MPR- Exam 2 Flashcards
Abnormal Demand
A large unexpected demand above the forecast, the result of a special deal with selected customers or unknown circumstances driving greater requirements. The possibility of abnormal demand must be considered in forecasting models.
Actual Demand
Sales orders, customer orders, or other forms of committed requirements that replace or net against the forecast demand inside the demand time fence. For example, in period 0 below, the forecast appears as follows
Period 1 2 3 4 5 6 7 8 9 10
Forecast 9 7 8 9 9 8 7 5 7 9
With actual demand of eight the following modifications would be made
Period 1 2 3 4 5 6 7 8 9 10
Orders 8
Forecast 7 8 9 9 8 7 5 7 9
Adaptive Smoothing
A type of exponential smoothing developed by Robert G Grown, in which the smoothing constant is adjusted as a trigonometric function of measuring the forecast error.
Aggregate Forecast
The Projected sales of product types, families, or some other product hierarchy that is usually time-phased and can be expressed as units to be manufactured or dollars (or both). The aggregate forecast is useful for planning capacity and resources (materials and employees) as well as for sales planning and analysis.
Aggregate Plan
A plan that supports the production strategy for product families, which includes all aspects. including, budgeted levels of finished goods, production backlog, and projected changes in the workforce.
Allocation
A process that reserves, for manufacturing orders, part that have not been released to the shop floor from the warehouse. An allocation creates a picking list that goes to the warehouse. The allocated part might not be sent from the warehouse until later, so an allocation ensures that the part will not be used to fill another order. It is an unprocessed stockroom requisition. Allocation is also a process that is used to distribute material where the quantities are not sufficient to cover all requirements.
Alpha Factor
Synonym: Smoothing constant
A weighting factor used in exponential smoothing. The value of the smoothing constant is between 0 and 1.00 and is determined by trial and error as a smoothing constant is applied to the most recent data. When there is no variability in sales from year to year, the smoothing constant is 0. When there is a wide variety in sales, the smoothing constant is 1.00
Assemble-to-Order
Subassemblies that are produced to a forecast but not completed until a customer order is received.
Description
* Fewer products than build-to-order
* Build to a forecasted option
*Assemble option to customer specification
* Use of planning bills
*Medium profit margin per item
Impact on Inventory
* Little, if any, finished goods
*inventory based on option forecast
* Raw material held, especially for long lead-time items.
Available to Promise
Beginning on-hand inventory minus customer orders that are due or past due. It is synonymous with uncommitted inventory
Backlog
Unshipped sales orders, customer orders, or other committed demand, which may or may not be past due. Backlog can be expressed in dollars, orders, or units
Backorder
Unshipped sales orders, customer orders, or other committed demand, which is either an immediate demand or past due, because there is not enough inventory to fill the orders. Costs of backorders can be hard(expedite fees, freight charges, overtime premium, and so on. Or soft (loss of customers or sales loss of goodwill and so on
Base Series
A method of determining the impact of seasonal demand, which uses a standard succession of values of demand data over a period of time. It is based on the relative level of demand, compared to past periods. The average for the base series is 1.0 so any value larger than one indicates that the demand was greater than the average, conversely, any value less than 1.0 indicates that the demand was less than the average.
Bias
A regular and consistent variation from the average always in one direction (consistently high or low ) Since a bias is a pattern of forecast error, a forecasting model should have very little bias
Bottom-Up-Replanning
Allows the user to understand and address MRP related problems such as shortages, expedites, and so on. The where-used logic and the pegging capabilities allow this bottom-up (implosion) process to take place.
Bill of Resources
A Bill of Resources states how much labor and machine time is required to produce the typical unit of a product. When the capacity required to produce the typical unit is multiplied by the units required by the MPS, the total capacity for the period results
Bucket vs. Bucketless
Bucket System- A time period usually a week.
Bucketless system An MRP DRP or other time phased system in which all time phased data are processed, stored, and usually displayed using dated records rather than defined time periods (buckets)
Business Plan
A statement of long-range strategy supported by a projection of resources, a business plan describes what the business looks like today and predicts what it will look like in the future. It sets the direction for the company, and creates a framework in which the organization can respond to changes required in order to stay competitive.
Capacity Management
There are two parts to capacity management:
1) The planning of the capacity required to meet projected demands.
2) The controlling of the capacity to monitor, adjust to, and achieve the plan.
