CPIM Part 1 (Version 7.1) - Key Terminology

Question 1

advance ship notice (ASN)

Answer 1

An electronic data interchange (EDI) notification of shipment of product.

Question 2

advanced planning and scheduling (APS)

Answer 2

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.

Question 3

andon

Answer 3

A sign board with signal lights used to make workers and management aware of a quality, quantity, or process problem.

Question 4

anticipation inventories

Answer 4

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

Question 5

available inventory

Answer 5

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

Question 6

available-to-promise (ATP)

Answer 6

1) In operations, 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.
2) In logistics, the quantity of a finished good that is or will be available to commit to a customer order based on the customer’s required ship date. To accommodate deliveries on future dates, ATP is usually time-phased to include anticipated purchases or production receipts. See: discrete available-to-promise, cumulative available-to-promise.

Question 7

average inventory

Answer 7

One-half the average lot size plus the safety stock, when demand and lot sizes are expected to be relatively uniform over time. The average can be calculated as an average of several inventory observations taken over several historical time periods; for example, 12-month ending inventories may be averaged. When demand and lot sizes are not uniform, the stock level versus time can be graphed to determine the average.

Question 8

back scheduling

Answer 8

A technique for calculating operation start dates and due dates. The schedule is computed starting with the due date for the order and working backward to determine the required start date and/or due dates for each operation. Syn: backward scheduling. Ant: forward scheduling

Question 9

backorder

Answer 9

An unfilled customer order or commitment. A backorder is an immediate (or past due) demand against an item whose inventory is insufficient to satisfy the demand. See: stockout.

Question 10

balance sheet

Answer 10

A financial statement showing the resources owned, the debts owed, and the owner’s share of a company at a given point in time. See: funds flow statement, income statement.

Question 11

bar code

Answer 11

A series of alternating bars and spaces printed or stamped on parts, containers, labels, or other media, representing encoded information that can be read by electronic readers. A bar code is used to facilitate timely and accurate input of data to a computer system.

Question 12

batch

Answer 12

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

Question 13

big data

Answer 13

Collecting, storing, and processing massive amounts of data for the purpose of converting it into useful information.

Question 14

bill of material (BOM)

Answer 14

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 exists for bills of material, including the single-level bill of material, indented bill of material, modular (planning) bill of material, transient bill of material, matrix bill of material, and costed bill of material.
2) A list of all the materials needed by a contract manufacturer to make one production run of a product’s piece parts/components for its customers. The bill of material may also be called the formula, recipe, or ingredients list in certain process industries.

Question 15

break-even point

Answer 15

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

Question 16

buffer management

Answer 16

In the theory of constraints, a process in which all expediting in a shop is driven by what is scheduled to be in the buffers (constraint, shipping, and assembly buffers). By expediting this material into the buffers, the system helps avoid idleness at the constraint and missed customer due dates. In addition, the reasons items are missing from the buffer are identified, and the frequency of occurrence is used to prioritize improvement activities.

Question 17

bullwhip effect

Answer 17

An extreme change in the supply position upstream in a supply chain generated by a small change in demand downstream in the supply chain. Inventory can quickly move from being backordered to being excess. This is caused by the serial nature of communicating orders up the chain with the inherent transportation delays of moving product down the chain. The bullwhip effect can be eliminated by synchronizing the supply chain.

Question 18

capable-to-promise (CTP)

Answer 18

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

Question 19

capacity available

Answer 19

The capability of a system or resource to produce a quantity of output in a particular time period. Syn: available capacity. See: capacity, available time.

Question 20

capacity management

Answer 20

The function of establishing, measuring, monitoring, and adjusting limits or levels of capacity in order to execute all manufacturing schedules (i.e., the production plan, master production schedule, material requirements plan, and dispatch list). Capacity management is executed at four levels: resource requirements planning, rough-cut capacity planning, capacity requirements planning, and input/output control.

Question 21

capacity planning

Answer 21

The process of determining the
amount of capacity required to produce in the future. This process may be performed at an aggregate or product-line level (resource requirements planning), at the master-scheduling level (rough-cut capacity planning), and at the material requirements planning level (capacity requirements planning). See: capacity requirements planning, resource planning, rough-cut capacity planning

Question 22

carrying cost

Answer 22

The cost of holding inventory, usually defined as a percentage of the dollar value of inventory per unit of time (generally one year). Carrying cost depends mainly on the cost of capital invested as well as costs of maintaining the inventory such as taxes and insurance, obsolescence, spoilage, and space occupied. Such costs vary from 10 percent to 35 percent annually, depending on type of industry. Carrying cost is ultimately a policy variable reflecting the opportunity cost of alternative uses for funds invested in inventory. Syn: holding costs

Question 23

cash flow

Answer 23

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.

Question 24

cause-and-effect diagram

Answer 24

A tool for analyzing process dispersion. It is also referred to as the Ishikawa diagram (because Kaoru Ishikawa developed it) and the fishbone diagram (because the complete diagram resembles a fish skeleton). The diagram illustrates the main causes and subcauses leading to an effect (symptom). The cause-and-effect diagram is one of the seven tools of quality. Syn: fishbone chart, Ishikawa diagram.

Question 25

centralized inventory control

Answer 25

Inventory decision making for all stockkeeping units exercised from one office or department for an entire company.

Question 26

chase production method

Answer 26

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

Question 27

closed-loop MRP

Answer 27

A system built around material requirements planning that includes the additional planning processes of production planning (sales and operations planning), master production scheduling, and capacity requirements planning. Once this planning phase is complete and the plans have been accepted as realistic and attainable, the execution processes come into play. These processes include the manufacturing control processes of input-output (capacity) measurement and detailed scheduling and dispatching, as well as anticipated delay reports from both the plant and suppliers, supplier scheduling, and so on. The term closed loop implies not only that each of these processes is included in the overall system, but also that feedback is provided by the execution processes so the planning can be kept valid at all times.

Question 28

Configure-to-order (CTO)

Answer 28

A production environment where a good or service is determined at order entry by customers who select from a pre-defined list of features, options, and attributes. The key components (bulk, semi-finished, intermediate, subassembly, fabricated, purchased, packing, and so on) used in the assembly or finishing process may be planned and usually stocked in anticipation of a customer order or only after receipt of the customer order. Receipt of a customer 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 configured from common components. Syn: assemble-to-order (ATO). See: make-to-order (MTO), make-to-stock (MTS).

Question 29

consignment

Answer 29

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

Question 30

constraint

Answer 30

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.

Question 31

continuous process improvement (CPI)

Answer 31

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

Question 32

continuous production

Answer 32

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

Question 33

continuous replenishment

Answer 33

A process by which a supplier is notified daily of actual sales or warehouse shipments and commits to replenishing these sales (for example, by size or color) without stockouts and without receiving replenishment orders. The result is a lowering of associated costs and an improvement in inventory turnover. See: rapid replenishment, vendor-managed inventory.

Question 34

control chart

Answer 34

A graphic comparison of process performance data with predetermined computed control limits. The process performance data usually consists of groups of measurements selected in the regular sequence of production that preserve the order. The primary use of control charts is to detect assignable causes of variation in the process as opposed to random variations. The control chart is one of the seven tools of quality. Syn: process control chart.

Question 35

control limit

Answer 35

A statistically determined line on a control chart (upper control limit or lower control limit). If a value occurs outside this limit, the process is deemed to be out of control.

Question 36

cost of poor quality

Answer 36

The costs associated with performing a task incorrectly and/or generating unacceptable output. These costs would include the costs of nonconformities, inefficient processes, and lost opportunities. See: quality costs.

Question 37

critical path method (CPM)

Answer 37

A network planning technique for the analysis of a project’s completion time used for planning and controlling the activities in a project. By showing each of these activities and their associated times, the critical path, which identifies those elements that actually constrain the total time for the project, can be determined. See: critical chain method, network analysis, critical activity, critical path.

Question 38

cross-docking

Answer 38

The concept of packing products on incoming shipments so they can be easily sorted at intermediate warehouses or for outgoing shipments based on final destination. The items are carried from the incoming vehicle docking point to the outgoing vehicle docking point without being stored in inventory at the warehouse. Cross-docking reduces inventory investment and storage space requirements. Syn: direct loading.

Question 39

customer relationship management (CRM)

Answer 39

A marketing philosophy based on putting the customer first. Involves the collection and analysis of information designed for sales and marketing decision support (in contrast to enterprise resources planning information) to understand and support existing and potential customer needs. Includes account management, catalog and order entry, payment processing, credits and adjustments, and other functions. Syn: customer relations management.

