APICS Glossary Part One Flashcards
The classification of a group of items in decreasing order of annual dollar volume (price multipled by projected volume) or other criteria. This array is then split into three classes, called A, B, and C. The A group usually represents 10 percent to 20 percent by number of items and 50 percent to 70 percent by projected dollar volume. The next grouping, B, usually represent about 20 percent of the items and about 20 percent of the dollar volume. The C class contains 60 percent to 70 percent of the items and represent about 10 percent to 30 percent of the dollar volume. The ABC principle states that effort and money can be saved through applying looser controls to the low-dollar-volume class items than will be applied to high-dollar-volume class items. The ABC principle is applicable to inventories, purchasing, sales, and so on. (Synonyms: ABS Classification, Distribution by value.) See: Pareto analysis, Pareto’s law.
ABC analysis
A self-powered radio frequency identification tag that broadcasts information. See: Radio frequency identification (RFID) tag.
Active tag
Techniques that deal with analysis and planning of logistics and manufacturing during short, intermediate, and long-term time periods. APS describes any computer program that uses advanced mathematical algorithms or logic to perform optimization or simulation on finite capacity scheduling, sourcing, capital planning, resource planning, forecasting, demand management, and others. These techniques simultaneously consider a range of constraints and business rules to provide real-time planning and scheduling, decision support, available-to-promise, and capable-to-promise capabilities. APS often generates and evaluates multiple scenarios. Management then selects one scenario to use as the “official plan.” The five main components of APS systems are (1) demand planning, (2) production planning, (3) production scheduling, (4) distribution planning, and (5) transportation planning.
Advanced planning and scheduling (APS)
One who acts on behalf of another (the principal) in dealing with a third party. Examples include a sales agent and a purchasing agent.
Agent
Strengthening the capabilities of a key supplier.
Alliance development
Additional inventories above basic pipeline stock to cover projected trends of increasing sales, planned sales promotion programs, seasonal fluctuations, plant shutdowns, and vacations.
Anticipation inventories
A production environment where a good or service can be assembled after receipt of a customer’s order. The key components (bulk, semi-finished, intermediate, subassembly, fabricated, purchased, packing, and so on) used in the assembly or finishing process are planned and usually stocked in anticipation of a customer order. Receipt of an order initiates assembly of the customized product. This strategy is useful where a large number of end products (based on the selection of options and accessories) can be assembled from common components. See: Make-to-order, Make-to-stock.
Assemble-to-order
A set of technologies that collect data about objects and then send these data to a computer without human intervention. Examples include radio frequency wireless devices and terminals, bar code scanners, and smart cards.
Automatic identification and data capture (AIDC)
The on-hand inventory balance minus allocations, reservations, backorders, and (usually) quantities held for quality problems. Often called beginning available balance. (Synonyms: Beginning available balance, Net inventory.)
Available inventory
The uncommitted portion of a company’s inventory and planned production maintained in the master schedule to support customer-order promising. The ATP quantity is the uncommitted inventory balance in the first period and is normally calculated for each period in which an MPS receipt is scheduled. In the first period, ATP includes on-hand inventory less customer orders that are due and overdue. Three methods of calculation are used: discrete ATP, cumulative ATP with look-ahead, and cumulative ATP without look-ahead.
Available-to-promise (ATP)
All the customer orders received but not yet shipped. Sometimes referred to as open orders or the order board.
Backlog
An unfilled customer order or commitment. A backorder is an immediate (or past due) demand against an item whose inventory is insufficient to satisfy the demand.
Backorder
A financial statement showing the resources owned, the debts owed, and the owner’s share of a company at a given point in time.
Balance sheet
A list of financial and operational measurements used to evaluate organizational or supply chain performance. The dimensions of the balanced scorecards might include customer perspective, business process perspective, financial perspective, and innovation and learning perspectives. It formally connects overall objectives, strategies, and measurements. Each dimension has goals and measurements.
Balanced scorecard
A method of encoding data using a bar code for fast and accurate readability.
