Module 1 Detailed Planning

Question 1

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

Answer 1

ABC classification

Question 2

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

Answer 2

anticipation inventories

Question 3

The number of hours a work center can be used, based on management decisions regarding shift structure, extra shifts, regular overtime, observance of weekends and public holidays, shutdowns, and the like.

Answer 3

available time

Question 4

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.

Answer 4

average inventory

Question 5

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.

Answer 5

back scheduling

Question 6

A method of inventory bookkeeping where the book (computer) inventory of components is automatically reduced by the computer after completion of activity on the component’s upper-level parent item based on what should have been used as specified on the bill of material and allocation records. This approach has the disadvantage of a built-in differential between the book record and what is physically in stock.

Answer 6

backflush

Question 7

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

Answer 7

balance sheet

Question 8

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

Answer 8

capacity

Question 9

The capability of a system or resource to produce a quantity of output in a particular time period.

Answer 9

capacity available

Question 10

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). This is executed at four levels: resource requirements planning, rough-cut planning, requirements planning, and input/output control.

Answer 10

capacity management

Question 11

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, at the master-scheduling level, and at the material requirements planning level.

Answer 11

capacity planning

Question 12

The capacity of a system or resource needed to produce a desired output in a particular time period.

Answer 12

capacity required

Question 13

The function of establishing, measuring, and adjusting limits or levels of capacity. In this context, the term refers to the process of determining in detail the amount of labor and machine resources required to accomplish the tasks of production. Open shop orders and planned orders in the MRP system are input to this, which through the use of parts routings and time standards translates these orders into hours of work by work center by time period. Even though rough-cut capacity planning may indicate that sufficient capacity exists to execute the MPS, this may show that capacity is insufficient during specific time periods.

Answer 13

capacity requirements planning (CRP)

Question 14

The cost of holding inventory, usually defined as a percentage of the dollar value of inventory per unit of time (generally one year). This 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. This is ultimately a policy variable reflecting the opportunity cost of alternative uses for funds invested in inventory.

Answer 14

carrying cost

Question 15

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.

Answer 15

cash flow

Question 16

A status awarded to a supplier that consistently meets predetermined quality, cost, delivery, financial, and count objectives. Incoming inspection may not be required.

Answer 16

certified supplier

Question 17

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.

Answer 17

consignment

Question 18

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.

Answer 18

continuous replenishment

Question 19

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

Answer 19

cost of goods sold (COGS)

Question 20

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

Answer 20

cycle counting

Question 21

One of the two main conceptual components of any item inventory, this is the most active component. This 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.

Answer 21

cycle stock

Question 22

1)Inventory-on-hand metric converted from units to how long the units will last. For example, if there are 2,000units on hand and the company is using 200 per day, then there are 10 days of supply. 2) A financial measure of the value of all inventory in the supply chain divided by the average daily cost of goods sold rate.

Answer 22

days of supply

Question 23

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.

Answer 23

decoupling inventory

Question 24

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

Answer 24

demonstrated capacity

Question 25

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

Answer 25

direct labor

Question 26

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

Answer 26

direct material

Question 27

Inventory, usually spare parts and finished goods, located in the distribution system (e.g., in warehouses or in transit between warehouses and the consumer).

Answer 27

distribution inventory

Question 28

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

Answer 28

dock-to-stock

Question 29

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:

Square root of: 2AS/iC

where A = annual usage in units, S = ordering costs in dollars, i = annual inventory carrying cost rate as a decimal, and C = unit cost.

Answer 29

economic order quantity (EOQ)

Question 30

A measurement (usually expressed as a percentage) of the actual output relative to the standard output expected. Efficiency measures how well something is performing relative to existing standards; in contrast, productivity measures output relative to a specific input (e.g., tons/labor hour). Efficiency is the ratio of (1) actual units produced to the standard rate of production expected in a time period, or (2) standard hours produced to actual hours worked (taking longer means less efficiency), or (3) actual dollar volume of output to a standard dollar volume in a time period. For example: (1) There is a standard of 100 pieces per hour and 780 units are produced in one eight-hour shift; the efficiency is 780 ÷ 800 converted to a percentage, or 97.5 percent. (2) The work is measured in hours and took 8.21 hours to produce 8 standard hours; the efficiency is 8 ÷ 8.21 converted to a percentage, or 97.5 percent. (3) The work is measured in dollars and produces $780 with a standard of $800; the efficiency is $780 ÷ $800 converted to a percentage, or 97.5 percent.

