasing, inventory control, traffic, receiv-
technique facilitates scheduling equipment in economic ing, incoming inspection, and salvage operations.P
run lengths and the use of low-cost production se-
procurement credit card—Credit cards with a pre-
quences. This scheduling method is used in some
determined credit limit issued to buyers. Syn: corporate
process industries. See: material-dominated
purchasing cards.P
scheduling.P
procurement cycle—Syn: procurement lead time.P
process organization structure—An organizational struc-
ture in which people are removed from their functional procurement lead time—The time required to design a
departments and placed into a group that works as a product, modify or design equipment, conduct market
single unit to perform the entire linked process. This is research, and obtain all necessary materials. Lead time
in contrast to a functional organization in which the ac- begins when a decision has been made to accept an
tivities that make up the process are performed by order to produce a new product and ends when produc-
people in multiple functionally oriented departments.P tion commences. Syn: procurement cycle, total pro-
curement lead time. See: time-to-market.P
process oriented—A characteristic in which the focus is
on the interrelated processes in a business environ- procurement services provider—A company that has
ment. It includes the activities to transform inputs into product, sourcing, and supply management knowledge
outputs that have value.P and acts as an outsourced process by other companies
and provides procurement help. They are most often
process planning—Determining the technological steps
used by companies where procurement is a significant
and sequence required to produce a product or service
part of business, but the company lacks the expertise to
at the required quality level and cost.P
effectively manage the process. This is a third-party
process selection—An economic analysis used to decide process.P
which process should be used when operations can be
producer—One who creates a good or service.P
performed by more than one process.P
producer market—Syn: industrial market.P
process sheet—Detailed manufacturing instructions is-
sued to the plant. The instructions may include specifi- producer’s risk (α)—For a given sampling plan, the
cations on speeds, feed, temperatures, tools, fixtures, probability of not accepting a lot, the quality of which
has a designated numerical value representing a level ventory) accounts, product costs become an expense
that is generally desired to accept. Usually the desig- (cost of sales) when the product is sold.P
nated value will be the acceptable quality level (AQL).
product data management (PDM)—A system that tracks
See: type I error.P
the configurations of parts and bills of material and also
produce-to-order—Syn: make-to-order.P the revisions and history of product designs. It facilities
produce-to-stock—Syn: make-to-stock.P the design release, distributes the design data to mul-
product grade—The categorization of goods based upon production card—In a just-in-time context, a card or oth-
the range of specifications met during the manufactur- er signal for indicating that items should be made for
ing process.P use or to replace some items removed from pipeline
stock. See: kanban.P
product group—Syn: product line.P
production control—The function of directing or regulat-
product group forecast—A forecast for a number of simi-
ing the movement of goods through the entire manufac-
lar products. See: aggregate forecast, product group.P
product layout—Another name for flow process layout.
The system is set up for a limited range of similar prod-
turing cycle from the requisitioning of raw material to
the delivery of the finished products.P
production cycle—Syn: manufacturing lead time.P
P
ucts. Focused-factory production would also be consi-
dered in this category. See: flow processing, focused production cycle elements—Elements of manufacturing
factory.P strategy that define the span of an operation by ad-
dressing the following areas: (1) the established boun-
product life cycle management (PLM)—The process of
daries for the firm’s activities, (2) the construction of
facilitating the development, use, and support of prod-
relationships outside the firm’s boundaries (i.e., suppli-
ucts that customers want and need. PLM helps profes-
ers, distributors, and customers), (3) circumstances un-
sionals envision the creation and preservation of
der which changes in established boundaries or
product information, both to the customer and along
relationships are necessary, (4) the effect of such
the reverse-logistics portion of the supply chain.P
boundary or relationship changes on the firm’s competi-
product velocity—Units sold per period.P tive position. The production cycle elements must expli-
production—The conversion of inputs into finished citly address the strategic implications of vertical
products.P integration in regard to (a) the direction of such expan-
sion, (b) the extent of the process span desired, and (c)
production activity control (PAC)—The function of routing
the balance among the resulting vertically linked
and dispatching the work to be accomplished through
activities.P
the production facility and of performing supplier con-
trol. PAC encompasses the principles, approaches, and production environment—Syn: manufacturing
techniques needed to schedule, control, measure, and environment.P
evaluate the effectiveness of production operations. production forecast—A projected level of customer de-
See: shop floor control.P mand for a feature (option, accessory, etc.) of a make-
production and inventory management—General term to-order or an assemble-to-order product. Used in two-
referring to the body of knowledge and activities con- level master scheduling, it is calculated by netting cus-
cerned with planning and controlling rates of purchas- tomer backlog against an overall family or product line
ing, production, distribution, and related capacity master production schedule and then factoring this
resources to achieve target levels of customer service, product’s available-to-promise by the option percentage
backlogs, operating costs, inventory investment, manu- in a planning bill of material. See: assemble-to-order,
facturing efficiency, and ultimately, profit and return on planning bill of material, two-level master schedule.P
investment.P production kanban—A signal, usually a card, used to
production and operations management (POM)— trigger the production of a part.P
Managing an organization’s production of goods or ser- production lead time—Syn: manufacturing lead time.P
vices; managing the process of taking inputs and creat-
production level—Syn: production rate.P
ing outputs.P
production leveling—Syn: level production method.P
production calendar—Syn: manufacturing calendar.P
production line—A series of pieces of equipment dedi-
production capability—1) The highest sustainable output
cated to the manufacture of a specific number of prod-
rate that could be achieved for a given product mix, raw
ucts or families.P
materials, worker effort, plant, and equipment. 2) The
collection of personnel, equipment, material, and production lot—A group of material that is processed in
process segment capabilities. 3) The total of the current one stage of production and put in inventory for further
committed, available, and unattainable capability of the production (or for shipment to customers).P
production facility. The capability includes the capacity
production management—1) The planning, scheduling,
of the resource.P
execution, and control of the process of converting in-
puts into finished goods. 2) A field of study that focuses of its primary purposes is to establish production rates
on the effective planning, scheduling, use, and control that will achieve management’s objective of satisfying
of a manufacturing organization through the study of customer demand by maintaining, raising, or lowering
concepts from design engineering, industrial engineer- inventories or backlogs, while usually attempting to
ing, management information systems, quality man- keep the workforce relatively stable. Because this plan
agement, inventory management, accounting, and other affects many company functions, it is normally prepared
functions as they affect the transformation process.P with information from marketing and coordinated with
production reporting and status control—A vehicle to productivity. See: efficiency, labor productivity, machine
provide feedback to the production schedule and allow productivity, utilization. 2) In economics, the ratio of
for corrective action and maintenance of valid on-hand output in terms of dollars of sales to an input such as
and on-order balances. Production reporting and status direct labor in terms of the total wages. This is called
control normally include manufacturing order authoriza- single factor productivity or partial factor productivity.P
tion, release, acceptance, operation start, delay report-
ing, move reporting, scrap and rework reporting, order product layout—Layout of resources arranged sequen-
close-out, and payroll interface. Syn: manufacturing or-
der reporting, shop order reporting.P
tially based on the product’s routing.P
product-mix flexibility—The ability to change over quickly product structure—The sequence of operations that
to other products produced in a facility, as required by components follow during their manufacture into a
demand shifts in mix.P product. A typical product structure would show raw ma-
terial converted into fabricated components, compo-
product number—Syn: item number.P
nents put together to make subassemblies,
product or service liability—The obligation of a company subassemblies going into assemblies, and so forth.P
to make restitution for loss related to personal injury,
profit margin—1) The difference between the sales and program manager—A person assigned program man-
cost of goods sold for an organization, sometimes ex- agement responsibilities for the implementation activi-
pressed as a percentage of sales. 2) In traditional ac- ties associated with a new or ongoing product or service
counting, the product profit margin is the product selling offering to customers. See: program management.P
price minus the direct material, direct labor, and allo-
progressive operations—Passing work from station to
cated overhead for the product, sometimes expressed
station.P
as a percentage of selling price.P
finition, external and internal design, construction, sys- and minimizing the likelihood and effect of negative
tem test, and implementation and maintenance), whose events.P
definition is determined by the needs of those control-
project schedule—In project management, a list of activ-
ling the project.P
ities and their planned completion dates that collective-
project management—The use of skills and knowledge ly achieve project milestones.P
in coordinating the organizing, planning, scheduling, di-
project scope—In project management, the work re-
project management team—In project management, the project team directory—A list of team member names,
personnel assigned to a project who are directly in- roles, and communication information.P
volved in management activities.P
promissory note—An agreement to pay a stipulated
project manufacturing—A type of manufacturing process amount during an agreed time period.P
used for large, often unique, items or structures that
promotion—One of the four Ps (product, price, place,
require a custom design capability (engineer-to-order).
and promotion) that constitute the set of tools used to
This type of process is highly flexible and can cope with
direct the business offering to the customer. Promotion
a broad range of product designs and design changes.
is the mechanism whereby information about the prod-
Product manufacturing usually uses a fixed-position
uct offering is communicated to the customer and in-
type layout. See: batch (fourth definition), continuous
cludes public relations, advertising, sales promotions,
production, job shop (second definition), process manu-
and other tools used to persuade customers to pur-
facturing, project, repetitive manufacturing.P
chase the product offering. See: four Ps.P
project model—A time-phased project planning and con-
promotional product—A product that is subject to wide
trol tool that itemizes major milestones and points of
fluctuations in sales because it is usually sold at a re-
user approval.P
duced price or with some other sales incentive.P
project network—A diagram showing the technological
proof of delivery—Carrier’s records indicating the person
relationships among activities in a project.P
signing for delivery with the date, time, and other re-
project phase—In project management, a set of related lated information.P
project activities that usually go together to define a
proportional rate—A lower rate given to specific parts of
project deliverable.P
a shipment, instead of the entire rate being charged for
project plan—In project management, a document that only one part of the shipment.P
has been approved by upper management that is to be
proprietary assembly—An assembly designed by a man-
used in executing and controlling a project. It docu-
ufacturer that may be serviced only with component
ments assumptions, facilitates communication, and
parts supplied by the manufacturer and whose design is
documents the approved budget and schedule. It may
owned or licensed by its manufacturer.P
exist at a summary or a detailed level.P
proprietary data—Any financial, technical, or other in-
project production—Production in which each unit or
formation developed at the expense of the person or
small group of units is managed by a project team
other entity submitting it, deemed to be of strategic or
created especially for that purpose.P
tactical importance to the company. It may be offered to
project risk management—In project management, a customers on a restricted-use basis.P
systematic process of controlling project risk. It includes
protection time—Syn: safety lead time.P
maximizing the likelihood and effect of positive events
protective capacity—The resource capacity needed to phantom bill of material, planning bill of material, super
protect system throughput—ensuring that some capacity bill of material.P
above the capacity required to exploit the constraint is
psychographics—The grouping of consumers according
available to catch up when disruptions inevitably occur.
to their behavior patterns and lifestyles.P
Nonconstraint resources need protective capacity to
rebuild the bank in front of the constraint or capacity- public key—In information systems, a system where one
constrained resource (CCR) and/or on the shipping person holds a private key (an encryption code defining
dock before throughput is lost and to empty the space
buffer when it fills.P
access rights) but shares another key with a set of
people with whom that person will communicate. See:
private key.P
P
protective inventory—In the theory of constraints, the
amount of inventory required relative to the protective publicly traded corporation—A corporation whose stock
capacity in the system to achieve a specific throughput is available on a national exchange.P
rate at the constraint. See: limiting operation.P public ownership—A business formed under law as a
separate legal entity and where stock is publicly traded.
protective packaging—Wrapping or covering of material
See: partnership, private ownership.P
that provides containment, protection, and identifica-
tion of inventory in a warehouse. The material must be public-private partnering—Cooperation between a gov-
contained in such a way that will support movement ernment entity and one or more private enterprises to
and storage and will fit into the dimension of storage perform work or utilize facilities.P
space and transportation vehicles.P public relations—The function that oversees a program
protocol—In information systems, a set of rules for de- to earn public understanding and acceptance.P
fining the format and relationships for sharing informa- public warehouse—The warehouse space that is rented
tion between devices. These rules govern the or leased by an independent business providing a varie-
transmission of data across a network and serve as the ty of services for a fee or on a contract basis.P
grammar of data communication languages.P
pull signal—Any signal that indicates when to produce or
prototype—1) A product model constructed for testing transport items in a pull replenishment system. For ex-
and evaluation to see how the product performs before ample, in just-in-time production control systems, a
releasing the product to manufacture. 2) Model consist- kanban card is used as the pull signal to replenish parts
ing of all files and programs needed for a business to the using operation. See: pull system.P
application.P
pull system—1) In production, the production of items
prototyping—1) A specialized product design and devel- only as demanded for use or to replace those taken for
opment process for developing a working model of a use. See: pull signal. 2) In material control, the with-
product. 2) A specialized system development process drawal of inventory as demanded by the using opera-
for performing a determination where user needs are tions. Material is not issued until a signal comes from
extracted, presented, and developed by building a work- the user. 3) In distribution, a system for replenishing
ing model of the system. Generally, these tools make it field warehouse inventories where replenishment deci-
possible to create all files and processing programs sions are made at the field warehouse itself, not at the
needed for a business application in a matter of days or central warehouse or plant.P
hours for evaluation purposes.P pull-through distributions—Supply chain activities that
provisioning—The process of identifying and purchasing are started by the consumer. Instead of the manufac-
the support items and determining the quantity of each turer “pushing” products to stores, in a pull-through dis-
support item necessary to operate and maintain a tribution consumers purchase items, which signals the
system.P manufacturer to produce more of that product. This is
effectively the consumer “pulling” products to the
proxy—1) A written document authorizing an agent to store.P
vote a shareholder’s stock at a shareholder meeting. 2)
The agent designated in 1).P punitive damages—The money awarded a plaintiff, not
as payment for the plaintiff ’s losses, but as punishment
PRT—Abbreviation for prerequisite tree.P for the defendant’s conduct.P
pseudo bill of material—An artificial grouping of items pup—A 28-foot trailer, usually used in trucking
that facilitates planning. See: modular bill of material, enterprises.P
purchase consolidation—The pooling of purchasing re- pure monopoly—A market in which only one firm pro-
quirements by multiple areas in a company, or even vides a particular product or service within a given area.
