Apics Dictionary: The Essential Supply Chain Reference

SIXTEENTH EDITION
APICS DICTIONARY
The essential supply chain reference
APICS Dictionary
SIXTEENTH EDITION
Editors
Paul H. Pittman, PhD, CFPIM, CSCP, Jonah

Professor of Operations Management
Indiana University Southeast
J. Brian Atwater, PhD, CPIM, Jonah

Assistant Professor of Operations Management
Indiana University Southeast
APICS Dictionary
Sixteenth edition—2019
Fifteenth edition—2016
Fourteenth edition—2013
Thirteenth edition—2010
Twelfth edition—2008
Eleventh edition—2005
Tenth edition—2002
Ninth edition—1998
Eighth edition—1995
Seventh edition—1992
Sixth edition—1987
Fifth edition—1982
Fourth edition—1980
Third edition—1970
Second edition—1966
First edition—1963
Copyright 2019 by APICS, Inc. d/b/a ASCM
International Standard Book Number: 978-O-56490-6
All rights reserved. No part of this publication covered by copyright

herein may be reproduced or copied in any form or by any means—
graphic, electronic, or mechanical, including photocopying, taping,
or informational storage and retrieval systems—without written
permission from the publisher.
ASCM
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Foreword
The Association for Supply Chain Management (ASCM) is the global leader in supply
chain organizational transformation, innovation, and leadership. As the largest
non-profit association for supply chain, ASCM is an unbiased partner, connecting
companies around the world to the newest thought leadership on all aspects of supply
chain. ASCM is built on the foundation of APICS certification and training, spanning over
60 years. As a reference to the supply chain management field for over 56 years, the 16th
edition of the APICS Dictionary continues to be an essential reference for the supply
chain profession, APICS certifications, educational programs, and training materials.
As ASCM continues to grow and provide more services and products to our profession,
our end-to-end supply chain body of knowledge continues to grow and evolve. This edition
of the APICS Dictionary reflects this growth and evolution with the inclusion of terms
from the ASCM Enterprise Certification, as well as changes in the Supply Chain Operations
Reference (SCOR) model and APICS professional certifications – CPIM, CSCP, and CLTD.
In this 16th edition of the APICS Dictionary, we had several objectives we wanted to
achieve. Specifically, we wanted to
1. integrate and update key reference terms for the ASCM Enterprise Certification
2. integrate new terminology and revise existing terms from the SCOR program and
SCOR-P endorsement
3. incorporate new terminology and revise existing terms for the Certification in
Logistics, Transportation and Distribution (CLTD)
4. stay current with the field by updating and revising terms used for the Certification in
Production and Inventory Management (CPIM) and the Certification in Supply Chain
Professional (CSCP)
5. ensure the integrity of any changes to the dictionary by working with the subject
matter experts in each area to resolve any differences in shared terms between the
programs, certifications, endorsements, and designations
6. improve definitions for consistent translation across multiple languages as the scope
of the dictionary’s use spreads into more foreign countries
7. incorporate suggested inclusions and modifications submitted from our members
8. improve the overall quality of the definitions by correcting errors, grammar, and
punctuation
9. eliminate terms not specific to the body of knowledge of our profession
All of these changes could not have been achieved without substantial assistance
from the editorial staff at ASCM and many subject matter experts. As the primary
educational reference of our discipline, its quality and value can only be sustained
through the collective contributions of our members. We will describe in more detail
how we achieved each of these objectives.
With every edition of the dictionary, certification committee representatives provide
changes and additions to support the examinations. These committee members
are familiar with the need to have their terms tied to two or more references and
well written for our readers to understand. These changes are ongoing and coincide
with every exam revision, as well as ongoing job task analyses performed on each
respective certification exam. As a primary reference for every certification exam,
the input these subject matter experts provide ensures the dictionary is current and
aligned with the exam content manual (ECM) for each examination.
All new terms and definitions, along with proposed modifications of existing definitions,
were vetted through the editors and/or subject matter experts from other the
certification committees for shared terms. This iterative process required the
patience of many volunteers working diligently to ensure accuracy and quality.
As an important international reference, the dictionary continues to be translated into

different languages. During the process of translation, definitions are improved through
clarification for more universal understanding. With the diversity of input from our
international volunteers working on the translations, definitions with context to a
specific country are revealed and can be changed for more international understanding.
These improvements benefit all of our members and professionals worldwide.
With every new edition, there is an opportunity for ASCM members worldwide
to recommend changes and additions. Every suggestion is carefully reviewed
and incorporated following the same process and standards for inclusion. There
were many thoughtful recommendations that were incorporated into this edition.
Spending the effort to carefully write and tie each recommendation to references
enhances the likelihood those recommendations are included.
Finally, the overall goal with each edition is to improve quality. Although bigger is not
necessarily better, it is expected that as a field evolves, its lexicon will evolve with it.
In this edition, approximately 200 terms were added or modified.
Acknowledgements
The editors would specifically like to thank the following staff and volunteers for their
careful review of the APICS Dictionary, 16th edition.
Jennifer Proctor, former Editor in Chief of ASCM Now (formerly APICS magazine) and
staff executive at ASCM, served many years as a wonderful partner that ensured many
ASCM publications, including the dictionary, were published at the utmost quality for our
members. Her partnership and support will be missed.
Jamie Luedtke, Manager, Standards and Content Development, for ASCM has been a
wonderful dictionary project team leader and a pleasure to have on our team. Jamie did an
excellent job assuring all communication and content between the editors, ASCM members,
and volunteer committees was handled in the most professional and timely manner.
Nishat Ahmed, CPIM, CIRM, CSCP, CPM, CLTD; Yemisi Bolumole, PhD, CTL, CLTD;
Joseph Carr, CPIM, CIRM, CSCP; Louis Carrieri, CPIM, CLTD; James Caruso,
CPIM, CSCP, CLTD; Staffan Cederstrand, CPIM; Matt Drake, PhD, CPIM-F, CLTD;
Stephen N. Chapman, PhD, CPIM-F, CSCP; Karen C. Eboch, CSCP; Lawrence Ettkin,
PhD, CPIM-F; Ann K. Gatewood, CPIM-F, CIRM, CSCP-F, CLTD-F; Douglas Hales, PhD,
CTL, CLTD-F; Mark C. Hardison, CPIM-F, CSCP-F, CLTD-F; Marilyn M. Helms, D.B.A.,
CPIM-F, CIRM, CSCP, CLTD CQM/OE; Daniel Iglesias, CPIM; Dr. Tricia M. Kerns, EdD,
MBA, LSSBB, CPIM, CLTD; Scott Lane, CTL, CLTD; William R. Leedale, CPIM-F, CIRM,
CSCP, CLTD; Daniel Monikes, CSCP, CLTD; Murray Olsen, CPIM-F, CIRM, CQA, CMQ/OE,
CSSGB; Andrea M. Prud’homme, PhD, CPIM-F, CIRM, CSCP, CLTD; Eric Schaudt, CPIM-F,
CSCP, SCOR-P, CLTD; Gary Smith, CPIM-F, CSCP-F, CLTD-F; Jaap Stumphius, CPIM-F,
CLTD; William S. Thurston, CPIM-F, CIRM, CSCP-F, PMP; Rosemary Van Treeck, CPIM,
CIRM, CSCP; Josie Vigil, CPIM-F, CSCP, CLTD.
Carol Ptak, CFPIM, CIRM and Chad Smith from the Demand Driven Institute and authors
of Orlicky’s Material Requirements Planning, Third Edition, 2011, for their suggestions and
revisions of terms related to demand driven material requirements planning (DDMRP).
The Institute of Industrial Engineers provided permission to include several definitions