Bar coding
Comparing a company’s costs, products, and services to that of a company through to have superior performance. The benchmark target if often a competitor but is not always a firm in the same industry. Seven types of benchmarking have been cited: (1) competitive benchmarking, (2) financial benchmarking, (3) functional benchmarking, (4) performance benchmarking, (5) process benchmarking, (6) product benchmarking, and (7) strategic benchmarking.
Benchmarking
1) A listing of all the subassemblies, intermediates, parts, and raw materials that go into a parent assembly showing the quantity of each required to make an assembly. It is used in conjunction with the master production schedule to determine the items for which purchase requisitions and production orders must be released. A variety of display formats exist for bills of material, including the single-level bill of material, transient bill of material, matrix bill of material, and costed bill of material. 2) A list of all the materials needed to make one production run of a product, by a contract manufacturer, of piece parts/components for its customers. The bill of material may also be called the formula, recipe, or ingredient list in certain process industries.
Bill of material (BOM)
A long-term commitment to a supplier for material against which short-term releases will be generated to satisfy requirements. Often blanket orders cover only one item with predetermined delivery dates. (Synonyms: Blanket order, Standing order.)
Blanket purchase order
A facility, function, department, or resource whose capacity is less than the demand placed upon it. For example, a bottleneck machine or work center exists where jobs are processed at a slower rate than they are demanded. (Synonym: Bottleneck operation.)
Bottleneck
1) A quantity of materials awaiting further processing. It can refer to raw materials, semifinished stores or hold points, or a work backlog that is purposely maintained behind a work center. 2) In the theory of constraints, buffers can be time or material and support throughput and/or due date performance. Buffers can be maintained at the constraint, convergent points (with a constraint part), divergent points, and shipping points.
Buffer
Information collected by an organization on customers, competitors, products or services, and processes. Business intelligence provides organizational data in such a way that the organizational knowledge filters can easily associate with this data and turn it into information for the organization. Persons involved in business intelligence processes may use application software and other technologies to gather, store, analyze, and provide access to data, and present that data in a simple, useful manner. The software aids in business performance management and aims to help consumers make better business decisions by offering them accurate, current, and relevant information. Some businesses use data warehouses because they are a logical collection of information gathered from various operational databases for the purpose of creating business intelligence.
Business intelligence
1) A statement of long-range strategy and revenue, cost, and profit objectives usually accompanied by budgets, a projected balance sheet, and a cash flow (source and application of funds) statement. A business plan is usually stated in terms of dollars and grouped by product family. The business plan is then translated into synchronized tactical functional plans through the production planning process (or the sales and operations planning process). Although frequently stated in different terms (dollars versus units), these tactical plans should agree with each other and with the business plan. 2) A document consisting of the business details (organization, strategy, and financing tactics) prepared by an entrepreneur to plan for a new business.
Business plan
A business discipline or function that uses business practices, techniques, and methods to create and improve business processes. BPM is a holistic approach to the use of appropriate process-related business disciplines to gain business performance improvements across the enterprise or supply chain. It promotes business effectiveness and efficiency while striving for innovation, flexibility, and integration with technology. Most process improvement disciplines or activities can be considered as BPM.
Business process management (BPM)
Business conducted over the internet between businesses. The implication is that this connectivity will cause businesses to transform themselves via supply chain management to become virtual organizations?reducing costs, improving quality, reducing delivery lead time, and improving due-date performance.
Business-to-business commerce (B2B)
Business being conducted between businesses and final consumers largely over the internet. It includes traditional brick and mortar businesses that also offer products online and businesses that trade exclusively electronically.
Business-to-consumer sales (B2C)
The process of committing orders against available capacity as well as inventory. This process may involve multiple manufacturing or distribution sites. Capable-to-promise employs a finite-scheduling model of the manufacturing system to determine when an item can be delivered. It includes any constraints that might restrict the production, such as availability of resources, lead time for raw materials or purchased parts, and requirements for lower-level components or subassemblies. The resulting delivery date takes into consideration production capacity, the current manufacturing environment, and future order commitments. The objective is to reduce the time spent by production planners in expediting orders and adjusting plans because of inaccurate delivery-date promises.