Capacity management includes long-term, medium term and short term capacity. The figure below illustrates how these periods are related in resource planning, rough-cut capacity planning, capacity requirements planning and input/output control.
What is capacity management (part 2)
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Chase Method
The Objective of this planning method is to maintain a level inventory while varying manufacturing rates to meet demand. Companies might combine chase and level production schedule methods over their planning horizon
Closed-Loop Material Requirements Planning (MRP)
An MRP system that contains feedback loops from all functions within the business such as sales and operations planning master production scheduling and capacity requirement planning. The feedback ensures that the system is always current and data used for making important decisions is available.
Common Parts Bill
Synonym: Common Parts Bill of Material
A Bill of Material created for planning purposes that gathers common parts under one pseudo parent part number to simplify MRP and (BOM) maintenance. In a factory that produces mountain bikes for example, a common parts (BOM) might contain the handle bar assembly seat and foot-peddles under a part number MTNBIKE-KIT
Contraint
A limitation (Physical, policy, or procedure ) that inhibits a process or somehow restricts it so that goals are never reached. An example of a physical constraint would be a CNC machine that runs one part every fifteen minutes when ten parts an hour are required. A procedural constraint would be that the routing for that same part directs the operations to the CNC rather than another faster work center. An example of a policy constraint might be a safety policy limiting an operator to one machine rather than being able to run enough machines at the work center to achieve the required rate
Consuming the forecast
Synonym: Forecast Consumption
Reducing or netting the forecast by actual demands as they are processed
Correlation
Correlation relates to the fact that when one set of data changes it is likely to impact another set of data. If changes are in the opposite direction, there is a negative correlation.
Continuous Flow
Synonym: Continuous Production
A manufacturing process that is batch less, where the product flows successively without breaks. This type of manufacturing is only possible in a high volume environment with very low product variety
Cumulative Lead-Time
The longest path through the Bill of Material product structure. Cumulative lead-time includes not only the manufacturing lead time but the purchasing, as well as design lead-time The planning horizon for the master schedule should be at least as long as the cumulative lead-time.
Curve Fitting
Using a straight line, polynomial, or other curve of historical demand to forecast future demand
Customer Partnership
Synonym: Customer supplier partnership
A relationship or alliance between a supplier and customer that drives decisions that are win-win. Successful businesses identify companies where long term relationships should be forged, with open two-way communication, mutual respect for a reasonable profit and a continued drive for better quality and lower prices
Customer Service
Meeting or exceeding the customers expectations. Customer service goes beyond meeting specifications and engineering requirements. It includes delivery performance pricing flexibility quality and warranty.
Delivery Cycle
Synonym: Delivery Lead-Time
The total duration from the receipt of the customer order until the order is completed, by delivering the product to the customer.
Decomposition
A forecasting technique that divides time series data into three segments.
1) Trend: A general increase or decrease over time.
2) Seasonal: A repeated demand pattern that is weekly, monthly, or quarterly. a recurring demand pattern.
3) Cyclical: Any repeated pattern that is not seasonal the forecast is made by projecting the individual patterns into the future and then combining them. If the time series data has no pattern, it is said to be random.
Delivery Policy
The standard length of time or goal from the point that a customer order is received until the item is actually shipped
Delphi Method
A qualitative forecasting method where experts are identified in various areas and asked to produce a forecast. The results of each person’s forecast is shared with the entire panel, then the individual experts are asked to reformulate their forecast. This might continue through several iterations.
Demand
The requirements for a specific item, expressed as an independent or dependent source. Independent demand is the result of customer orders, sales orders, or forecast. Dependent demand is calculated through MRP as it explodes through the Bill of Material
Demand Filter
A set of rules or a standard that is established to routinely monitor sales and to compare them to the forecast, in order to identify variances beyond the defined limit.
Demand Management
The administration and entry of customer orders into the master schedule. This also includes working with the customers and or sales in a feedback loop to manually agree on new dates when problems arise, such as shortages, resource limitations, engineering changes and so on. The feedback loop is what makes demand management different from order entry.
Demand Time Fence (DTF)
This covers a period of time in which even desired changes would be very costly in terms of time and money. This period is based on estimates of how long it takes to make changes in customer orders, the forecast, and manufacturing and supplier lead-times. If allowed, changes within the time fence are usually authorized by higher management , including accounting, so that the cost of the change can be properly accounted for. Changes are typically allowed if there is available inventory and or capacity or a major competitive advantage can be achieved.