reprinted from the text Industrial Engineering Terminology, revised edition, Copyright 1991,
Institute of Industrial Engineers, 3577 Parkway Lane, Suite 200, Norcross, Georgia 30092.
The American Society of Quality provided permission to include several terms from “The
Quality Glossary,” updated in 2018.
The Theory of Constraints International Certification Organization provided permission

to include several terms from the TOCICO Dictionary.
The Spectrum Publishing Company provided permission to use terms from the book,
Synchronous Management, by Michael Umble, CFPIM, and M.L. Srikanth.
The Association for Manufacturing Excellence provided the definition for kaizen blitz,
which is trademarked.
100 percent inspection • accelerated depreciation
100 percent inspection–The act of inspecting or

testing every item in an incoming or outgoing lot.
ABC classification–The classification of a group of
items in decreasing order of annual dollar volume
(price multiplied by projected volume) or other
A
14 Points–W. Edwards Deming’s 14 management
criteria. This array is then split into three classes,
practices to help companies increase their quality
called A, B, and C. The A group usually represents
and productivity: (1) create constancy of purpose
10 percent to 20 percent by number of items and
for improving products and services; (2) adopt the
50 percent to 70 percent by projected dollar volume.
new philosophy; (3) cease dependence on inspection
The next grouping, B, usually represents about
to achieve quality; (4) end the practice of awarding
20 percent of the items and about 20 percent of
business on price alone; instead, minimize total
the dollar volume. The C class contains 60 percent
cost by working with a single supplier; (5) improve
to 70 percent of the items and represents about
constantly and forever every process for planning,
10 percent to 30 percent of the dollar volume. The
production, and service; (6) institute training on the
ABC principle states that effort and money can be
job; (7) adopt and institute leadership; (8) drive out
saved through applying looser controls to the low-
fear; (9) break down barriers between staff areas;
dollar-volume class items than to the high-dollar-
(10) eliminate slogans, exhortations, and targets for
volume class items. The ABC principle is applicable to
the workforce; (11) eliminate numerical quotas for
inventories, purchasing, and sales. Syn: ABC analysis,
the workforce and numerical goals for management;
distribution by value. See: 80-20, Pareto analysis,
(12) remove barriers that rob people of pride of
Pareto’s law.
workmanship and eliminate the annual rating or merit
system; (13) institute a vigorous program of education ABC frequency of access–A warehouse location that is
and self-improvement for everyone; and (14) put determined by both a product’s ABC classification and
everybody in the company to work to accomplish the by the frequency with which it is removed or replaced.
transformation. Syn: Deming’s 14 Points.
ABC inventory control–An inventory control
3D printing–The process of layering materials to make approach based on the ABC classification.
products and components using computer data.
ABM–Abbreviation for activity-based management.
Syn: additive manufacturing. See: rapid prototyping.
abnormal demand–Demand in any period that is
3PL–Abbreviation for third-party logistics.
outside the limits established by management policy.
40/30/30 rule–A rule that identifies the sources This demand may come from a new customer or from
of scrap, rework, and waste as 40 percent product existing customers whose own demand is increasing
design, 30 percent manufacturing processing, and or decreasing. Care must be taken in evaluating the
30 percent from suppliers. nature of the demand: Is it a volume change? Is it a
change in product mix? Is it related to the timing of
4PL–Abbreviation for fourth-party logistics.
the order? See: outlier.
80-20–A term referring to the Pareto principle. The
ABP–Abbreviation for activity-based planning.
principle suggests that most effects come from
relatively few causes; that is, 80 percent of the effects absentee rate–A ratio comparing the number of
(or sales or costs) come from 20 percent of the employee-days lost with the total number of available
possible causes (or items). See: ABC classification. employee-days of employment during some base
period, usually one month.
A absorption costing–An approach to inventory

valuation in which variable costs and a portion of
fixed costs are assigned to each unit of production.
The fixed costs are usually allocated to units of output
A3 method–A means of compactly describing a
on the basis of direct labor hours, machine hours, or
business process.
material costs. Syn: allocation costing. See: activity-
ABB–Abbreviation for activity-based budgeting. based costing.
ABC–Abbreviation for activity-based cost accounting. accelerated depreciation–A depreciation method

involving large write-offs in the early years of an
ABC analysis–Syn: ABC classification. asset’s life and smaller write-offs later. This method
reduces the value of an asset faster than straight-line
depreciation.
APICS Dictionary, 16th edition 1

accept • acid test ratio
A accept–To take receipt of an item as being complete

and sound.
function of the product. In many companies, an
accessory means that the choice does not have to be
specified before shipment but can be added at a later
acceptable outgoing quality level (AOQL)–The
date. In other companies, this choice must be made
demarcation between the level of defects in a lot at
before shipment. See: feature.
which the lot will be accepted or rejected.
accident prevention–The application of basic scientific
acceptable quality level (AQL)–When a continuing
and technical principles—including education and
series of lots is considered, a quality level that, for
training—to detect, analyze, and minimize hazards
the purposes of sampling inspection, is the limit of a
with the objective of avoiding accidents.
satisfactory process average.
acclimatization–The physiological, emotional,
acceptable sampling plan–A specific plan that
and behavioral adjustment to changes in the
indicates the sampling sizes and the associated
environment. Proper performance depends
acceptance or nonacceptance criteria to be used.
on adequate acclimatization to the workplace,
acceptance criteria–Those performance including significant mechanical features such as
requirements and conditions that must be reached seat height and lighting. Heat, cold, humidity, and
before projects or products are accepted. light are important physiologically.
acceptance number–1) A number used in acceptance accountability–Being answerable for, but not
sampling as a cutoff at which the lot will be accepted necessarily personally charged with, doing the
or rejected. For example, if x or more units are bad work. Accountability cannot be delegated, but it
within the sample, the lot will be rejected. 2) The value can be shared.
of the test statistic that divides all possible values
account manager–A manager who has direct
into acceptance and rejection regions.
responsibility for a customer’s interest.
acceptance plan–How an organization determines
accounts payable–The value of goods and services
which product lots to accept or reject based on
acquired for which payment has not yet been made.
samples. See: acceptance sampling.
accounts receivable–The value of goods shipped or
acceptance sampling–1) The process of sampling a
services rendered to a customer for which payment
portion of goods for inspection rather than examining
has not yet been received. Usually includes an
the entire lot. The entire lot may be accepted or
allowance for bad debts.
rejected based on the sample even though the specific
units in the lot are better or worse than the sample. accreditation–Certification by a recognized body of
There are two types: attributes sampling and variables the facilities, capability, objectivity, competence, and
sampling. In attributes sampling, the presence or integrity of an agency, service, operational group, or
absence of a characteristic is noted in each of the individual to provide the specific service or operation
units inspected. In variables sampling, the numerical needed. For example, the Registrar Accreditation
magnitude of a characteristic is measured and Board accredits those organizations that register
recorded for each inspected unit; this type of sampling companies to the ISO 9000 Series Standards.
involves reference to a continuous scale of some kind.
accumulation bin–A place, usually a physical location,
2) A method of measuring random samples of lots or
used to accumulate all components that go into
batches of products against predetermined standards.
an assembly before the assembly is sent out to
accessibility–1) In transportation, the ease with the assembly floor. Syn: assembly bin.
which a carrier provides service from one point to
accuracy–The degree of freedom from error or the
another. 2) In warehousing, the ability to get to and
degree of conformity to a standard. Accuracy is
within the point of storage easily.
different from precision. For example, four-significant-
accessorial charges–A bill for services, such as digit numbers are less precise than six-significant-
inside deliveries, that are made in addition to digit numbers; however, a properly computed four-
transportation charges. significant-digit number might be more accurate than
an improperly computed six-significant-digit number.
accessory–A choice or feature added to the good or
service offered to the customer for customizing the acid test–Syn: quick asset ratio.
end product. An accessory enhances the capabilities
acid test ratio–Syn: quick asset ratio.
of the product but is not necessary for the basic
2 APICS Dictionary, 16th edition

