Metodologias Produtivas: Diconário APICS

actual costs

The labor, material, and associated overhead costs that are charged against a job as it moves through the production process.

ABC inventory control

An inventory control approach based on the ABC classification.

aggregate lead time

Syn: cumulative lead time.

The longest planned length of time to accomplish the activity in question. It is found by reviewing the lead time for each bill of material path below the item; whichever path adds up to the greatest number defines cumulative lead time. Syn: aggregate lead time, combined lead time, composite lead time, critical path lead time, stacked lead time. See: planning horizon, planning time fence.

anticipation inventories

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

assemble-to-order

A production environment where a good or service can be assembled after receipt of a customer's order. The key components (bulk, semifinished, intermediate, subassembly, fabricated, purchased, packing, and so on) used in the assembly or finishing process are planned and usually stocked in anticipation of a customer order. Receipt of an order initiates assembly of the customized product. This strategy is useful where a large number of end products (based on the selection of options and accessories) can be assembled from common components. Syn: finish-to-order. See: make-to-order, make-to-stock.

assembly line

An assembly process in which equipment and work centers are laid out to follow the sequence in which raw materials and parts are assembled. See: line, production line.

assets

An accounting/financial term (balance sheet classification of accounts) representing the resources owned by a company, whether tangible (cash, inventories) or intangible (patent, goodwill). Assets may have a short-term time horizon, such as cash, accounts receivable, and inventory or a long-term value, such as equipment, land, and buildings. See: balance sheet, liabilities, owner's equity.

available inventory

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.

available-to-promise (ATP)

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 lookahead, and cumulative ATP without lookahead. See: discrete available-to-promise, cumulative available-to-promise.

average cost per unit

The estimated total cost, including allocated overhead, to produce a batch of goods divided by the total number of units produced.

backflush

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. Syn: explode-to-deduct, post-deduct inventory transaction processing. See: pre-deduct inventory transaction processing.

backlog

All the customer orders received but not yet shipped. Sometimes referred to as open orders or the order board. See: order backlog, past due order.

backorder

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.

backward scheduling

Syn: back scheduling.

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.

balance sheet

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.

batch

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 and that 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.

batch processing

1) A manufacturing technique in which parts are accumulated and processed together in a lot. 2) A computer technique in which transactions are accumulated and processed together or in a lot. Syn: batch production.

bias

A consistent deviation from the mean in one direction (high or low). A normal property of a good forecast is that it is not biased. See: average forecast error.

bill of material (BOM)

1) A listing of all the subassemblies, intermediates, parts, and raw materials that go into a parent assembly showing the quantity of each required to make an assembly. It is used in conjunction with the master production schedule to determine the items for which purchase requisitions and production orders must be released. A variety of display formats exist for bills of material, including the single-level bill of material, 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 to make one production run of a product, by a contract manufacturer, of piece parts/components for its customers. The bill of material may also be called the formula, recipe, or ingredients list in certain process industries.

blanket order

Syn: blanket purchase order.

A long-term commitment to a supplier for material against which short-term releases will be generated to satisfy requirements. Often blanket orders cover only one item with predetermined delivery dates. Syn: blanket order, standing order.

bottleneck

A facility, function, department, or resource whose capacity is less than the demand placed upon it. For example, a bottleneck machine or work center exists where jobs are processed at a slower rate than they are demanded.

buffer

1) A quantity of materials awaiting further processing. It can refer to raw materials, semifinished stores or hold points, or a work backlog that is purposely maintained behind a work center. 2) In the theory of constraints, buffers can be time or material and support throughput and/or due date performance. Buffers can be maintained at the constraint, convergent points (with a constraint part), divergent points, and shipping points.