Question 40

cycle stock

Answer 40

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. Syn: cycle inventory.

Question 41

cycle time

Answer 41

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

Question 42

data governance

Answer 42

The overall management of data’s accessibility, usability, reliability, and security. Used to ensure data record accuracy.

Question 43

decentralized inventory control

Answer 43

Inventory decision making exercised at each stocking location for SKUs at that location.

Question 44

decoupling inventory

Answer 44

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

Question 45

delivery lead time

Answer 45

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

Question 46

demand lead time

Answer 46

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

Question 47

demonstrated capacity

Answer 47

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

Question 48

direct labor

Answer 48

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

Question 49

direct material

Answer 49

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

Question 50

discrete manufacturing

Answer 50

The production of distinct items such as automobiles, appliances, or computers.

Question 51

discrete order picking

Answer 51

A method of picking orders in which the items on one order are picked before the next order is picked. See: batch picking, order picking, zone picking.

Question 52

distribution center (DC)

Answer 52

Typically a finished goods warehouse designed for demand-driven rapid distribution to retailers (retail distribution centers), wholesalers, or direct shipments to customers (order fulfillment centers). Cross-docking warehouses are another type of distribution center. See: cross-docking.

Question 53

distribution warehouse

Answer 53

A facility where goods are received in large-volume uniform lots, stored briefly, and then broken down into smaller orders of different items required by the customer. Emphasis is on expeditious movement and handling.

Question 54

drum schedule

Answer 54

The detailed production schedule for a resource that sets the pace for the entire system. The drum schedule must reconcile the customer requirements with the system’s constraint(s).

Question 55

drum-buffer-rope (DBR)

Answer 55

The theory of constraints method for scheduling and managing operations that have an internal constraint or capacity-constrained resource.

Question 56

economic order quantity (EOQ)

Answer 56

A type of fixed order quantity model that determines the amount of an item to be purchased or manufactured at one time. The intent is to minimize the combined costs of acquiring and carrying inventory. The basic formula is: where A = annual usage in units, S = ordering costs in dollars, i = annual inventory carrying cost rate as a decimal, and C = unit cost. Syn: economic lot size, minimum cost order quantity. See: total cost curve.

Question 57

electronic data interchange (EDI)

Answer 57

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

Question 58

employee empowerment

Answer 58

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

Question 59

employee involvement (EI)

Answer 59

The concept of using the experience, creative energy, and intelligence of all employees by treating them with respect, keeping them informed, and including them and their ideas in decision-making processes appropriate to their areas of expertise. Employee involvement focuses on quality and productivity improvements. Syn: people involvement.

Question 60

explode

Answer 60

To perform a bill-of-material explosion.

Question 61

external failure costs

Answer 61

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

Question 62

external setup time

Answer 62

The time associated with elements of a setup procedure performed while the process or machine is running. Ant: internal setup time.

Question 63

field service

Answer 63

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

Question 64

finished goods inventory

Answer 64

Those items on which all manufacturing operations, including final test, have been completed. These products are available for shipment to the customer as either end items or repair parts. Syn: finished products inventory. See: goods.

Question 65

finite forward scheduling

Answer 65

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

Question 66

finite loading

Answer 66

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

Question 67

firm planned order (FPO)

Answer 67

A planned order that can be frozen in quantity and time. The computer is not allowed to change it automatically; this is the responsibility of the planner in charge of the item that is being planned. This technique can aid planners working with MRP systems to respond to material and capacity problems by firming up selected planned orders. In addition, firm planned orders are the normal method of stating the master production schedule. See: planning time fence.

Question 68

five Ss

Answer 68

Five terms beginning with “S” used to create a workplace suitable for lean production: sort, simplify, scrub, standardize, and sustain. Sort means to separate needed items from unneeded ones and remove the latter. Simplify means to neatly arrange items for use. Scrub means to clean up the work area. Standardize means to sort, simplify, and scrub daily. Sustain means to always follow the first four Ss. Sometimes referred to by the Japanese equivalents: seiri, seiton, seiso, seiketsu, and shitsuke.

Question 69

five whys

Answer 69

The common practice in total quality management is to ask “why” five times when confronted with a problem. By the time the answer to the fifth “why” is found, the ultimate cause of the problem is identified. Syn: five Ws. See: root cause analysis.

Question 70

fixed order quantity

Answer 70

A lot-sizing technique in MRP or inventory management that will always cause planned or actual orders to be generated for a predetermined fixed quantity, or multiples thereof, if net requirements for the period exceed the fixed order quantity.

Question 71

fixed overhead

Answer 71

Traditionally, all manufacturing costs— other than direct labor and direct materials—that continue even if products are not produced. Although fixed overhead is necessary to produce the product, it cannot be directly traced to the final product.

Question 72

fixed-location storage

Answer 72

A method of storage in which a relatively permanent location is assigned for the storage of each item in a storeroom or warehouse. Although more space is needed to store parts than in a random-location storage system, fixed locations become familiar, and therefore a locator file may not be needed. See: random-location storage.

Question 73

fixed-position manufacturing

Answer 73

Similar to project manufacturing, this type of manufacturing is mostly used for large, complex projects where the product remains in one location for its full assembly period or may move from location to location after considerable work and time are spent on it. Examples of fixedposition manufacturing include shipbuilding or aircraft assembly, for which the costs of frequent movement of the product are very high.

Question 74

flow processing

Answer 74

In process systems development, work flows from one workstation to another at a nearly constant rate and with no delays. When producing discrete (geometric) units, the process is called repetitive manufacturing; when producing non-geometric units over time, the process is called continuous manufacturing. A physical-chemical reaction takes place in the continuous flow process.

Question 75

flow shop

Answer 75

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

Question 76

flowchart

Answer 76

The output of a flowcharting process; a chart that shows the operations, transportation, storages, delays, inspections, and so on related to a process. Flowcharts are drawn to better understand processes. The flowchart is one of the seven tools of quality. Syn: flow diagram. See: block diagram, flow process chart.

Question 77

fluctuation inventory

Answer 77

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

Question 78

forward scheduling

Answer 78

A scheduling technique where the scheduler proceeds from a known start date and computes the completion date for an order, usually proceeding from the first operation to the last. Dates generated by this technique are generally the earliest start dates for operations. See: forward pass. Ant: back scheduling.

Question 79

functional layout

Answer 79

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

Question 80

Gantt chart

Answer 80

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

Question 81

gemba

Answer 81

The place where humans create value; the real workplace. Also a philosophy: “Go to the actual place, see the actual work.”

Question 82

general and administrative expenses (G&A)

Answer 82

The category of expenses on an income statement that includes the costs of general managers, computer systems, research and development, etc.

Question 83

green reverse logistics

Answer 83

The responsibility of the supplier to dispose of packaging materials or environmentally sensitive materials such as heavy metals.

Question 84

gross margin

Answer 84

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

Question 85

gross requirement

Answer 85

The total of independent and dependent demand for a component before the netting of on-hand inventory and scheduled receipts.

Question 86

hedge inventory

Answer 86

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

Question 87

heijunka

Answer 87

In just-in-time philosophy, an approach to level production throughout the supply chain to match the planned rate of end product sales.

Question 88

histogram

Answer 88

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

Question 89

hoshin planning

Answer 89

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

Question 90

idle capacity

Answer 90

The available capacity that exists on nonconstraint resources beyond the capacity required to support the constraint. Idle capacity has two components: protective capacity and excess capacity.

Question 91

income statement

Answer 91

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

Question 92

Incoterms

Answer 92

A series of pre-defined commercial terms published by the International Chamber of Commerce relating to international commercial law. These terms do not cover property rights.

Question 93

indented bill of material

Answer 93

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

Question 94

infinite loading

Answer 94

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

Question 95

intermittent production

Answer 95

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

Question 96

intermodal transport

Answer 96

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

Question 97

internal failure costs

Answer 97

The cost of things that go wrong before the product reaches the customer. Internal failure costs usually include rework, scrap, downgrades, reinspection, retesting, and process losses.

Question 98

internal setup time

Answer 98

The time associated with elements of a setup procedure performed while the process or machine is not running. Ant: external setup time.

Question 99

interplant demand

Answer 99

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

Question 100

inventory adjustment

Answer 100

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

Question 101

inventory buffer

Answer 101

Inventory used to protect the throughput of an operation or the schedule against the negative effects caused by delays in delivery, quality problems, delivery of an incorrect quantity, and so on. Syn: inventory cushion. See: fluctuation inventory, safety stock.