acknowledgment • activity dictionary
acknowledgment–A communication by a supplier to

advise a purchaser that a purchase order has been
received. It usually implies acceptance of the order by
to predict workload and resource requirements
in developing a business plan. Budgets show the
predicted consumption and cost of resources using
A
the supplier. forecasted workload as a basis. The company can
use performance to budget in evaluating success in
acquisition cost–The cost required to obtain one or
setting and pursuing strategic goals; this activity is
more units of an item. Computed as order quantity
part of the activity-based planning process.
times unit cost. See: ordering cost.
activity-based cost accounting–A cost accounting
action message–An output of a system that identifies
system that accumulates costs based on activities
the need for, and the type of action to be taken to
performed and then uses cost drivers to allocate
correct, a current or potential problem. Examples of
these costs to products or other bases such as
action messages in an MRP system include release
customers, markets, or projects. It attempts to
order, reschedule in, reschedule out, and cancel. Syn:
allocate overhead costs on a more realistic basis
exception message, action report.
than by using direct labor or machine hours. Syn:
action plan–A process to obtain results identified by activity-based costing. See: absorption costing.
one or more objectives.
activity-based costing (ABC)–In activity-based cost
action report–Syn: action message. accounting, a model—by time period—of resource
costs created as a result of activities related to
activation–Putting a resource to work. products or services or other items causing the
active data gathering–Data gathered when a activity to be carried out. Syn: activity-based cost
company initiates conversation with the customer. accounting, activity-based costing model.
active inventory–The raw materials, work in process, activity-based costing system–A set of activity-based
and finished goods that will be used or sold within a cost accounting models that collectively define data
given period. on an organization’s resources, activities, drivers,
objects, and measurements.
active load–Work scheduled to be completed
including items that may not yet be on hand. activity-based management (ABM)–The use of
activity-based costing information about cost pools
active tag–A radio frequency identification tag that and drivers, activity analysis, and business processes
broadcasts information and contains its own power to identify business strategies; improve product design,
source. See: radio frequency identification (RFID). manufacturing, and distribution; and remove waste from
operations. See: activity-based cost accounting.
activity–1) In activity-based cost accounting, a task
or activity, performed by or at a resource, required activity-based planning (ABP)–In activity-based
for production of the organization’s output of goods cost accounting, a continuing definition of activity
and services. A resource may be a person, machine, and resource requirements (for both financial and
or facility. Activities are grouped into pools by type operational systems) based on future demand for
of activity and allocated to products. 2) In project products or services by specific customer needs.
management, an element of work on a project. It Demand for resources is related to resource
usually has an anticipated duration, anticipated cost, availability; capacity overages and shortfalls are
and expected resource requirements. Sometimes corrected. Activity-based budgeting is derived from
“major activity” is used for larger bodies of work. the outputs of ABP.
activity analysis–In project management, the activity code–In project management, a value that
identification and description of activities within an allows filtering or ordering of activities in reports.
organization for the purpose of activity-based costing.
activity definition–The specific work to be performed
activity attributes–Multiple features associated that defines a project deliverable.
with each activity to be performed. These include
predecessor activities, successor activities, and activity dictionary–In activity-based cost accounting,
resource requirements. a set of standard definitions of activities including
descriptions, business process, function source,
activity-based budgeting (ABB)–In activity-based cost drivers, and other data important to activity-
cost accounting, a budgeting process employing based planning.
knowledge of activities and driver relationships

activity driver • adaptive control
A activity driver–In activity-based cost accounting, a

yardstick of demands placed on an activity by given
cost objects. Its purpose is to assign activity costs to
actual cost of work performed–The direct costs
actually incurred in, and the indirect costs applied
to, accomplishing work performed within a given
cost objects. time period. These costs should reconcile with
the contractor’s incurred-cost ledgers, which are
activity duration–The planned difference between
regularly audited by the client.
the start and finish dates of a project activity.
actual costs–The labor, material, and associated
activity identifier–A unique alphanumeric code that
overhead costs that are charged against a job as it
differentiates one project activity from other activities.
moves through the production process.
activity level–A description of how reactive one
actual cost system–A cost system that collects
activity is to changes in the level of another activity or
costs historically as they are applied to production
cost object.
and allocates indirect costs to products based on the
activity list–A record of planned activities in a specific costs and achieved volume of the products.
project, including an activity description and an
actual demand–Actual demand is composed of
activity identifier.
customer orders (and often allocations of items,
activity network diagram–One of the seven newer tools ingredients, or raw materials to production or
of quality. A drawing including nodes that represent distribution). Actual demand nets against or
operations to be performed and arrows representing “consumes” the forecast, depending upon the rules
precedence relationships. This drawing represents all chosen over a time horizon. For example, actual
of the activities to be finished to complete a project. demand will totally replace forecast inside the
Also known as a critical path diagram or PERT chart. sold-out customer order backlog horizon (often
called the demand time fence) but will net against
activity-on-arc network–Syn: activity-on-arrow the forecast outside this horizon based on the
network. chosen forecast consumption rule.
activity-on-arrow network (AOA)–A project actual duration–The difference between the actual
management network diagram in which the passage of start date of a project activity and the current date
time, via activities, takes place on the arrows. The start (if the activity is still in progress) or the difference
of an activity is represented by the tail of the arrow, and between the actual start date of a project activity
the completion of the activity is represented by the tip and the actual completion date (if the activity is
of the arrow. The sequence of the arrows represents the completed).
sequence of activities. Arrows are connected by nodes,
which are usually circles. Syn: activity-on-arc network, actual finish date–In project management, the date on
arrow diagram method, event-on-arrow network. which an activity in a project was actually completed.
activity-on-node network (AON)–A project actual start date–In project management, the date
management network diagram in which the passage on which an activity in a project was actually started.
of time, via activities, takes place on circles called
actual volume–Actual output expressed as a volume
nodes. Each node contains a number representing
of capacity. It is used in the calculation of variances
the estimated duration of the activity it represents.
when compared to demonstrated capacity (practical
Nodes are connected by arrows that show precedence
capacity) or budgeted capacity.
relationships. Syn: event-on-node network, precedence
diagram method. adaptable website–In e-commerce, a site that a
visitor can change to customize.
activity ratio–A financial ratio to determine how
an organization’s resources perform relative to adaptive control–1) The ability of a control system to
the revenue the resources produce. Activity ratios change its own parameters in response to a measured
include inventory turnover, receivables conversion change in operating conditions. 2) Machine control
period, fixed-asset turnover, and return on assets. units in which feeds and/or speeds are not fixed. The
control unit, working from feedback sensors, is able
activity resource estimating–Estimating the types
to optimize favorable situations by automatically
and amounts of resources that will be needed for
increasing or decreasing the machining parameters.
various project activities.
This process ensures optimum tool life or surface
activity sequencing–The process of defining and finish and/or machining costs or production rates.
documenting dependencies among project activities.