business plan

1) A statement of long-range strategy and revenue, cost, and profit objectives usually accompanied by budgets, a projected balance sheet, and a cash flow (source and application of funds) statement. A business plan is usually stated in terms of dollars and grouped by product family. The business plan is then translated into synchronized tactical functional plans through the production planning process (or the sales and operations planning process). Although frequently stated in different terms (dollars versus units), these tactical plans should agree with each other and with the business plan. See: long-term planning, strategic plan. 2) A document consisting of the business details (organization, strategy, and financing tactics) prepared by an entrepreneur to plan for a new business.

capacity

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. Capacity required represents the system capability needed to make a given product mix (assuming technology, product specification, etc.). As a planning function, both capacity available and capacity required can be measured in the short term (capacity requirements plan), intermediate term (rough-cut capacity plan), and long term (resource requirements plan). Capacity control is the execution through the I/O control report of the short-term plan. Capacity can be classified as budgeted, dedicated, demonstrated, productive, protective, rated, safety, standing, or theoretical. See: capacity available, capacity required. 3) Required mental ability to enter into a contract.

capacity available

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

capacity management

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.

capacity required

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

capacity requirements planning (CRP)

The function of establishing, measuring, and adjusting limits or levels of capacity. The term capacity requirements planning in this context 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 CRP, 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, CRP may show that capacity is insufficient during specific time periods. See: capacity planning.

carrying cost

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 such costs of maintaining the inventory as taxes and insurance, obsolescence, spoilage, and space occupied. Such costs vary from 10% to 35% 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.

cash flow

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.

cellular manufacturing

A manufacturing process that produces families of parts within a single line or cell of machines controlled by operators who work only within the line or cell.

changeover

Syn: setup.

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 and preparation of the equipment for production of the next scheduled item). Syn: changeover, turnaround, turnaround time.

chase production method

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 production method

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.

closed-loop MRP

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, 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 that the planning can be kept valid at all times.

competitive analysis

An analysis of a competitor that includes its strategies, capabilities, prices, and costs.

component

The raw material, part, or subassembly that goes into a higher level assembly, compound, or other item. This term may also include packaging materials for finished items. See: ingredient, intermediate part.

consignment

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.

constraint

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.

continuous flow (production)

Syn: continuous production.

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. See: mass production, project manufacturing.

control chart

A graphic comparison of process performance data with predetermined computed control limits. The process performance data usually consist of groups of measurements selected in 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.

cost of goods sold

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. See: cost of sales.

cost of poor quality

The cost associated with providing poor-quality products or services. There are four categories of costs: internal failure costs (costs associated with defects found before the customer receives the product or service), external failure costs (costs associated with defects found after the customer receives the product or service), appraisal costs (costs incurred to determine the degree of conformance to quality requirements), and prevention costs (costs incurred to keep failure and appraisal costs to a minimum). Syn: cost of quality.

cumulative lead time

customer service

1) The ability of a company to address the needs, inquiries, and requests from customers. 2) A measure of the delivery of a product to the customer at the time the customer specified.

customer service ratio

1) A measure of delivery performance of finished goods, usually expressed as a percentage. In a make-to-stock company, this percentage usually represents the number of items or dollars (on one or more customer orders) that were shipped on schedule for a specific time period, compared with the total that were supposed to be shipped in that time period. Syn: customer service level, fill rate, order-fill ratio, percent of fill. Ant: stockout percentage. 2) In a make-to-order company, it is usually some comparison of the number of jobs or dollars shipped in a given time period (e.g., a week) compared with the number of jobs or dollars that were supposed to be shipped in that time period.

cycle

1) The interval of time during which a system or process, such as seasonal demand or a manufacturing operation, periodically returns to similar initial conditions. 2) The interval of time during which an event or set of events is completed.

cycle counting

An inventory accuracy audit technique where inventory is counted on a cyclic schedule rather than once a year. A cycle inventory 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 cycle counting systems require the counting of a certain number of items every workday with each item counted at a prescribed frequency. The key purpose of cycle counting is to identify items in error, thus triggering research, identification, and elimination of the cause of the errors.

cycle stock

One of the two main conceptual components of any item inventory, the cycle stock is the most active component, i.e., that which 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.