Demonstrated Capacity
Based on historical results, it shows how much capacity was actually used in production. IT shows over-or under utilization of capacity as compared to rated capacity
Dependent Demand
Dependent demand is the demand for all the components required to satisfy the dependent or independent demand from a higher level and is determined using the BOM structure for the parent or next higher assembly. These demands are calculated, not forecasted in contract independent demand is forecasted and any given item might have both dependent and independent demand. For example a part might be the component of an assembly and also be sold as a service part. THe MRP represents dependent demand.
Design to Order
Synonym: Engineer To Order
A manufacturing strategy that is required when products are so unique or one of a kind that a completed customer specification is needed before work can start. This strategy results in no finished goods and very little raw materials. However, the lead time is normally very long
Deviation
The variance between the acutal outcome and the forecast or between a number and the mean set of numbers. The deviation is usually measured as an absolute value (the numeric value without regard to the sign). It is also a document from the manufacturer to the customer acknowledging that certain specifications for the product have not been met.
Distribution
The activities and functions involved with processing finished goods or spares into a warehouse and shipping them to customer upon the receipt of a customer order. Distribution also includes the responsibilities for controlling the finished goods inventory, such as material handling, packaging, cycle counting order processing and customer service.
Distribution Center
A storage facility that is geographically located to service customers through quicker access and product delivery capabilities. Distribution centers include those run by suppliers, wholesalers and retailers, and those classified as public warehouses.
Distribution of Forecast Errors
A dispersal of forecast variances, often displayed in the form of a histogram for analysis or identification of a pattern for the errors.
Distribution Resource Planning (DRPII)
An expanded use of Distrubution requirements planning, that determines the overall resources needed to meet the plan this might include storage space (square feet, cubit feet, containers and so on) materials handling equipment and dollars.
Distribution Requirements Planning (DRP)
DRP involves meeting customer requirements and receiving and storing goods at the lowest cost possible. In most cases, distribution encompasses the process of customer order entry through delivery of the product to the customer. To determine what is needed a a branch warehouse, DRP uses a time-phased order point approach. In DRP the planned orders at the branch warehouse are exploded via MRP logic to become gross requirements for the various levels of regional warehouses, factory warehouses, and so on, and then becomes input to the Master Production Schedule.
Distribution Planning
The planning activities associated with transportation, warehousing inventory levels materials handling or administration site and location planning, industrial packaging data processing and communications networks to support distribution
Distribution Network Structure
The planned channels of inventory disbursement from one or more sources to field warehouses and ultimately to the customer. There may be one or more levels in the disbursement system.
Double Order Point
Synonym: Double Order Point System
A reorder point method, primarily for distribution systems, where two order points are used. The first order pint reached provides a warning to the supplying source of a future requirement. It is determined by adding the usage during the manufacturing lead-time to the actual order point. THe second order point is when the replenishment order is actually launched for a quantity that covers usage during the replenishment lead-time
Econometric Model
A set of formulas that are used together in order to determine the interrelationship of dependent and independent variables.
Efficiency
A measurement of the performance of a machine, work center, operation, or department which is the ratio of the actual output to the expected (or standard) output. The formula for calculating efficency dpends on how work is measured for the project being analyzed- units produced, hours worked or dollars produced. Examples:
1) Measured in units produced: for example: the standard for a mill is 48 parts per shift, the machinist produced 42
(42/48) x 100%==87.5% efficiency
2) Measured in standard house produced: for example: the standard fora job is 4 hours a new trainee worked 5.2 hours
(4/5.2) x 100% 76.9% efficiency
3) Measured in dollars produced: for example, work center 001 produced $670 against a standard of $700
($670/$700) x 100%= 95.7 % efficiency
Engineer to Order
A manufacturing strategy that is required when products are unique or one of a kind and a completed customer specification is needed before work can start. This strategy results in no finished goods and inimal raw materials. However the lead time is normally very long
Exponential Smoothing
A forecasting tool that uses a weighted moving average, which applies more credence to recent events and data and gradually decreases as the occurrence ages. The benefit of this method is that it can be applied whether or not a trend exists or is evident.