Question 102

inventory control

Answer 102

The activities and techniques of maintaining the desired levels of items, whether raw materials, work in process, or finished products. Syn: material control.

Question 103

inventory ordering system

Answer 103

Inventory models for the replenishment of inventory. Independent demand inventory ordering models include fixed reorder cycle, fixed reorder quantity, optional replenishment, and hybrid models, among others. Dependent demand inventory ordering models include material requirements planning, kanban, and drum-buffer-rope.

Question 104

inventory turnover

Answer 104

The number of times that an inventory cycles, or “turns over,” during the year. A frequently used method to compute inventory turnover is to divide the annual cost of sales by the average inventory level. For example, an annual cost of sales of $21 million divided by an average inventory of $3 million means that inventory turned over seven times. Syn: inventory turns, turnover. See: inventory velocity.

Question 105

jidoka

Answer 105

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

Question 106

job costing

Answer 106

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

Question 107

job shop scheduling

Answer 107

The production planning and control techniques used to sequence and prioritize production quantities across operations in a job shop.

Question 108

kaizen

Answer 108

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

Question 109

leading indicator

Answer 109

A specific business activity index that indicates future trends. For example, housing starts is a leading indicator for the industry that supplies builders’ hardware.

Question 110

lead-time offset

Answer 110

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

Question 111

lean production

Answer 111

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

Question 112

lean six sigma

Answer 112

A methodology that combines the improvement concepts of lean and six sigma. It uses the seven wastes of lean and the DMAIC process from six sigma, and awards recognition of competence through judo-style belts.

Question 113

level of service

Answer 113

A measure (usually expressed as a percentage) of satisfying demand through inventory or by the current production schedule in time to satisfy the customers’ requested delivery dates and quantities. In a make-to-stock environment, level of service is sometimes calculated as the percentage of orders picked complete from stock upon receipt of the customer order, the percentage of line items picked complete, or the percentage of total dollar demand picked complete. In make-to-order and design-to-order environments, level of service is the percentage of times the customer-requested or acknowledged date was met by shipping complete product quantities. Syn: measure of service, service level. See: cycle service level.

Question 114

level production method

Answer 114

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

Question 115

level schedule

Answer 115

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

Question 116

liabilities

Answer 116

An accounting/financial term (balance sheet classification of accounts) representing debts or obligations owed by a company to creditors. Liabilities may have a short-term time horizon, such as accounts payable, or a longer-term obligation, such as mortgage payable or bonds payable. See: assets, balance sheet, debt, owner’s equity.

Question 117

load

Answer 117

The amount of planned work scheduled for and actual work released to a facility, work center, or operation for a specific span of time. Usually expressed in terms of standard hours of work or, when items consume similar resources at the same rate, units of production. Syn: workload.

Question 118

load leveling

Answer 118

Spreading orders out in time or rescheduling operations so that the amount of work to be done in sequential time periods tends to be distributed evenly and is achievable. Although both material and labor are ideally level loaded, specific businesses and industries may load to one or the other exclusively (e.g., service industries). Syn: capacity smoothing, level loading. See: level schedule.

Question 119

lot-for-lot (L4L)

Answer 119

A lot-sizing technique that generates planned orders in quantities equal to the net requirements in each period. See: discrete order quantity.

Question 120

lot-size inventory

Answer 120

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

Question 121

low-level code

Answer 121

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

Question 122

make-or-buy decision

Answer 122

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

Question 123

manufacturing calendar

Answer 123

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

Question 124

manufacturing lead time

Answer 124

The total time required to manufacture an item, exclusive of lower-level purchasing lead time. For make-to-order products, it is the length of time between the release of an order to the production process and shipment to the final customer. For make-to-stock products, it is the length of time between the release of an order to the production process and receipt into inventory. Included are order preparation time, queue time, setup time, run time, move time, inspection time, and put-away time. Syn: manufacturing cycle, production cycle, production lead time. See: lead time.

Question 125

manufacturing order

Answer 125

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

Question 126

manufacturing philosophy

Answer 126

The set of guiding principles, driving forces, and ingrained attitudes that helps communicate goals, plans, and policies to all employees and that is reinforced through conscious and subconscious behavior within the manufacturing organization.

Question 127

manufacturing resource planning (MRP II)

Answer 127

A method for the effective planning of all resources of a manufacturing company. Ideally, it addresses operational planning in units and financial planning in dollars, and has a simulation capability to answer what-if questions. It is made up of a variety of processes, each linked together: business planning, production planning (sales and operations planning), master production scheduling, material requirements planning, capacity requirements planning, and the execution support systems for capacity and material. Output from these systems is integrated with financial reports such as the business plan, purchase commitment report, shipping budget, and inventory projections in dollars. Manufacturing resource planning is a direct outgrowth and extension of closed-loop MRP.

Question 128

mass customization

Answer 128

The use of mass production techniques to create large volume of products in a wide variety keeping production costs low while enabling customized output primarily utilizing postponement or delayed differentiation.

Question 129

master data

Answer 129

An enterprise’s essential core data consisting of basic information needed across the enterprise to conduct business. Master data describes the core entities of the enterprise including products, customers, suppliers, sites, and chart of accounts.

Question 130

master data management (MDM)

Answer 130

A discipline in which business and IT work together to ensure the uniformity, accuracy, completeness, relevancy, integrity, and accountability of the enterprise’s shared master data.

Question 131

master planning

Answer 131

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

Question 132

master schedule

Answer 132

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

Question 133

materials handling

Answer 133

Movement and storage of goods inside the distribution center. This represents a capital cost and is balanced against the operating costs of the facility.

Question 134

materials management

Answer 134

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

Question 135

mean absolute deviation (MAD)

Answer 135

The average of the absolute values of the deviations of observed values from some expected value. MAD can be calculated based on observations and the arithmetic mean of those observations. An alternative is to calculate absolute deviations of actual sales data minus forecast data. This data can be averaged in the usual arithmetic way or with exponential smoothing. See: forecast error, tracking signal.

Question 136

min-max system

Answer 136

A type of order point replenishment system where the minimum (min) is the order point, and the maximum (max) is the “order up to” inventory level. The order quantity is variable and is the result of the max minus available and on-order inventory. An order is recommended when the sum of the available and on-order inventory is at or below the min.

Question 137

mixed-model production

Answer 137

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

Question 138

mixed-model scheduling

Answer 138

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

Question 139

modularization

Answer 139

In product development, the use of standardized parts for flexibility and variety. Permits product development cost reductions by using the same item(s) to build a variety of finished goods. This is the first step in developing a planning bill of material process.

Question 140

move time

Answer 140

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

Question 141

muda (waste)

Answer 141

In lean manufacturing, costs are reduced by reducing waste within a system. There are seven categories of waste: (1) overproduction—excess or too early; (2) waiting—queuing delays; (3) transportation— unneeded movements; (4) processing—poor process design; (5) motion—activities that do not add value; (6) inventory—stock that is sitting and is accumulating cost without necessarily providing value; (7) defective units—scrap or rework.

Question 142

multilevel bill of material

Answer 142

A display of all the components directly or indirectly used in a parent, together with the quantity required of each component. If a component is a subassembly, blend, intermediate, etc., all its components and all their components also will be exhibited, down to purchased parts and raw materials.

Question 143

multisourcing

Answer 143

Procurement of a good or service from more than one independent supplier. Syn: multiple sourcing. Ant: single sourcing. See: dual sourcing.

Question 144

mura

Answer 144

A Japanese word meaning unevenness or variability.

Question 145

muri

Answer 145

A Japanese word meaning strain or overburden.

Question 146

net requirements

Answer 146

In MRP, the net requirements for a part or an assembly are derived as a result of applying gross requirements and allocations against inventory on hand, scheduled receipts, and safety stock. After being lot-sized and offset for lead time, net requirements become planned orders.

Question 147

one-piece flow

Answer 147

A concept in which items are processed directly from one step to the next, one unit at a time. This helps to shorten lead times and lines of communication, thus more quickly identifying problems.

Question 148

on-hand balance

Answer 148

The quantity shown in the inventory records as being physically in stock.

Question 149

on-time schedule performance

Answer 149

A measure (percentage) of meeting the customer’s originally negotiated delivery request date. Performance can be expressed as a percentage based on the number of orders, line items, or dollar value shipped on time.