across companies.P The monopoly may be regulated or unregulated. See:
industry structure types.P
purchased part—An item sourced from a supplier.P
pure oligopoly—A market in which a few companies pro-
purchase order—The purchaser’s authorization used to
duce essentially the same product or service and mar-
formalize a purchase transaction with a supplier. A pur-
purchasing capacity—The act of buying capacity or ma- put-away—Removing the material from the dock (or oth-
chine time from a supplier. A company can then sche- er location of receipt), transporting the material to a sto-
dule and use the capacity of the machine or a part of rage area, placing that material in a staging area and
the capacity of the machine as if it were in its own then moving it to a specific location, and recording the
plant.P movement and identification of the location where the
material has been placed.P
purchasing lead time—The total lead time required to
obtain a purchased item. Included here are order prep- put-away time—The lead time between when a raw ma-
aration and release time; supplier lead time; transporta- terial or component arrives and when the items are
tion time; and receiving, inspection, and put-away time. available in the store. Syn: dock-to-stock time.P
See: lead time, supplier lead time, time-to-product.P put-to-light—A process that uses lights to ensure mate-
purchasing performance measurement—Syn: supplier rials are placed in the correct locations. Also, it is used
measurement.P to ensure that picked items are placed correctly.P
purchasing unit of measure—Syn: unit of measure (pur- pyramid forecasting—A forecasting technique that
chasing).P enables management to review and adjust forecasts
made at an aggregate level and to keep lower level
pure competition—A market in which many competitors
forecasts in balance. The procedure begins with the roll
offer undifferentiated products or services within a giv-
up (aggregation) of item forecasts into forecasts by
en geographical area. Competitors are forced to accept
product group. The management team establishes a
the market price for their product. See: industry struc-
(new) forecast for the product group. The value is then
ture types.P
forced down (disaggregation) to individual item fore-
casts so that they are consistent with the aggregate satisfaction with a product’s characteristics and
plan. The approach combines the stability of aggregate features.Q
forecasts and the application of management judgment
quality assurance/control—Two terms that have many
with the need to forecast many end items within the
interpretations because of the multiple definitions for
constraints of an aggregate forecast or sales plan. See:
the words “assurance” and “control.” For example,
management estimation, planning bill of material,
“assurance” can mean the act of giving confidence, the
product group forecast.P
state of being certain, or the act of making certain;
“control” can mean an evaluation to indicate needed Q
Q corrective responses, the act of guiding, or the state of
a process in which the variability is attributable to a
constant system of chance causes. One definition of
QCD—Abbreviation for quality, cost, delivery.Q quality assurance is all the planned and systematic
Q chart—A control chart for evaluating the stability of a activities implemented within the quality system that
process in terms of a quality score. The quality score is can be demonstrated to provide confidence that a good
the weighted sum of the count of events of various or service will fulfill requirements for quality. One
classifications, where each classification is assigned a definition for quality control is the operational
weight. Syn: quality chart, quality score chart.Q techniques and activities used to fulfill requirements for
quality. Often, however, quality assurance and quality
QFD—Abbreviation for quality function deployment.Q control are used interchangeably, referring to the
actions performed to ensure the quality of a good,
QRM—Abbreviation for quick-response manufacturing.Q
service, or process. See: quality control.Q
QRP—Abbreviation for quick-response program.Q
quality at the source—A producer’s responsibility to pro-
QS 9000—A variation of ISO 9000 certification with vide 100 percent acceptable quality material to the
additional requirements tailored for the automobile consumer of the material. The objective is to reduce or
industry, including suppliers. QS 9000 is being eliminate shipping or receiving quality inspections and
superseded by ISO/ TS 16949, which incorporates line stoppages as a result of supplier defects.Q
many European standards. See: ISO 9000, ISO/TS
quality audit—A systematic, independent examination
16949.Q
and review to determine whether quality activities and
qualifiers—Syn: order qualifiers. See: order losers, order related results comply with planned arrangements and
winners.Q whether these arrangements are implemented effec-
tively and are suitable to achieve the objectives.Q
qualitative forecasting techniques—An approach to fo-
recasting that is based on intuitive or judgmental evalu- quality characteristic—A property of a product or service
ation. It is used generally when data are scarce, not that is important enough to count or measure. See: per-
available, or no longer relevant. Common types of qua- formance measurement system.Q
litative techniques include: personal insight, sales force quality chart—Syn: Q chart.Q
estimates, panel consensus, market research, visionary
forecasting, and the Delphi method. Examples include quality circle—A small group of people who normally
developing long-range projections and new product in- work as a unit and meet frequently to uncover and solve
troduction.Q problems concerning the quality of items produced,
process capability, or process control. Syn: quality con-
quality—Conformance to requirements or fitness for trol circle. See: small group improvement activity.Q
use. Quality can be defined through five principal ap-
proaches: (1) Transcendent quality is an ideal, a condi- quality control—The process of measuring quality
tion of excellence. (2) Product-based quality is based on conformance by comparing the actual with a standard
a product attribute. (3) User-based quality is fitness for for the characteristic and acting on the difference. See:
use. (4) Manufacturing-based quality is conformance to quality assurance/control.Q
requirements. (5) Value-based quality is the degree of quality control circle—Syn: quality circle.Q
excellence at an acceptable price. Also, quality has two
quality, cost, delivery (QCD)—Key measurements of cus-
major components: (1) quality of conformance—quality
tomer satisfaction. Kaizen activity strives to improve
is defined by the absence of defects, and (2) quality of
these measurements.Q
design—quality is measured by the degree of customer
quality costs—The overall costs associated with preven- quality tree—An analytical tool that visualizes that quali-
tion activities and the improvement of quality through- ty is composed of four layers of achievement: (1) in-
out the firm before, during, and after production of a spection, (2) process measurement and improvement,
product. These costs fall into four recognized catego- (3) process control, and (4) design for quality.Q
ries: internal failure costs, external failure costs, ap-
quality trilogy—A three-pronged approach to managing
praisal costs, and prevention costs. Internal failure
quality proposed by Joseph Juran. The three legs are
costs relate to problems before the product reaches the
queue management—Tactics to deal with an excess quotation—A statement of price, terms of sale, and de-
number of items, such as products or customers, wait- scription of goods or services offered by a supplier to a
ing in line for service.Q prospective purchaser; a bid. When given in response to
an inquiry, it is usually considered an offer to sell. See:
queue ratio—The ratio of the hours of slack within the
bid.Q
job to the queue originally scheduled.Q
quotation expiration date—The date on which a quoted
R
queue time—The amount of time a job waits at a work price is no longer valid.Q
center before setup or work is performed on the job.
R
Queue time is one element of total manufacturing lead
time. Increases in queue time result in direct increases
to manufacturing lead time and work-in-process
inventories.Q rack—A storage device for handling material in pallets. A
rack usually provides storage for pallets arranged in ver-
queuing analysis—The study of waiting lines. See:
tical sections with one or more pallets to a tier. Some
queuing theory.Q
racks accommodate more than one-pallet-deep
queuing theory—The collection of models dealing with storage.R
waiting line problems; for example, problems for which racking—A function performed by a rack-jobber, a full-
customers or units arrive at some service facility at function intermediary who performs all regular ware-
which waiting lines or queues may build. Syn: waiting housing functions and some retail functions, typically
line theory. See: queuing analysis.Q stocking a display rack.R
quick asset ratio—A measure of a firm’s financial stabili- radio frequency identification (RFID)—A system using
ty. It is defined as (current assets – inventory)/current electronic tags to store data about items. Accessing
liabilities. A value greater than one is desirable. Syn: these data is accomplished through a specific radio fre-
quick ratio, acid test, acid test ratio.Q quency and does not require close proximity or line-of-
sight access for data retrieval. See: active tag, passive
quick changeover—The ability to shorten machine se-
tag, semi-passive tag.R
tups between different machine operation requirements
to increase process flexibility. Most concentration is on RAM—Abbreviation for responsibility assignment
reducing external setup time first, then on internal se- matrix.R
tup issues. This reduces economic order quantity, ramp rate—The speed at which a company expands or
queue and manufacturing lead times, and work in grows. Syn: growth trajectory.R
process inventory; it improves quality, process, and ma-
terial flows.Q R&D—Abbreviation for research and development.R
R&D order—Syn: experimental order.R
quick ratio—Syn: quick asset ratio.Q
random access—A manner of storing records in a com-
quick-response manufacturing (QRM)—A manufacturing
puter file so that an individual record may be accessed
technique based on time-based competition to drive
without reading other records.R
continuous improvement. With its roots in the strategies
adopted by the Japanese in the 1980s and developed random cause—Syn: common causes.R
further by the University of Wisconsin, quick-response random component—A component of demand usually
manufacturing focuses on the relentless pursuit of lead describing the impact of uncontrollable variation on
time reduction. Using manufacturing resources planning demand. See: decomposition, time series analysis.R
for higher-level planning, it often uses a replenishment
random events—1) occurrences that have no discerna-
technique called paired-cell overlapping loops of cards,
ble pattern. 2) In statistics, unexplained movements oc-
which combines the best of push and pull strategies.
curring in historical (time series) data. See: random
See: paired-cell overlapping loops of cards.Q
variation.R
quick-response program (QRP)—A system of linking final
random-location storage—A storage technique in which
retail sales with production and shipping schedules
parts are placed in any space that is empty when they
back through the chain of supply; employs point-of-sale
arrive at the storeroom. Although this random method
scanning and electronic data interchange, and may use
requires the use of a locator file to identify part loca-
direct shipment from a factory to a retailer.Q
tions, it often requires less storage space than a fixed-
location storage method. Syn: floating inventory location rated capacity—The expected output capability of a re-
system, floating storage location. See: fixed-location source or system. Capacity is traditionally calculated
storage.R from such data as planned hours, efficiency, and utiliza-
tion. The rated capacity is equal to hours available ×
random numbers—A sequence of integers or group of
efficiency × utilization. Syn: calculated capacity, effec-
numbers (often in the form of a table) that show abso-
tive capacity, nominal capacity, standing capacity.R
lutely no relationship to each other anywhere in the se-
receipt—1) The physical acceptance of an item into a errors than another; management should instead im-
stocking location. 2) Often, the transaction reporting of prove the system, making it possible for everyone to
this activity.R achieve higher quality.R
receivables conversion period—The length of time re- redundancy—1) A backup capability, coming either from
quired to collect sales receipts. Syn: average collection extra machines or from extra components within a ma-
period.R chine, to reduce the effects of breakdowns. 2) The use
receiving—The function encompassing the physical re-
ceipt of material, the inspection of the shipment for
conformance with the purchase order (quantity and
of one or more extra or duplicating components in a
system or equipment (often to increase reliability).R R
redundant component—A backup part of a machine or
damage), the identification and delivery to destination, product.R
and the preparation of receiving reports.R
reference capacity model—A simulation model with ac-
receiving point—The location to which material is being
curate operational details and demand forecasts that
shipped. Ant: shipping point.R
can provide practical capacity utilization predictions.
receiving report—A document used by the receiving Various alternatives for system operation can be eva-
function of a company to inform others of the receipt of luated effectively.R
goods purchased.R
refurbished goods—Syn: remanufactured parts.R
recency, frequency, monetary (RFM)—Giving customers
refurbished parts—Syn: remanufactured parts.R
the highest rating who have bought recently, bought
many times, and bought in large amounts.R regen—Slang abbreviation for regeneration MRP.
reconciling inventory—Comparing the physical inventory Pronounced “ree-jen.”R
figures with the perpetual inventory record and making regeneration MRP—An MRP processing approach where
any necessary corrections.R the master production schedule is totally reexploded
reconsignment—Permission by a carrier to alter the down through all bills of material, to maintain valid
destination and/or consignee after the shipment has priorities. New requirements and planned orders are
reached its original destination.R completely recalculated or “regenerated” at that time.
Ant: net change MRP.R
record—1) A collection of data fields arranged in a pre-
defined format. 2) A set of related data that a computer registration to standards—A process in which an accre-
program treats as a unit.R dited, independent third-party organization conducts an
on-site audit of a company’s operations against the re-
record accuracy—A measure of the conformity of rec-
quirements of the standard to which the company
orded values in a bookkeeping system to the actual val-
wants to be registered. Upon successful completion of
ues; for example, the on-hand balance of an item
the audit, the company receives a certificate indicating
maintained in a computer record relative to the actual
that it has met the standard requirements.R
on-hand balance of the items in the stockroom.R
recovery time—In periods of insufficient capacity, jobs regression analysis—A statistical technique for deter-
back up indefinitely. This leads to increased lead times mining the best mathematical expression describing the
and missed due dates. Recovery time is a period of time functional relationship between one response and one
when capacity exceeds demand to allow the system to or more independent variables. See: least-squares
empty out. If there is not enough recovery time before method.R
the next episode of insufficient capacity, in-process in- regularized schedule—A schedule having certain items
ventory and lead times continue to grow.R produced at regular intervals.R
recycle—1) The reintroduction of partially processed
rejected inventory—Inventory that does not meet quality
product or carrier solvents from one operation or task
requirements but has not yet been sent to rework,
into a previous operation. 2) A recirculation process.R
scrapped, or returned to a supplier.R
red bead experiment—An experiment developed by W.
rejection—The act of identifying an item as not meeting
Edwards Deming to illustrate the impossibility of putting
quality specifications.R
employees in rank order of performance. The experi-
ment shows that it would be a waste of management’s relational database—A software program that allows us-
time to try to find out why one worker produced more ers to obtain information drawn from two or more data-
bases that are made up of two-dimensional arrays of ronment where worn-out products are restored to like-
data.R new condition.R
relationship map—A graphic map of the relationship be- remanufacturing resource planning—A manufacturing
tween the business functions. It shows the inputs and resource planning system designed for remanufacturing
outputs flow across functions. It is useful to show how facilities.R
processes are currently performed, disconnections in
remedial maintenance—Unscheduled maintenance per-
relationships between functions represented by boxes remote diagnostics—The capability of determining the
in the map.R cause of a problem from an off-site location.R
relationship marketing—A form of target marketing in reneging—A queuing theory term for leaving a line after
which the type and time of communications are deter- entering it but before receiving service. See: balking.R
mined by the customer. Syn: permission marketing.R reorder cycle—Syn: replenishment lead time.R
release—The authorization to produce or ship material reorder point—Syn: order point.R
that has already been ordered.R
reorder quantity—1) In a fixed-reorder quantity system of
released order—Syn: open order.R inventory control, the fixed quantity that should be or-
dered each time the available stock (on-hand plus on-
release-to-start manufacturing—The time it takes from
order) falls to or below the reorder point. 2) In a variable
when an order is released until the beginning of the
reorder quantity system, the amount ordered from time
manufacturing process. This delay occurs because of
period to time period will vary. Syn: replenishment order
the movement of materials and the changing of lines. It
quantity.R
is non-productive time that increases lead time.R
repairables—Items that are technically feasible to repair
relevant costs—Those costs incurred because of a deci-
economically.R
sion. The costs would not have resulted unless the de-
cision was made and implemented. They are relevant to repair bill of material—In remanufacturing, the bill of
the decision.R material defining the actual work required to return a
product to service. This bill is constructed based on in-
relevant range—The range of activity planned for a
spection and determination of actual requirements.
firm.R
See: disassembly bill of material.R
reliability—The probability that a product will perform its repair factor—The percentage of time on average that
specified function under prescribed conditions without an item must be repaired for return to a serviceable
failure for a specified period of time. It is a design pa- condition. The repair factor is also expressed as a per-
rameter that can be made part of a requirements centage applied to the quantity per assembly on the bill
statement. See: mean time between failures, mean of material. It is useful for forecasting materials and ca-
time for failures.R pacity requirements for planning purposes. Syn: fre-
reliability engineering—The function responsible for the quency of repair. See: occurrence factor, replacement
determination and application of appropriate reliability factor.R
tasks and criteria during the design, development, repair order—Syn: rework order.R
manufacture, test, and support of a product that will
result in achieving of the specified product reliability.R repair parts—Syn: service parts.R
remanufactured parts—Components or assemblies that repair parts demand—Syn: service parts demand.R
are refurbished or rebuilt to perform the original func- repeatability of measurement—The variation in mea-
tion. Syn: refurbished goods, refurbished parts.R surements obtained when one measurement instru-
ment is used several times by an appraiser while
remanufacturing—1) An industrial process in which
measuring the identical characteristic on the same
worn-out products are restored to like-new condition. In
part.R
contrast, a repaired product normally retains its identity,
and only those parts that have failed or are badly worn repetitive industries—The group of manufacturers that
are replaced or serviced. 2) The manufacturing envi- produce high-volume, low-variety products such as
spark plugs, lawn mowers, and paper clips. See: repeti- replenishment lead time—The total period of time that
tive manufacturing.R elapses from the moment it is determined that a prod-
uct should be reordered until the product is back on the
repetitive manufacturing—The repeated production of
shelf available for use. Syn: reorder cycle.R
the same discrete products or families of products.