adaptive smoothing • aggregate lead time
adaptive smoothing–A form of exponential smoothing

in which the smoothing constant is automatically
adjusted as a function of forecast error measurement.
advance ship notice (ASN)–An electronic data
interchange (EDI) notification of shipment of product. A
advantage–See: competitive advantage.
adaptive website–In e-commerce, a site that records
aesthetics–A dimension of product quality that
a visitor’s behavior, uses artificial intelligence software
intends to appeal to the senses.
to “learn” this behavior, and chooses what to present to
the visitor based on this learning. affinity diagram–A total quality management tool
with which employees working in silence generate
additive manufacturing–Syn: 3D printing.
ideas and later categorize these ideas.
additives–A special class of ingredients characterized
affirmative action–A hiring policy that requires
either by being used in minimal quantities or by
employers to analyze the workforce for
being introduced into the processing cycle after the
underrepresentation of protected classes. It
initial stage.
involves recruiting minorities and members of
adjudicate–To hear and decide an issue under protected classes, changing management attitudes
legal dispute. or prejudices toward them, removing discriminatory
employment practices, and giving preferential
adjustable capacity–Capacity, such as labor or tools,
treatment to protected classes.
that can be changed in the short term.
aftermarket–A secondary market for parts and
administrative contracting officer–A government
accessories used to repair or enhance an item.
employee who ensures compliance with the terms
and conditions of contracts. after-sale service–Syn: field service.
ADU–Abbreviation for average daily usage. agency tariff–Rates for a variety of carriers published
in a single document.
advanced planning and scheduling (APS)–Techniques
that deal with analysis and planning of logistics and agent–One who acts on behalf of another (the
manufacturing during short, intermediate, and long- principal) in dealing with a third party. Examples
term time periods. APS describes any computer include a sales agent and a purchasing agent.
program that uses advanced mathematical algorithms
agglomeration–Sharing a common location with a
or logic to perform optimization or simulation on
variety of other companies.
finite capacity scheduling, sourcing, capital planning,
resource planning, forecasting, demand management, aggregate demand–Demand that is grouped (e.g., all
and others. sedans) for making forecasts or plans. See: aggregate
forecast.
These techniques simultaneously consider a range of
constraints and business rules to provide real-time aggregate forecast–An estimate of sales, often
planning and scheduling, decision support, available- time-phased, for a grouping of products or product
to-promise, and capable-to-promise capabilities. APS families produced by a facility or firm. Stated in
often generates and evaluates multiple scenarios. terms of units, dollars, or both, the aggregate
Management then selects one scenario to use as forecast is used for sales and production planning
the “official plan.” The five main components of APS (or for sales and operations planning) purposes. See:
systems are (1) demand planning, (2) production product group forecast.
planning, (3) production scheduling, (4) distribution
planning, and (5) transportation planning. aggregate inventory–The inventory for any grouping
of items or products involving multiple stockkeeping
advanced planning system (APS)–Syn: advanced units. See: base inventory level.
planning and scheduling.
aggregate inventory management–Establishing the
advanced production system (APS)–Syn: advanced overall level (dollar value) of inventory desired and
planning and scheduling. implementing controls to achieve this goal.
advance material request–Ordering materials before aggregate lead time–Syn: cumulative lead time.
the release of the formal product design. This early
release is required because of long lead times.

aggregate plan • allowable cost
A aggregate plan–A plan that includes budgeted levels

of finished goods, inventory, production backlogs, and
changes in the workforce to support the production
attribute that includes product or service flexibility
(speedy introduction of new products and services),
mix flexibility (ability to quickly change products
strategy. Aggregated information (e.g., product line, or services offered), volume flexibility (ability to
family) rather than product information is used, hence service large order quantities), and delivery flexibility
the name aggregate plan. (ability to quickly change delivery dates to meet new
requirements).
aggregate planning–A process to develop tactical
plans to support the organization’s business plan. AGVS–Abbreviation for automated guided
Aggregate planning usually includes the development, vehicle system.
analysis, and maintenance of plans for total sales, total
AI–Abbreviation for artificial intelligence.
production, targeted inventory, and targeted customer
backlog for families of products. The production plan AIDC–Abbreviation for automatic identification
is the result of the aggregate planning process. Two and data capture.
approaches to aggregate planning exist: (1) production
planning and (2) sales and operations planning. See: air pollutant emissions–One of the five green SCOR
production planning, sales and operations planning, metrics. Includes emissions of major pollutants: Cox,
sales plan. Nox, Sox, VOCs and Particulate. These are the major
emissions that the U.S. EPA tracks.
aggregate production plan (APP)–A long-range plan
that is used to determine timing and quantity of total air waybill (AWB)–A bill of lading for transporting
future production for a family of products. Syn: long- domestic or international freight by air. It specifies the
term production plan. destination and terms of trade agreed upon by the
shipper and transportation organization.
aggregate reporting–1) Reporting of process hours
in general, allowing the system to assign the actual AIS–Abbreviation for automated information system.
hours to specific products run during the period algorithm–A prescribed set of well-defined rules or
based on standards. 2) Also known as gang reporting processes for solving a problem in a finite number
or the reporting of total labor hours. of steps (e.g., the full statement of the arithmetic
aggregate unit of capacity–Combined capacity unit procedure for calculating the reorder point).
of measure when a variety of outputs exists. alliance development–Strengthening the capabilities
aggregation–The concept that pooling random of a key supplier.
variables reduces the relative variance of the allocated item–In an MRP system, an item for which a
resulting aggregated variable. For example, the picking order has been released to the stockroom but
relative variance in sales of all models of automobiles which has not yet been sent from the stockroom.
sold by a firm is less than that for a single model.
allocated material–Syn: reserved material.
agile manufacturing–Syn: agile supply chain.
allocation–1) The classification of resources or item
agile project management–A project management quantities that have been assigned to specific orders
methodology often employed in environments where but have not yet been released from the stockroom to
the output of the project is the result of a process production. It is an “uncashed” stockroom requisition.
or a series of subprojects with unstructured results. 2) A process used to distribute material in short
An agile project follows a more iterative path to supply. Syn: assignment. See: reservation.
completion than a traditional project. The agile
project management methodology is most common allocation costing–Syn: absorption costing.
in software development.
allocative efficiency–The use of resources to produce
agile supply chain–The ability to respond quickly those goods and services most wanted by consumers.
to unpredictable changes in customer needs by
allowable cost–A reasonable cost specifically
reconfiguring operations. Syn: agile manufacturing.
permitted under Federal Acquisition Regulation (FAR)
agility–The ability to quickly plan, source, make, requirements.
and deliver to adapt and respond to changes in the
competitive environment. It is a SCOR performance