Extrapolation
Using historical data to estimate the value of a data series into the future
Extrinsic Forecast
Extrinsic indicators are supplied by such bodies as government agencies and trade associations. The data must be assigned a period number in order to associate it with group demand data for the same period. SOme examples of indicators are GDP, industry sales , inventories, housing starts, retail sales, price indexes and unemployment rates
Final Assembly Schedule (FAS)
The final assembly schedule is used primarily in a build-to-stock, assemble-to-order environment. Ordering these are numerous options from which the customer can choose. The FAS is developed once the customer order is in the order entry and the delivery date has been agreed upon. Temporary Bills of Material, called planning bills, are used to schedule the options in to deliverable products
Finishing Lead-Time
Usually in an assemble-to-order environment, this is the time it takes to complete manufacturing the product after the customer order is received. Alternatively, it can refer to the normal lead-time in a final assembly schedule for completing the product.
Finish-to-Order
Synonym: Assemble-To-Order
Subassemblies are produced to a forecast but not completed until a customer order is received
Description:
* Fewer products than build to order, but volumes are higher
* Build to forecasted options.
*Assemble option to customer specification
*Use of planning Bills
* Medium profit margin per item
* Raw material held, especially for long lead time items
Finite Loading/Scheduling
A capacity-planning term for the technique of recognizing the capacity limits of a work center and then assigning no more work than can be completed for that time period.
Firm planned Order (FPO)
An order that has had the quantity and due date locked in. These orders are under the control of a person and not the MRP system. Changes might be suggested by the system but must be made manually. The Master production schedule (MPS has only firmed planned orders.
Focused Forecasting?
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Forecast consumption
Reducing or netting the forecast by actual demands as they are processed.
Forecast Error
The inaccuracy measured as an absolute value or a percentage of the sales forecast. It can be calculated by the following formula:
Forecast Error= Actual Demand - Forecast Demand
The larger the forecast error, the more inventory that must be carried.
Forecast Horizon
The time period covered by a forecast. A forecast horizon of one year would require a rolling twelve-month forecast.
Forecast Interval
The amount of time between the creation of forecasts. For example, if a company publishes a forecast on the first working day of every month, the forecast interval is monthly.
Frequency Distribution
Where the probability distribution is a table o statistical probabilities of all possible outcomes, the frequency distribution displays the actual outcome of each event. The data is classified into subdivisions called classes and can be presented in a table format (see below) or graphically as a histogram.
Class Frequency Yellow 6 Red 4 Green 5 Orange 3 Blue 1
Hedge
Any action taken to offset a perceived risk for a company. Common situations are potential labor strikes, price volatility of certain commodities and currency fluctuations.
Independent Demand
Demand that comes from sources such as the forecast, customer orders for end items and repair parts, and orders from other divisions of a company. Independent demand is demand for an end item or service part that is unrelated to the demand for other items. The MPS contains only independent demand
Intrinsic Forecast
Intrinsic forecasting relies solely on the internal historical data (sales history) of the item being forecast. It is the opposite of extrinsic forecast.
Job Shop
A job shop manufacturing environment is characterized by high product variety and low product volumes. Work stations (machines) are grouped together by department or function, as compared to a cellular types of manufacturing where one machine of each type is grouped into a cell dedicated to producing a new product
Just-in-Time (JIT)
part 1
JIT manufacturing evolved from work done in the area of quality control from the early 1950s through the 1980s. JIT programs were influenced by continuous process improvements. From a broad view, JIT is a philosophy. From a very narrow view, JIT means scheduling the right part, at the right place, at the right time. Total quality control and total quality management have been the driving force behind the evolution toward JIT
Just-in-Time(JIT)
part 2
Three major areas in which JIT principles can be implemented:
1) production and manufacturing: Most companies begin with JIT production by building units per day per week in a linear fashion to meet the monthly demand.
2) Purchasing and Supplier Management: Next, companies focus on getting suppliers to deliver materials needed for building assemblies and subassemblies.
3) Shipments and Forecasting: The final area of focus is shipments. Most companies never focus on forecasting more accurately. JIT manufacturing theory assumes that as customers place orders, these orders are shipped only when needed. If demand fluctuates, however, there must be inventory to buffer this fluctuation. This means fluctuation must be forecasted.
Least Squares Method
A technique of curve fitting where a line is selected through a series of data points so that the variances above and below the line are minimized.
Level of Service
A measurement of meeting the customers (internal or external) needs. Some typical examples include:
- Percentage of customers orders filled each day
- Percentage of lines picked complete
- Percentage of total dollar demand picked complete
- Percentage of times the customer order due date was met
Level Schedule
A master production schedule (MPS) or production schedule that requires the same amount of product to be built routinely over a period of time, by building a buffer or finished goods. This provides for a steady manpower requirement, or smoothing, on the ship floor.