Repetitive methodology minimizes setups, inventory, replenishment order quantity—Syn: reorder quantity.R
and manufacturing lead times by using production lines,
replenishment period—The time between successive
assembly lines, or cells. Work orders are no longer ne-
cessary; production scheduling and control are based
on production rates. Products may be standard or as-
replenishment orders. Syn: replenishment interval. See:
review period.R R
sembled from modules. Repetitive is not a function of reprocessed material—Goods that have gone through
speed or volume. Syn: repetitive process, repetitive pro- selective rework or recycle.R
duction. See: project manufacturing.R
reproducibility—A production program’s ability to regu-
repetitive process—Syn: repetitive manufacturing.R larly produce products of the correct quantity and
quality.R
repetitive production—Syn: repetitive manufacturing.R
replacement cost—A method of setting the value of in- request for information (RFI)—An inquiry to a potential
ventories based upon the cost of the next purchase.R supplier about that supplier’s product or service for po-
tential use in the business. The inquiry can provide cer-
replacement cost systems—A method of inventory valu- tain business requirements or be of a more general
ation that assigns an item cost based on the next item exploratory nature. See: request for proposal (RFP).R
price incurred.R
request for proposal (RFP)—A document used to solicit
replacement factor—The percentage of time on average vendor responses when the functional requirements
that an item will require replacement. The replacement and features are known but no specific product is in
factor is also expressed as a percentage applied to the mind. Syn: invitation for bid (IFB). See: request for in-
quantity per assembly on the bill of material. It is useful formation (RFI).R
for forecasting materials and capacity requirements for
planning purposes. See: occurrence factor, repair request for quote (RFQ)—A document used to solicit
factor.R vendor responses when a product has been selected
and price quotations are needed from several
replacement order—An order for the replacement of ma- vendors.R
terial that has been scrapped.R
required capacity—Syn: capacity required.R
replacement parts—Parts that can be used as substi-
tutes that differ from completely interchangeable ser- requirements definitions—Specifying the inputs, files,
vice parts in that they require some physical processing, and outputs for a new system, but without
modification (e.g., boring, cutting, drilling) before they expressing computer alternatives and technical
can replace the original part.R details.R
replan cycle—The time it takes to implement a new pro- requirements explosion—The process of calculating the
duction plan into the plant’s actual production plan. demand for the components of a parent item by multip-
Done after completion of the last cycle and is a rolling lying the parent item requirements by the component
document.R usage quantity specified in the bill of material. Syn:
explosion.R
replanning frequency—In an MRP system, the amount of
time between successive runs of the MRP model. If the requirements traceability—The capability to determine
planner does not run MRP frequently enough, the ma- the source of demand requirements through record lin-
terial plan becomes inaccurate as material require- kages. It is used in analyzing requirements to make ad-
ments and inventory status change with the passage of justments to plans for material or capacity. See:
time.R pegging.R
rescheduling—The process of changing order or opera- useful for plan resource schedules, including human
tion due dates, usually as a result of their being out of resources.R
phase with when they are needed.R
resource calendar—A calendar of working days and
rescheduling assumption—A fundamental assumption nonworking days that shows when resources are idle.
of MRP logic that existing open orders can be resche- Typically, the calendar includes holidays and weekends.
duled in nearer time periods far more easily than new See: manufacturing calendar.R
and professional employees; information; knowledge; percentage based on retail markup to the retail price, to
and capital. Syn: integrated resource management.R determine its inventory value based on cost.R
resource planning—Capacity planning conducted at the retainage—A percentage of a contract value that is
business plan level. The process of establishing, mea- withheld pending project completion and approval.R
suring, and adjusting limits or levels of long-range ca-
retention efficiency—In marketing, a measurement of
pacity. Resource planning is normally based on the
how well a company creates repeat customers.R
production plan but may be driven by higher level plans
beyond the time horizon for the production plan (e.g.,
the business plan). It addresses those resources that
retirement of debt—The termination of a debt obligation
by appropriate settlement with the lender. Understood
R
take long periods of time to acquire. Resource planning to be in full amount unless partial settlement is
decisions always require top management approval. specified.R
Syn: resource requirements planning. See: capacity retrofit—An item that replaces components originally
planning, long-term planning.R installed on equipment; a modification to in-service
resource profile—The standard hours of load placed on equipment.R
a resource by time period. Production lead-time data return disposal costs—The costs that occur from dis-
are taken into account to provide time-phased projec- carding or recycling products that are returned because
tions of the capacity requirements for individual produc- they have reached the end of their useful life or are ob-
tion facilities. See: bill of resources, capacity planning solete. Commonplace in consumer goods industry.R
using overall factors, product load profile, rough-cut ca-
pacity planning.R return goods handling—The work a company puts into
accepting returned goods from their customers.R
resource requirements planning—Syn: resource
planning.R return material authorization (RMA)—1) A form that
must be completed that describes the product returned
response time—The elapse of time or average delay be- and why it was returned. 2) A number given to authorize
tween the initiation of a transaction and the results of the acceptance of returned items. 3) Should require
the transaction.R signatory authorization to return the goods.R
responsibility assignment matrix (RAM)—A tool to ensure return merchandise authorization—Syn: return material
that each component of work in a project is assigned to authorization.R
a responsible person.R
return on assets (ROA)—Net income for the previous 12
responsible landfill—Landfill operations designed to turn months divided by total assets. See: return on owner’s
waste into recoverable resources, minimize the amount equity (ROE).R
of space consumed, and maximize the operational life
return on investment (ROI)—A relative measure of finan-
of the landfill.R
cial performance that provides a means for comparing
responsible procurement—Assuring the use of ethical various investments by calculating the profits returned
sources of goods and services to bring about a positive during a specified time period. In the theory of con-
impact and minimize the negative impact on societies straints, ROI is calculated as throughput minus operat-
and environments, including reduce, reuse, and recycle ing expense divided by investment.R
of materials, where a firm does business. It includes return on net assets—Profit divided by assets excluding
processes for identifying, assessing, and managing the depreciation.R
environmental, social, and ethical risk in the supply
chain. Syn: environmentally responsible purchasing.R return on owner’s equity (ROE)—A financial measure-
ment of how successful a company is in creating in-
responsiveness—A dimension of service quality referring come for the owners of the organization. A comparison
to the promptness and helpfulness in providing a of the ROE with the ROA indicates the effectiveness of
service.R financial leverage employed by the firm. The measure-
retailer—A business that takes title to products and re- ment is calculated by dividing the net income by aver-
sells them to final consumers.R age owner’s equity. See: return on assets (ROA).R
returns management process—A process of handling rework lead time—The time required to rework material
returns that includes environmentally sound disposal or in-house or at a supplier’s location.R
recycling, composing repair instructions, warranty re-
rework order—A manufacturing order to rework and sal-
pairs, and collecting return data.R
vage defective parts or products. Syn: repair order,
returns processing cost—All of the costs associated with spoiled work order.R
dealing with returned items after they have been re- RFID—Abbreviation for radio frequency identification.R
reverse logistics—A complete supply chain dedicated to risk avoidance—Changing a plan to eliminate a risk or to
the reverse flow of products and materials for the protect plan objectives from its impact.R
purpose of returns, repair, remanufacture, and/or risk breakdown structure—A tool that helps identify po-
recycling.R tential project risks, organized by risk categories and
subcategories.R
reverse logistics service—A service that arranges for the
disposal of returned products.R risk category—A cluster of risk causes with a label such
as external, environmental, technical, or
reverse supply chain—The planning and controlling of
organizational.R
the processes of moving goods from the point of con-
sumption back to the point of origin for repair, reclama- risk management planning—The process of defining
tion, recycling, or disposal. See: reverse logistics.R how to identify and minimize risk factors for a project.R
review period—The time between successive evalua- risk mitigation—Reducing the exposure to risk, either by
tions of inventory status to determine whether to reord- its likelihood or its impact.R
er. See: replenishment period.R risk pooling—A method often associated with the man-
agement of inventory risk. Manufacturers and retailers
revision level—A number or letter representing the num-
that experience high variability in demand for their
ber of times a part drawing or specification has been
products can pool together common inventory compo-
changed.R
nents associated with a broad family of products to buf-
rework—Reprocessing to salvage a defective item or fer the overall burden of having to deploy inventory for
part.R each discrete product.R
risk register—A report that has summary information on RORO—Acronym for roll-on/roll-off container ship.R
qualitative risk analysis, quantitative risk analysis, and
rough-cut capacity planning (RCCP)—The process of
risk response planning. This register contains all identi-
converting the master production schedule into re-
fied risks and associated details.R
quirements for key resources, often including labor;
risk response plan—A document defining known risks machinery; warehouse space; suppliers’ capabilities;
including description, cause, likelihood, costs, and pro- and, in some cases, money. Comparison to available or
posed responses. It also identifies current status on
each risk.R
risk response planning—The process of developing a
demonstrated capacity is usually done for each key re-
source. This comparison assists the master scheduler in
establishing a feasible master production schedule.
R
plan to avoid risks and to mitigate the effect of those Three approaches to performing RCCP are the bill of
that cannot be avoided.R labor (resources, capacity) approach, the capacity plan-
ning using overall factors approach, and the resource
RMA—Abbreviation for return material authorization.R profile approach. See: bill of resources, capacity plan-
ROA—Abbreviation for return on assets.R ning, capacity planning using overall factors, product
load profile, resource profile.R
robotics—Replacing activities previously performed by
humans with mechanical devices or robots that can be route sheet—Syn: routing.R
either operated by humans or run by computer. Difficult-
routing—1) Information detailing the method of manu-
to-do, dangerous, or monotonous tasks are likely candi-
facture of a particular item. It includes the operations to
dates for robots to perform.R
be performed, their sequence, the various work centers
robust design—Type of design for a product or service involved, and the standards for setup and run. In some
that plans for intended performance even in the face of companies, the routing also includes information on
a harsh environment.R tooling, operator skill levels, inspection operations and
robustness—The condition of a product or process de- testing requirements, and so on. Syn: bill of operations,
sign that remains relatively stable with a minimum of instruction sheet, manufacturing data sheet, operation
variation even though factors that influence operations chart, operation list, operation sheet, route sheet,
or usage, such as environment and wear, are constantly routing sheet. See: bill of labor, bill of resources. 2) In
changing.R information systems, the process of defining the path a
message will take from one computer to another
ROE—Abbreviation for return on owner’s equity.R computer.R
ROI—Abbreviation for return on investment.R
routing sheet—Syn: routing.R
rolling forecast—Moving the forecast horizon forward to
run—A quantity of production being processed.R
new periods by adding recent data (and perhaps drop-
ping the oldest data).R run chart—A graphical technique that illustrates how a
process is performing over time. By statistically
rolling wave planning—A form of planning where the
analyzing a run chart, a process can be determined to
work to be performed in the near term is planned in de-
be under or out of control. The most common types of
tail and longer term work is planned at a lesser level of
data used to construct the charts are ranges, averages,
detail.R
percentages/counts, and individual process attributes
roll-on/roll-off container ship—A ship that allows trailers (e.g., temperature). Syn. run diagram. See: C chart, P
to be driven on and off without the use of cranes.R chart, R chart, U chart, X-bar chart.R
root cause analysis—Analytical methods to determine run diagram—Syn: run chart.R
the core problem(s) of an organization, process, prod-
uct, market, and so forth. See: current reality tree, five running sum of forecast errors—The arithmetic sum of
whys, stratification analysis.R the differences between actual and forecasted demand
for the periods being evaluated.R
rope—One of the three devices required for proper
management of operations. (The other two are drum run order—Syn: manufacturing order.R
and buffer.) The rope is the information flow from the run-out list—1) A list of items to be scheduled into pro-
drum to the front of the line (material release), which duction in sequence by the dates at which the present
chokes the release of materials to match the flow available stock is expected to be exhausted. 2) A
through the constraint.R statement of ingredients required to use up an available
resource (e.g., how much “a” resource is required to safety stock—1) In general, a quantity of stock planned
consume 300 pounds of “x”).R to be in inventory to protect against fluctuations in de-
mand or supply. 2) In the context of master production
run-out method—A method of assigning available pro-
scheduling, the additional inventory and capacity
duction or storage capacity to products based on the
planned as protection against forecast errors and short-
product’s demand and inventory level.R
term changes in the backlog. Overplanning can be used
run sheet—A log-type document used in continuous to create safety stock. Syn: buffer stock, reserve stock.
make-to-order products, it can also take the place of an sample—A portion of a universe of data chosen to esti-
end item part number by becoming the control number mate some characteristics about the whole universe.