Answer 30

efficiency

Question 31

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

Answer 31

external setup time

Question 32

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.

Answer 32

finished goods inventory

Question 33

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.

Answer 33

fixed order quantity

Question 34

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.

Answer 34

fixed overhead

Question 35

A form of independent demand management model in which an order is placed every n time units. The order quantity is variable and essentially replaces the items consumed during the current time period. If M is the maximum inventory desired at any time and x is the quantity on hand at the time the order is placed, then in the simplest model, the order quantity equals M minus x. The quantity M must be large enough to cover the maximum expected demand during the lead time plus a review interval. The order quantity model becomes more complicated whenever the replenishment lead time exceeds the review interval, because outstanding orders then have to be factored into the equation.

Answer 35

fixed reorder cycle inventory model

Question 36

Inventory that is carried as a cushion to protect against forecast error.

Answer 36

fluctuation inventory

Question 37

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

Answer 37

general and administrative expenses (G&A)

Question 38

Accounting practices that conform to conventions, rules, and procedures that are generally accepted by the accounting profession.

Answer 38

generally accepted accounting principles (GAAP)

Question 39

The difference between total revenue and the cost of goods sold.

Answer 39

gross margin

Question 40

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.

Answer 40

hedge inventory

Question 41

A financial statement showing the net income for a business over a given period of time.

Answer 41

income statement

Question 42

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

Answer 42

internal setup time

Question 43

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

Answer 43

in-transit inventory

Question 44

1)Those stocks or items used to support production (raw materials and work-in-process items), supporting activities (maintenance, repair, and operating supplies), and customer service (finished goods and spare parts). Demand for inventory may be dependent or independent.Inventory functions are anticipation, hedge, cycle (lot size), fluctuation(safety, buffer, or reserve), transportation (pipeline), and service parts.2)All the money currently tied up in the system. As used in theory of constraints, inventory refers to the equipment, fixtures, buildings, and so forth that the system owns—as well as inventory in the forms of raw materials, work-in-process, and finished goods.

Answer 44

inventory

Question 45

When the on-hand quantity is within an allowed tolerance of the recorded balance. This important metric usually is measured as the percent of items with inventory levels that fall within tolerance. Target values usually are 95 percent to 99 percent, depending on the value of the item. For logistical operations (location management) purposes, it is sometimes measured as the number of storage locations with errors divided by the total number of storage locations.

Answer 45

inventory accuracy

Question 46

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.

Answer 46

inventory adjustment

Question 47

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.

Answer 47

inventory buffer

Question 48

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

Answer 48

inventory control

Question 49

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

Answer 49

inventory management

Question 50

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.

Answer 50

inventory ordering system

Question 51

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.

Answer 51

inventory turnover

Question 52

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.

Answer 52

job costing

Question 53

This cost includes the product cost plus the costs of logistics, such as warehousing, transportation, and handling fees.

Answer 53

landed cost

Question 54

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

Answer 54

lead time

Question 55

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.

Answer 55

level of service

Question 56

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.

Answer 56

liabilities

Question 57

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.

Answer 57

load

Question 58

A display of future capacity requirements based on released and/or planned orders over a given span of time.

Answer 58

load profile

Question 59

A set of procedures (e.g., assigning unique batch numbers and tracking each batch) used to maintain lot integrity from raw materials from the supplier through manufacturing to consumers.

Answer 59

lot control

Question 60

The amount of a particular item that is ordered from the plant or a supplier or issued as a standard quantity to the production process.

Answer 60

lot size

Question 61

A lot-sizing technique that generates planned orders in quantities equal to the net requirements in each period.

Answer 61

lot-for-lot (L4L)

Question 62

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.

Answer 62

lot-size inventory

Question 63

Items used in support of general operations and maintenance such as maintenance supplies, spare parts, and consumables used in the manufacturing process and supporting operations.

Answer 63

maintenance, repair, and operating (MRO) supplies

Question 64

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.