Question 150

open order

Answer 150

1) A released manufacturing order or purchase order. Syn: released order. See: scheduled receipt. 2) An unfilled customer order.

Question 151

operating expense

Answer 151

All the money an organization spends in generating goal units.

Question 152

operations management

Answer 152

1) The planning, scheduling, and control of the activities that transform inputs into finished goods and services. 2) A field of study that focuses on the effective planning, scheduling, use, and control of a manufacturing or service organization through the study of concepts from design engineering, industrial engineering, management information systems, quality management, production management, inventory management, accounting, and other functions as they affect the operation.

Question 153

operator flexibility

Answer 153

Training machine workers to perform tasks outside their immediate jobs and in problem-solving techniques to improve process flexibility. This is a necessary process in developing a fully cross-trained workforce.

Question 154

order entry

Answer 154

The process of accepting and translating what a customer wants into terms used by the manufacturer or distributor. The commitment should be based on the available-to-promise (ATP) line in the master schedule. This can be as simple as creating shipping documents for finished goods in a make-tostock environment, or it might be a more complicated series of activities, including design efforts for maketo-order products. See: master schedule, order service.

Question 155

order picking

Answer 155

Selecting or “picking” the required quantity of specific products for movement to a packaging area (usually in response to one or more shipping orders) and documenting that the material was moved from one location to shipping. Syn: order selection. See: batch picking, discrete order picking, zone picking.

Question 156

order point

Answer 156

A set inventory level where, if the total stock on hand plus on order falls to or below that point, action is taken to replenish the stock. The order point is normally calculated as forecasted usage during the replenishment lead time plus safety stock. Syn: reorder point, statistical order point, trigger level. See: fixed reorder quantity inventory model.

Question 157

order promising

Answer 157

The process of making a delivery commitment (i.e., answering the question, “When can you ship?”). For make-to-order products, this usually involves a check of uncommitted material and availability of capacity, often as represented by the master schedule available-to-promise. Syn: customer order promising, order dating. See: available-topromise, order service.

Question 158

order qualifiers

Answer 158

Those competitive characteristics that a firm must exhibit to be a viable competitor in the marketplace. For example, a firm may seek to compete on characteristics other than price, but in order to “qualify” to compete, its costs and the related price must be within a certain range to be considered by its customers. Syn: qualifiers. See: order losers, order winners.

Question 159

order winners

Answer 159

Those competitive characteristics that cause a firm’s customers to choose that firm’s goods and services over those of its competitors. Order winners can be considered to be competitive advantages for the firm. Order winners usually focus on one (rarely more than two) of the following strategic initiatives: price/cost, quality, delivery speed, delivery reliability, product design, flexibility, after-market service, and image. See: order losers, order qualifiers.

Question 160

ordering cost

Answer 160

The costs that increase as the number of orders placed increases. Used in calculating order quantities. Includes costs related to the clerical work of preparing, releasing, monitoring, and receiving orders; the physical handling of goods; inspections; and setup costs, as applicable. See: acquisition cost, inventory costs.

Question 161

outsourcing

Answer 161

The process of having suppliers provide goods and services that were previously provided internally. Outsourcing involves substitution—the replacement of internal capacity and production by that of the supplier. See: subcontracting.

Question 162

overhead

Answer 162

The costs incurred in the operation of a business that cannot be directly related to the individual goods or services produced. These costs, such as light, heat, supervision, and maintenance, are grouped in several pools (e.g., department overhead, factory overhead, general overhead) and distributed to units of goods or services by some standard allocation method such as direct labor hours, direct labor dollars, or direct materials dollars. Syn: burden. See: expense.

Question 163

overlapped schedule

Answer 163

A manufacturing schedule that “overlaps” successive operations. Overlapping occurs when the completed portion of an order at one work center is processed at one or more succeeding work centers before the pieces left behind are finished at the preceding work centers. Syn: lap phasing, operation overlapping, telescoping. See: send ahead. Ant: gapped schedule, overlapped production.

Question 164

owner’s equity

Answer 164

An accounting/financial term (balance sheet classification of accounts) representing the residual claim by the company’s owners or shareholders, or both, to the company’s assets less its liabilities. See: assets, balance sheet, liabilities.

Question 165

pacemaker

Answer 165

In lean, the resource that is scheduled based on the customer demand rate for that specific value stream; this resource performs an operation or process that governs the flow of materials along the value stream. Its purpose is to maintain a smooth flow through the manufacturing plant. A larger buffer is provided for the pacemaker than other resources so that it can maintain continuous operation. See: constraint.

Question 166

parent item

Answer 166

The item produced from one or more components. Syn: parent.

Question 167

Pareto’s law

Answer 167

A concept developed by Vilfredo Pareto, an Italian economist, that states that a small percentage of a group accounts for the largest fraction of its impact or value. In an ABC classification, for example, 20 percent of the inventory items may constitute 80 percent of the inventory value. See: ABC classification, 80-20.

Question 168

participative design/engineering

Answer 168

A concept that refers to the simultaneous participation of all the functional areas of the firm in the product design activity. Suppliers and customers are often also included. The intent is to enhance the design with the inputs of all the key stakeholders. Such a process should ensure that the final design meets all the needs of the stakeholders and should ensure a product that can be quickly brought to the marketplace while maximizing quality and minimizing costs. Syn: co-design, concurrent design, concurrent engineering, new product development team, parallel engineering, simultaneous design/engineering, simultaneous engineering, team design/ engineering. See: early manufacturing involvement.

Question 169

pegging

Answer 169

In MRP and MPS, the ability to identify for a given item the sources of its gross requirements and/or allocations. Pegging can be thought of as active whereused information. See: requirements traceability.

Question 170

performance standard

Answer 170

In a performance measurement system, the accepted, targeted, or expected value for the criterion. See: performance criterion, performance measure, performance measurement system.

Question 171

period order quantity

Answer 171

A lot-sizing technique under which the lot size is equal to the net requirements for a given number of periods (e.g., weeks into the future). The number of periods to order is variable, each order size equalizing the holding costs and the ordering costs for the interval. See: discrete order quantity, dynamic lot sizing.

Question 172

periodic replenishment

Answer 172

A method of aggregating requirements to place deliveries of varying quantities at evenly spaced time intervals rather than variably spaced deliveries of equal quantities.

Question 173

perpetual inventory record

Answer 173

A computer record or manual document on which each inventory transaction is posted so that a current record of the inventory is maintained.

Question 174

physical supply

Answer 174

The movement and storage of goods from suppliers to manufacturing. The cost of physical supply is ultimately passed on to the customer.

Question 175

picking list

Answer 175

A document that lists the material to be picked for manufacturing or shipping orders. Syn: disbursement list, material list, stores issue order, stores requisition.

Question 176

pickup and delivery costs

Answer 176

Carrier charges for each shipment pickup and the weight of that shipment. Costs can be reduced if several smaller shipments are consolidated and picked up in one trip.

Question 177

pipeline stock

Answer 177

Inventory in the transportation network and the distribution system, including the flow through intermediate stocking points. The flow time through the pipeline has a major effect on the amount of inventory required in the pipeline. Time factors involve order transmission, order processing, scheduling, shipping, transportation, receiving, stocking, review time, and so forth. Syn: pipeline inventory. See: distribution system, transportation inventory.

Question 178

plan-do-check-action (PDCA)

Answer 178

A four-step process for quality improvement. In the first step (plan), a plan to effect improvement is developed. In the second step (do), the plan is carried out, preferably on a small scale. In the third step (check), the effects of the plan are observed. In the last step (action), the results are studied to determine what was learned and what can be predicted. The plan-do-check-action cycle is sometimes referred to as the Shewhart cycle (because Walter A. Shewhart discussed the concept in his book, Statistical Method from the Viewpoint of Quality Control) or as the Deming circle (because W. Edwards Deming introduced the concept in Japan and the Japanese subsequently called it the Deming circle). Syn: plan-do-check-act cycle, Shewhart circle of quality, Shewhart cycle. See: Deming circle.

Question 179

planned order

Answer 179

A suggested order quantity, release date, and due date created by the planning system’s logic when it encounters net requirements in processing MRP. In some cases, it can also be created by a master scheduling module. Planned orders are created by the computer, exist only within the computer, and may be changed or deleted by the computer during subsequent processing if conditions change. Planned orders at one level will be exploded into gross requirements for components at the next level. Planned orders, along with released orders, serve as input to capacity requirements planning to show the total capacity requirements by work center in future time periods. See: planning time fence.