that is scheduled through the finishing operations.S The universe of data could consist of sizes of customer
orders, number of units of inventory, number of lines on
sales plan—A time-phased statement of expected cus-
a purchase order, and so forth.S
tomer orders anticipated to be received (incoming
sales, not outgoing shipments) for each major product sample average—A key measure that represents the
family or item. It represents sales and marketing man-
agement’s commitment to take all reasonable steps
necessary to achieve this level of actual customer or-
central tendency of a sample.S
sales planning—The process of determining the overall sampling—1) A statistical process where generalizations
sales plan to best support customer needs and opera- regarding an entire body of phenomena are drawn from
tions capabilities while meeting general business objec- a relatively small number of observations. 2) In market-
tives of profitability, productivity, competitive customer ing, the delivery of free trial goods to consumers.S
lead times, and so on, as expressed in the overall busi- sampling distribution—The distribution of values of a
ness plan. See: production planning, sales and opera- statistic calculated from samples of a given size.S
tions planning.S
sampling plan—Within acceptance sampling, the deter-
sales promotion—1) Sales activities that supplement mination of the sample size and the number of defec-
both personal selling and marketing, coordinate the tives that will trigger rejection of a lot.S
two, and help to make them effective (e.g., displays). 2)
More loosely, the combination of personal selling, ad- sawtooth diagram—A quantity-versus-time graphic
vertising, and all supplementary selling activities. 3) representation of the order point/order quantity
Promotion activities—other than advertising, publicity, inventory system showing inventory being received and
and personal selling—that stimulate interest, trial, or then used up and reordered.S
purchase by final customers or others in the marketing SBQ—Abbreviation for standard batch quantity.S
channel.S
SBT—Abbreviation for scan-based trading.S
sales quota—The level of sales that an individual or
group is expected to meet.S SBU—Abbreviation for strategic business unit.S
sales representative—An employee authorized to accept scalability—1) How effectively a company can grow its
a customer’s order for a product. Sales representatives business in order to meet demand. 2) How effectively
usually go to the customer’s location when industrial the solution to a problem can be scaled up as the prob-
products are being marketed.S lem’s size increases.S
salvage—Property that, because of its worn, damaged, scan-based trading (SBT)—As an item is sold, scanned
deteriorated, or incomplete condition or specialized na- information is sent to the manufacturer and creates a
ture has no reasonable prospect of sale or use as servi- replacement order of that item. Used often in large re-
ceable property without major repairs or alterations, but tail store chains as well as large volume product
that has some value in excess of its scrap value.S producers.S
salvage value—1) The cost recovered or that could be Scanlon plan—A system of group incentives on a
recovered from used property when removed, sold, or company-wide or plant-wide basis that sets up one
scrapped. A factor in appraisal of property value and in measure that reflects the results of all efforts. The uni-
computing depreciation. 2) The market value of a ma- versal standard is the ratio of labor costs to sales value
chine or facility at any point in time. Normally, an esti- added by production. If there is an increase in produc-
mate of an asset’s net value at the end of its estimated tion sales value with no change in labor costs, produc-
life.S tivity has increased while unit cost has decreased.S
scanner—An electronic device that optically converts scheduled downtime—Planned shutdown of equipment
coded information into electrical control signals for data or plant to perform maintenance or to adjust to soften-
collection or system transaction input.S ing demand.S
scarcity—A concept central to economics that means scheduled finish date—In project management, an activ-
less of a good is freely available than consumers would ity’s planned finish time, normally between the early
like.S finish time and the late finish time. It may reflect re-
scatter diagram—Syn: scatter chart.S schedule harmony—In supply chains, the arrival of
goods at a transfer point with a small buffer time in
scatterplot—Syn: scatter chart.S front of their departure via a different transportation
SCEM—Abbreviation for supply chain event mode.S
management.S schedule performance index (SPI)—Earned value (EV)
scenario forecasts—Plans for how an organization will divided by planned value (PV), which measures a
respond to anticipated future situations.S project’s schedule efficiency.S
scenario planning—A planning process that identifies scheduler—A general term that can refer to a material
critical events before they occur and use this knowledge planner, dispatcher, or a combined function.S
to determine effective alternatives.S schedule variance (SV)—Earned value (EV) minus
schedule—A timetable for planned occurrences (e.g., planned value (PV), which measures a project’s sche-
shipping schedule, master production schedule, main- dule performance.S
tenance schedule, supplier schedule). Some schedules scheduling—The act of creating a schedule, such as a
include the starting and ending time for activities (e.g., shipping schedule, master production schedule, main-
project schedule).S tenance schedule, or supplier schedule.S
schedule activity—During a project, a specific piece of scheduling algorithm—Syn: scheduling rules.S
work performed that has estimated costs, duration, and
resource requirements.S scheduling rules—Basic rules that can be used consis-
tently in a scheduling system. Scheduling rules usually
schedule board—Syn: control board.S specify the amount of time to allow for a move, queue,
schedule chart—Usually a large piece of graph paper load calculation, and so forth. Syn: scheduling
used in the same manner as a control board. Where the algorithm.S
control board often uses strings and markers to scientific inventory control—Syn: statistical inventory
represent plans and progress, the schedule chart is typ- control.S
ically filled in with pencil. See: control board.S
scientific management—Managing a production system
schedule control—Control of a plant floor by schedules using scientific principles. Usually refers to the prin-
rather than by job orders (called order control). ciples established by Frederick Taylor.S
Schedules are derived by taking requirements over a
scope—In project management, the totality of products
period of time and dividing by the number of workdays
to be created by a project.S
allowed to run the parts or assemblies. Production
completed is compared with the schedule to provide scope change—In project management, a change to a
control. This type of control is most frequently used in project’s scope, usually requiring an adjustment to the
repetitive and process manufacturing.S project’s budget and schedule.S
scope definition—In project management, subdividing a seasonal index—A number used to adjust data to sea-
project into smaller components to facilitate sonal demand. Syn: seasonal adjustment. See: base
management.S series.S
SCOR®—An acronym for Supply Chain Operations seasonal inventory—Inventory built up to smooth pro-
Reference-model.S duction in anticipation of a peak seasonal demand. Syn:
seasonal stock.S
S
scorecard—This is a performance measurement tool
used by a company that summarizes its key perfor- seasonality—A repetitive pattern of demand from year to
mance indicators. Another use of scorecard is to meas- year (or other repeating time interval) with some periods
ure the supply chain members and ensure that their considerably higher than others. Syn: seasonal varia-
performance is meeting company standards.S tion. See: base series.S
seiso—A term that states that a productive workplace is of sending material ahead is to reduce the manufactur-
found through cleanliness. See: five Ss.S ing lead time. See: overlapped schedule.S
seiton—A term that refers to neatness in the workplace sensei—A Japanese word meaning teacher or one with
that is achieved by straightening offices and work experience.S
areas. See: five Ss.S
sensitivity analysis—A technique for determining how
self-directed work team—Generally, a small, indepen- much an expected outcome or result will change in re-
server address—The internet address of a server.S and social services; and local, state, and federal
governments.S
server factory—A facility making minor improvements to
products; set up primarily to avoid the host country’s service level—Syn: level of service.S
barriers to trade.S service level agreement (SLA)—A document that
service—Sometimes used to describe those activities represents the terms of performance for organic
support.S
S
that support the production or distribution functions in
any organization, such as customer service and field service-oriented architecture (SOA)—A style of informa-
service.S tion technology (IT) design that guides all aspects of
creating and using business services throughout their
serviceability—1) Design characteristic that facilitates
life cycles, as well as defining and provisioning the IT
the easy and efficient performance of service activities.
infrastructure that enables different computer applica-
Service activities include those activities required to
tions to exchange data and participate in business
keep equipment in operating condition, such as lubrica-
processes, regardless of the operating systems or pro-
tion, fueling, oiling, and cleaning. 2) A measurement of
gramming languages underlying those applications.S
the degree to which servicing of an item will be accom-
plished within a given time under specified conditions. service parts—Those modules, components, and ele-
See: maintainability. 3) The competitive advantage ments that are planned to be used without modification
gained when an organization focuses on aspects such to replace an original part. Syn: repair parts, spare
as the speed and courtesy in which customer com- parts.S
plaints and questions are answered, following up with
service parts demand—The need or requirement for a
customers after the sale to ensure satisfaction, and of-
component to be sold by itself, as opposed to being
fering on-site service for product repairs. 4) Measure of
used in production to make a higher level product. Syn:
repairs and maintenance based on cost, speed, and
repair parts demand, spare parts demand.S
convenience.S
service parts revenue—The value of sales of replace-
service blueprint—A service analysis method that allows ment parts to external and internal customers, net of
service designers to identify processes involved in the discounts and coupons.S
service delivery system, isolate potential failure points
in the system, establish time frames for the service de- service phases—The number of phases necessary to
livery, and set standards for each step that can be service a new arrival in the system.S
quantified for measurement.S service positioning—Syn: product positioning.S
service bureau model—A business strategy in which a service rate—In queuing theory, the rate at which arriv-
company outsources certain products and services from als are processed through the production or service sys-
another company. The company prefers to concentrate tem, in arrivals per unit of time. See: queuing theory.S
on its core business rather than expending resources service reliability—A dimension of service quality refer-
on the outsourced item.S ring to the capability of a service provider to perform
service capacity—The number of daily customers a firm dependably and accurately.S
is designed to serve; actual throughput may be larger or service response logistics—Obtaining, producing, and
smaller.S distributing material for wholesaling and retailing;
service factor—Syn: safety factor.S supply chain management is focused on location, ser-
vice, and capacity issues. Syn: integrated logistics.S
service function—A mathematical relationship of the
service time—The time taken to serve a customer (e.g.,
safety factor to service level (i.e., the fraction of demand
the time required to fill a sales order or the time re-
routinely met from stock).S
quired to fill a request at a tool crib).S
service industry—1) In its narrowest sense, an organiza-
service vs. investment chart—A curve showing the
tion that provides an intangible product (e.g., medical or
amount of inventory that will be required to give various
legal advice). 2) In its broadest sense, all organizations
levels of customer service.S
except farming, mining, and manufacturing. This defini-
tion of service industry includes retail trade; wholesale servo system—A control mechanism linking a system’s
trade; transportation and utilities; finance, insurance, input and output, designed to feed back data on system
and real estate; construction; professional, personal, output to regulate the operation of the system.S
SET—Acronym for secure electronic transaction.S shelf life—The amount of time an item may be held in
inventory before it becomes unusable.S
setup—1) The work required to change a specific ma-
chine, resource, work center, or line from making the shelf life control—A technique of physical first-in, first-
last good piece of item A to making the first good piece out usage aimed at minimizing stock obsolescence.S
of item B. 2) The refitting of equipment to neutralize the
Shewhart circle of quality—Syn: plan-do-check-action.S
effects of the last lot produced (e.g., teardown of the
setup flexibility—The ability for a change to a different ship-age limit—The date after which a product cannot be
product to be made with little delay.S shipped to a customer.S
setup lead time—Syn: setup time.S shipper-carriers—Companies that ship goods in their
own vehicles. Many large retailers are shipper-carriers
setup time—The time required for a specific machine,
as they own their own fleets.S
resource, work center, process, or line to convert from
the production of the last good piece of item A to the shipping—The function that performs tasks for the out-
first good piece of item B. Syn: setup lead time.S going shipment of parts, components, and products. It
includes packaging, marking, weighing, and loading for
seven new tools (N7)—A set of quality improvement
shipment.S
tools developed by the Japanese Society for QC
Technique Development. The N7 are affinity diagram, shipping lane—A specific route that ocean liners take
interrelationship digraph, matrix diagram, tree diagram, between ports to help traffic flow and to avoid the most
prioritization matrix, process decision program chart, dangerous areas of the ocean.S
and activity network diagram. See: basic seven tools of
shipping lead time—The number of working days nor-
quality.S
mally required for goods to move between a shipping
seven tools of quality—Syn: basic seven tools of and receiving point, plus acceptance time in days at the
quality.S receiving point.S
seven zeros—The seven zeros are an essential part of shipping manifest—A document that lists the pieces in a
the Toyota Production System. They are zero defects, shipment. A manifest usually covers an entire load re-
zero excess lot size, zero setups, zero breakdowns, zero gardless of whether the load is to be delivered to a sin-
excess handling, zero lead time, and zero surging.S gle destination or too many destinations. Manifests
usually list the items, piece count, total weight, and the
SG&A—Abbreviation for selling, general and
destination name and address for each destination in
administrative.S
the load.S
shape—An element of variability results that measures
shipping order debit memo—The document used to au-
the output of a process. If a process results in product
thorize the shipment of rejected material back to the
dimensions falling within a bell-shaped curve, then the
supplier and create a debit entry in accounts payable.S
process is running normally.S
shipping point—The location from which material is sent.
shared services—Consolidation of support processes to
Ant: receiving point.S
form a separate unit to provide services to the parent
company and external customers. This lowers costs and shipping tolerance—An allowable deviation that the
may improve support because the shared-services unit supplier can ship over or under the contract quantity.S
is more focused.S
shitsuke—The effort and discipline required to continual-
shareholder wealth—The present value of all anticipated ly enforce changes made in an organization. See: five
payments to the shareholders of a firm.S Ss.S
shojinka—Continually balancing the number of workers times used interchangeably with dispatching, although
in a work center to meet demand with a minimum num- dispatching does not necessarily include shop planning.
ber of workers. It requires a line design, such as U- For example, the selection of jobs might be handled by
shaped, that supports varying the number of workers.S the centralized dispatching function, while the actual
shop planning might be done by the foreman or a rep-
shop calendar—Syn: manufacturing calendar.S
resentative.S
shop committee—That committee that represents the
union in its relations and negotiations with a company
or plant. This is the first stage for the unionized em-
shop scheduling—Syn: operations scheduling.S
shop traveler—Syn: traveler.S S
ployees to vet complaints.S shortage cost—The marginal profit that is lost when a
shop floor control—A system for using data from the customer orders an item that is not immediately availa-
shop floor to maintain and communicate status infor- ble in stock.S
mation on shop orders (manufacturing orders) and on shortage gaming—When suppliers ration or apportion
work centers. Shop floor control can use order control supplies, and buyers, in response, inflate their orders in
or flow control to monitor material movement through an attempt to receive what they actually need.S
the facility. The major subfunctions of shop floor control
short-cycle manufacturing—Syn: just in time.S
are (1) assigning priority of each shop order; (2) main-
taining working-process quantity information; (3) con- shortest processing time (SPT) rule—A dispatching rule
veying shop order status information to the office; (4) that directs the sequencing of jobs in ascending order
providing actual output data for capacity control pur- by processing time. If this rule is followed, the most jobs
poses; (5) providing quantity by location by shop order at a work center per time period will be processed. As a
for work-in-process inventory and accounting purposes; result, the average lateness of jobs at that work center
and (6) providing measurement of efficiency, utilization, is minimized, but some jobs will be very late. Syn: smal-
and productivity of the workforce and machines. The lest processing time rule.S
major subfunctions for flow control are based primarily short-haul discrimination—A pricing strategy in which
on production rates and feeding work into production to more is charged for a shorter haul than for a longer
meet these planned rates, then monitoring and control- haul, when the route and the delivery are the same.
ling production. See: flow control, order control, produc- Used to push the long-haul process.S
tion activity control.S
short-range planning horizon—A planning/forecasting
shop order—Syn: manufacturing order.S time frame encompassing a few days to at most a few
shop order close-out station—A stocking point on the weeks.S
shop floor where completed production of components short shipment—A situation in which a piece of freight
is transacted (received) into and subsequently trans- designated by the shipping document is missing from
acted (issued) to assembly or other downstream opera- delivery.S
tions. This technique is used to reduce material
short-term planning—The function of adjusting limits or
handling by avoiding the need to move items into and
levels of capacity within relatively short periods of time,
out of stockrooms, while simultaneously enabling a high
such as parts of a day, a day, or a week.S
degree of inventory record accuracy.S
shrinkage—Reductions of actual quantities of items in
shop order reporting—Syn: production reporting and sta-
stock, in process, or in transit. The loss may be caused
tus control.S
by scrap, theft, deterioration, evaporation, and so
shop packet—A package of documents used to plan and forth.S
control the shop floor movement of an order. The pack-
shrinkage factor—A percentage factor used to compen-
et may include a manufacturing order, operations
sate for the expected loss during the manufacturing
sheets, engineering blueprints, picking lists, move tick-
cycle of an item. This factor differs from the scrap factor
ets, inspection tickets, and time tickets.S
in that it affects all components of the item, where the
shop planning—The function of coordinating the availa- scrap factor relates to only one component’s usage.