Life Cycle Analysis
The sales data for each stage of the life cycle one product (introduction, growth, maturity, saturation, and decline) is used in a quantitative forecasting approach to credit a forecast for a new similar product.
Make-to-Order
Manufacturing that does not begin until a customer order is placed:
DESCRIPTION
* More products than engineer-to order, however, volumes are very low
* customer lead times are ling, but not as long as engineer-to-order
* High profit margin per unit
IMPACT ON INVENTORY
*No finished goods
*Raw material and work-in-process inventories.
* Safety stock carried for ling lead-time items.
Make-to Stock
Manufacturing is driven by a forecast, with finished goods shipped to a distribution center or retail outlet
DESCRIPTION
*Very low product verity, high product volume
*Build to forecasted demand of independent items.
*Buffer for forecast error must be calculated.
*Low profit margin per item
IMPACT ON INVENTORY
*Inventory carried at the finished goods level
*Emphasis on instant availability
Manufacturing Environment
Whether a production process is make-to-stock,make-to-order, or assemble-to-order, the structure or envelope of business philosophies, strategies, competencies, technologies, and processes that influence how the manufacturing is performed.
Manufacturing Process
All activities required to convert raw material into finished goods at a production firm.
Mass Customization
The creation of a high-volume product with large variety so that a customer may specify an exact model out of a large volume of possible end items while manufacturing cost is low due to large volume. An example is a personal computer order in which the customer may specify processor speed, memory size, hard disk size and speed, removable storage device characteristics, and many other options when a PCs are assembled on one line at low cost.
Master Production Schedule
The line on the Master Schedule that drives the MRP
Master Schedule Item
A part number or end item included in the Master Schedule
Master Scheduler
The job title of the employe responsible for creating the master production schedule(MPS). The master scheduler must balance customer service, plant efficiency, and inventory costs, which is accomplished by starting with the sales forecast and applying knowledge of the shop floor capacity, production rates, lead-times, and material availability
Mean
The arithmetic average of a set of numbers, calculated by summing the set and dividing by the number of values in that set. 7,10,10 Mean= (7+10+10)/3=9
Mean Absolute Deviation (MAD)
part 1
A shortcut method for calculating the standard deviation of the forecast error, which will provide approximately the same answer as the standard deviation of the forecast error.
To calculate MAD simply total the forecast error, disregarding whether the forecast error is negative or positive. This total is divided by the number of time periods being reviewed, then multiplied by the MAD factor (constant values) for the number of deviations desired.
Period Act Sales Forecast Error
1 1520 1510 10
2 1490 1500 10
3 1510 1500 10
4 1520 1500 20
5 1470 1510 40
Mean Absolute Deviation
Part 2
Steps for calculating mean absolute deviation (MAD)
1) add forecast error in column 3, disregard negative/positive
2) calculate the average of the total forecast error
3) multiply the answer in step 2 (average of forecast error) by 1.25 (the MAD factor for one positive deviation) which is equal to one standard deviation.
Median
When a set of numbers is placed in order of their value, the median is the middle number
Mixed-Model Master schedule
A master production schedule (MPS) that supports multiple product models. An example of from the third quarter of a mixed model master schedule appears below:
Jul Aug Sep FG 123 900 950 900 FG456 700 700 600 FG789 400 350 500
Mode
in a set of values, the most frequent number that appears
Modular Bill of Materials
A planning bill that is done by options or product
modules, prevalent in industries where there is a wide variety of optional features. For example, a personal computer manufacturing factory might use modular Bills of Material to plan for hard drive sizes, memory, and so on.
Moving Average
A mathematical average of a set number of observations that is recalculated with each new observation. As the new value is included in the set, the oldest is eliminated. for example:
Jan Feb Mar Apr
10 13 11 14
In march a three month moving average would be 11.33 calculated by [(10+13+11)/3]
In April, the three month moving average would be 12.67
calculated by [(13+11+14)/3]
Multilevel Master Production Schedule (MPS)
the ability in the master scheduling process to be able to schedule items within the bill of materials of the finished goods. This would occur when there are independent demands for a component of subassembly. For example, a complex subassembly may be a major spare, with a forecast provided by customer service. In this instance, the end item and the spare would both be master scheduled
Noise
small variance that occurs naturally in a process. This difference between the actual and the expected value is random and unpredictable, but also insignificant.