cycle time

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

decoupling

Creating independence between supply and use of material. Commonly denotes providing inventory between operations so that fluctuations in the production rate of the supplying operation do not constrain production or use rates of the next operation.

demand

A need for a particular product or component. The demand could come from any number of sources, e.g., customer order or forecast, an interplant requirement, or a request from a branch warehouse for a service part or for manufacturing another product. At the finished goods level, demand data are usually different from sales data because demand does not necessarily result in sales (i.e., if there is no stock, there will be no sale). There are generally up to four components of demand: cyclical component, random component, seasonal component, and trend component.

demand management

1) The function of recognizing all demands for goods and services to support the market place. It involves prioritizing demand when supply is lacking. Proper demand management facilitates the planning and use of resources for profitable business results. 2) In marketing, the process of planning, executing, controlling, and monitoring the design, pricing, promotion, and distribution of products and services to bring about transactions that meet organizational and individual needs. Syn: marketing management.

demand pull

The triggering of material movement to a work center only when that work center is ready to begin the next job. It in effect eliminates the queue from in front of a work center, but it can cause a queue at the end of a previous work center.

demonstrated capacity

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.

dependent demand

Demand that is directly related to or derived from the bill of material structure for other items or end products. Such demands are therefore calculated and need not and should not be forecast. A given inventory item may have both dependent and independent demand at any given time. For example, a part may simultaneously be the component of an assembly and sold as a service part. See: independent demand.

direct labor

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

direct material

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

discrete manufacturing

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

dispatching

The selecting and sequencing of available jobs to be run at individual workstations and the assignment of those jobs to workers.

distribution inventory

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

distribution requirements planning (DRP)

1) The function of determining the need to replenish inventory at branch warehouses. A time-phased order point approach is used where the planned orders at the branch warehouse level are "exploded" via MRP logic to become gross requirements on the supplying source. In the case of multilevel distribution networks, this explosion process can continue down through the various levels of regional warehouses (master warehouse, factory warehouse, etc.) and become input to the master production schedule. Demand on the supplying sources is recognized as dependent, and standard MRP logic applies. 2) More generally, replenishment inventory calculations, which may be based on other planning approaches such as period order quantities or "replace exactly what was used," rather than being limited to the time-phased order point approach.

distribution resource planning (DRP II)

The extension of distribution requirements planning into the planning of the key resources contained in a distribution system: warehouse space, workforce, money, trucks, freight cars, etc.

distributor

A business that does not manufacture its own products, but purchases and resells these products. Such a business usually maintains a finished goods inventory. Syn: wholesaler.

due date

The date when purchased material or production material is due to be available for use. Syn: expected receipt date. See: arrival date.

economic order quantity (EOQ)

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 d = annual demand, c = average cost of order preparation, i = annual inventory carrying cost percentage, and u = unit cost. Syn: economic lot size, minimum cost order quantity. See: total cost curve.

efficiency

A measurement (usually expressed as a percentage) of the actual output 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. Illustrations of these calculations follow. (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%. (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.

electronic data interchange (EDI)

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

employee empowerment

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.

employee involvement (EI)

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.

engineer-to-order

Products whose customer specifications require unique engineering design, significant customization, or new purchased materials. Each customer order results in a unique set of part numbers, bills of material, and routings. Syn: design-to-order.

expedite

To rush or chase production or purchase orders that are needed in less than the normal lead time; to take extraordinary action because of an increase in relative priority. Syn: stockchase.

explode

To perform a bill-of-material explosion.

feedback

The flow of information back into the control system so that actual performance can be compared with planned performance.

fill rate

Syn: customer service ratio.

final assembly schedule (FAS)

A schedule of end items to finish the product for specific customers' orders in a make-to-order or assemble-to-order environment. It is also referred to as the finishing schedule because it may involve operations other than just the final assembly; also, it may not involve assembly, but simply final mixing, cutting, packaging, etc. The FAS is prepared after receipt of a customer order as constrained by the availability of material and capacity, and it schedules the operations required to complete the product from the level where it is stocked (or master scheduled) to the end-item level.

finish-to-order

Syn: assemble-to-order.

finished good

Syn: end item.