bility of material handling, material, resources, setup, Syn: shrinkage rate.S
and tooling so that an operation or job can be done on a
shrinkage rate—Syn: shrinkage factor.S
particular machine. Shop planning is often part of the
dispatching function. The term shop planning is some- SIC—Abbreviation for standard industrial classification.S
sigma—A Greek letter (Σ) commonly used to designate simultaneous engineering—Syn: participative design/
the standard deviation of a population.S engineering.S
signed message—In information systems, a message for single-card kanban system—Syn: one-card kanban
which the sender can be authenticated.S system.S
significant part number—A part number that is intended single-channel, single-phase system—A queuing system
to convey certain information, such as the source of the that has only one channel for arrivals to enter and only
alternate suppliers are available. See: sole-source SKU—Abbreviation for stockkeeping unit. Pronounced as
supplier.S "skew."S
single sourcing—A method whereby a purchased part is SLA—Abbreviation for service level agreement.S
supplied by only one supplier. Traditional manufacturers slack—Syn: float, slack time.S
usually have at least two suppliers for each component
part they purchase to ensure continuity of supply and slack time—In project management, the amount of time
S
(more so) to foster price competition between the sup- that an activity may be delayed from its early start with-
pliers. A JIT manufacturer will frequently have only one out delaying the project finish date. Syn: slack.S
supplier for a purchased part so that close relationships slack time rule—A dispatching rule that directs the
can be established with a smaller number of suppliers. sequencing of jobs based on slack time. Slack time is
These close relationships (and mutual interdepen- equal to (days left until due date × hrs/day) minus
dence) foster high quality, reliability, short lead times, standard hours of work left on this specific job; for
and cooperative action. Ant: multisourcing. See: sole example, (5 × 8) – 12 = 28 hours of slack. The lower
source.S the amount of slack time, the higher the priority in
SIPOC—An acronym for supplier, input, process, output, sequencing of jobs.S
customer (pronounced “sye-pahk”).S slot based production—A term used in lean manufactur-
six sigma—A methodology that furnishes tools for the ing that describes a production schedule that is held
improvement of business processes. The intent is to level, but leaves some openings to meet unexpectedly
decrease process variation and improve product high levels of demand. This is a part of the “extra capac-
quality.S ity” planning process.S
slow-moving items—Those inventory items with a low
six sigma quality—The six sigma approach is a set of
turnover; items in inventory that have a relatively low
concepts and practices that key on reducing variability
rate of usage compared to the normal amount of inven-
in processes and reducing deficiencies in the product.
tory carried.S
Important elements are (1) Producing only 3.4 defects
for every one million opportunities or operations; (2) smallest processing time rule—Syn: shortest processing
Process improvement initiatives striving for six sigma- time rule.S
level performance. Six sigma is a business process that
small group improvement activity—An organizational
permits organizations to improve bottom-line perfor-
technique for involving employees in continuous im-
mance, creating and monitoring business activities to
provement activities. See: quality circle.S
reduce waste and resource requirements while increas-
ing customer satisfaction.S SMART—Abbreviation for simple, measurable, achieva-
ble, reasonable, and trackable.S
skew—The degree of nonsymmetry shown by a frequen-
cy or probability distribution.S smart label—A label with an embedded radio frequency
identification tag.S
skill-based compensation—A method of employee com-
pensation that bases the employee’s wage rate on the SMED—Abbreviation for single-minute exchange of die.S
number of skills the employee is qualified to perform. smoothing—The process of averaging data by a mathe-
People who are qualified to do a wider variety of skills matical process or by curve fitting, such as the least-
are paid more. See: labor grade.S squares method or exponential smoothing.S
skills inventories—An organized file of information on smoothing constant—In exponential smoothing, the
each employee’s skills, abilities, knowledge, and expe- weighting factor that is applied to the most recent de-
rience, usually maintained by a personnel office. See: mand, observation, or error. In this case, the error is de-
labor grade.S fined as the difference between actual demand and the
forecast for the most recent period. The weighting factor
skills matrix—A visual tool to show the skills/skill levels
is represented by the symbol α. Theoretically, the range
of employees. This is mostly used when forming a team
of α is 0.0 to 1. Syn: alpha factor, smoothing factor.S
so the leader knows what skills are necessary to
accomplish the team’s goals. This also is used when smoothing inventories—Inventories used when up-
using a full-cross training process to ensure that all stream production levels are less than downstream
workers are cross trained to the same levels.S demand.S
smoothing factor—Syn: smoothing constant.S Southern Common Market (Mercosur)—A market/ cus-
toms alliance between Argentina, Brazil, Paraguay, and
SOA—Abbreviation for service-oriented architecture.S
Uruguay created by the Treaty of Ascuncion (1991).S
social responsibility—Commitment by top management
space buffer—Physical space immediately after the con-
to behave ethically and to contribute to community de-
straint that can accommodate output from the con-
velopment. This may also entail improving the work-
straint when there is a stoppage downstream that
force’s quality of life.S
smoothing models—Another name for forecasting mod- spare parts demand—Syn: service parts demand.S
els that utilize moving averages. The forecast is SPC—Abbreviation for statistical process control.S
“smoothed” in the sense that averages have less varia-
special cause—Syn: assignable cause.S
bility than individual periods.S
specialization—Producing a limited product line in order
software as a service—Computer services are provided
to focus on a product or a process. Specialization is of-
by a third party that keeps all of the software and hard-
ten intended to improve productivity and reduce costs.S
ware in its place of business and the company using the
services accesses them via the internet. A very common special-purpose machinery—Machines that are de-
technique used to outsource technological state-of-the- signed to perform a small number of activities. They are
art costs that can be avoided.S not as flexible as general purpose machinery but they
may be faster and more accurate.S
sole proprietorship—A form of business in which one
person has ownership and control. See: corporation, special warranty—An assurance that the product is fit
partnership.S for the specific purpose for which the product will be
used. See: general warranty, warranty.S
sole source—The situation where the supply of a prod-
uct is available from only one organization. Usually specification—A clear, complete, and accurate state-
technical barriers such as patents preclude other sup- ment of the technical requirements of a material, an
pliers from offering the product. See: single sourcing.S item, or a service, and of the procedure to determine if
the requirements are met.S
sole-source supplier—The only supplier capable of meet-
ing (usually technical) requirements for an item. See: specification limits—Syn: tolerance limits.S
single-source supplier.S specific identification—This method keeps track of the
sorting—The function of physically separating a homo- units of the beginning inventory and the units pur-
geneous subgroup from a heterogeneous population of chased—that is, specific identification of the purchase
items.S cost of each item. This may be done through a coding
method or serial number identification.S
source document—An original written or printed record
of some type that is to be converted into machine- specific performance—A contract remedy requiring de-
readable form.S fendants to do what they have contracted to do.S
source inspection—Inspection at the source of supply or speculative buying—Purchasing an item not immediately
production (e.g., the supplier or the work center) as op- needed in anticipation of future price increase. See:
posed to inspection following receipt from the supplier buying down, hedge, hedging.S
or following transfer of the items from one work center speed of design process—The time frame that a product
to another.S or service is designed to satisfy customer needs and
sourcing—The process of identifying a company that regulations and be field-tested before entering a
provides a needed good or service.S market.S
sourcing decisions—High-level decisions regarding spend analysis—A purchasing activity in which a firm
which products or services will be produced within a explores its spending patterns to identify opportunities
company and which will be purchased from external to reduce costs or improve quality. This process is a
supply chain partners. These decisions normally are part of value analysis as well as cost-benefit analysis.S
based on supplier cost and capability by comparison to
spend management—Managing the outflow of funds in
producing the product in house.S
order to buy goods and services. The term is intended to
standard deviation—A measurement of dispersion of sonal rest to overcome fatigue and unavoidable delays.
data or of a variable. The standard deviation is com- It is also frequently used as a basis for incentive pay
puted by finding the differences between the average systems and as a basis of allocating overhead in cost
and actual observations, squaring each difference, add- accounting systems. Syn: standard hours. See:
ing the squared differences, dividing by n – 1 (for a standard.S
sample), and taking the square root of the result. See:
standing capacity—Syn: rated capacity.S
estimate of error.S
standardized ingredient—A raw ingredient that has been startup—That period starting with the date of initial op-
preprocessed to bring all its specifications within stan- eration during which the unit is brought up to accepta-
dard ranges before it is introduced to the main process. ble production capacity and quality within estimated
This preprocessing minimizes variability in the produc- production costs. Startup is the activity that commences
tion process.S on the date of initial activity and has significant duration
on most projects, but is often confused (used inter-
standardized product—A product that can be made in changeably) with date of initial operation.S
large quantities, or continuously, because of very few
product designs.S startup audit—The technique of having an implementa-
tion team tour or visit the implementation site on a fre-
standard output—An estimate of what should be pro- quent basis and use the "management by walking
duced, given a certain level of resources. Can be stated around" technique to identify problems and solutions.S
in units per hour or units per period (day, shift, etc.).S
startup costs—The extra operating costs to bring the
standard ratio—A relationship based on a sample distri- plant or product on-stream incurred between the com-
bution by value for a particular company. When the pletion of construction and the start of normal opera-
standard ratio for a particular company is known, cer- tions. In addition to the difference between actual
tain aggregate inventory predictions can be made (e.g., operating costs during that period and normal costs,
the amount of inventory increase that would be required they include employee training, equipment tests,
to provide a particular increase in customer service).S process adjustments, salaries and travel expense of
standard service—Service that is the same for most temporary labor staff and consultants, report writing,
customers.S post-startup monitoring, and associated overhead.
Additional capital required to correct plant problems
standard time—The length of time that should be re- may be included. Startup costs are sometimes
quired to (1) set up a given machine or operation and capitalized.S
(2) run one batch or one or more parts, assemblies, or
statement of cash flows—Syn: funds flow statement.S
end products through that operation. This time is used
in determining machine requirements and labor re- statement of work—1) A description of products to be
quirements. Standard time assumes an average worker supplied under a contract. 2) In projection manage-
following prescribed methods and allows time for per- ment, the first project planning document that should
be prepared. It describes the purpose, history, delive- statistical thinking—The ability to draw conclusions
rables, and measurable success indicators for a project. based on data.S
It captures the support required from the customer and
statute of limitations—A statute restricting the length of
identifies contingency plans for events that could throw
time in which a lawsuit may be filed.S
the project off course. Because the project must be sold
to management, staff, and review groups, the state- steady state—Waiting lines are subject to wide fluctua-
ment of work should be a persuasive document.S tions when they first are created in a simulation model.
statistical control—The situation where variations step budget—A budget that establishes anticipated tar-
among the observed samples can be attributed to a gets at which an operation will perform for each step or
constant system of chance causes.S level of production. A step budget can be likened to
several different fixed budgets. This method of budget-
statistical control charts—Data are collected from physi- ing is useful because most of the manufacturing over-
cal measurements, or customer surveys, and plotted on head expenditures vary in steps, not as a straight line.
a chart so that conformance to specifications or cus- See: flexible budget.S
tomer satisfaction can be tracked and improved.S
step-function scheduling—Scheduling logic that recog-
statistical inventory control—The use of statistical me- nizes run length to be a multiple of the number of
thods to model the demands and lead times expe- batches to be run rather than simply a linear relation-
rienced by an inventory item or group of items. Demand ship of run time to total production quantity.S
during lead time and between reviews can be modeled,
stickering—Placing manufacturer-or customer-requested
and reorder points, safety stocks, and maximum inven-
stickers on the boxes of the product being sent to them.
tory levels can be defined to strive for desired customer
These are typically done so that the customer, typically
service levels, inventory investments, manufacturing
a retailer, can more effectively track its inventory. Bar
and distribution efficiency, and targeted returns on in-
coding is commonly a part of the stickering process.S
vestments. Syn: scientific inventory control. See: fixed
reorder quantity inventory model.S stochastic models—Models where uncertainty is explicit-
ly considered in the analysis.S
statistical order point—Syn: order point.S
stock—1) Items in inventory. 2) Stored products or ser-
statistical order point system—Syn: order point system.S vice parts ready for sale, as distinguished from stores,
statistical process control (SPC)—The application of sta- which are usually components or raw materials.S
tistical techniques to monitor and adjust an operation. stockchase—Syn: expedite.S
Often the term statistical process control is used inter-
changeably with statistical quality control.S stock code—Syn: item number.S
stock dividend—A dividend paid to shareholders in stock
statistical quality control (SQC)—The application of sta-
rather than cash.S
tistical techniques to control quality. Often the term sta-
tistical process control is used interchangeably with stockkeeping unit (SKU)—1) An inventory item. For ex-
statistical quality control, although statistical quality ample, a shirt in six colors and five sizes would
control includes acceptance sampling as well as statis- represent 30 different SKUs. 2) In a distribution system,
tical process control.S an item at a particular geographic location. For exam-
ple, one product stocked at the plant and at six different
statistical safety stock calculations—The mathematical
distribution centers would represent seven SKUs.S
determination of safety stock quantities considering
forecast errors, lot sizes, desired customer service le- stockless production—Syn: just in time.S
vels, and the ratio of lead time to the length of the fore-
stockless purchasing—Buying material, parts, supplies,
cast period. Safety stock is frequently the product of the
and so on, for direct use by the departments involved,
appropriate safety factor and the standard deviation or
as opposed to receiving them into stores and subse-
mean absolute deviation of the distribution of demand
quently issuing them to the departments. The intent is
forecast errors.S
to reduce inventory investment, increase cash flow, re-
duce material handling and storage, and provide better stores—1) Stored materials used in making a product.
service. See: dock-to-stock inventory.S 2) The room where stored components, parts, assem-
blies, tools, fixtures, and so forth are kept.S
stock number—Syn: item number.S
stores issue order—Syn: picking list.S
stock order—An order to replenish stock, as opposed to
a production order to make a particular product for a stores ledger card—A card on which records of the items
specific customer.S on hand and on order are maintained.S
stop sequence—A loading procedure in which the first strategic mission—A statement of the future business
stop is loaded last.S scope of an enterprise. The statement incorporates
what is being satisfied (customer needs), who is being
stop work order—Syn: hold order.S
satisfied (customer groups), and how the company
storage—The retention of parts or products for future creates value for the customer (processes, technolo-
use or shipment.S gies, and core competencies).S
storage costs—A subset of inventory carrying costs, in- strategic partnerships—Alliances with top supplier and
cluding the cost of warehouse utilities, material han- buyer performers to enhance a firm’s performance.S
dling personnel, equipment maintenance, building
strategic performance measurements—Measurements
maintenance, and security personnel.S
that relate to the long-term goals of a business.
store—A storage point located upstream of a work sta- Examples include profitability, market share, growth,
tion intended to make it easier to see customer and productivity. See: global performance measure-
requirements.S ments, operational performance measurements.S
strategic plan—The plan for how to marshal and deter- structured problem solving—a defined process applied
mine actions to support the mission, goals, and objec- to determine, evaluate and resolve an identified prob-
tives of an organization. Generally includes an lem. The methodology includes (1) the collection of fac-
organization’s explicit mission, goals, and objectives tual data, (2) defining why the situation is a problem, (3)
and the specific actions needed to achieve those goals defining a concise definition of what the problem is, (4)
and objectives. See: business plan, operational plan, generation of possible solutions, without discussing so-
strategic planning, strategy, tactical plan.S lutions at this time, and (5) evaluation of the pros and
stratification analysis—A statistical tool for determining sub-tier supplier—A supplier who delivers a product to a
root causes in which observed historical data are sepa- direct supplier to the customer.S
rated by particular characteristics to determine the ef-
successor activity—1) In project management, in an
fect of each characteristic upon the observed results.