Normal distribution
Majority of observations occur around the average or the mean, and the frequency lessens with the distance from the average. it is bell shaped with the highest point in the middle being the mean, then quickly sloping down as the variance from the average (above and below) becomes greater
Option
A feature that is either identified by the customer or selected by the customer from a list of possible choices. which somewhat customizes the end item.
Option overplanning
Master scheduling quantities of an option that are above forecast in order to protect against demand uncertainty. Where options are not formally forecasted, the plan is increased over the expected sales. The overplanned quantity is usually limited to periods beyond the demand time fence.
Order Entry
Converting the customer requirements into specific part numbers, due dates, and price, and loading that information into the company’s manufacturing system. Often a customers request is not in a form that can be entered directly, and must be reviewed and matched to part numbers recognized by the internal sytem.
Order Promising
The act of supplying a delivery date on a potential or confirmed customer order
Outlier
an event that occurs infrequently. An event or occurrence that is significantly distant from the statistical mean.
Outsourcing
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
Overstated MPS
A Master Production Schedule that exceeds capacity. This typically occurs when past due orders and safety stock demand are gathered in the first month of the MPS. An overstated schedule will drive false requirements through MRP if not modified prior to running
Package-to-Order
A production environment in which products are produced to a forecast but not packaged until a customer order is submitted. The items packaged are all common, but what is included in the final package varies by customer. for instance, wine might be bottled in bulk and then different customer labels applied.
Pegging
Pegging allows the user of an MRP/MPS system to see what caused demand from higher level sources
Planning Bill of Material
A Bill of Material that is created to gather similar items or logical groupings of items, in order to simplify the planning activities. Options are often scheduled using pseudo bills of materials. Another example might be for spares, where replacement parts are linked to a parent called “spares”
Planning Horizon
The length of time covered by the Master Schedule which at minimum must extend through the cumulative lead-time of the finished goods
Planning Time Fence
The planning time fence consists of firm planned orders, which are orders that can be frozen in quantity and time. The computer software must be overridden manually to make changes. Various restrictions or changes in operating procedures take place. For example, changes to the MPS can be accomplished easily outside the cumulative lead time, while changes inside the cumulative lead time become increasingly more difficult
Point of Sale (POS)
A system that reduces the inventory balances at the time that the sale is made usually at the cash register. This method is only possible with computerized inventory records and through the use of bar codes or magnetic media. Sales data and inventory adjustments are recorded immediately, often triggering daily replenishment orders.
Probability
The mathematical odds of a predicted outcome of an event occurring usually stated as a number between 0 and 1 the probability can be estimated though a subjective process or calculated through experimentation.
Probability Distribution
A table, that indicates the statistical frequency of all possible outcomes that can occur for an event.
Process Manufacturing
Process manufacturing tends to be high-volume, low product variety types of manufacturing. Typical of the continuous type of manufacturing would be chemicals, oil, candy, and so on.
Product Group Forecast
A forecast for a selection of finished goods within the same family or with similar characteristics
Production Level
Synonym: Production Rate
A measure of workload for a plant, expressed as units to be produced over a set period of time. For example, a plant may have a production rate of 20,000 units per month.
Production Plan
Synonym: Sales and Operations Plan (S&OP)
Sets the overall level of manufacturing output needed to meet the planned level of sales and of inventory as documented in the business plan. The production plan acts as a control and constraint to the master production schedule (MPS)
Production Planning
An iterative process, that results in three sets of figures: one year projected sales, changes in inventory levels, and production levels
Production Rate
A measure of workload for a plant, expressed as units to be produced over a set period of time.
Production schedule
The authorization to manufacture or produce specific quantities of finished goods
Product life cycle
Products that have various stages in their existence, each requiring different forecasting techniques. The product life cycle consists of introduction, growth, maturity, decline, and demise
Product Load Profile
A model which represents the capacity, resources, and lead-time needed to produce one unit of a particular product group or family. Profiles are used for rough cut capacity planning for a plant or to focus in on the impact of key/critical work centers
Product Mix
The proportion of individuals 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
Projected Available Balance
Predicted inventory balance into the future, calculated by the following formula:
On hand inventory-Requirements +Scheduled Receipts +Planned Orders=Projected Available Balance
Projection
Synonym: Extrapolation
Using historical data to estimate the value of a data series into the future
Project Management
All aspects of monitoring and coordinating the successful completion of a collection of tasks related to one goal. This involves planning, budgeting, tracking, scheduling, and reporting.