Question 180

planned order receipt

Answer 180

The quantity planned to be received at a future date as a result of a planned order release. Planned order receipts differ from scheduled receipts in that they have not been released. Syn: planned receipt.

Question 181

planned order release

Answer 181

A row on an MRP table that is derived from planned order receipts by taking the planned receipt quantity and offsetting to the left by the appropriate lead time. See: order release.

Question 182

planning bill of material

Answer 182

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

Question 183

planning horizon

Answer 183

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

Question 184

point of sale (POS)

Answer 184

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

Question 185

postponement

Answer 185

A product design, or supply chain strategy that deliberately delays final differentiation of a product (assembly, production, packaging, tagging, etc.) until the latest possible time in the process. This shifts product differentiation closer to the consumer to reduce the anticipatory risk of producing the wrong product. The practice eliminates excess finished goods in the supply chain. Sometimes referred to as Delayed Differentiation.

Question 186

prevention costs

Answer 186

The costs caused by improvement activities that focus on the reduction of failure and appraisal costs. Typical costs include education, quality training, and supplier certification. Prevention costs are one of four categories of quality costs.

Question 187

preventive maintenance

Answer 187

The activities, including adjustments, replacements, and basic cleanliness, that forestall machine breakdowns. The purpose is to ensure that production quality is maintained and that delivery schedules are met. In addition, a machine that is well cared for will last longer and cause fewer problems. Syn: periodic maintenance.

Question 188

priority control

Answer 188

The process of communicating start and completion dates to manufacturing departments in order to execute a plan. The dispatch list is the tool normally used to provide these dates and priorities based on the current plan and status of all open orders.

Question 189

priority planning

Answer 189

The function of determining what material is needed and when. Master production scheduling and material requirements planning are the elements used for the planning and replanning process to maintain proper due dates on required materials.

Question 190

process batch

Answer 190

The quantity or volume of output that is to be completed at a workstation before switching to a different type of work or changing an equipment setup.

Question 191

process flexibility

Answer 191

The design of the manufacturing system, including operators and machinery, that allows quick changeovers to respond to near-term changes in product volume and mix. A necessary tool in lean and just in time.

Question 192

process flow diagram

Answer 192

A graphical and progressive representation of the various steps, events, and tasks that make up an operations process. Provides the viewer with a picture of what actually occurs when a product is manufactured or a service is performed.

Question 193

procurement

Answer 193

The business functions of procurement planning, purchasing, inventory control, traffic, receiving, incoming inspection, and salvage operations.

Question 194

procurement lead time

Answer 194

The time required to design a product, modify or design equipment, conduct market research, and obtain all necessary materials. Lead time begins when a decision has been made to accept an order to produce a new product and ends when production commences. Syn: procurement cycle, total procurement lead time. See: time-to-market.

Question 195

product differentiation

Answer 195

A strategy of making a product distinct from the competition on a nonprice basis such as availability, durability, quality, or reliability.

Question 196

product family

Answer 196

A group of products or services that pass through similar processing steps, have similar characteristics, and share common equipment prior to shipment or delivery to the customer. Can be from different overlapping product lines that are produced in one factory and often used in production planning (or sales and operations planning). See: product line.

Question 197

product layout

Answer 197

Another name for flow process layout. A system that is set up for a limited range of similar products. Focused-factory production is also considered to be in this category. See: flow processing, focused factory.

Question 198

product mix

Answer 198

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

Question 199

production activity control (PAC)

Answer 199

The function of routing and dispatching the work to be accomplished through the production facility and of performing supplier control. PAC encompasses the principles, approaches, and techniques needed to schedule, control, measure, and evaluate the effectiveness of production operations. See: shop floor control.

Question 200

production line

Answer 200

A series of pieces of equipment dedicated to the manufacture of a specific number of products or families.

Question 201

production plan

Answer 201

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

Question 202

production planning

Answer 202

A process to develop tactical plans based on setting the overall level of manufacturing output (production plan) and other activities to best satisfy the current planned levels of sales (sales plan or forecasts), while meeting general business objectives of profitability, productivity, competitive customer lead times, etc., as expressed in the overall business plan.

The sales and production capabilities are compared, and a business strategy that includes a sales plan, a production plan, budgets, pro forma financial statements, and supporting plans for materials and workforce requirements, and so on, is developed. A primary purpose is to establish production rates that will achieve management’s objective of satisfying customer demand by maintaining, raising, or lowering inventories or backlogs, while usually attempting to keep the workforce relatively stable.

Because this plan affects many company functions, it is normally prepared with information from marketing and coordinated with the functions of manufacturing, sales, engineering, finance, human resources, etc. See: aggregate planning, production plan, sales and operations planning, sales plan.

Question 203

productive capacity

Answer 203

In the theory of constraints, the maximum of the output capabilities of a resource (or series of resources) or the market demand for that output for a given time period. See: excess capacity, idle capacity, protective capacity.

Question 204

productivity

Answer 204

1) An overall measure of the ability to produce a good or a service. It is the actual output of production compared to the actual input of resources. Productivity is a relative measure across time or against common entities (labor, capital, etc.). In the production literature, attempts have been made to define total productivity where the effects of labor and capital are combined and divided into the output. One example is a ratio that is calculated by adding the dollar value of labor, capital equipment, energy, and material, and so forth and dividing it into the dollar value of output in a given time period. This is one measure of total factor productivity. See: efficiency, labor productivity, machine productivity, utilization. 2) In economics, the ratio of output in terms of dollars of sales to an input such as direct labor in terms of the total wages. Known as single factor productivity or partial factor productivity.

Question 205

profit margin

Answer 205

1) The difference between the sales and cost of goods sold for an organization, sometimes expressed as a percentage of sales. 2) In traditional accounting, the product profit margin is the product selling price minus the direct material, direct labor, and allocated overhead for the product, sometimes expressed as a percentage of selling price.

Question 206

project management

Answer 206

The use of skills and knowledge in coordinating the organizing, planning, scheduling, directing, controlling, monitoring, and evaluating of prescribed activities to ensure that the stated objectives of a project, manufactured good, or service are achieved. See: project.

Question 207

projected available balance

Answer 207

An inventory balance projected into the future. It is the running sum of onhand inventory minus requirements plus scheduled receipts and planned orders. Syn: projected available inventory.

Question 208

protective capacity

Answer 208

The resource capacity needed to protect system throughput—ensuring that some capacity above the capacity required to exploit the constraint is available to catch up when disruptions inevitably occur. Nonconstraint resources need protective capacity to rebuild the bank in front of the constraint or capacity-constrained resource (CCR) and/or on the shipping dock before throughput is lost and to empty the space buffer when it fills.

Question 209

protective inventory

Answer 209

In the theory of constraints, the amount of inventory required relative to the protective capacity in the system to achieve a specific throughput rate at the constraint. See: limiting operation.

Question 210

protective packaging

Answer 210

Wrapping or covering of material that provides containment, protection, and identification of inventory in a warehouse. The material must be contained in such a way that will support movement and storage and will fit into the dimension of storage space and transportation vehicles.

Question 211

pull system

Answer 211

1) In production, the production of items only as demanded for use or to replace those taken for use. See: pull signal. 2) In material control, the withdrawal of inventory as demanded by the using operations. Material is not issued until a signal comes from the user. 3) In distribution, a system for replenishing field warehouse inventories where replenishment decisions are made at the field warehouse itself, not at the central warehouse or plant.

Question 212

purchasing lead time

Answer 212

The total lead time required to obtain a purchased item. Included here are order preparation and release time; supplier lead time; transportation time; and receiving, inspection, and put-away time. See: lead time, supplier lead time, time-to-product.

Question 213

push system

Answer 213

1) In production, the production of items at times required by a given schedule planned in advance. 2) In material control, the issuing of material according to a given schedule or issuing material to a job order at its start time. 3) In distribution, a system for replenishing field warehouse inventories where replenishment decision making is centralized, usually at the manufacturing site or central supply facility. See: pull system.

Question 214

quality at the source

Answer 214

A producer’s responsibility to provide 100 percent acceptable quality material to the consumer of the material. The objective is to reduce or eliminate shipping or receiving quality inspections and line stoppages as a result of supplier defects.

Question 215

quality control

Answer 215

The process of measuring quality conformance by comparing the actual with a standard for the characteristic and taking corrective actions on the difference. See: quality assurance/contol.