activity-on-arrow network, the activity (arrow) that de-
See: root cause analysis.S
parts a node. 2) In project management, in an activity-
strict liability—A tort doctrine requiring those engaging in on-node network, the activity at the tip of the arrow.S
very hazardous activities or those manufacturing very
summarized bill of material—A form of multilevel bill of
hazardous items be held to a high standard of
material that lists all the parts and their quantities re-
conduct.S
quired in a given product structure. Unlike the indented
strict performance—The performance of a contract good bill of material, it does not list the levels of manufacture
enough for the contractor to be paid full price less the and lists a component only once for the total quantity
other party’s losses.S used.S
summarized where-used—A form of an indented where- purchased, but is usually approved to supply those
used bill of material that shows all parents in which a items.S
given component is used, the required quantities, and
supplier audit—Auditing supplier processes as part of a
all the next-level parents until the end item is reached.
supplier development system.S
Unlike the indented where-used, it does not list the le-
vels of manufacture.S supplier base—The group of suppliers from which a firm
S
acquires goods and services. Syn: supply base.S
summary judgment—A judicial ruling that no essential
facts are in dispute and that one party to the suit merits supplier certification—Certification procedures verifying
judgment as a matter of law.S that a supplier operates, maintains, improves, and doc-
uments effective procedures that relate to the custom-
sum of deviations—Syn: cumulative sum.S
er’s requirements. Such requirements can include cost,
sunk cost—1) The unrecovered balance of an invest- quality, delivery, flexibility, maintenance, safety, and ISO
ment. It is a cost, already paid, that is not relevant to quality and environmental standards.S
the decision concerning the future that is being made.
supplier clustering—Deliberately sole sourcing remote
Capital already invested that for some reason cannot be
suppliers within a small geographical area to facilitate
retrieved. 2) A past cost that has no relevance with re-
joint shipments of what would otherwise be less-than-
spect to future receipts and disbursements of a facility
truckload quantities.S
undergoing an economic study. This concept implies
that since a past outlay is the same regardless of the supplier development—Technical and financial
alternative selected, it should not influence the choice assistance given to existing and potential suppliers to
between alternatives.S improve quality and/or due date/performance.S
super bill of material—A type of planning bill, located at supplier footprint—Describes the supply base for a par-
the top level in the structure, that ties together various ticular material, component, or service. When stratified
modular bills (and possibly a common parts bill) to de- properly for leverage, cost impact, risk, and perfor-
fine an entire product or product family. The quantity mance can lead to a supplier footprint transition plan
per relationship of the super bill to its modules for consolidated leverage, supply-base reduction, and
represents the forecasted percentage of demand of focused effort.S
each module. The master-scheduled quantities of the
supplier-input-process-output-customer (SIPOC)
super bill explode to create requirements for the mod-
diagram—A high-level process map that shows substan-
ules that also are master scheduled. See: pseudo bill of
tial subprocesses in an organization’s process together
material.S
with the structure of the process represented by the
superflush—A technique to relieve all components down suppliers, inputs, outputs, and customers. A SIPOC dia-
to the lowest level using the complete bill of material, gram defines the critical aspects of a process without
based on the count of finished units produced or trans- losing the overall perspective.S
ferred to finished goods inventory.S
supplier lead time—The amount of time that normally
supermarket approach—A way of managing inventory elapses between the time an order is received by a
and improving picking by making all parts easy to take supplier and the time the order is shipped. Syn: vendor
off of a shelf, much like the shelves of a supermarket. lead time. See: purchasing lead time.S
Inventory is then restocked in such a way that em-
supplier-managed inventory—A relationship where the
ployees always have easy access.S
buyer maintains inventory usually at its facility and pro-
supervisor estimate—An estimate, made by a knowled- vides the supplier information about the amount of
geable manager, of the labor required for an stock on hand. It is the responsibility of the supplier to
operation.S monitor this information and send replacement items
when the inventory reaches a particular level.S
supplier—1) Provider of goods or services. See: vendor.
2) Seller with whom the buyer does business, as op- supplier measurement—The act of measuring the sup-
posed to vendor, which is a generic term referring to all plier’s performance to a contract. Measurements usual-
sellers in the marketplace.S ly cover delivery reliability, lead time, and price. Syn:
purchasing performance measurement. See: vendor
supplier alternate—A seller other than the primary one.
measurement.S
The supplier alternate may or may not supply the items
supplier number—A numerical code used to distinguish resolve problems, and advise other planners and the
one supplier from another.S master scheduler when purchased items will not arrive
on time to support the schedule. The supplier
supplier-owned inventory—A system in which the suppli-
schedulers are normally organized by commodity, as are
er not only controls the inventory, but owns it and keeps
the buyers. By using the supplier scheduler approach,
in close to the consumer until it is purchased by the
the buyers are freed from day-to-day order placement
consumer. Falls within the supplier managed inventory
and expediting, and therefore have the time to do cost
umbrella.S
chain business processes such as planning, transporta- supply chain planning—The determination of a set of
tion, logistics, or procurement. SCEM can also be ap- policies and procedures that govern the operation of a
plied to supply chain business intelligence applications supply chain. Planning includes the determination of
to alert users to any unplanned or unexpected event.S marketing channels, promotions, respective quantities
and timing, inventory and replenishment policies, and
supply chain execution—Execution-oriented software
production policies. Planning establishes the parame-
applications for effective procurement and supply of
ters within which the supply chain will operate.S
supply chain integration—When supply chain partners supply chain risk—The variety of possible events and
interact at all levels to maximize mutual benefit.S their outcomes that could have a negative effect on the
flow of goods, services, funds, or information resulting
supply chain inventory visibility—Software applications
in some level of quantitative or qualitative loss for the
that permit monitoring events across a supply chain.
supply chain.S
These systems track and trace inventory globally on a
line-item level and notify the user of significant devia- supply chain visibility—The ability of supply chain part-
tions from plans. Companies are provided with realistic ners to access demand and production information
estimates of when material will arrive.S from trading partners.S
supply chain management—The design, planning, ex- supply rate—Production rate, or quantity of units per
ecution, control, and monitoring of supply chain activi- unit of time, sent to inventory.S
ties with the objective of creating net value, building a supply uncertainty—The risk of interruptions in the flow
competitive infrastructure, leveraging worldwide logis- of components from upstream suppliers.S
tics, synchronizing supply with demand, and measuring
support costs—In activity-based cost accounting, activity
performance globally.S
costs not directly related with producing a product, such
supply chain mastery—A firm’s ability to achieve supe- as the cost of the information system.S
rior results through exceptional management of reve-
support functions—Activities such as accounting and
nue generation, segmented supplier and customer
information systems that do not directly participate in
management, collaboration and information sharing,
production but that are nevertheless essential.S
risk management, data analysis, and appropriate use of
technology.S surge capacity—The ability to meet sudden, unexpected
increases in demand by expanding production with ex-
supply chain network design systems—Systems created
isting personnel and equipment.S
among all members of the supply chain in order to get
all members on the same page and with the same goals surge tank—A container to hold output from one process
in order to promote efficiency.S and feed it to a subsequent process. It is used when
line balancing is not possible or practical or only on a
Supply Chain Operations Reference (SCOR®) model—A
contingency basis when downstream equipment is non-
process reference model developed and endorsed by
operational.S
the Supply Chain Council as the cross-industry, stan-
dard diagnostic tool for supply chain management. The surplus—A situation in which an oversupply exists.S
SCOR model describes the business activities asso- surrogate driver—In activity-based cost accounting, a
ciated with satisfying a customer’s demand, which in- substitute for the best possible driver that is useful be-
clude plan, source, make, deliver, and return. Use of the cause it is less costly and almost as accurate.S
model includes analyzing the current state of a compa-
survey research—A form of research (frequently used in
ny’s processes and goals, quantifying operational per-
marketing research) where data are collected by mailing
formance, and comparing company performance to
questionnaires to a group of people within a target au-
benchmark data. SCOR has developed a set of metrics
dience. See: marketing research.S
for supply chain performance, and Supply Chain Council
members have formed industry groups to collect best sustainability—Activities that provide present benefit
practices information that companies can use to eva- without compromising the needs of future
luate their supply chain performance.S generations.S
sustaining activity—In activity-based cost accounting, an systems analysis—1) The analyzing in detail of the in-
activity that is not directly beneficial to any specific cost formation needed for an organization, the characteris-
object but does benefit the organization as a whole.S tics and components of the current information system,
and the requirements of any proposed changes to the
sweepstakes—A marketing promotion in which prizes
information system. 2) A method of problem solving that
are awarded, usually by chance.S
encompasses the identification, study, and evaluation
of interdependent parts and their attributes that func-
T
SWOT—Abbreviation for strengths, weaknesses, oppor-
tunities, and threats.S tion in an ongoing process and that constitute an organ-
ic whole.S
SWOT analysis—An analysis of the strengths, weak-
nesses, opportunities, and threats of and to an organi- systems audit—The audit of any activity that can affect
zation. SWOT analysis is useful in developing strategy.S final product quality.S
synchronized production—A manufacturing manage- systems concept—An attempt to create the most effi-
ment philosophy that includes a consistent set of prin- cient complete system as opposed to the most efficient
ciples, procedures, and techniques where every action individual parts. A “whole process” or “whole company”
is evaluated in terms of the global goal of the system. operating system that is driven by cause and effect.S
Both kanban, which is a part of the JIT philosophy, and systems network—A group of interconnected nodes. This
drum-buffer-rope, which is a part of the theory of con- implies redundancy in connections and some means
straints philosophy, represent synchronized production (e.g., machines) for implementing the connection.S
control approaches. Syn: synchronous manufacturing.
systems rollup—Integrating computer systems; this
See: drum-buffer-rope, kanban, synchronous
enables faster data retrieval and better information sys-
scheduling.S
tem responsiveness.S
synchronous control—A pull-type production control sys-
systems thinking—A school of thought that focuses on
tem that is based on setting production rates and feed-
recognizing the interconnections between the parts of a
ing work into production to meet the planned rates,
system and synthesizing them into a unified view of the
then monitoring and controlling production.S
whole.S
synchronous manufacturing—Syn: synchronized systems view—A holistic approach to management that
production.S considers how actions impact the production process.
synchronous scheduling—Scheduling processes (kan- Included within the system are suppliers, product de-
ban in just in time and drum-buffer-rope in theory of sign, process design, the production process, distribu-
constraints environments) that focus on synchronizing tion, and customers.S
all operations to the constraint of the system. See: syn-
chronized production.S
ning, sales and operations planning, strategic plan, tac- increases are not directly correlated to the increase in
tical planning.T the distance shipped.T
tactical planning—The process of developing a set of tardiness—For jobs that are late, the delivery date mi-
tactical plans (e.g., production plan, sales plan, market- nus the due date. See: earliness, lateness.T
ing plan). Two approaches to tactical planning exist for tare weight—The weight of a substance, obtained by de-
linking tactical plans to strategic plans—production ducting the weight of the empty container from the
tank inventory—Goods stored in tanks. These goods TBL—Abbreviation for triple bottom line.T
may be raw materials, intermediates, or finished goods. TCO—Abbreviation for total cost of ownership.T
The description of inventory as tank inventory indicates
the necessity of calculating the quantity on hand from TCP/IP—Abbreviation for transmission control protocol/
the levels within the tanks.T internet protocol.T
team design/engineering—Syn: participative design/
tapering rate—A rate structure in which a shipping rate
engineering.T
increases as the distance shipped increases, but the
teardown—All work items required between the end of terminal value—The value of an operation or entity at
one operation or job and the start of setup for the next the end of the period considered.T
operation or job, both jobs requiring the same machi-
terminals—In transportation, locations where carriers
nery or facilities. See: teardown time.T
load and unload goods to and from vehicles. Also used
teardown bill of material—Syn: disassembly bill of to make connections between local pickup and delivery
material.T service and line-haul service. Functions performed in
include grasp, move, release, select, and position. See: expressed for a given time period—such as, per month,
predetermined time standards.T week, day, or even minute. If the goal units are money,
throughput will be an amount of money per time period.
third-order smoothing—Syn: triple smoothing.T
In that case, throughput is calculated as revenues re-
third-party logistics (3PL)—A buyer and supplier team ceived minus totally variable costs divided for the cho-
with a third party that provides product delivery servic- sen time period.T
es. This third party may provide added supply chain
T expertise.T
third-party logistics company—A company that manages
throughput accounting—A management accounting me-
thod that is based on the belief that because every sys-
tem has a constraint that limits global performance, the
all or part of another company’s product delivery most effective way to evaluate the impact that any pro-
operations.T posed action will have on the system as a whole is to
third-party registration system—Using an outside party look at the expected changes in the global measures of
(rather than the buyer) to determine the adequacy of a throughput, inventory, and operating expense.T
seller’s product quality. If several buyers use the same
throughput time—Syn: cycle time (second definition).T
third party system, such as ISO9000, the seller avoids
having multiple audits.T tiered workforce—A strategy used to vary workforce le-
vels, where additional full-time or part-time employees
third-party transportation services—Outside firms provid-
are hired during peak demand periods, while a smaller,
ing transportation of goods.T
permanent staff is maintained year-round. This tech-
third-party warehousing—The outsourcing of the ware- nique is used heavily in perishable seasonal goods in-
housing function by the seller of the goods.T dustries (e.g. chocolate production, nursery plants,
Thomas Register—A privately produced reference set etc.).T
that includes a listing of part suppliers by product type tier one—The group of suppliers that are directly re-
and geographic area.T sponsible for not only product supply but product
three-bin kanban—Simple kanban structure that development.T
focuses on cycling three bins of material continually and
tiger teams—Teams that attempt to achieve a specific
provides a visible method to align replenishment with
goal within a short time period.T
consumption. One bin is ready to ship from the supplier
at all times, while two are back to back in time and attendance—A collection of data relating to an
manufacturing/production at or near point of use. As employee’s record of absences and hours worked.T
the front bin empties, a signal is sent to the supplier to
time and materials (T&M) contract—A type of contract
send a full bin and the back bin is issued forward into
that is a hybrid between cost-reimbursable and fixed-
production. See: kanban.T
time contracts.T
3D printing—The process of layering materials to make
products and components using computer data. Syn: time-based competition (TBC)—A corporate strategy that
additive manufacturing. See: rapid prototyping.3 emphasizes time as the vehicle for achieving and
maintaining a sustainable competitive edge. Its
3PL—Abbreviation for third-party logistics.3 characteristics are (1) it deals only with those lead
three-point estimate—A project management technique times that are important to the customers; (2) the lead-
that uses three cost or duration estimates to stand for time reductions must involve decreases in both the
the optimistic (O), most likely (M), and pessimistic (P) mean and the variance; and (3) the lead-time
situation. The mean value (MV) is often found using reductions must be achieved through system/process
MV=(O+4M+P)/6. This technique can improve the accu- analysis (the processes must be changed to reduce
racy of cost or duration estimates when underlying as- lead times). TBC is a broad-based strategy. Reductions
sumptions are uncertain.T in lead times are achieved by changing the processes
and the decision structures used to design, produce,
threshold costs—A company’s variable costs, which
and deliver products to the customers. TBC involves
must be covered for a company to continue to stay in
design, manufacturing, and logistical processes.T
business.T
time-based order system—Syn: fixed reorder cycle inven-
throughput—The rate at which the system generates
tory model.T
“goal units.” Because throughput is a rate, it is always
time bucket—A number of days of data summarized into patterns of demand must be considered in time series
a columnar or row-wise display. A weekly time bucket analysis: seasonal, trend, cyclical, and random.T
would contain all of the relevant data for an entire
time series analysis—Analysis of any variable classified
week. Weekly time buckets are considered to be the
by time in which the values of the variable are functions
largest possible (at least in the near and medium term)
of the time periods. Time series analysis is used in fore-
to permit effective MRP.T
casting. A time series consists of seasonal, cyclical,
time buffer—Protection against uncertainty that takes
the form of time.T
time card—A document recording attendance time, of-
trend, and random components. See: cyclical compo-
nent, random component, seasonal component, trend
component.T
T
ten used for indicating the number of hours for which time series forecasting—A forecasting method that
wages are to be paid. Syn: clock card.T projects historical data patterns into the future. It in-
time-definite services—Delivery of goods and services volves the assumption that the near-term future will be
where an agreement has been reached on the day and like the recent past.T
time of the delivery.T times interest earned—Ratio of profits before payment
time fence—A policy or guideline established to note of interest and income taxes (EBIT) to interest on debt.T
where various restrictions or changes in operating pro-
time stamping—Tracking with each transaction the time
cedures take place. For example, changes to the master
of occurrence. It is used in period closings and to tie
production schedule can be accomplished easily
end items to samples for certification of item
beyond the cumulative lead time, while changes inside
properties.T
the cumulative lead time become increasingly more dif-
ficult to a point where changes should be resisted. Time time standard—The predetermined times allowed for
fences can be used to define these points. See: de- the performance of a specific job. The standard will of-
mand time fence, hedge, planning time fence.T ten consist of two parts, that for machine setup and
that for actual running. The standard can be developed
time-now date—Syn: data date.T
through observation of the actual work (time study),
time period safety stock—A safety stock that is based on summation of standard micromotion times (predeter-
usage over a designated time frame. The period can be mined or synthetic time standards), or approximation
set as days, weeks, or months. Safety stock varies di- (historical job times).T
rectly with the demand. This differs from statistical-
based safety stocks in that the amount is not based on time study—Timing employees as they accomplish jobs
deviation from demand.T for the purpose of setting time standards.T
time-phased order point (TPOP)—MRP-like time planning timetables—Schedules that are organized by starting
logic for independent demand items, where gross re- location/destination and show the times for departures
quirements come from a forecast, not via explosion. and arrivals.T
This technique can be used to plan distribution center time ticket—An operator-entered labor claim. Syn: job
inventories as well as to plan for service (repair) parts, ticket.T
because MRP logic can readily handle items with de-
pendent demand, independent demand, or a combina- time-to-market—The total time required to design, build,
tion of both. Time-phased order point is an approach and deliver a product (timed from concept to delivery).