Capable-to-promise (CTP)
The cost of holding inventory, usually defined as a percentage of the dollar value of inventory per unit of time (generally one year). Carrying cost depends mainly on the cost of capital invested as taxes and insurance, obsolescence, spoilage, and space occupied. Such costs vary by industry. Carrying cost is ultimately a policy variable reflecting the opportunity cost of alternative uses for funds invested in inventory.
Carrying cost
The net flow of dollars into or out of the proposed project. The algebraic sum, in any time period, of all cash receipts, expenses, and investments. Also called cash proceeds or cash generated.
Cash flow
An indicator of how efficiently a company manages its assets to improve cash flow. Inventory days + accounts receivable days - accounts payable days = cash-to-cash cycle time.
Cash-to-cash cycle time
1) The work required to change a specific machine, resource, work center, or line from making the last good piece of item A to making the first good piece of item B. 2) The refitting of equipment to neutralize the effects of the last lot produced (e.g., teardown of the just-completed production, preparation of the equipment for production of the next scheduled item). (Synonyms: Setup, Turnaround, Turnaround time).
Changeover
A production planning method that maintains a stable inventory level while varying production to meet demand. Companies may combine chase and level production schedule methods. (Synonyms: Chase production method, Chase-demand strategy).
Chase strategy
1) A collaboration process whereby supply chain trading partners can jointly plan key supply chain activities from production and delivery of raw materials to production and delivery of final products to end customers. Collaboration encompasses business planning, sales forecasting, and all operations required to replenish raw materials and finished goods. 2) A process philosophy for facilitating collaborative communications. CPFR is considered a standard, endorsed by the Voluntary Interindustry Commerce Standards. (Synonym: Collaborative planning).
Collaborative planning, forecasting, and replenishment (CPFR)
An analysis of a competitor that includes its strategies, capabilities, prices and costs.
Competitive analysis
1) A shipment that is handled by a common carrier. 2) The process of a supplier placing goods at a customer location without receiving payment until after the goods are used or sold.
Consignment
An online marketplace, usually owned by a third party, that allows members to trade with each other. This site lowers members search costs and enables lower prices for the buyer.
Consortia trade exchanges (CTX)
1) Any element or factor that prevents a system from achieving a higher level of performance with respect to its goal. Constraints can be physical, such as a machine center or lack of material, but they can also be managerial, such as a policy or procedure. 2) One of a set of equations that cannot be violated in an optimization procedure.
Constraint
Computer applications that enable digital information to be changed online. These applications have the ability to store information in a repository and provide access to the data.
Content management applications
A process by which a supplier is notified daily of actual sales or warehouse shipments and commits to replenishing these sales (by size, color, and so on) without stockouts and without receiving replenishment orders. The result is a lowering of associated costs and an improvement in inventory turnover. (Synonym: Rapid replenishment). See: Vendor-managed inventory.
Continuous replenishment
An accounting classification useful for determining the amount of direct materials, direct labor, and allocated overhead associated with the products sold during a given period of time.
Cost of goods sold
The cost associated with providing poor quality products or services. There are four categories of costs: (1) internal failure costs (costs associated with defects found before the customer receives the product or service); (2) external failure costs (costs associated with defects found after the customer receives the product or service); (3) appraisal costs (costs incurred to determine the degree of conformance to quality requirements); and (4) prevention costs (costs incurred to keep failure and appraisal costs to a minimum). (Synonym: Cost of poor quality).
Cost of quality
The concept of packing products on the incoming shipments so they can easily sorted at intermediate warehouses or for outgoing shipments based on final destination. The items are carried from the incoming vehicle docking point to the outgoing vehicle docking point without being stored in inventory at the warehouse. Cross-docking reduces inventory investment and storage space requirements. (Synonym: Direct loading).
Cross-docking
Occurs when customers buy additional products or services after the initial purchase.
Cross-selling
The longest planned length of time to accomplish the activity in question. It is found by reviewing the lead time for each bill or material path below the item; whichever path adds up to the greatest number defines cumulative lead time. (Synonyms: Aggregate lead time, Combined lead time, Composite lead time, Critical path lead time, Stacked lead time). See: Planning horizon.