Pyramid Forecasting
This top-down process is continually checked to ensure that enough capacity exists to meet the plan. When the process reaches the master schedule, it then starts from the bottom level and rolls back up to the business plan, to make sure the detail numbers in units and dollars still add up to the aggregate total this process is sometimes called pyramid forecasting.
Pyramid-Forecasting
Forecasting process must also look at the time periods to be covered, the product details, and the geographical location. summary of these three types of aggregations:
- TIME: long-term (months, quarters, years) business plan, medium-term (weeks, months) Master Schedule, short-term (days, weeks)-MRP
- PRODUCT: Total business volume(dollars) families of products (dollars and units) individual products (units)stock-keeping units(units)
- GEOGRAPHIC LOCATION Global(dollars) Regional (units/dollars District(units) store/facility volumes (units)
Re-manufacturing
The Process of taking used parts and sub-assemblies and refurbishing them to look like new. These re-manufactured items must be clearly identified as such and never sold as a new item.
Random Sample
A selection of data chosen using any method in which every data element had an equal probability of being selected.
Regression Analysis
An extrinsic forecasting tool that describes the relationship between one item and one or more independent variables. In regression analysis, a relationship is established whereby the value of one variable can be predicted given the knowledge of other variables. The simplest version of regression analysis is “Trend-line analysis”
Resource Planning
An iterative process to determine if there are enough resources (capacity available). It compares the demand for resources from the product groups with items included in the production plan.
Rough-Cut Capacity Planning (RCCP)
The process of converting the MPS into capacity needs for key resources: people, equipment, , facilities, suppliers capabilities, and money required to fund acquisitions. The purpose of the RCCP is to assist the Scheduler in establishing a feasible MPS
Safety Capacity
Additional capacity set aside over and above the required capacity to meet the current master production schedule in order to account for fluctuations in demand.
Safety Factor
A structural engineering term that measures the ratio of the average strength of a design versus the greatest stress anticipated.
Sales and Operations Planning (S&OP)
A process performed at least monthly that converts the sales forecast into a Master Production Schedule which attempts to balance conflicting goals: minimize inventory investments, minimize potential backorder situation and provide a relatively smooth flow for manufacturing. This process usually has high visibility and is often where major business decisions(product introductions, significant changes in the production rate, and so on) are decided and implemented
Sales Plan
A time-phased schedule of anticipated sales or customer orders for each master scheduled item, which is used as the source for the S&OP). It should be in the same units as the MPS-if the MPS schedules by unique end items, then the sales plan should be to that detail
Sales Promotion
Sales activities that supplement both personal selling and marketing, coordinate the two and help make them effective
Sample
A portion of the full quantity that is selected to represent the entire quantity. The size of the sample is dependent on the overall quantity, the characteristics being reviewed, the critical nature of the items, and the level of risk that is acceptable.
Sampling Distribution
The frequency distribution of a statistic or characteristic from samples of a given lot size
Seasonal Index
A quantity or percentage applied to the normal forecast in order to adjust for seasonal demand.
- Divide the annual sales of a given historical year by either 12 (monthly) or by 4(quarterly)
- if 12 was used in step #1, divide the actual monthly sales by the calculated average monthly sales. If 4 was used, divide the actual quarterly sales by the calculated average quarterly sales.
Scatter Chart
Synonym: Scatter Diagram
A graphical method to review the relationship between two variables or to actually predict the results of one based on the known activity of the first. The x-axis is used for the variables that is known and the y-axis is used for the variable that is being predicted.
Seaonality
The fluctuation in sales throughout the year that generally repeats from year to year in similar patterns. The effects of weather, holidays, or other buying patterns that are somehow linked to the calendar create a repeatable sales pattern for most industries.
Second Order Smoothing
An Extrinsic Forecasting tool, which is a type of exponential smoothing for trend situations. This method uses two previously computed averages to extrapolate into the future.
Service Function
Customer service increases with the increase with the increase of inventory. Service function is the mathematical relationship of the increased inventory from safety stock with that customer service level.
Service Industry
An organization that provides an intangible product, all organizations except farming, mining, and manufacturing.
Service Level Agreement
A document that represents the terms of performance for organic support
Service Parts Demand
Synonym: repair parts demand
Demand that reflects the projected need for parts used to repair products already sold and must be included in the the master schedule. A part can be both a repair part and used as a component of a product.