that uses time periods, thus allowing for lumpy with- See: procurement lead time.T
drawals instead of average demand. When used in dis-
time-to-product—The total time required to receive, fill,
tribution environments, the planned order releases are
and deliver an order for an existing product to a cus-
input to the master schedule dependent demands. See:
tomer, timed from the moment that the customer plac-
fixed reorder quantity inventory model.T
es the order until the customer receives the product.
time phasing—The technique of expressing future de- See: purchasing lead time.T
mand, supply, and inventories by time period. Time
time to reliably replenish (TRR)—The time in which a
phasing is one of the key elements of material require-
part can reliably be obtained if necessary.T
ments planning.T
time utility—When a delivery gets to a customer at exact-
time series—A set of data that is distributed over time,
ly the right time (not early, not late).T
such as demand data in monthly time periods. Various
time value of money—1) The cumulative effect of tool order—A document authorizing issue of specific
elapsed time on the money value of an event, based on tools from the tool crib or other storage. Syn: tool issue
the earning power of equivalent invested funds. See: order.T
future worth, present value. 2) The interest rate that
TOP—Acronym for technical/office protocol.T
capital is expected to earn.T
tipping point—The moment when something unique be- top management commitment (quality)—In the total
T comes common. The term often refers to the popular quality management philosophy, participation of the
acceptance of new technologies. The concept has been highest-level official in the organization’s quality im-
applied to any process in which beyond a certain point, provement efforts. Participation includes establishing
the rate at which the process (chemical, sociological, and serving on a quality committee, establishing quality
environmental, etc.) proceeds increase dramatically.T policies and goals, deploying those goals to lower levels
of the organization, providing the resources and training
TMS—Abbreviation for transportation management that the lower levels need to achieve the goals, partici-
system.T pating in quality improvement teams, reviewing
TN—Abbreviation for telnet.T organization-wide progress, recognizing those who have
performed well, and revising the current reward system
TOC—Abbreviation for theory of constraints.T
to reflect the importance of achieving the quality goals.T
TOC performance measures—In the theory of con-
straints, throughput, inventory, and operating expense total annual material receipts—The amount (in dollars)
are considered performance measures that link opera- of all direct materials that were received in a calendar
tional decisions to organizational profit.T year. This number should fall very close to the direct
material dollars that were used in a calendar year in a
TOFC—Abbreviation for trailer on a flatcar.T lean environment.T
tolerance—Allowable departure from a nominal value
total cost analysis—In purchasing, a process by which a
established by design engineers that is deemed ac-
firm seeks to identify and quantify all of the major costs
ceptable for the functioning of the good or service over
associated with various sourcing options.T
its life cycle.T
total cost concept—In logistics, the idea that all logistical
tolerance limits—1) The upper and lower extreme values
decisions that provide equal service levels should favor
permitted by the tolerance. 2) In work measurement,
the option that minimizes the total of all logistical costs
the limits between which a specified operation time val-
and not be used on cost reductions in one area alone,
ue or other work unit will be expected to vary. See: lower
such as lower transportation charges.T
specification limit, upper specification limit. Syn: speci-
fication limits.T total cost consideration—Considering all cost impacts,
tolerance stack up—When two or more components, all rather than just one cost impact, on customer service
within tolerance limits but some distance from the spe- improvement.T
cification itself, are assembled together the assembly total cost curve—1) In cost-volume-profit (breakeven)
may be subject to early failure because of the interac- analysis, the total cost curve is composed of total fixed
tion between the components.T and variable costs per unit multiplied by the number of
ton-mile—A way to measure the transportation of freight. units provided. Breakeven quantity occurs where the
It is the multiplication of weight being transported (in total cost curve and total sales revenue curve intersect.
tons) by the distance it is being transported (in miles). See: break-even chart, break-even point. 2) In inventory
Heavily used in rail and ship transportation mode.T theory, the total cost curve for an inventory item is the
sum of the costs of acquiring and carrying the item.
tool—Any instrument, such as a saw blade, that is the
See: economic order quantity.T
working part of a machine.T
total cost of ownership (TCO)—In supply chain manage-
tool calibration frequency—The recommended length of
ment, the total cost of ownership of the supply delivery
time between tool calibrations. It is normally expressed
system is the sum of all the costs associated with every
in days.T
activity of the supply stream. The main insight that TCO
tool issue order—Syn: tool order.T offers to the supply chain manager is the understanding
tool number—The identification number assigned to ref- that the acquisition cost is often a very small portion of
erence and control a specific tool.T the total cost of ownership.T
total cost of quality—A sum that includes costs asso- total procurement lead time—Syn: procurement lead
ciated with rework, scrap, warranty costs, and other time.T
costs associated with preventing or resolving quality
problems.T total productive maintenance (TPM)—Preventive main-
tenance plus continuing efforts to adapt, modify, and
total cost of quality curve—A curve that suggests there is refine equipment to increase flexibility, reduce material
some optimal quality level, Q*. The curve is calculated handling, and promote continuous flows. It is operator-
by adding costs of internal and external failures, pre-
vention costs, and appraisal costs. The optimal quality
level occurs where this curve reaches a minimum point.
oriented maintenance with the involvement of all quali-
fied employees in all maintenance activities. Syn: total
preventive maintenance.T
T
It is a single turning point curve that always has a
minimum.T total quality control (TQC)—The process of creating and
producing the total composite good and service charac-
total costs—Considering all cost impacts, rather than
teristics (by marketing, engineering, manufacturing,
just one cost impact, on customer service
purchasing, etc.) through which the good and service
improvement.T
will meet the expectations of customers.T
total cumulative manufacturing cycle time—Average
time between a part entering a manufacturing system total quality engineering (TQE)—The discipline of design-
and completion of final packaging.T ing quality into the product and manufacturing
processes by understanding the needs of the customer
total employee involvement (TEI)—An empowerment
and performance capabilities of the equipment. See:
program in which employees are invited to participate in
design for quality.T
actions and decision making that were traditionally re-
served for management.T total quality management (TQM)—A term coined to de-
total factor productivity—A measure of productivity (of a scribe Japanese-style management approaches to qual-
department, plant, strategic business unit, firm, etc.) ity improvement. Since then, total quality management
that combines the individual productivities of all its re- (TQM) has taken on many meanings. Simply put, TQM is
sources, including labor, capital, energy, material, and a management approach to long-term success through
equipment. These individual factor productivities are customer satisfaction. TQM is based on the participa-
often combined by weighting each according to its tion of all members of an organization in improving
monetary value and then adding them. For example, if processes, goods, services, and the culture in which
material accounts for 40 percent of the total cost of they work. The methods for implementing this approach
sales and labor 10 percent of the total cost of sales, are found in teachings of such quality leaders as Philip
etc., total factor productivity = .4 (material productivity) B. Crosby, W. Edwards Deming, Armand V. Feigenbaum,
+ .1 (labor productivity) + etc.T Kaoru Ishikawa, J.M. Juran, and Genichi Taguchi.T
total fixed costs—Costs that remain constant in total re- total value analysis—A method of economic analysis in
gardless of changes in activity.T which a model expresses the dependent variable of in-
total float—In project management, the length of time terest as a function of independent variables, some of
an activity can be late without delaying succeeding ac- which are controllable.T
tivities. See: float, free float, independent float.T
total variable costs—Costs that vary in total in propor-
total lead time—Syn: lead time.T tion to changes in activity.T
total line-haul cost—Basic costs of carrier operation to
total waste management (TWM)—A methodology that
move a container of freight, including driver's wages
enables finding solutions to waste issues while keeping
and usage depreciation, which vary with the distance
in mind financial elements and the business case.T
shipped and the cost per mile.T
total make cycle time—Average cumulative processing touches—A statistic that is used to determine efficiency
time between a part entering a manufacturing system for costing/pricing functions. A touch is anytime that a
and completion of manufacturing activities (not includ- labor activity is utilized during the manufacturing or
ing packaging).T service creation process. This brought about the term
“touch labor” for direct labor personnel.T
total preventive maintenance—Syn: total productive
maintenance.T touch labor—Syn: direct labor.T
Toyota Production System (TPS)—A manufacturing me- trading company—A company that introduces foreign
thodology developed at Toyota that has evolved into the buyers and sellers and arranges all product
concepts of just in time and lean manufacturing.T export/import details, documentation, and
transportation.T
TPM—Abbreviation for total productive maintenance.T
trading partner—Any organization external to the firm
TPOP—Abbreviation for time-phased order point.T
that plays an integral role within the supply chain com-
a factor for increasing or decreasing tendencies in the turnover—1) Syn: inventory turnover. 2) In the United
data due to things such as population growth or income Kingdom and certain other countries, annual sales
changes.T volume.T
trend analysis—An analysis to determine whether trend
turnover ratio—An indicator of whether or not a compa-
(general upward or downward change) exists in data.
ny is using its assets efficiently. It is measured by divid-
See: trend forecasting models.T
ing sales by average assets during a particular period.T
TRP—Abbreviation for transportation requirements two-card kanban system—A kanban system where a
planning.T move card and production card are employed. The
TRR—Abbreviation for time to reliably replenish.T move card authorizes the movement of a specific num-
ber of parts from a source to a point of use. The move
TRT—Abbreviation for transition tree.T
card is attached to the standard container of parts dur-
truckload carriers—Carriers that deliver/charge only for ing movement to the point of use of the parts. The pro-
full truckload shipments.T duction card authorizes the production of a given
truckload lot—A truck shipment that qualifies for a lower number of parts for use or replenishment. Syn: dual-
freight rate because it meets a minimum weight and/or card kanban system. See: one-card kanban system.T
volume.T
two-level master schedule—A master scheduling ap-
trust—A fiduciary relationship in which the trustee holds proach in which a planning bill of material is used to
ownership for the benefit of another party (benefactor).T master schedule an end product or family, along with
TS 16949—Syn: ISO/TS 16949.T selected key features (options and accessories). See:
hedge, multilevel master schedule, production
turnaround—Syn: setup.T
forecast.T
turnaround costs—Syn: setup costs.T
type I error—An incorrect decision to reject something
turnaround time—Syn: setup.T
(such as a statistical hypothesis or a lot of products)
turnkey system—1) Computer packages that are already when it is acceptable. See: producer’s risk.T
prepared by a hardware manufacturer or software
house and are ready to run. 2) Any system of machines type II error—An incorrect decision to accept something
that is ready for immediate use.T when it is unacceptable. See: consumer’s risk.T
UDE—Abbreviation for undesirable effect. uniform product code—A retail product numbering and
Pronounced“oodee.”U bar coding system that identifies the item and the man-
ufacturer.U
U-lines—Production lines shaped like the letter “U.” The
shape allows workers to easily perform several nonse- uniform resource locator (URL)—A means of locating
quential tasks without much walk time. The number of web pages regardless of where they are on the
workstations in a U-line is usually determined by line internet.U
balancing. U-lines promote communication.U
uniform warehouse receipts act—An act that regulates
unattainable capability—The portion of the production public warehousing; it sets up the legal responsibilities
capability that cannot be attained. This is typically of warehouse managers and determines the receipts
caused by factors such as equipment unavailability, that can be issued.U
suboptimal scheduling, or resource limitations.U
union contract—A formal contract, usually covering two-
uncertainty—Unknown future events that cannot be to-six years, between a union representing employees
predicted quantitatively within useful limits; for exam- and their company that covers all aspects of pay, work-
ple, an accident that destroys facilities, a major strike, ing conditions, and strike options.U
or an innovation that makes existing products
union free—A designation that indicates that a company
obsolete.U
or operation does not have a union contract.U
uncontrollable factors—In the environment of a produc-
tion system, those factors that cannot be changed (e.g., union shop—A facility in which all hourly employees are
temperature, natural causes, weather, vibration).U unionized, or more formally a clause in a collective bar-
gaining agreement under which membership in the un-
under-capacity scheduling—Allowing more time than ion is required as a condition of employment. Union
should be necessary to complete a day’s work. As a re- shops are illegal in some regions.U
sult, a daily quota is met more often and workers have
time to cross-train or perform maintenance on their unit cost—Total labor, material, and overhead cost for
tools and machines.U one unit of production (e.g., one part, one gallon, one
pound).U
undertime—A condition occurring when more personnel
are on the payroll than are required to produce the United Nations Global Compact—A voluntary initiative
planned output.U whereby companies embrace, support, and enact, with-
in their sphere of influence, a set of core values in the
undesirable effects (UDE)—In theory of constraints:
areas of human rights, labor standards, the environ-
Those negative aspects of an environment that are
ment, and anticorruption.U
noted so that a current reality tree may be
constructed.U unitization—In warehousing, the consolidation of several
units into larger units for fewer handlings.U
unfair labor practice—Activities by management or labor
that violate the National Labor Relations Act. Failure to unit load—A shipping unit made up of a number of
bargain in good faith is an example.U items, or bulky material, arranged or constrained so the
mass can be picked up or moved as a single unit.