A product sold as a completed item or repair part; any item subject to a customer order or sales forecast. Syn: end product, finished good, finished product. See: good.

finite forward scheduling

A 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.

finite loading

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.

firm planned order (FPO)

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.

fixed order quantity

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.

flexible manufacturing system (FMS)

A group of numerically controlled machine tools interconnected by a central control system. The various machining cells are interconnected via loading and unloading stations by an automated transport system. Operational flexibility is enhanced by the ability to execute all manufacturing tasks on numerous product designs in small quantities and with faster delivery.

flow manufacturing

Syn: flow shop.

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.

flow shop

fluctuation inventory

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

FMS

Abbreviation for flexible manufacturing system.

forecast error

The difference between actual demand and forecast demand, stated as an absolute value or as a percentage. See: average forecast error, forecast accuracy, mean absolute deviation, tracking signal.

forecasting

The business function that attempts to predict sales and use of products so they can be purchased or manufactured in appropriate quantities in advance.

formula

A statement of ingredient requirements. A formula may also include processing instructions and ingredient sequencing directions. Syn: formulation, recipe.

forward scheduling

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.

general and administrative expenses (G and A)

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

gross margin

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

gross requirement

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

in-transit inventory

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

income statement

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

independent demand

The demand for an item that is unrelated to the demand for other items. Demand for finished goods, parts required for destructive testing, and service parts requirements are examples of independent demand. See: dependent demand.

infinite loading

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.

infinite scheduling

Syn: infinite loading.

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.

input/output control (I/O)

A technique for capacity control where planned and actual inputs and planned and actual outputs of a work center are monitored. Planned inputs and outputs for each work center are developed by capacity requirements planning and approved by manufacturing management. Actual input is compared to planned input to identify when work center output might vary from the plan because work is not available at the work center. Actual output is also compared to planned output to identify problems within the work center. Syn: input/output analysis. See: capacity control.

inspection

Measuring, examining, testing, or gauging one or more characteristics of a good or service and comparing the results with specified requirements to determine whether conformity is achieved for each characteristic.

intermittent production

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.

interplant demand

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.

intrinsic forecast method

A forecast based on internal factors, such as an average of past sales. Ant: extrinsic forecast.

inventory

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) In the theory of constraints, inventory is defined as those items purchased for resale and includes finished goods, work in process, and raw materials. Inventory is always valued at purchase price and includes no value-added costs, as opposed to the traditional cost accounting practice of adding direct labor and allocating overhead as work in process progresses through the production process.

inventory adjustment

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

inventory control

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

inventory issue

1) Items released from an inventory location for use or sale. 2) The inventory record transaction reducing the inventory balance by the amount released.

inventory management

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

inventory returns

Items returned to the manufacturer as defective, obsolete, overages, etc. An inventory item record transaction records the return or receipt into physical stores of materials from which the item may be scrapped.

inventory turnover

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 average inventory level into the annual cost of sales. For example, an average inventory of $3 million divided into an annual cost of sales of $21 million means that inventory turned over seven times. Syn: inventory turns, turnover. See: inventory velocity.

inventory turns

Syn: inventory turnover.

inventory turns

Syn: inventory turnover.

item master record

Syn: item record.

The "master" record for an item. Typically, it contains identifying and descriptive data and control values (lead times, lot sizes, etc.) and may contain data on inventory status, requirements, planned orders, and costs. Item records are linked by bill of material records (or product structure records), thus defining the bill of material. Syn: item master record, part master record, part record.

job costing

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.

job order

Syn: manufacturing order.

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.

job shop

1) An organization in which similar equipment is organized by function. Each job follows a distinct routing through the shop. 2) A type of manufacturing process used to produce items to each customer's specifications. Production operations are designed to handle a wide range of product designs and are performed at fixed plant locations using general-purpose equipment. Syn: jobbing. See: intermittent production, project manufacturing.

job shop layout

Syn: functional layout.