allowance • annuity
allowance–1) In work measurement, a time value

or percentage of time by which the normal time is
increased, or the amount of nonproductive time
American Standard Code for Information Interchange
(ASCII)–Standard seven-bit character code used by
computer manufacturers to represent 128 characters
A
applied, to compensate for justifiable causes or policy for information interchange among data processing
requirements that necessitate performance time not systems, communications systems, and other
directly measured for each element or task. Usually information system equipment. An eighth bit is added
includes irregular elements, incentive opportunity on as a parity bit to check a string of ASCII characters for
machine-controlled time, minor unavoidable delays, rest correct transmission.
time to overcome fatigue, and time for personal needs.
amortization–The process of recovering (via
2) In assembly, the minimum clearance or maximum
expensing) a capital investment over a period of time.
interference distance between two adjacent objects.
See: capital recovery.
allowed time–A normal time value increased by
analog–As applied to an electrical or computer
appropriate allowances.
system, the capability of representing data in
alpha factor–Syn: smoothing constant. continuously varying physical phenomena (as in a
voltmeter) and converting it into numbers.
alpha release–An extremely early version of a product
released to obtain feedback about its suitability. analysis of variance (ANOVA)–A statistical analysis
system that estimates what portion of variation in
alternate feedstock–A backup supply of an item that
a dependent variable is caused by variation in one
either acts as a substitute or is used with alternate
or more independent variables. It also produces
equipment.
a number used to infer whether any or all of the
alternate operation–Replacement for a normal step independent-dependent variable relationships have
in the manufacturing process. Ant: primary operation. statistical significance (i.e., have not been caused by
randomness in the data).
alternate part–When a buyer can purchase similar
products from different suppliers. This increases the analytic workplace design–A design based on
buyer’s power since the buyer does not have to rely on established biomechanical and behavioral concepts,
just one supplier. including the known operating characteristics of
people. Produces a workplace situation well within
alternate routing–A routing that is usually less the range of human capacity and does not generally
preferred than the primary routing but results in an require modification, improvement, or preliminary
identical item. Alternate routings may be maintained experimental “mock-up.”
in the computer or off-line via manual methods,
but the computer software must be able to accept analyze phase–One of the six sigma phases of
alternate routings for specific jobs. quality. It consists of the following steps: (a) define
performance objective, (b) identify independent
alternate work center–The work center where an variables, and (c) analyze sources of variability. See:
operation is not normally performed but can be define-measure-analyze-improve-control process.
performed. Ant: primary work center.
andon–A sign board with signal lights used to make
American customer satisfaction index–A metric workers and management aware of a quality, quantity,
cosponsored by the University of Michigan and the or process problem.
American Society for Quality that measures the
satisfaction of U.S. customers with the goods and annual inventory count–Syn: physical inventory.
services available to them from both domestic and
annualized contract–A negotiated agreement with
foreign origins.
a supplier for one year that sets pricing, helps ensure
American National Standards Institute (ANSI)–The a continuous supply of material, and provides the
parent organization of the interindustry electronic supplier with estimated future requirements.
interchange of the business transaction standard.
annual percentage rate–In finance, the rate of
This group is the clearinghouse on U.S. electronic
interest paid for a loan after compounding is
data interchange standards.
considered. Syn: effective interest rate.
American Society for Quality (ASQ)–Founded in 1946,
annual physical inventory–Syn: physical inventory.
a not-for-profit educational organization with more
than 100,000 individual and organizational members annuity–A stream of fixed payments for a stipulated
who are interested in quality improvement. time—yearly or at other intervals.

ANOVA • arbitrage
A ANOVA–Acronym for analysis of variance.
ANSI–Acronym for American National Standards

apparent authority–Authority perceived by a third
party to flow from a principal to an ostensible agent
when in fact no agency relationship exists.
Institute.
appellant–One who appeals a court decision to
ANSI Z.10–A voluntary consensus standard on
higher authority.
occupational health and safety management
systems. It uses recognized management system application package–A computer program or set of
principles in order to be compatible with quality and programs designed for a specific application (e.g.,
environmental management system standards such inventory control, MRP).
as the ISO 9000 and ISO 14000 Series.
application service provider (ASP)–A firm that
anti-bribery regulations–Country regulations that performs outsourced services for clients.
penalize organizations that engage in bribery. The
applications software–A computer program or set of
OECD Anti-Bribery Convention requires countries to
programs designed to assist in the performance of a
develop such regulations.
specific task such as word processing, accounting, or
anticipated delay report–A report, normally issued by inventory management. See: application system.
both manufacturing and purchasing to the material
application system–A set of programs of specific
planning function, regarding jobs or purchase orders
instructions for processing activities needed to
that will not be completed on time. This report
compute specific tasks for computer users, as
explains why the jobs or purchases are delayed
opposed to operating systems that control the
and when they will be completed. This report is an
computer’s internal operations. Examples are payroll,
essential ingredient of the closed-loop MRP system. It
spreadsheets, and word processing programs. See:
is normally a handwritten report. Syn: delay report.
applications software.
anticipation inventories–Additional inventory above
application-to-application–The exchange of data
basic pipeline stock to cover projected trends of
between computers without reentry of data.
increasing sales, planned sales promotion programs,
seasonal fluctuations, plant shutdowns, and vacations. appraisal–1) An evaluation of employee performance.
2) In total quality management, the formal evaluation
anticipation order–An order placed before an item
and audit of quality.
has been made available for delivery.
appraisal costs–Those costs associated with the
anti-dumping duty–An imposed responsibility
formal evaluation and audit of quality in the firm.
whereby a company sells imported goods at prices
Typical costs include inspection, quality audits,
below what is charged in its domestic market.
testing, calibration, and checking time.
any-quantity rate–A situation in which no quantity
appreciation of a currency–An increase in the buying
discount is available for large shipments.
power of a country’s currency in terms of other
AOA–Abbreviation for activity-on-arrow network. countries’ goods and services.
AON–Abbreviation for activity-on-node network. approved vendor list (AVL)–A list of parties that have
been approved by a company as its suppliers. This
AOQ–Abbreviation for average outgoing quality.
list usually is based on product quality and financial
AOQL–1) Abbreviation for average outgoing quality stability of the vendor.
limit. 2) Abbreviation for acceptable outgoing quality
APR–Abbreviation for annual percentage rate.
level.
APS–1) Abbreviation for advanced planning and
APICS–Founded in 1957 as the American Production
scheduling. 2) Abbreviation for advanced planning
and Inventory Control Society, APICS builds
system.
operations management excellence in individuals
and enterprises through superior education and AQL–Abbreviation for acceptable quality level.
training, internationally recognized certifications,
arbitrage–Risk-free buying of an asset in one market
comprehensive resources, and a worldwide network
and simultaneous selling of an identical asset at a
of accomplished industry professionals.
profit in another market.
APP–Abbreviation for aggregate production plan.