Cumulative lead time
A marketing philosophy based on putting the customer first. The collection and analysis of information designed for sales and marketing decision support (as contrasted to enterprise resources planning information) to understand and support existing and potential customer needs. It includes account management, catalog and order entry, payment processing, credits and adjustments, and other functions. (Synonym: Customer relations management).
Customer relationship management (CRM)
1) The ability of a company to address the needs, inquires, and requests from customers. 2) A measure of the delivery of a product to the customer at the time the customer specified.
Customer service
1) A measure of delivery performance of finished goods, usually expressed as a percentage. In a make-to-stock company, this percentage usually represents the number of items or dollars (on one or more customer orders) that were shipped on schedule for a specific time period, compared with the total that were supposed to be shipped in that time period. (Synonyms: Customer service level, Fill rate, Order-fill ratio, Percent of fill. Antonym: Stockout percentage). 2) In a make-to-order company, it is shipped in a given time period (e.g., a week) compared with the number of jobs or dollars that were supposed to be shipped in that time period.
customer service ratio
1) The interval of time during which a system or process, such as seasonal demand or a manufacturing operation, periodically returns to similar initial conditions. 2) The interval of time during which an event or set of events is completed.
Cycle
An inventory accuracy audit technique where inventory is counted on a cyclic schedule rather than once a year. A cycle inventory count in usually taken on a regular, defined basis (often more frequently for high-value or fast-moving items and less frequently for low-value or slow-moving items). Most effective cycle counting systems require the counting of a certain number of items every workday with each item counted at a prescribed frequency. The key purpose of cycle counting is to identify items in error, thus triggering research, identification, and elimination of the cause of the errors.
Cycle counting
One of the two main conceptual components of any item inventory, the cycle stock is the most active component; the cycle stock depletes gradually as customer orders are received and is replenished cyclically when supplier orders are received. The other conceptual component of the item inventory is the safety stock, which is a cushion of protection against uncertainty in the demand or in the replenishment lead time. (Synonym: Cycle inventory).
Cycle stock
1) In industrial engineering, the time between completion of two discrete units of production. For example, the cycle time of motors assembled at a rate of 120 per hour would be 30 seconds. 2) In materials management, it refers to the length of time from when material enters a production facility until it exits. (Synonym: Throughput time).
Cycle time
Sifting through a database to find and fix mistakes such as misspelling, missing information, and false data.
Data cleansing
1) A catalog of requirements and specifications for an information system. 2) A file that stores facts about the files and databases for all systems that are currently being used or for the software involved.
Data dictionary
A relational database procedure that helps to minimize data duplication and protect the database from certain logical and structural anomalies when data is merged.
Data normalization
A repository of data that has been specially prepared to support decision-making applications. (Synonym: Decision-support data).
Data warehouse
The software designed for organizing data and providing the mechanism for storing, maintaining, and retrieving that data on a physical medium (i.e., a database). A DBMS separates data from the application programs and people who use the data and permits many different views of the data.
Database management system (DBMS)
Creating independence between supply and use of material. Commonly denotes providing inventory between operations so that fluctuations in the production rate of the supplying operation do not constrain production or use rates of the next operation.
Decoupling
A six sigma improvement process comprised of five stages: (1) Determine the nature of the problem, (2) Measure existing performance and commence recording data and facts that offer information about the underlying causes of the problem, (3) Study the information to determine the root causes of the problem, (4) Improve the process by effecting solutions to the problem, and (5) Monitor the process until the solutions become ingrained.
Define, measure, analyze, improve, control (DMAIC) process
A need for a particular product or component. The demand could come from any number of sources (e.g., a customer order or forecast, an interplant requirement, a branch warehouse request for a service part of the manufacturing of another product). At the finished goods level, demand data are usually different from sales data because demand does not necessarily result in sales (i.e., if there is no stock, there will be no sale). There are generally up to four components of demand: cyclical component, random component, seasonal component, and trend component.
Demand
Forecasting the demand for a particular good, component, or service.