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, and press). Syn: job shop layout, process layout.

job shop scheduling

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

Just-in-Time (JIT)

A philosophy of manufacturing based on planned elimination of all waste and on continuous improvement of productivity. It encompasses the successful execution of all manufacturing activities required to produce a final product, from design engineering to delivery, and includes all stages of conversion from raw material onward. The primary elements of Just-in-Time are to have only the required inventory when needed; to improve quality to zero defects; to reduce lead times by reducing setup times, queue lengths, and lot sizes; to incrementally revise the operations themselves; and to accomplish these activities at minimum cost. In the broad sense, it applies to all forms of manufacturing-job shop, process, and repetitive-and to many service industries as well. Syn: short-cycle manufacturing, stockless production, zero inventories.

kanban

A method of Just-in-Time production that uses standard containers or lot sizes with a single card attached to each. It is a pull system in which work centers signal with a card that they wish to withdraw parts from feeding operations or suppliers. The Japanese word kanban, loosely translated, means card, billboard, or sign, but other signaling devices such as colored golf balls have also been used. The term is often used synonymously for the specific scheduling system developed and used by the Toyota Corporation in Japan. See: move card, production card, synchronized production.

lead time

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. Syn: total lead time. See: manufacturing lead time, purchasing lead time.

lead-time offset

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

leading indicator

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

level of service

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.

level schedule

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.

liabilities

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.

line manufacturing

Repetitive manufacturing performed by specialized equipment in a fixed sequence.

load

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.

load leveling

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.

lot

A quantity produced together and sharing the same production costs and specifications. See: batch.

lot control

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.

lot size

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. Syn: order quantity.

lot-for-lot

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

lot-size inventory

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.

maintenance, repair, and operating supplies (MRO)

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.

make-to-order

A production environment where a good or service can be made after receipt of a customer's order. The final product is usually a combination of standard items and items custom-designed to meet the special needs of the customer. Where options or accessories are stocked before customer orders arrive, the term assemble-to-order is frequently used. See: assemble-to-order, make-to-stock.

make-to-stock

A production environment where products can be and usually are finished before receipt of a customer order. Customer orders are typically filled from existing stocks, and production orders are used to replenish those stocks. See: assemble-to-order, make-to-order.

manufacturing lead time

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 here 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.

manufacturing process

The series of operations performed upon material to convert it from the raw material or a semifinished state to a state of further completion. Manufacturing processes can be arranged in a process layout, product layout, cellular layout, or fixed-position layout. Manufacturing processes can be planned to support make-to-stock, make-to-order, assemble-to-order, etc., based on the strategic use and placement of inventories. See: production process, transformation process.

manufacturing resource planning (MRP II)

A method for the effective planning of all resources of a manufacturing company. Ideally, it addresses operational planning in units, 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.

market driven

Responding to customers' needs.

market share

The actual portion of current market demand that a company or product achieves.

marketing research

The systematic gathering, recording, and analyzing of data about problems relating to the marketing of goods and services. Such research may be undertaken by impartial agencies or by business firms or their agents. Marketing research includes several types: (1) Market analysis (product potential is a type) is the study of the size, location, nature, and characteristics of markets, (2) Sales analysis (or research) is the systematic study and comparison of sales (or consumption) data, (3) Consumer research (motivation research is a type) is concerned with the discovery and analysis of consumer attitudes, reactions, and preferences. Syn: market research.

master planning

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).

master production schedule (MPS)

The master production schedule is a line on the master schedule grid that reflects the anticipated build schedule for those items assigned to the master scheduler. The master scheduler maintains this schedule, and in turn, it becomes a set of planning numbers that drives material requirements planning. It represents what the company plans to produce expressed in specific configurations, quantities, and dates. The master production schedule is not a sales item forecast that represents a statement of demand. The master production schedule must take 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 schedule.