arbitration • asset management efficiency
arbitration–The process by which an independent

third party is brought in to settle a dispute or to
preserve the interests of two conflicting parties.
ASQC–Abbreviation for American Society for Quality
Control, now simply American Society for Quality (ASQ). A
AS/RS–Abbreviation for automated storage/
arithmetic mean–Syn: mean. retrieval system.
arrival–In queuing theory, a unit, such as a person or assays–Tests of the physical and chemical properties
part, that arrives for service. of a sample.
arrival date–The date purchased material is due to assemble-to-order (ATO)–A production environment
arrive at the receiving site. The arrival date can be where a good or service can be assembled after receipt
input, it can be equal to the current due date, or it can of a customer’s order. The key components (bulk,
be calculated from the ship date plus transit time. semi-finished, intermediate, subassembly, fabricated,
See: due date. purchased, packing, and so on) used in the assembly
or finishing process are planned and usually stocked
arrival rate–In queuing theory, the value or
in anticipation of a customer order. Receipt of an order
distribution describing how often a person or thing
initiates assembly of the customized product. This
arrives for service.
strategy is useful where a large number of end products
arrow–1) In activity-on-arrow networks, the graphic (based on the selection of options and accessories)
presentation of an activity. The tail of the arrow can be assembled from common components. Syn:
represents the start of the activity. The head of the finish-to-order. See: make-to-order, make-to-stock.
arrow represents the finish. Unless a time scale is
assembly–A group of subassemblies and/or parts
used, the length of the arrow stem has no relation to
that are put together and that constitute a major
the duration of the activity. Length and direction of
subdivision for the final product. An assembly may be
the arrow are usually a matter of convenience and
an end item or a component of a higher-level assembly.
clarity. 2) In activity-on-node networks, an arrow
represents a precedence requirement. assembly bin–Syn: accumulation bin.
arrow diagram–A technique to determine the assembly chart–Overview of a product containing

relationships and precedence of different activities assembly and subassembly operations, materials, and
and the time estimate for project completion. The components.
technique is useful in identifying potential problems
assembly lead time–The time that normally elapses
and improvement opportunities.
between the issuance of a work order to the assembly
arrow diagram method–Syn: activity-on-arrow network. floor and work completion.
artificial intelligence (AI)–1) Computer programs that assembly line–An assembly process in which
can learn and reason in a manner similar to humans. equipment and work centers are laid out to follow
The problem is defined in terms of states and operators the sequence in which raw materials and parts are
to generate a search space that is examined for the assembled. See: line, production line.
best solution. In contrast, conventional programming
assembly order–A manufacturing order to an assembly
collects and processes data by algorithm or fixed step-
department authorizing it to put components together
by-step procedures. 2) An area in computer science
into an assembly. See: blend order.
that attempts to develop AI computer programs.
assembly parts list–As used in the manufacturing
ASC–Abbreviation for accredited standards
process, a list of all parts (and subassemblies) that
committee.
make up a particular assembly. See: batch card,
ASCII–Acronym for American Standard Code for manufacturing order.
Information Interchange.
asset management efficiency–This cost attribute
ASN–Abbreviation for advance ship notice. describes the ability of the supply chain to efficiently
use assets. Asset management strategies in a supply
ASP–Abbreviation for application service provider.
chain include inventory reduction and in-sourcing
ASQ–Abbreviation for American Society for Quality. versus outsourcing. Example metrics include
inventory days of supply and capacity utilization.
It is a SCOR performance attribute.

asset recovery • authentication key
A asset recovery–The cost-effective classification

and recovery of usable raw materials from product
returns, obsolete or excess goods, or scrap and waste.
ATA carnet–Syn: carnet.
ATO–Abbreviation for assemble-to-order.

The goals are to minimize costs and liabilities while ATP–Abbreviation for available-to-promise.
maximizing returns from reusable assets.
ATR certificate–A certificate that is required for trade
assets–An accounting/financial term (balance between the EU and Turkey. It grants zero duty to “free
sheet classification of accounts) representing the circulating” goods in the EU, which are goods originating
resources owned by a company, whether tangible in the EU or imported to the EU with all import duties
(cash, inventories) or intangible (patent, goodwill). and taxes paid. Agricultural goods, minerals, and steel
Assets may have a short-term time horizon—such as are excluded and must use form EUR1.
cash, accounts receivable, and inventory—or a long-
term value (such as equipment, land, and buildings). attachment–An accessory that has to be physically
See: balance sheet, liabilities, owner’s equity. attached to the product. See: feature.
asset value–The adjusted purchase price of the asset attractability efficiency–In e-commerce, a measure
plus any costs necessary to prepare the asset for use. of how well an organization persuades people who
are aware of its website to actually use the site. See:
assignable cause–A source of variation in a process conversion efficiency.
that can be isolated, especially when its significantly
larger magnitude or different origin readily distinguishes attractor–In information systems, a website that, over
it from random causes of variation. Syn: special cause. time, continues to attract a large number of visitors.
See: common causes, assignable variation. attribute–1) Quality control value that is either a yes/
assignable variation–Variation made by one or no value or is counted rather than being measured
more causes that can be identified and removed. on a continuous scale. See: variable, attribute data.
See: assignable cause, common causes. 2) A description of an item or service that specifies
either a presence or an absence, such as “on-time”
assigned material–Syn: reserved material. versus “late.”
assignee–One who receives a transfer of contract attribute data–Go/no-go information. The control
rights from a party to the contract. charts based on attribute data include percent chart,
number of affected units chart, count chart, count-
assignment–Syn: allocation.
per-unit chart, quality score chart, and demerit chart.
assignor–One who sells contract rights to a third See: attribute, attribute inspection.
person.
attribute inspection–Inspection for a go/no-go
associative forecasting–Uses one or more variables decision or yes/no decision or to count the number of
that are believed to affect demand in order to forecast defects on a unit. See: attribute, attribute data.
future demand.
attrition factor–The budget fraction apportioned for
assortment warehousing–A warehousing technique replacement personnel training because of projected
that stores the goods close to the customer to ensure personnel losses (retirements, promotions, and
short customer lead times. terminations).
assumed receipt–A receiving technique based on the audit–An objective comparison of actions to policies
assumption that a shipment is as expected. Receiving and plans.
personnel do not verify the delivery quantity. This
audit trail–Tracing the transactions affecting the
technique is used to eliminate invoices.
contents or origin of a record.
assurance–One of the dimensions of service quality.
authentication–In information systems, the act of
The ability of employees to inspire trust and confidence.
identifying a person or confirming the source of a
assured source of supply–A guaranteed supply message.
source generally created by a contract.
authentication key–In information systems, a key
asynchronous process–A condition under which that ensures that data in an electronic business
two related processes run to finish independently transaction is not changed. It can also be used as a
of each other. form of digital signature.