Question 216

quality costs

Answer 216

The overall costs associated with prevention activities and the improvement of quality throughout the firm before, during, and after production of a product. These costs fall into four recognized categories: internal failure costs, external failure costs, appraisal costs, and prevention costs. Internal failure costs relate to problems before the product reaches the customer. These usually include rework, scrap, downgrades, reinspection, retest, and process losses. External failure costs relate to problems found after the product reaches the customer. These usually include such costs as warranty and returns. Appraisal costs are associated with the formal evaluation and audit of quality in the firm. Typical costs include inspection, quality audits, testing, calibration, and checking time. Prevention costs are those caused by improvement activities that focus on reducing failure and appraisal costs. Typical costs include education, quality training, and supplier certification. See: cost of poor quality.

Question 217

quality function deployment (QFD)

Answer 217

A methodology designed to ensure that all the major requirements of the customer are identified and subsequently met or exceeded through the resulting product design process and the design and operation of the supporting production management system. QFD can be viewed as a set of communication and translation tools. QFD tries to eliminate the gap between what the customer wants in a new product and what the product is capable of delivering. QFD often leads to a clear identification of the major requirements of the customers. These expectations are referred to as the voice of the customer (VOC). See: house of quality.

Question 218

quantity discount

Answer 218

A price reduction allowance determined by the quantity or value of a purchase.

Question 219

quick changeover

Answer 219

The ability to shorten machine setups between different machine operation requirements to increase process flexibility. Highest concentration is on first reducing external setup time, then on internal setup issues. This reduces economic order quantity, queue and manufacturing lead times, and work-in-process inventory; it improves quality, process, and material flows.

Question 220

radio frequency identification (RFID)

Answer 220

A system using electronic tags to store data about items. Accessing or retrieving this data is accomplished through a specific radio frequency and does not require close proximity or line-of-sight access. See: active tag, passive tag, semi-passive tag.

Question 221

random variation

Answer 221

A fluctuation in data that is caused by uncertain or random occurrences. See: random events.

Question 222

random-location storage

Answer 222

A storage technique in which parts are placed in any space that is empty when they arrive at the storeroom. Although this random method requires the use of a locator file to identify part locations, it often requires less storage space than a fixed-location storage method. Syn: floating inventory location system, floating storage location. See: fixed-location storage.

Question 223

rated capacity

Answer 223

The expected output capability of a resource or system. Capacity is traditionally calculated from such data as planned hours, efficiency, and utilization. The rated capacity is equal to hours available × efficiency × utilization. Syn: calculated capacity, effective capacity, nominal capacity, standing capacity.

Question 224

receiving

Answer 224

The function encompassing the physical receipt of material, the inspection of the shipment for conformance with the purchase order (quantity and damage), the identification and delivery to destination, and the preparation of receiving reports.

Question 225

record accuracy

Answer 225

A measure of the conformity of recorded values in a bookkeeping system to the actual values; for example, the on-hand balance of an item maintained in a computer record relative to the actual on-hand balance of the items in the stockroom.

Question 226

remanufacturing

Answer 226

1) An industrial process in which worn-out products are restored to like-new condition. In contrast, a repaired product normally retains its identity, and only those parts that have failed or are badly worn are replaced or serviced. 2) The manufacturing environment where worn-out products are restored to like-new condition.

Question 227

reorder quantity

Answer 227

1) In a fixed reorder quantity system of inventory control, the fixed quantity that should be ordered each time the available stock (on-hand plus on-order) falls to or below the reorder point. 2) In a variable reorder quantity system, the amount ordered from time period to time period varies. Syn: replenishment order quantity

Question 228

repetitive manufacturing

Answer 228

The repeated production of the same discrete products or families of products. Repetitive methodology minimizes setups, inventory, and manufacturing lead times by using production lines, assembly lines, or cells. Work orders are no longer necessary; production scheduling and control are based on production rates. Products may be standard or assembled from modules. Repetitiveness is not a function of speed or volume. Syn: repetitive process, repetitive production. See: project manufacturing.

Question 229

replenishment lead time

Answer 229

The total period of time that elapses from the moment it is determined that a product should be reordered until the product is back on the shelf available for use. Syn: reorder cycle.

Question 230

request for quote (RFQ)

Answer 230

A document used to solicit vendor responses when a product has been selected and price quotations are needed from several vendors.

Question 231

requirements explosion

Answer 231

The process of calculating the demand for the components of a parent item by multiplying the parent item requirements by the component usage quantity specified in the bill of material. Syn: explosion.

Question 232

resource planning

Answer 232

Capacity planning conducted at the business plan level. The process of establishing, measuring, and adjusting limits or levels of long-range capacity. Resource planning is normally based on the production plan but may be driven by higher-level plans beyond the time horizon of the production plan (e.g., the business plan). It addresses those resources that take long periods of time to acquire. Resource planning decisions always require top management approval. Syn: resource requirements planning. See: capacity planning, long-term planning.

Question 233

reverse logistics

Answer 233

A complete supply chain dedicated to the reverse flow of products and materials for the purpose of returns, repair, remanufacture, and/or recycling.

Question 234

risk management

Answer 234

The identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities.

Question 235

root cause analysis

Answer 235

Analytical methods to determine the core problem(s) of an organization, process, product, market, and so forth. See: current reality tree, five whys, stratification analysis.

Question 236

rough-cut capacity planning (RCCP)

Answer 236

The process of converting the master production schedule into requirements for key resources often including labor, machinery, warehouse space, suppliers’ capabilities, and, in some cases, money. Comparison to available or demonstrated capacity is usually done for each key resource. This comparison assists the master scheduler in establishing a feasible master production schedule. Three approaches to performing RCCP are the bill of labor (resources, capacity) approach, the capacity planning using overall factors approach, and the resource profile approach. See: bill of resources, capacity planning, capacity planning using overall factors, product load profile, resource profile.

Question 237

run time

Answer 237

The time required to process a piece or lot at a specific operation. Run time does not include setup time. Syn: run standards.

Question 238

sales plan

Answer 238

A time-phased statement of expected customer orders anticipated to be received (incoming sales, not outgoing shipments) for each major product family or item. Represents sales and marketing management’s commitment to take all reasonable steps necessary to achieve this level of actual customer orders. Is a necessary input to the production planning process (or sales and operations planning process). Expressed in units identical to those used for the production plan (as well as in sales dollars). See: aggregate planning, production plan, production planning, sales and operations planning.

Question 239

sawtooth diagram

Answer 239

A quantity-versus-time graphic representation of the order point/order quantity inventory system showing inventory being received and then used up and reordered.

Question 240

scatter chart

Answer 240

A graphical technique to analyze the relationship between two variables. Two sets of data are plotted on a graph, with the y axis used for the variable to be predicted and the x axis used for the variable to make the prediction. The graph will show possible relationships (although two variables might appear to be related, they might not be—those who know most about the variables must make that evaluation). The scatter chart is one of the seven tools of quality. Syn: cross plot, scatter diagram, scatterplot.

Question 241

scatterplot

Answer 241

Syn: scatter chart.

Question 242

scheduled receipt

Answer 242

An open order that has an assigned due date. See: open order.

Question 243

seasonal inventory

Answer 243

Inventory built up to smooth production in anticipation of a peak seasonal demand. Syn: seasonal stock.

Question 244

seasonality

Answer 244

A predictable repetitive pattern of demand measured within a year where demand grows and declines. These are calendar-related patterns that can appear annually, quarterly, monthly, weekly, daily and/or hourly. Syn: seasonal variation. See: base series.

Question 245

service parts

Answer 245

Those modules, components, and elements that are planned to be used without modification to replace an original part. Syn: repair parts, spare parts.

Question 246

setup

Answer 246

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). Syn: changeover, turnaround time.

Question 247

setup time

Answer 247

The time required for a specific machine, resource, work center, process, or line to convert from the production of the last good piece of item A to the first good piece of item B. Syn: setup lead time.

Question 248

Shingo’s seven wastes

Answer 248

Shigeo Shingo, a pioneer in the Japanese just-in-time philosophy, identified seven barriers to improving manufacturing. They are the waste of overproduction, waste of waiting, waste of transportation, waste of stocks, waste of motion, waste of making defects, and waste of the processing itself.

Question 249

single-level bill of material

Answer 249

A display of components that are directly used in a parent item. It shows only the relationships one level down.

Question 250

single-source supplier

Answer 250

A company that is selected to have 100 percent of the business for a part although alternate suppliers are available. See: sole-source supplier.