Answer 64

manufacturing calendar

Question 65

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.

Answer 65

min-max system

Question 66

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

Answer 66

move time

Question 67

Procurement of a good or service from more than one independent supplier.

Answer 67

multisourcing

Question 68

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.

Answer 68

on-time schedule performance

Question 69

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.

Answer 69

order point

Question 70

The inventory method that places an order for a lot whenever the quantity on hand is reduced to a predetermined level known as the order point.

Answer 70

order point system

Question 71

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.

Answer 71

ordering cost

Question 72

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.

Answer 72

overhead

Question 73

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.

Answer 73

owner’s equity

Question 74

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.

Answer 74

Pareto’s law

Question 75

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.

Answer 75

period order quantity

Question 76

A physical inventory taken at some recurring interval (e.g., monthly, quarterly, or annual physical inventory).

Answer 76

periodic inventory

Question 77

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

Answer 77

periodic replenishment

Question 78

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

Answer 78

perpetual inventory record

Question 79

1)The actual inventory itself. 2) The determination of inventory quantity by actual count. Physical inventories can be taken on a continuous, periodic, or annual basis.

Answer 79

physical inventory

Question 80

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

Answer 80

physical supply

Question 81

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.

Answer 81

pipeline stock

Question 82

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.

Answer 82

point of sale (POS)

Question 83

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.

Answer 83

process batch

Question 84

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

Answer 84

procurement

Question 85

Cost allocated by some method to the products being produced. Initially recorded in asset (inventory) accounts, product costs become an expense (cost of sales) when the product is sold.

Answer 85

product cost

Question 86

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. 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.

Answer 86

productivity

Question 87

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.

Answer 87

profit margin

Question 88

The purchaser’s authorization used to formalize a purchase transaction with a supplier. A purchase order, when given to a supplier, should contain statements of the name, part number, quantity, description, and price of the goods or services ordered; agreed-to terms as to payment, discounts, date of performance, and transportation; and all other agreements pertinent to the purchase and its execution by the supplier.

Answer 88

purchase order

Question 89

An authorization to the purchasing department to purchase specified materials in specified quantities within a specified time.

Answer 89

purchase requisition

Question 90

The term used in industry and management to denote the function of and the responsibility for procuring materials, supplies, and services.

Answer 90

purchasing

Question 91

Conformance to requirements or fitness for use. Quality can be defined through five principal approaches: (1) Transcendent quality is an ideal; a condition of excellence. (2) Product-based quality is based on a product attribute. (3) User-based quality is fitness for use. (4) Manufacturing-based quality is conformance to requirements. (5) Value-based quality is the degree of excellence at an acceptable price. Also, quality has two major components: (1) quality of conformance—quality is defined by the absence of defects, and (2) quality of design—quality is measured by the degree of customer satisfaction with a product’s characteristics and features.

Answer 91

quality

Question 92

A waiting line. In manufacturing, the jobs at a given work center waiting to be processed. As queues increase, so do average queue time and work-in-process inventory.

Answer 92

queue

Question 93

The amount of time a job waits at a work center before setup or work is performed on the job. Queue time is one element of total manufacturing lead time. Increases in queue time result in direct increases to manufacturing lead time and work-in-process inventories.

Answer 93

queue time

Question 94

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.

Answer 94

rated capacity

Question 95

Purchased items or extracted materials that are converted via the manufacturing process into components and products.

Answer 95

raw material

Question 96

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.

Answer 96

record accuracy

Question 97

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.

Answer 97

reorder quantity

Question 98

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.

Answer 98

replenishment lead time

Question 99

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

Answer 99

request for quote (RFQ)

Question 100

An internet auction in which suppliers attempt to underbid their competitors. Company identities are known only by the buyer.

Answer 100

reverse auction

Question 101

1)Information detailing the method of manufacture of a particular item. It includes the operations to be performed, their sequence, the various work centers involved, and the standards for setup and run. In some companies, the routing also includes information on tooling, operator skill levels, inspection operations and testing requirements, and so on. 2) In information systems, the process of defining the path a message will take from one computer to another computer.