authorized deviation • available time
authorized deviation–Permission for a supplier

or the plant to manufacture an item that is not
in conformance with the applicable drawings or
automatic identification system (AIS)–A system
that can use various means, including bar code
scanning and radio frequencies, to sense and load
A
specifications. data in a computer.
autodiscrimination–The ability of a bar code reader to automatic relief–A set of inventory bookkeeping
read several different types of symbols consecutively. methods that automatically adjusts computerized
inventory records based on a production transaction.
automated assembly system–A system that
Examples of automatic relief methods are backflushing,
produces completed products or assemblies without
direct-deduct, and pre-deduct processing.
the contribution of direct labor.
automatic rescheduling–Rescheduling done by the
automated clearinghouse–A U.S. nationwide system
computer to automatically change due dates on
for electronic payments preferred by a myriad of
scheduled receipts when it detects that due dates and
banks, consumers, and corporations. This system
need dates are out of phase. Ant: manual rescheduling.
can carry payment information in a standardized,
computer-accessible format. automation–The substitution of machine work for
human physical and mental work, or the use of machines
automated flow line–A production line that has
for work not otherwise able to be accomplished,
machines linked by automated parts transfer and
entailing a less continuous interaction with humans
handling machines.
than previous equipment used for similar tasks.
automated guided vehicle system (AGVS)–A
autonomation–Automated shutdown of a line,
transportation network that automatically routes one
process, or machine upon detection of an abnormality
or more material handling devices, such as carts or
or defect.
pallet trucks, and positions them at predetermined
destinations without operator intervention. autonomous work group–A production team that
operates a highly focused segment of the production
automated information system (AIS)–Computer
process to an externally imposed schedule but with little
hardware and software configured to automate
external reporting, supervision, interference, or help.
calculating, computing, sequencing, storing,
retrieving, displaying, or communicating, or to auxiliary item–An item required to support the
otherwise manipulate data and textual material to operation of another item.
provide information.
availability–The percentage of time that a worker or
automated process controls system–A system that machine is capable of working. The formula is
can measure the performance of a process, compare availability = (S S– B) x 100% where S is the scheduled
the result to predetermined standards, and then make time and B is the downtime.
adjustments to the process.
available capacity–Syn: capacity available.
automated quality control inspection system–
available inventory–The on-hand inventory balance
A system that employs machines to help inspect
minus allocations, reservations, backorders, and
products for quality control.
(usually) quantities held for quality problems. Often
automated storage/retrieval system (AS/RS)–A called beginning available balance. Syn: beginning
high-density rack inventory storage system that uses available balance, net inventory.
vehicles to automatically load and unload the racks.
available time–The number of hours a work center
automatic identification and data capture (AIDC)– can be used, based on management decisions
Technologies that collect data about objects and regarding shift structure, extra shifts, regular
then sends the data to a computer without human overtime, observance of weekends and public
intervention. Examples include radio frequency holidays, shutdowns, and the like. See: capacity
wireless devices and terminals, bar code scanners, available, utilization.
and smart cards.

available-to-promise (ATP) • AWB
A available-to-promise (ATP)–1) In operations, the

uncommitted portion of a company’s inventory
and planned production maintained in the master
average inventory–One-half the average lot size
plus the safety stock, when demand and lot sizes
are expected to be relatively uniform over time.
schedule to support customer-order promising. The The average can be calculated as an average of
ATP quantity is the uncommitted inventory balance several inventory observations taken over several
in the first period and is normally calculated for historical time periods; for example, 12-month ending
each period in which an MPS receipt is scheduled. inventories may be averaged. When demand and lot
In the first period, ATP includes on-hand inventory sizes are not uniform, the stock level versus time can
less customer orders that are due and overdue. be graphed to determine the average.
Three methods of calculation are used: discrete ATP,
average outgoing quality (AOQ)–The expected
cumulative ATP with look-ahead, and cumulative ATP
average quality level of outgoing product for a given
without look-ahead. (2) In logistics, the quantity of
value of incoming product quality.
a finished good that is or will be available to commit
to a customer order based on the customer's average outgoing quality limit (AOQL)–The maximum
required ship date. To accommodate deliveries on average outgoing quality over all possible levels of
future dates, ATP is usually time-phased to include incoming quality for a given acceptance sampling
anticipated purchases or production receipts. plan and disposal specification.
See: discrete available-to-promise, cumulative
available-to-promise. average payment period–The average time between
receipt of materials and payment for those materials.
available work–Work that is actually in a department
ready to be worked on as opposed to scheduled work average total cost–The ratio of total costs (the sum
that may not yet be physically on hand. Syn: live load. of total fixed costs and total variable costs) over
units produced.
average chart–A control chart in which the
subgroup average, X-bar, is used to evaluate the average variable cost–The ratio of total variable
stability of the process level. Syn: X-bar chart. costs over units produced.
average collection period–Syn: receivables AVL–Abbreviation for approved vendor list.

conversion period. avoidable cost–A cost associated with an activity
average cost per unit–The estimated total cost, that would not be incurred if the activity was not
including allocated overhead, to produce a batch of performed (e.g., telephone cost associated with
goods divided by the total number of units produced. vendor support).
average cost system–In cost accounting, a method avoidable delay–The delay controlled by a worker
of inventory valuation for accounting purposes. A and therefore not allowed in the job standard.
weighted average (based on quantity) of item cost award audits–Site visits associated with award
is used to determine the cost of goods sold (income programs such as the Malcolm Baldrige National
statement) and inventory valuation (balance sheet). Quality Award or similar state-sponsored award
Average cost provides a valuation between last-in, programs.
first-out and first-in, first-out methods. See: first in,
first out; last in, first out. awareness efficiency–In e-commerce, a
measurement of how well an organization informs
average daily usage (ADU)–Average usage of a part, people who have access to the web that the
component, or good on a daily basis. organization’s website exists.
average fixed cost–The total fixed cost divided by units AWB–Abbreviation for air waybill.
produced. This value declines as output increases.
average forecast error–1) The arithmetic mean of

the forecast errors. 2) The exponentially smoothed
forecast error. See: bias, forecast error.