master schedule

The master schedule is a format that includes time periods (dates), the forecast, customer orders, projected available balance, available-to-promise, and the master production schedule. The master schedule 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.

material requirements planning (MRP)

A set of techniques that uses bill of material data, inventory data, and the master production schedule to calculate requirements for materials. It makes recommendations to release replenishment orders for material. Further, because it is time-phased, it makes recommendations to reschedule open orders when due dates and need dates are not in phase. Time-phased MRP begins with the items listed on the MPS and determines (1) the quantity of all components and materials required to fabricate those items and (2) the date that the components and material are required. Time-phased MRP is accomplished by exploding the bill of material, adjusting for inventory quantities on hand or on order, and offsetting the net requirements by the appropriate lead times.

materials management

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.

materials management

mean absolute deviation (MAD)

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. These data can be averaged in the usual arithmetic way or with exponential smoothing. See: forecast error, tracking signal.

move time

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

multilevel bill of material

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.

multisourcing

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

net requirements

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. Net requirements, lot-sized and offset for lead time, become planned orders.

on-hand balance

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

open order

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

operation

1) A job or task, consisting of one or more work elements, usually done essentially in one location. 2) The performance of any planned work or method associated with an individual, machine, process, department, or inspection. 3) One or more elements that involve one of the following: the intentional changing of an object in any of its physical or chemical characteristics; the assembly or disassembly of parts or objects; the preparation of an object for another operation, transportation, inspection, or storage; planning, calculating, or giving or receiving information.

order entry

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 line (ATP) in the master schedule. This can be as simple as creating shipping documents for finished goods in a make-to-stock environment, or it might be a more complicated series of activities, including design efforts for make-to-order products. See: master schedule, order service.

order point

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.

order promising

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-to-promise, order service.

order qualifiers

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.

order quantity

Syn: lot size.

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. Syn: order quantity.

order winners

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.

ordering cost

Used in calculating order quantities, the costs that increase as the number of orders placed increases. It 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.

overhead

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.

owner's equity

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.

package to order

A production environment in which a good or service can be packaged after receipt of a customer order. The item is common across many different customers; packaging determines the end product.

packing and marking

The activities of packing for safe shipping and unitizing one or more items of an order, placing them into an appropriate container, and marking and labeling the container with customer shipping destination data, as well as other information that may be required.

parent item

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

pegging

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

performance measurement system

A system for collecting, measuring, and comparing a measure to a standard for a specific criterion for an operation, item, good, service, business, etc. A performance measurement system consists of a criterion, a standard, and a measure. Syn: metrics. See: performance criterion, performance measure, performance standard.

perpetual inventory record

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

physical distribution

Syn: distribution.

1) The activities associated with the movement of material, usually finished goods or service parts, from the manufacturer to the customer. These activities encompass the functions of transportation, warehousing, inventory control, material handling, order administration, site and location analysis, industrial packaging, data processing, and the communications network necessary for effective management. It includes all activities related to physical distribution, as well as the return of goods to the manufacturer. In many cases, this movement is made through one or more levels of field warehouses. Syn: physical distribution. 2) The systematic division of a whole into discrete parts having distinctive -characteristics.

physical inventory

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. Syn: annual inventory count, annual physical inventory. See: periodic inventory.

pipeline inventory

Syn: pipeline stock.

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, etc. Syn: pipeline inventory. See: distribution system, transportation inventory.

planned order

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.

planned order receipt

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.

planned order release

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.

planning horizon

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 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.

priority control

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.

process

1) A planned series of actions or operations (e.g., mechanical, electrical, chemical, inspection, test) that advances a material or procedure from one stage of completion to another. 2) A planned and controlled treatment that subjects materials or procedures to the influence of one or more types of energy (e.g., human, mechanical, electrical, chemical, thermal) for the time required to bring about the desired reactions or results.

process layout

Syn: functional layout.