Answer 101

routing

Question 102

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

Answer 102

run time

Question 103

An element of time added to normal lead time to protect against fluctuations in lead time so that an order can be completed before its real need date. When used, the MRP system, in offsetting for lead time, will plan both order release and order completion for earlier dates than it would otherwise.

Answer 103

safety lead time

Question 104

1)In general, a quantity of stock planned to be in inventory to protect against fluctuations in demand or supply. 2) In the context of master production scheduling, the additional inventory and capacity planned as protection against forecast errors and short-term changes in the backlog. Overplanning can be used to create safety stock.

Answer 104

safety stock

Question 105

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

Answer 105

sawtooth diagram

Question 106

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

Answer 106

seasonal inventory

Question 107

Those modules, components, and elements that are planned to be used without modification to replace an original part.

Answer 107

service parts

Question 108

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).

Answer 108

setup

Question 109

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.

Answer 109

setup time

Question 110

Reductions of actual quantities of items in stock, in process, or in transit. The loss may be caused by scrap, theft, deterioration, evaporation, and so forth.

Answer 110

shrinkage

Question 111

A company that is selected to have 100 percent of the business for a part although alternate suppliers are available.

Answer 111

single-source supplier

Question 112

The situation where the supply of a product is available from only one organization. Usually technical barriers such as patents preclude other suppliers from offering the product.

Answer 112

sole source

Question 113

The target costs of an operation, process, or product including direct material, direct labor, and overhead charges.

Answer 113

standard costs

Question 114

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.

Answer 114

standard time

Question 115

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

Answer 115

start date

Question 116

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.

Answer 116

stock keeping unit (SKU)

Question 117

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

Answer 117

stockout costs

Question 118

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.

Answer 118

stockout percentage

Question 119

1)Provider of goods or services. 2) Seller with whom the buyer does business, as opposed to vendor, which is a generic term referring to all sellers in the marketplace.

Answer 119

supplier

Question 120

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.

Answer 120

supplier certification

Question 121

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 procure-to-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.

Answer 121

supplier relationship management (SRM)

Question 122

All the provisions and agreements of a contract.

Answer 122

terms and conditions

Question 123

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.

Answer 123

total cost of ownership (TCO)

Question 124

Considering all cost impacts, rather than just one cost impact, on customer service improvement.

Answer 124

total costs

Question 125

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.

Answer 125

traceability

Question 126

Inventory in transit between manufacturing and stocking locations.

Answer 126

transit inventory

Question 127

A standard allowance that is assumed on any given order for the movement of items from one operation to the next.

Answer 127

transit time

Question 128

Inventory that is in transit between locations.

Answer 128

transportation inventory

Question 129

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.

Answer 129

two-bin inventory system

Question 130

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

Answer 130

unit cost

Question 131

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 between0 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. 2) In the theory of constraints, activation of a resource that productively contributes to reaching the goal. Over-activation of a resource does not productively utilize a resource.

Answer 131

utilization

Question 132

1)In accounting, the addition of direct labor, direct material, and allocated overhead assigned at an operation. It is the cost roll-up asa 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-value-added activities in producing and providing a good or service.

Answer 132

value added

Question 133

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

Answer 133

variance

Question 134

1)The rate of change of an item with respect to 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.

Answer 134

velocity

Question 135

A means of optimizing supply chain performance in which the supplier has access to the customer’s inventory data and is responsible for maintaining the inventory level required by the customer. Accomplished by a process in which resupply is performed by the vendor through regularly scheduled reviews of the on-site inventory. The on-site inventory is counted, damaged or outdated goods are removed, and the inventory is restocked to predefined levels. The vendor obtains a receipt for the restocked inventory and accordingly invoices the customer.

Answer 135

vendor-managed inventory

Question 136

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.

Answer 136

visual review system

Question 137

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.

Answer 137

wait time

Question 138

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.

Answer 138

wall-to-wall inventory

Question 139

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.

Answer 139

work center

Question 140

A good or goods in various stages of completion throughout the plant, including all material from raw material that has been released for initial processing up to completely processed material awaiting final inspection and acceptance as finished goods inventory. Many accounting systems also include the value of semifinished stock and components in this category.

Answer 140

work in process (WIP)

Question 141

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.

Answer 141

yield