Question 251

six sigma

Answer 251

A methodology that furnishes tools for the improvement of business processes. The intent is to decrease process variation and improve product quality.

Question 252

split lot

Answer 252

A manufacturing order quantity that has been divided into two or more smaller quantities, usually after the order has been released. The quantities of a split lot may be worked on in parallel, or a portion of the original quantity may be sent ahead to a subsequent operation to be worked on while work on the remainder of the quantity is being completed at the current operation. The purpose of splitting a lot is to reduce the lead time of the order.

Question 253

spread

Answer 253

Variability of an action. Often measured by the range or standard deviation of a particular dimension.

Question 254

standard time

Answer 254

The length of time that should be required to (1) set up a given machine or operation and (2) run one batch or one or more parts, assemblies, or end products through that operation. Used in determining machine requirements and labor requirements. Assumes an average worker who follows prescribed methods, and allows time for personal rest to overcome fatigue and unavoidable delays. Also frequently used as a basis for incentive pay systems and as a basis of allocating overhead in cost accounting systems. Syn: standard hours. See: standard.

Question 255

start date

Answer 255

In project management, the time an activity begins; may be defined as an actual start date or a planned start date.

Question 256

statistical process control (SPC)

Answer 256

The application of statistical techniques to monitor and adjust an operation. Often used interchangeably with statistical quality control, although statistical quality control includes acceptance sampling as well as statistical process control.

Question 257

stock keeping unit (SKU)

Answer 257

1) An inventory item. For example, a shirt in six colors and five sizes represents 30 different SKUs. 2) In a distribution system, an item at a particular geographic location. For example, one product stocked at the plant and at six different distribution centers would represent seven SKUs.

Question 258

stockout costs

Answer 258

The costs associated with a stockout. Those costs may include lost sales, backorder costs, expediting, and additional manufacturing and purchasing costs.

Question 259

stockout percentage

Answer 259

A measure of the effectiveness with which a company responds to actual demand or requirements. The stockout percentage can be a comparison of total orders containing a stockout to total orders, or of line items incurring stockouts to total line items ordered during a period. One formula is stockout percentage = (1 – customer service ratio) × 100 percent. Ant: customer service ratio.

Question 260

store

Answer 260

A storage point located upstream of a work station, intended to make it easier to see customer requirements.

Question 261

strategic plan

Answer 261

The plan for how to marshal and determine actions to support the mission, goals, and objectives of an organization. Generally includes an organization’s explicit mission, goals, and objectives and the specific actions needed to achieve those goals and objectives. See: business plan, operational plan, strategic planning, strategy, tactical plan.

Question 262

subcontracting

Answer 262

Sending production work outside to another manufacturer. See: outsourcing.

Question 263

supplier certification

Answer 263

Certification procedures verifying that a supplier operates, maintains, improves, and documents effective procedures that relate to the customer’s requirements. Such requirements can include cost, quality, delivery, flexibility, maintenance, safety, and ISO quality and environmental standards.

Question 264

supplier lead time

Answer 264

The amount of time that normally elapses between the time an order is received by a supplier and the time the order is shipped. Syn: vendor lead time. See: purchasing lead time.

Question 265

supplier partnership

Answer 265

The establishment of a working relationship with a supplier organization whereby two organizations act as one. Syn: collaborative supply relationship.

Question 266

supplier relationship management (SRM)

Answer 266

A comprehensive approach to managing an enterprise’s interactions with the organizations that supply the goods and services the enterprise uses. The goal of SRM is to streamline and make more effective the processes between an enterprise and its suppliers. SRM is often associated with automating procureto-pay business processes, evaluating supplier performance, and exchanging information with suppliers. An e-procurement system is often an example of an SRM family of applications.

Question 267

supply chain management

Question 268

terminal-handling charges

Answer 268

1) Carrier charges dependent on the number of times a shipment must be loaded, handled, and unloaded. Cost can be reduced by consolidating shipments into fewer parcels or by shipping in truckload quantities. 2) For shipping lines, the costs of paying container terminals for unloading and loading during shipment. These costs are borne by the shipping lines at the port of shipment or destination.

Question 269

terminals

Answer 269

In transportation, locations where carriers load and unload goods to and from vehicles. Also used to make connections between local pickup and delivery service and line-haul service. Functions performed in terminals include weighing connections with other routes and carriers, vehicle routing, dispatching, maintenance, paperwork, and administration. Terminals may be owned and operated by the carrier or the public.

Question 270

theory of constraints (TOC)

Answer 270

A holistic management philosophy developed by Dr. Eliyahu M. Goldratt, based on the principle that complex systems exhibit inherent simplicity. Even a very complex system comprising thousands of people and pieces of equipment can have, at any given time, only a very, very small number of variables—perhaps only one, known as a constraint— that actually limit the ability to generate more of the system’s goal.

Question 271

theory of constraints (TOC) accounting

Answer 271

A cost and managerial accounting system that accumulates costs and revenues into three areas—throughput, inventory, and operating expense. Does not create incentives (through allocation of overhead) to build up inventory. Is considered to provide a truer reflection of actual revenues and costs than traditional cost accounting, and is closer to a cash flow concept of income than is traditional accounting.

Provides a simplified and more accurate form of direct costing that subtracts true variable costs (those costs that vary with throughput quantity). Unlike traditional cost accounting systems in which the focus is generally placed on reducing costs in all the various accounts, the primary focus of TOC accounting is on aggressively exploiting the constraint(s) to make more money for the firm. Syn: constraint accounting, throughput accounting.

Question 272

third-party logistics (3PL)

Answer 272

A buyer and supplier team with a third party that provides product delivery services. This third party may provide added supply chain expertise.

Question 273

throughput

Answer 273

The rate at which the system generates “goal units.” Because throughput is a rate, it is always expressed for a given time period—such as per month, week, day, or even minute. If the goal units are money, throughput is an amount of money per time period. In that case, throughput is calculated as revenues received minus totally variable costs divided by units of the chosen time period.

Question 274

time bucket

Answer 274

A number of days of data summarized into a columnar or row-wise display. For example, a weekly time bucket contains all the relevant data for an entire week. Weekly time buckets are considered to be the largest possible (at least in the near and medium term) to permit effective MRP.

Question 275

time buffer

Answer 275

Protection against uncertainty that takes the form of time.

Question 276

time fence

Answer 276

A policy or guideline established to note where various restrictions or changes in operating procedures take place. For example, changes to the master production schedule can be accomplished easily beyond the cumulative lead time, while changes inside the cumulative lead time become increasingly more difficult to a point where changes should be resisted. Time fences can be used to define these points. See: demand time fence, hedge, planning time fence.

Question 277

time-phased order point (TPOP)

Answer 277

MRP-like time planning logic technique for independent demand items, where gross requirements come from a forecast, not via explosion. Can be used to plan distribution center inventories as well as to plan for service (repair) parts, because MRP logic can readily handle items with dependent demand, independent demand, or a combination of both. An approach that uses time periods, thus allowing for lumpy withdrawals instead of average demand. When used in distribution environments, the planned order releases are input to the master schedule dependent demands. See: fixed reorder quantity inventory model.

Question 278

tolerance

Answer 278

Allowable departure from a nominal value established by design engineers that is deemed acceptable for the functioning of the good or service over its life cycle.

Question 279

total cost curve

Answer 279

1) In cost-volume-profit (breakeven) analysis, the total cost curve is composed of total fixed and variable costs per unit multiplied by the number of units provided. Breakeven quantity occurs where the total cost curve and total sales revenue curve intersect. See: break-even chart, break-even point. 2) In inventory theory, the total cost curve for an inventory item is the sum of the costs of acquiring and carrying the item. See: economic order quantity

Question 280

total cost of ownership (TCO)

Answer 280

In supply chain management, the total cost of ownership of the supply delivery system is the sum of all the costs associated with every activity of the supply stream. The main insight that TCO offers to the supply chain manager is the understanding that the acquisition cost is often a very small portion of the total cost of ownership.

Question 281

total line-haul cost

Answer 281

Basic costs of carrier operation to move a container of freight, including drivers’ wages and usage depreciation, which vary with the distance shipped and the cost per mile.

Question 282

total productive maintenance (TPM)

Answer 282

Preventive maintenance plus continuing efforts to adapt, modify, and refine equipment to increase flexibility, reduce material handling, and promote continuous flows. It is operator-oriented maintenance with the involvement of all qualified employees in all maintenance activities. Syn: total preventive maintenance.