product differentiation

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

product family

A group of products with similar characteristics, often used in production planning (or sales and operations planning). Syn: product line.

product layout

Layout of resources arranged sequentially based on the product's routing.

product life cycle

1) The stages a new product goes through from beginning to end, i.e., the stages that a product passes through from introduction through growth, maturity, and decline. 2) The time from initial research and development to the time at which sales and support of the product to customers are withdrawn. 3) The period of time during which a product can be produced and marketed profitably.

production activity control (PAC)

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.

production line

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

production plan

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 can be used to express the plan: units, tonnage, standard hours, number of workers, and so on. The production plan is 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.

productivity

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, etc., 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. This is called single factor productivity or partial factor productivity.

profit

1) Gross profit-earnings from an ongoing business after direct costs of goods sold have been deducted from sales revenue for a given period. 2) Operating profit-earnings or income after all expenses (selling, administrative, depreciation) have been deducted from gross profit. 3) Net profit-earnings or income after adjusting for miscellaneous income and expenses (patent royalties, interest, capital gains) and tax from operating profit. Syn: income.

profit margin

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 being the product selling price minus the direct material, direct labor, and allocated overhead for the product, sometimes expressed as a percentage of selling price.

projected available inventory

Syn: projected available balance.

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

pull system

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.

purchase order

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.

purchase requisition

An authorization to the purchasing department to purchase specified materials in specified quantities within a specified time. See: parts requisition.

purchasing

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

push system

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.

quality

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.

quality at the source

A producer's responsibility to provide 100% 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.

quality control

The process of measuring quality conformance by comparing the actual with a standard for the characteristic and acting on the difference. See: quality assurance/control.

queue

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.

random variation

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

random-location storage

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.

rated capacity

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 x efficiency x utilization. Syn: calculated capacity, effective capacity, nominal capacity, standing capacity.

raw material

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

receipt

1) The physical acceptance of an item into a stocking location. 2) Often, the transaction reporting of this activity.

record accuracy

A measure of the conformity of recorded values in a bookkeeping system to the actual values, e.g., 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.

remanufacturing

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.

reorder point

Syn: order point.

reorder quantity

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 will vary. Syn: replenishment order quantity.

repetitive manufacturing

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. Repetitive is not a function of speed or volume. Syn: repetitive process, repetitive production. See: project manufacturing.

replenishment lead time

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.

request for quote (RFQ)

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

required capacity

Syn: capacity required.

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

requirements explosion

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.

requisition

Syn: parts requisition.

An authorization that identifies the item and quantity required to be withdrawn from an inventory. Syn: requisition. See: purchase requisition.

resource planning

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 for 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.

rough-cut capacity planning (RCCP)

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.

routing

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. Syn: bill of operations, instruction sheet, manufacturing data sheet, operation chart, operation list, operation sheet, route sheet, routing sheet. See: bill of labor, bill of resources. 2) In information systems, the process of defining the path a message will take from one computer to another computer.

run time

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

safety stock

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. Syn: buffer stock, reserve stock. See: hedge, inventory buffer.

sales and operations planning

A process to develop tactical plans that provide management the ability to strategically direct its businesses to achieve competitive advantage on a continuous basis by integrating customer-focused marketing plans for new and existing products with the management of the supply chain. The process brings together all the plans for the business (sales, marketing, development, manufacturing, sourcing, and financial) into one integrated set of plans. It is performed at least once a month and is reviewed by management at an aggregate (product family) level. The process must reconcile all supply, demand, and new-product plans at both the detail and aggregate levels and tie to the business plan. It is the definitive statement of the company's plans for the near to intermediate term, covering a horizon sufficient to plan for resources and to support the annual business planning process. Executed properly, the sales and operation planning process links the strategic plans for the business with its execution and reviews performance measurements for continuous improvement. See: aggregate planning, production plan, production planning, sales plan, tactical planning.