Demand forecasting
1) The function of recognizing all demands for goods and services to support the marketplace. It involves prioritizing demand when supply is lacking. Proper demand management facilitates the planning and use of resources for profitable business results. 2) In marketing, the process of planning, executing, controlling, and monitoring the design, pricing, promotion, and distribution of products and services to bring about transactions that meet organizational and individual needs. (Synonym: Marketing management). See: Demand planning.
Demand management
Using forecasts and experience to estimate demand for various items at various points in a supply chain. Several forecasting techniques may be used during the planning process. Often, families of items are aggregated in doing this planning. Aggregation also may occur by geographical region or by life cycle stage. Forecast demand is compared to actual demand in order to measure and increase forecast accuracy. See: Demand management.
Demand planning
The triggering of material movement to a work center only when that work center is ready to begin the next job. In effect, it shortens or eliminates the queue at the end of a previous work center. Demand pull also can occur within a supply chain, in which case it often is called a demand chain.
Demand pull
The practice of using the 4 Ps (product, pricing, placement, promotion) and other market variables to influence the demand of a product or service so that the demand better matches the available supply.
Demand shaping
Demand that is directly related to or derived from the bill of material structure for other items or end products. Such demands are therefore calculated and need not and should not be forecast. A given inventory item may have both dependent and independent demand at any given time. For example, a part may simultaneously be the component of an assembly and sold as a service part. See: Independent demand.
Dependent demand
Changing a product’s design to improve its production and use through the entire supply chain, from raw material to end-of-life cycle.
Design for the supply chain
Inventory, usually spare parts and finished goods, located in the distribution system (e.g., in warehouses, in-transit between warehouses and the consumer.)
Distribution inventory
1) The function of determining the need to replenish inventory at branch warehouses. A time-phased order point approach is used where the planned orders at the branch warehouse level are “exploded” via MRP logic to become gross requirements on the supplying source. In the case of multilevel distribution networks, this explosion process can continue down through the various levels of regional warehouses (master warehouse, factory warehouse, etc.) and become input to the master production schedule. Demand on the supplying sources is recognized as dependent, and standard MRP logic applies. 2) More generally, replenishment inventory calculations, which may be based on other planning approaches such as period order quantities or “replace exactly what was used,” rather than being limited to the time-phased order point approach.
Distribution requirements planning (DRP)
A business that does not manufacture its own products, but purchases and resells these products. Such a business usually maintains a finished goods inventory. (Synonym: Wholesaler).
Distributor
The use of computer and telecommunication technologies to conduct business via electronic transfer of data and documents.
Electronic commerce (e-commerce)
The paperless (electronic) exchange or trading documents, such as purchase orders, shipment authorizations, advanced shipment notices, and invoices, using standardized document formats.
Electronic data interchange (EDI)
The electronic representation of a document that can be printed.
Electronic document
Codes that are used with RFID tags to carry information on the product that will support warranty programs.
Electronic product codes (EPCs)
Planning for the phase-out of one product and the phase-in of a new product to avoid both the excessive inventory of an out-of-stock situation with the old product before the replacement product is available.
End-of-life management
Products whose customer specifications require unique engineering design, significant customization, or new purchased materials. Each customer order results in a unique set of part numbers, bills of materials, and routings. (Synonym: Design-to-order).
Engineer-to-order
Framework for organizing, defining, and standardizing the business processes necessary to effectively plan and control an organization so the organization can use its internal knowledge to seek external advantage.
Enterprise resources planning (ERP)
This language facilitates direct communication among computers on the internet. Unlike the older hypertext markup language (HTML), which provides HTML tags giving instructions to a web browser about how to display information, XML tags give instructions to a web browser about the category of information.
Extensible markup language (XML)
A network connection to a partner’s network using secure information processing and internet protocols to do business.
Extranet
A forecast method on a correlating leading indicator, such as estimating furniture sales based on housing starts. Extrinsic forecasts tend to be more useful for large aggregations, such as total company sales, than for individual product sales. (Antonym: Intrinsic forecast method).
Extrinsic forecasting method
The flow of information back into the control system so that actual performance can be compared with planned performance.
Feedback
A protocol used to transfer files over the internet.
File transfer protocol (FTP)