Question 283

total quality management (TQM)

Answer 283

A term coined to describe Japanese-style management approaches to quality improvement. Since then, total quality management (TQM) has taken on many meanings. Simply put, TQM is a management approach to longterm success through customer satisfaction. TQM is based on the participation of all members of an organization in improving processes, goods, services, and the culture in which they work. The methods for implementing this approach are found in teachings of such quality leaders as Philip B. Crosby, W. Edwards Deming, Armand V. Feigenbaum, Kaoru Ishikawa, J.M. Juran, and Genichi Taguchi.

Question 284

traceability

Answer 284

1) The attribute allowing the ongoing location of a shipment to be determined. 2) The registering and tracking of parts, processes, and materials used in production, by lot or serial number.

Question 285

tracking signal

Answer 285

The ratio of the cumulative algebraic sum of the deviations between the forecasts and the actual values to the mean absolute deviation. Used to signal when the validity of the forecasting model might be in doubt. See: forecast error, mean absolute deviation.

Question 286

transaction channel

Answer 286

A distribution network that deals with change of ownership of goods and services including the activities of negotiation, selling, and contracting.

Question 287

transportation

Answer 287

The function of planning, scheduling, and controlling activities related to mode, vendor, and movement of inventories into and out of an organization.

Question 288

transportation inventory

Answer 288

Inventory that is in transit between locations. See: pipeline stock, transit inventory.

Question 289

trend

Answer 289

General upward or downward movement of a variable over time (e.g., demand, process attribute).

Question 290

truckload (TL) carriers

Answer 290

Carriers that deliver/charge only for full truckload shipments.

Question 291

two-bin inventory system

Answer 291

A type of fixed-order system in which inventory is carried in two bins. A replenishment quantity is ordered when the first bin (working) is empty. During the replenishment lead time, material is used from the second bin. When the material is received, the second bin (which contains a quantity to cover demand during lead time plus some safety stock) is refilled and the excess is put into the working bin. At this time, stock is drawn from the first bin until it is again exhausted. Also used loosely to describe any fixed-order system even when physical “bins” do not exist. Syn: bin reserve system. See: visual review system.

Question 292

U-lines

Answer 292

Production lines shaped like the letter “U.” The shape allows workers to easily perform several nonsequential tasks without much walk time. The number of workstations in a U-line is usually determined by line balancing. U-lines promote communication.

Question 293

UN Global Compact Management Model

Answer 293

A framework for guiding companies through the process of formally committing to, assessing, defining, implementing, measuring, and communicating the United Nations Global Compact and its principles.

Question 294

uniform plant loading

Answer 294

In lean, the distribution of work between work stations so that the time required for each station to complete all tasks is as close to equal as possible. See: line balancing.

Question 295

unit cost

Answer 295

Total labor, material, and overhead cost for one unit of production (e.g., one part, one gallon, one pound).

Question 296

unit load

Answer 296

A shipping unit made up of a number of items; bulky material arranged or constrained so the mass can be picked up or moved as a single unit. Reduces material handling costs. Often shrink-packed on a pallet before shipment.

Question 297

unit of measure

Answer 297

The unit in which the quantity of an item is managed (e.g., pounds, each, box of 12, package of 20, case of 144).

Question 298

United Nations Global Compact

Answer 298

A voluntary initiative whereby companies embrace, support, and enact, within their sphere of influence, a set of core values in the areas of human rights, labor standards, the environment, and anticorruption.

Question 299

unitization

Answer 299

In warehousing, the consolidation of several units into larger units for fewer handlings.

Question 300

upstream

Answer 300

Used as a relative reference within a firm or supply chain to indicate moving in the direction of the raw material supplier.

Question 301

utilization

Answer 301

1) A measure (usually expressed as a percentage) of how intensively a resource is being used to produce a good or service. Compares actual time used to available time. Traditionally, calculated as the ratio of direct time charged (run time plus setup time) to the clock time available. Utilization is a percentage between 0 percent and 100 percent that is equal to 100 percent minus the percentage of time lost due to the unavailability of machines, tools, workers, and so forth. See: efficiency, lost time factor, productivity. 2) In the theory of constraints, activation of a resource that productively contributes to reaching the goal. Overactivation of a resource does not productively utilize a resource. See: available time.

Question 302

value added

Answer 302

1) In accounting, the addition of direct labor, direct material, and allocated overhead assigned at an operation. It is the cost roll-up as a part goes through a manufacturing process to finished inventory. 2) In current manufacturing terms, the actual increase of utility from the viewpoint of the customer as a part is transformed from raw material to finished inventory; the contribution made by an operation or a plant to the final usefulness and value of a product, as seen by the customer. The objective is to eliminate all non-valueadded activities in producing and providing a good or service.

Question 303

value analysis

Answer 303

The systematic use of techniques that identify a required function, establish a value for that function, and finally provide that function at the lowest overall cost. Focuses on the functions of an item rather than the methods of producing the present product design.

Question 304

value chain analysis

Answer 304

An examination of all links a company uses to produce and deliver its products and services, starting from the origination point and continuing through delivery to the final customer.

Question 305

value stream

Answer 305

The processes of creating, producing, and delivering a good or service to the market. For a good, the value stream encompasses the raw material supplier, the manufacture and assembly of the good, and the distribution network. For a service, the value stream consists of suppliers, support personnel and technology, the service “producer,” and the distribution channel. May be controlled by a single business or a network of several businesses.

Question 306

value stream map

Answer 306

A graph displaying the sequence of operations needed to produce and deliver a product or service.

Question 307

variable cost

Answer 307

An operating cost that varies directly with a change of one unit in the production volume (e.g., direct materials consumed, sales commissions).

Question 308

variance

Answer 308

1) The difference between the expected (budgeted or planned) value and the actual. 2) In statistics, a measurement of dispersion of data. See: estimate of error.

Question 309

velocity

Answer 309

1) The rate of change of an item with respect to time. See: inventory turnover, lead time. 2) In supply chain management, a term used to indicate the relative speed of all transactions, collectively, within a supply chain community. A maximum velocity is most desirable because it indicates higher asset turnover for stockholders and faster order-to-delivery response for customers.

Question 310

visual review system

Answer 310

A simple inventory control system where the inventory reordering is based on actually looking at the amount of inventory on hand. Usually used for low-value items, such as nuts and bolts. See: two-bin inventory system.

Question 311

voice of the customer (VOC)

Answer 311

Actual customer descriptions in words for the functions and features customers desire for goods and services. In the strict definition, as related to quality function deployment (QFD), the term customer indicates the external customer of the supplying entity.

Question 312

wait time

Answer 312

The time a job remains at a work center after an operation is completed until it is moved to the next operation. It is often expressed as a part of move time.

Question 313

wall-to-wall inventory

Answer 313

An inventory management technique in which material enters a plant and is processed through the plant into finished goods without ever having entered a formal stock area. Syn: four-wall inventory.

Question 314

warehousing

Answer 314

The activities related to receiving, storing, and shipping materials to and from production or distribution locations.

Question 315

ways

Answer 315

Paths over which a carrier operates, including right-of-way, roadbed, tracks, and other physical facilities. May be owned by the government, privately held by the carrier, or provided by nature.

Question 316

what-if analysis

Answer 316

The process of evaluating alternate strategies by answering the consequences of changes to forecasts, manufacturing plans, inventory levels, and so forth. See: simulation.

Question 317

where-used list

Answer 317

A listing of every parent item that calls for a given component, and the respective quantity required, from a bill-of-material file. See: implosion.

Question 318

work cell

Answer 318

Dissimilar machines grouped together into a production unit to produce a family of parts having similar routings.

Question 319

work center

Answer 319

A specific production area, consisting of one or more people and/or machines with similar capabilities, that can be considered as one unit for purposes of capacity requirements planning and detailed scheduling. Syn: load center.

Question 320

work order

Answer 320

1) An order to the machine shop for tool manufacture or equipment maintenance; not to be confused with a manufacturing order. Syn: work ticket. 2) An authorization to start work on an activity (e.g., maintenance) or product.

Question 321

yield

Answer 321

The amount of good or acceptable material available after the completion of a process. Usually computed as the final amount divided by the initial amount converted to a decimal or percentage. In manufacturing 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 specific number of finished goods. For example, if 50 units of a product are required by a customer and a yield of 70 percent is expected, then 72 units (computed as 50 units divided by .7) should be started in the manufacturing process. Syn: material yield. See: scrap factor, yield factor.