sales plan

A time-phased statement of expected customer orders anticipated to be received (incoming sales, not outgoing shipments) for each major product family or item. It represents sales and marketing management's commitment to take all reasonable steps necessary to achieve this level of actual customer orders. The sales plan is a necessary input to the production planning process (or sales and operations planning process). It is 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.

scheduled receipt

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

scheduling

The act of creating a schedule, such as a shipping schedule, master production schedule, maintenance schedule, or supplier schedule.

seasonality

A repetitive pattern of demand from year to year (or other repeating time interval) with some periods considerably higher than others. See: base series.

service industry

1) In its narrowest sense, an organization that provides an intangible product, e.g., medical or legal advice. 2) In its broadest sense, all organizations except farming, mining, and manufacturing. This definition of service industry includes retail trade; wholesale trade; transportation and utilities; finance, insurance, and real estate; construction; professional, personal, and social services; and local, state, and federal governments.

service parts

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

service parts demand

The need or requirement for a component to be sold by itself, as opposed to being used in production to make a higher level product. Syn: repair parts demand, spare parts demand.

setup

setup lead time

Syn: setup time.

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.

shop calendar

Syn: manufacturing calendar.

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.

shop order

Syn: manufacturing order.

simulation

1) The technique of using representative or artificial data to reproduce in a model various conditions that are likely to occur in the actual performance of a system. It is frequently used to test the behavior of a system under different operating policies. 2) Within MRP II, using the operational data to perform what-if evaluations of alternative plans to answer the question, Can we do it? If yes, the simulation can then be run in the financial mode to help answer the question, Do we really want to? See: what-if analysis.

single-level bill of material

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

single-source supplier

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

standard costs

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

standard hours

Syn: standard time.

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. This time is used in determining machine requirements and labor requirements. Standard time assumes an average worker following prescribed methods and allows time for personal rest to overcome fatigue and unavoidable delays. It is 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.

start date

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

statistical process control (SPC)

The application of statistical techniques to monitor and adjust an operation. Often the term statistical process control is used interchangeably with statistical quality control.

stockkeeping unit (SKU)

1)An inventory item. For example, a shirt in six colors and five sizes would represent 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.

stockout costs

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

strategic plan

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.

subcontracting

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

supplier

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

supplier lead time

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.

supplier partnership

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

supply chain

The global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash.

throughput time

Syn: cycle time (second definition).

time bucket

A number of days of data summarized into a columnar or rowwise display. A weekly time bucket would contain all of 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

time fence

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. MRP.

total productive maintenance (TPM)

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.

total quality management (TQM)

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 long-term 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.

tracking signal

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.

transit time

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

transportation inventory

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

trend

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

two-bin inventory system

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. This term is also used loosely to describe any fixed-order system even when physical "bins" do not exist. Syn: bin reserve system. See: visual review system.

unit of measure

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

utilization

1) A measure (usually expressed as a percentage) of how intensively a resource is being used to produce a good or service. Utilization compares actual time used to available time. Traditionally, utilization is the ratio of direct time charged (run time plus setup time) to the clock time available. Utilization is a percentage between 0% and 100% that is equal to 100% minus the percentage of time lost due to machine, tool, worker, etc., unavailability. See: efficiency, lost time factor, productivity. 2) In the theory of constraints, utilization is the ratio of the time the resource is needed to support the constraint to the time available for the resource, expressed as a percentage. See: activation.

value added

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. It is 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.

variance

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.

vendor

Any seller of an item in the marketplace. See: supplier.

vendor-managed inventory (VMI)

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. This activity is accomplished by a process in which resupply is done 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. See: continuous replenishment.

visual review system

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.

wait time

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.

warehousing

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

waste

1) Any activity that does not add value to the good or service in the eyes of the consumer. 2) A by-product of a process or task with unique characteristics requiring special management control. Waste production can usually be planned and somewhat controlled. Scrap is typically not planned and may result from the same production run as waste. See: hazardous waste.

where-used list

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.

work cell

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

work center

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

work in process (WIP)

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. Syn: in-process inventory.

work order

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

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