Sigma
The Greek letter used to represent the standard deviation, which is the calculated spread of the data
Simulation
Synonym: What-If-Analysis
A capability in many software packages, especially in master scheduling, that allows for the impact of a transaction (customer order in the case of the master schedule) to be evaluated before the sale is accepted
Single Exponential Smoothing
Synonym: First-Order Smoothing
A single exponential smoothing, a weighted moving average approach that is applied to forecasting problems where the data do not exhibit significant trend or seasonal patterns.
Skew
A normal frequency distribution curve is somewhat symmetrical around the average. Skew is the amount hat the distribution is asymmetrical, meaning that the curve is lopsided or lumpy.
Smoothing
A method of averaging data to allow a consistent stream of requirements, either by using a mathematical process or by curve fitting. Smoothing is important for an efficient organization. Smoothing tends to build inventory in the short term and therefore increases carrying cost.
Smoothing Constant
A weighting factory used in exponential smoothing. The value of the smoothing constant is between 0 and 1.00 and is determined by trial and error as a smoothing constant is applied to the most recent data. When there is not variability in sales from year to year, the smoothing constant is 0. When there is a wide variety in sales, the smoothing constant is 1.00
Standard Deviation
One of the most important tools used in determining the required inventory is the standard deviation of the forecast error calculation. Purpose to calculate an amount of inventory that will allow for forecast error and establish a certain probability the item is still shipping on time. The inventory is called safety stock Safety lead-time and safety stock have the same effect on inventory, they both create demand for inventory before it is needed
Substitutions
An authorized use of an alternate material or component when the primary material or component is not available. Depending on the circumstances, the authorization might be automatic, or it might require a special waiver to be acknowledged by the customer.
Supplier Bill of Material
A planning Bill of Material that defines an entire product or a product family by linking various modular bills and possibly, a common parts bill also. The forecasted percentage of demand for each of the modules is represented in the super Bill of Material by the quantity per relationships for the modules
Time Fense
The master scheduling planning horizon is segmented through the use of time fences. These time fences define the parameters in which changes to customer orders can be made, as well as changes to capacity. Time fences are described as demand time fences, planning time fences, and capacity planning time fences.
Time-Phased Order Point (TPOP)
Used in a distribution systems to schedule the right item at the right time at the right place and in the right amount. Gross requirements are derived from forecasts rather than MRP explosions. TROP uses time periods, withdrawals are clumped or lumpy
Time Series Analysis
The Value of some variables are functions of time periods. This is an analysis of the variables classified by those time periods
Traceability
- The attribute allowing the ongoing location of a shipment to be determined
- The registering and tacking of parts, processes, and materials used in production, by lot or serial number.
Tracking Singnal
Used to measure the health of a forecasting model. Calculated by dividing the sum of the period forecast error by the mean absolute deviation. Tracking signal is computed as the ratio of the cumulative error to the MAD. If the answer is greater than +4.0 then the forecasting model measured should be reviewed closely.
Transportation Modes
The way an item is transported
Trend Forecasting Models
Various methods for forecasting when definite upward or downward pattern exist including double exponential smoothing. regression and triple smoothing
Two-Level MPS
A technique in Master Scheduling, whereby the end item and options are included in the MPS. This approach reduces the volume of scheduled items that would be needed to identify every possible combination of features.
Universe
The Total population of a set of data, the complete set. samples are selected from the universe to statistically represent the whole
Utilizaiton
A measurement of how much a machine or work center was used as a percentage of the available time that it could have been used. In the theory of constraints (TOC) utilization is the percentage of the time available that is actually required for the operation that is constrained.
Vendor-Managed Inventory (VMI)
Inventory at a plant that is controlled and maintained by the supplier. The supplier typically has access to the MRP system or conducts a physical review of the stockroom or floor-stock locations. When a replenishment order is required, the supplier processes the order, ships the parts and coordinates the receipt and stocking of the material when complete.
Warehouse Demand
An independent demand for a part created by a distribution center or warehosue
Weighted Moving Average
A method of averaging where the value of the data is increased or discounted based on criteria that determines its importance. For example, more recent historical data is more relevant than data from several years ago, so more importance would be placed on it.
CPFR
A collaboration process whereby supply chain trading partners can jointly plan key supply chain activities from production and delivery of raw materials to production and delivery of final products to end customers
Simple Moving average
A moving average where the oldest data point is dropped and the newest data point is included in the calculation.
Exponential Smoothing
A type of weighted moving average forecasting technique in which past observations are geometrically discounted according to their age
Quantitative forecasting techniques
An approach to forecasting where historical demand data is used to project future demand.
Seasonal index
A number used to adjust data to seasonal demand