UN Global Compact Management Model—A framework
Reduces material handling costs. Often shrink-packed
for guiding companies through the process of formally
on a pallet before shipment.U
committing to, assessing, defining, implementing, mea-
unit load concept—Waiting for a container or pallet to be upcharges—Additional charges that are added to a deli-
filled before the material is moved.U vered bill that are not included in the original contract.
These occur because of unforeseen increases to the
unit of driver measure—The common unit of measure
deliverer’s cost base.U
used to group similar processes, so that comparisons
can be made easily.U upgrade—Improvement in operating characteristics.U
unit of issue—The standard issue quantity of an item upper control limit (UCL)—Control limit for points above
the theory of constraints, activation of a resource that value-based management (VBM)—The concept of satis-
productively contributes to reaching the goal. Over- fying customers to create shareholder wealth.V
activation of a resource does not productively utilize a
value chain—The functions within a company that add
resource. See: available time.U
value to the goods or services that the organization
sells to customers and for which it receives payment.V
V
V
value chain analysis—An examination of all links a com-
pany uses to produce and deliver its products and ser-
valid schedule—A detailed, feasible calendar of specific vices starting from the origination point and continuing
items flowing into and through a factory.V through delivery to the final customer.V
valuation—The technique of determining worth, typically
value chain initiative—This initiative combines software,
of inventory. Valuation of inventories may be expressed
hardware, and supply chain companies to develop an
in standard dollars, replacement dollars, current aver-
integrated system to support software sharing among
age dollars, or last-purchase-price dollars.V
diverse applications.V
value—The worth of an item, good, or service.V
value-driven enterprise—An organization that is de-
value added—1) In accounting, the addition of direct signed and managed to add utility from the viewpoint of
labor, direct material, and allocated overhead assigned the customer in the transformation of raw materials into
at an operation. It is the cost roll-up as a part goes a finished good or service.V
through a manufacturing process to finished inventory.
2) In current manufacturing terms, the actual increase value engineering and/or analysis—A disciplined
of utility from the viewpoint of the customer as a part is approach to the elimination of waste from products or
transformed from raw material to finished inventory. It processes through an investigative process that focuses
is the contribution made by an operation or a plant to on the functions to be performed and whether such
the final usefulness and value of a product, as seen by functions add value to the good or service.V
the customer. The objective is to eliminate all non- value index—A measure that uses the performance and
value-added activities in producing and providing a importance scores for various dimensions of perfor-
good or service.V mance for an item or service to calculate a score that
value-added network (VAN)—A network, often supporting indicates the overall value of an item or service to a
EDI, providing services additional to those provided by customer.V
common carriers.V
value-of-service pricing—Allowing the market to deter-
value-added productivity per employee—A measure that mine the price.V
is determined by three things: total output of a compa-
ny, materials purchased, and total employment. To value of transfers—The amount transferred, in a fiscal
come up with this number, one must subtract materials year, from one stage of the manufacturing process to
purchased from total output and then divide that num- another. For example, it is the amount of raw materials
ber by total employment. It allows a company to under- that are transformed into work in process.V
stand easily how much production the typical employee value perspective—A quality perspective that holds that
is producing.V quality must be judged, in part, by how well the charac-
value-adding/non-value-adding—The assessment of teristics of a particular product or service align with the
each of the company’s activities to determine if that needs of a specific user.V
activity adds value to the organization or its customers.
value stream—The processes of creating, producing,
If an activity is considered non-value-adding it should be
and delivering a good or service to the market. For a
eliminated to increase an organization’s efficiency.V
good, the value stream encompasses the raw material
value analysis—The systematic use of techniques that supplier, the manufacture and assembly of the good,
identify a required function, establish a value for that and the distribution network. For a service, the value
function, and finally provide that function at the lowest stream consists of suppliers, support personnel and
overall cost. This approach focuses on the functions of technology, the service “producer,” and the distribution
an item rather than the methods of producing the channel. The value stream may be controlled by a single
present product design.V business or a network of several businesses.V
value stream map—A graph displaying the sequence of a measurement of dispersion of data. See: estimate of
operations needed to produce and deliver a product or error.V
service.V
variation—A change in data, a characteristic, or a func-
value stream mapping—A lean production tool to visual- tion that is caused by one of four factors: special caus-
ly understand the flow of materials from supplier to cus- es, common causes, tampering, or structural variation.V
tomer that includes the current process and flow as well
VATI Analysis—In the theory of constraints, a procedure
levels. The vendor obtains a receipt for the restocked vertical marketplace—An online marketplace connecting
inventory and accordingly invoices the customer. See: buyers and sellers within the same industry. It enables
continuous replenishment.V lower prices by lowering transaction costs.V
vendor measurement—The act of measuring the ven- vertical merger—An alliance of two firms where one firm
dor’s performance to a contract. Measurements usually is a supplier to the other.V
cover delivery reliability, lead time, quality, and price.
V
See: supplier measurement.V vestibule training—A variant of job rotation in which a
separate work area is set up for a trainee so that the
vendor-owned inventory (VOI)—Syn: consigned stocks.V actual work situation does not pressure the trainee.
vendor scheduler—Syn: supplier scheduler.V Examples are cockpit simulators and other machine si-
mulators.V
vendor scheduling—Syn: supplier scheduling.V
venture team—A set of individuals assigned outside viral marketing—An advertisement that is embedded
normal channels to develop ideas for new products.V into web-based technology, e.g., email or pop-up ads,
that can easily move through the internet and get in
vertical dependency—The relationship between a parent front of the target audience who may never have seen it
item and a component in its bill of material that defines otherwise.V
the need for the component based on producing the
parent, without regard to the availability of other com- virtual cell—A logical rather than physical grouping of
ponents at the same level in the bill of material. See: manufacturing resources. Resources in virtual cells can
horizontal dependency.V be dispersed throughout a facility. Product mix changes
may change the layout of a virtual cell. This technique is
vertical display—A method of displaying or printing out-
used when it is not practical to move the equipment.V
put from an MRP system where requirements, sche-
duled receipts, projected balance, and so forth are virtual corporation—The logical extension of outpartner-
displayed vertically. Vertical displays are often used in ing. With the virtual corporation, the capabilities and
conjunction with bucketless systems. Ant: horizontal systems of the firm are merged with those of the sup-
display.V pliers, resulting in a new type of corporation where the
boundaries between the suppliers’ systems and those
vertical integration—The degree to which a firm has de-
of the firm seem to disappear. The virtual corporation is
cided to directly produce multiple value-adding stages
dynamic in that the relationships and structures formed
from raw material to the sale of the product to the ulti-
change according to the changing needs of the
mate consumer. The more steps in the sequence, the
customer.V
greater the vertical integration. A manufacturer that de-
cides to begin producing parts, components, and mate- virtual factory—A changed transformation process most
rials that it normally purchases is said to be backward frequently found under the virtual corporation. It is a
integrated. Likewise, a manufacturer that decides to transformation process that involves merging the capa-
take over distribution and perhaps sale to the ultimate bilities and capacities of the firm with those of its sup-
consumer is said to be forward integrated. See: back- pliers. Typically, the components provided by the
ward integration, forward integration.V suppliers are those that are not related to a core com-
vertically integrated firm—An organization with functions petency of the firm, while the components managed by
that were previously performed by suppliers but are now the firm are related to core competencies. One ability
done internally. See: horizontally integrated firm.V found in the virtual factory is that it can be restructured
quickly in response to changing customer demands and
vertical marketing—A coordinated product marketing needs.V
system, with activities undertaken by one company, for
a supply chain.V virtual inventory systems—A virtual system that enables
supply chain partners to share data in a central
vertical marketing system—A marketing system that fo-
database.V
cuses on the means to reduce the traditional indepen-
dence of indirect channels. The system strategically virtual organization—Short-term alliances between in-
seeks to increase the integration and interdependence dependent organizations in a potentially long-term rela-
of channels by uniting them with common objectives tionship to design, produce, and distribute a product.
and team management (e.g., franchising, cooperatives, Organizations cooperate based on mutual values and
vertical integration).V act as a single entity to third parties.V
virtual reality—Hardware and software that create an lems are trivial in quality assurance, he changed it to
apparently real environment.V “useful many.”V
virtual supply chain—A collection of firms that typically VMI—Abbreviation for vendor-managed inventory.V
exists for only a short period. Virtual supply chains are VOC—Abbreviation for voice of the customer.V
more flexible than traditional supply chains, but less
efficient.V VOI—Abbreviation for vendor-owned inventory.V
WAN—Acronym for wide area network.W Scrap is typically not planned and may result from the
same production run as waste. See: hazardous waste.W
wand—A device connected to a bar-code reader to iden-
tify a bar code.W waterspider—An expert worker who makes the rounds of
workstations and provides assistance, as needed. The
wandering bottleneck—An undesirable effect in which
waterspider knows all processes well enough to take
the bottleneck moves relatively frequently from one re-
over if needed. At Toyota, this position is a prerequisite
source to another.W
warehouse management and transportation execution waybill—A document containing a list of goods with
systems—Logistics information systems that initiate and shipping instructions related to a shipment.W
control the movement of materials between supply
ways—Paths over which a carrier operates, including
chain partners.W
right-of-way, roadbed, tracks, and other physical facili-
warehouse management system (WMS)—A computer ties. May be owned by the government or privately held
application system designed to manage and optimize by the carrier or provided by nature.W
workflows and the storage of goods within a warehouse.
webcasting—Syn: push technology.W
These systems often interface with automated data
capture and enterprise resources planning systems.W web directory—A list of web pages that is structured hie-
rarchically.W
warehouses (distribution centers)—Facilities used to
store inventory. Decisions driving warehouse manage- webpage—A document containing hypertext links to cer-
ment include site selection, number of facilities in the tain other documents including multimedia
system, layout, and methods of receiving, storing, and documents.W
retrieving goods.W web services—A common internet or intranet framework
warehousing—The activities related to receiving, storing, that enables the movement of data from one applica-
and shipping materials to and from production or distri- tion to another, without the requirement for a direct
bution locations.W connection between two supply chain applications and
without regard to the underlying operating system for
warrant of merchantability—An implied warranty that those applications.W
goods are fit for the use to which they are generally
applied.W weight confirmation—The process of confirming a ship-
ment arrival only by confirming the correct weight has
warranty—A commitment, either expressed or implied, been delivered.W
that a certain fact regarding the subject matter of a con-
tract is presently true or will be true. The word should be weighted-factor rating model—A method to analyze the
distinguished from guarantee, which means a contract advantages of various locations along several qualita-
or promise by an entity to answer for the performance tive and quantitative dimensions.W
of a product or person. See: general warranty, guaran- weighted moving average—An averaging technique in
tee, special warranty.W which the data to be averaged are not uniformly
warranty costs—All of the costs associated with a war- weighted but are given values according to their impor-
ranty; these include shipping, receiving, repairing, re- tance. See: moving average, simple moving average.W
placement, and the materials needed for repair or weighted-point plan—A supplier selection and rating ap-
replacement.W proach that uses the input gathered in the categorical
plan approach and assigns weights to each evaluation
waste—1) Any activity that does not add value to the
category. A weighted sum for each supplier is obtained
good or service in the eyes of the consumer. 2) A by-
and a comparison made. The weights used should sum
product of a process or task with unique characteristics
to 100 percent for all categories. See: categorical
requiring special management control. Waste produc-
plan.W
tion can usually be planned and somewhat controlled.
what-if analysis—The process of evaluating alternate work center where-used—A listing (constructed from a
strategies by answering the consequences of changes routing file) of every manufactured item that is routed
to forecasts, manufacturing plans, inventory levels, and (primary or secondary) to a given work center.W
so forth. See: simulation.W
worker efficiency—A measure (usually computed as a
what-if simulation—An approach to conducting a what-if percentage) of worker performance that compares the
analysis usually found in MRP II and ERP systems.W standard time allowed to complete a task to the actual
replacement. This concept extends the idea of “a place yellow belt—One who has completed six sigma training
for everything and everything in its place.”W in certain hands-on tools.Y
work rules—1) Compensation rules concerning such is- yield—The amount of good or acceptable material avail-
sues as overtime, vacation, and shift premiums. 2) able after the completion of a process. Usually com-
Employee and employer job rights and obligation rules, puted as the final amount divided by the initial amount
such as performance standards, promotion procedures, converted to a decimal or percentage. In manufacturing
job descriptions, and layoff rules. Work rules are usually
a part of a union contract and may include a code of
conduct for workers and language to ensure decent
planning and control systems, yield is usually related to
specific routing steps or to the parent item to determine
how many units should be scheduled to produce a spe-
Z
conditions and health standards.W cific number of finished goods. For example, if 50 units
work sampling—The use of a number of random sam- of a product are required by a customer and a yield of
ples to determine the frequency with which certain ac- 70 percent is expected then 72 units (computed as 50
tivities are performed.W units divided by .7) should be started in the manufactur-
ing process. Syn: material yield. See: scrap factor, yield
work sequence—Ordered activities performed to ac-
factor.Y
complish work.W
workstation—The assigned location where a worker per- yield factor—A measurement of the yield of a process.
forms the job; it could be a machine or a workbench.W For a specific process or operation, yield factor + scrap
factor = 1. See: scrap factor, yield.Y
work teams—Teams of employees formed to shepherd a
particular work area or function.W yield management—An approach commonly used by
services with highly perishable products, in which prices
work ticket—Syn: work order.W
are regularly adjusted to maximize total profit.Y
world-class quality—A term used to indicate a standard
of excellence: the best of the best.W YMS—Abbreviation for yard management system.Y
world-class company—An organization that has reached yokoten—A Japanese word meaning sharing
a level of excellence due to superior products or servic- information.Y
es and customer satisfaction; best of the best.W
World Trade Organization (WTO)—The successor to the
General Agreement on Tariffs and Trade (GATT); the in-
ternational agency overseeing trade between nations.W
Z
write-off—In accounting, the process of removing an as- zero-based budgeting—A budget procedure used primar-
set from an organization’s books through the expensing ily by governmental agencies, in which managers are
process.W required to justify each budgetary expenditure anew, as
if the budget were being initiated for the first time ra-
WTO—Abbreviation for World Trade Organization.W ther than being based on an adjustment of prior-year
WYSIWYG—Acronym for what you see is what you get.W data.Z
Z order that are within his/her zone. The picker then fills
the next order for items from his/her zone.Z
zone of freedom—Legal authority for transportation
companies to charge, within limits, more than their va-
riable costs.Z
zone picking—A method of subdividing a picking list by
areas within a storeroom for more efficient and rapid
order picking. A zone-picked order must be grouped to a
single location before delivery or must be delivered to
different locations, such as work centers. See: batch
picking, discrete order picking, order picking.Z
zone price—A standard product price which applies to all
geographic locations within a zone.Z