B2B • balance-of-stores record
B
backsourcing–Company processes that, previously
handled externally, have been reassigned internally.
B2B–Abbreviation for business-to-business commerce.

backup/restore–The procedure of making backup
copies of computer files or disks and, in case of loss B
of or damage to the original, using the backups to
B2C–Abbreviation for business-to-consumer sales. restore the files or disks. In such a case, the only work
B7–Abbreviation for the basic seven tools of quality. lost is that done since the backup was made.
BAC–Acronym for budget at completion. backup support–An alternate location or maintainer

that can provide the same service response or
backflush–A method of inventory bookkeeping support as the primary location or maintainer.
where the book (computer) inventory of components
is automatically reduced by the computer after backward integration–The process of buying
completion of activity on the component’s upper- or owning elements of the production cycle and
level parent item based on what should have been channel of distribution back toward raw material
used as specified on the bill of material and allocation suppliers. See: vertical integration.
records. This approach has the disadvantage of a backward pass–In the critical path method of project
built-in differential between the book record and planning, working from the finish node backward
what is physically in stock. Syn: explode-to-deduct, through the network logic to the start node to
post-deduct inventory transaction processing. See: determine the various late start dates and late finish
pre-deduct inventory transaction processing. dates. See: critical path method, forward pass.
backflush costing–The application of costs based on backward scheduling–Syn: back scheduling.
the output of a process. Backflush costing is usually
associated with repetitive manufacturing environments. bad-debt loan ratio–In financial management, the
fraction of accounts receivable that is never recovered.
backhauling–The process of a transportation vehicle
returning from the original destination point to the balance–1) The act of evenly distributing the work
point of origin. The 1980 Motor Carrier Act deregulated elements between the two hands performing an
interstate commercial trucking and thereby allowed operation. 2) The state of having approximately
carriers to contract for the return trip. The backhaul equal working times among the various operations
can be with a full, partial, or empty load. An empty in a process or the stations on an assembly line. See:
backhaul is called deadheading. See: deadhead. balance delay.
backlog–All the customer orders received but not yet balance delay–1) The idle time of one hand in an
shipped. Sometimes referred to as open orders or the operation caused by uneven workload balancing. 2)
order board. See: order backlog, past due order. The idle time of one or more operations in a series
caused by uneven workload balancing. See: balance,
backorder–An unfilled customer order or commitment. lost time factor.
A backorder is an immediate (or past due) demand
against an item whose inventory is insufficient to balanced scorecard–A list of financial and operational
satisfy the demand. See: stockout. measurements used to evaluate organizational
or supply chain performance. The dimensions of
back room–In service operations, the part of the the balanced scorecard might include customer
operation that is completed without direct customer perspective, business process perspective,
contact. Many service operations contain both back financial perspective, and innovation and learning
room and front room operations. See: front room. perspectives. It formally connects overall objectives,
backroom costs–Indirect costs for operations that do strategies, and measurements. Each dimension has
not add direct value to a product and may or may not goals and measurements.
be necessary to support its production. balance-of-stores record–A double-entry record
back scheduling–A technique for calculating operation system that shows the balance of inventory items on
start dates and due dates. The schedule is computed hand and the balances of items on order and available
starting with the due date for the order and working for future orders. Where a reserve system of materials
backward to determine the required start date and/ control is used, the balance of material on reserve is
or due dates for each operation. Syn: backward also shown.
scheduling. Ant: forward scheduling.

balance of trade • base series
balance of trade–A plus or minus amount found by barrier to entry–Factors that prevent companies from
comparing a country’s exports of merchandise to its entering into a particular market, such as high initial
B imports.
balance sheet–A financial statement showing the

investment in equipment.
baseband coax–A coaxial cable offering a single

resources owned, the debts owed, and the owner’s channel for text, voice, or video transmission.
share of a company at a given point in time. See: funds
base demand–The percentage of a company’s
flow statement, income statement.
demand derived from continuing contracts and/
balancing operations–In repetitive just-in-time or existing customers. Because this demand is
production, matching actual output cycle times well known and recurring, it becomes the basis of
of all operations to the demand or use for parts management’s plans. Syn: baseload demand.
as required by final assembly and, eventually, as
base index–Syn: base series.
required by the market.
base inventory level–The inventory level made
balancing the line–In repetitive manufacturing,
up of aggregate lot-size inventory plus aggregate
regulating the assignments given to each workstation
safety stock inventory. It does not take into account
in order to ensure that all tasks at each workstation
the anticipation inventory that will result from the
on the line are performed in as close to the same time
production plan. The base inventory level should be
as possible.
known before the production plan is made. Syn: basic
Baldrige Award–Syn: Malcolm Baldrige National stock. See: aggregate inventory.
Quality Award.
baseline–In project management, the approved time-
Baldrige lite–A state or company quality award program phased plan for the schedule or cost of a piece of
modeled after the Malcolm Baldrige National Quality work, including approved changes.
Award but with a simplified application process.
baseline measures–A set of measurements (or
Baldrige-qualified–A designation claimed by metrics) that seeks to establish the current or starting
companies that have been granted a site visit by the level of performance of a process, function, product,
Malcolm Baldrige National Quality Award examiners. firm, or other entity. Baseline measures are usually
established before implementing improvement
balking–When customers will not join a queue when
activities and programs.
they learn how long it is. See: reneging.
baseload demand–Syn: base demand.
bandwidth–In telecommunications, a measurement
of how much data can be moved along a base point pricing–A type of geographic pricing policy
communications channel per unit of time, usually where customers order from designated shipping
measured in bits per second. points without freight charges if they are located
within a specified distance from the base point.
bar code–A series of alternating bars and spaces
Customers outside area boundaries pay base price
printed or stamped on parts, containers, labels, or
plus transportation costs from the nearest base point.
other media, representing encoded information that
can be read by electronic readers. A bar code is used base series–A standard succession of values of
to facilitate timely and accurate input of data to a demand-over-time data used in forecasting seasonal
computer system. items. This series of factors is usually based on the
relative level of demand during the corresponding
bar coding–A method of encoding data using bar
period of previous years. The average value of the
codes for fast and accurate readability.
base series over a seasonal cycle is 1.0. A figure higher
barge–A self-propelled, pushed, or pulled flat- than 1.0 indicates that demand for that period is
bottomed ship for use in inland waterways. It is higher than average; a figure less than 1.0 indicates
frequently used to transport bulk commodities. less-than-average demand. For forecasting purposes,
the base series is superimposed upon the average
bar graph–A graphical method of displaying data by demand and trend in demand for the item in question.
grouping observations into specific clusters. Syn: base index. See: seasonal index, seasonality.

base stock system • benchmarking
base stock system–A method of inventory control that batch formula–Syn: batch bill of materials.
includes most of the systems in practice as special
B
batch manufacturing–A type of manufacturing
cases. In this system, when an order is received for
process in which sets of items are moved through the
any item, it is used as a picking ticket, and duplicate
different manufacturing steps in a group or batch.
copies, called replenishment orders, are sent back to
all stages of production to initiate replenishment of batch number–Syn: lot number.
stocks. Positive or negative orders, called base stock
orders, are also used from time to time to adjust the batch picking–A method of picking orders in which
level of the base stock of each item. In actual practice, order requirements are aggregated by product across
replenishment orders are usually accumulated when orders to reduce movement to and from product
they are issued and are released at regular intervals. locations. The aggregated quantities of each product
are then transported to a common area where the
basic producer–A manufacturer that uses individual orders are constructed. See: discrete order
natural resources to produce materials for other picking, order picking, zone picking.
manufacturing. A typical example is a steel company
that processes iron ore and produces steel ingots; batch processing–1) A manufacturing technique
other examples are companies that make wood pulp, in which parts are accumulated and processed
glass, and rubber. together in a lot. 2) A computer technique in which
transactions are accumulated and processed
basic seven tools of quality (B7)–Tools that help together or in a lot. Syn: batch production.
organizations understand their processes in order
to improve them. The tools are the cause-and-effect batch production–Syn: batch processing.
diagram (also known as the fishbone diagram or the batch sensitivity factor–A multiplier that is used
Ishikawa diagram), check sheet, flowchart, histogram, for the rounding rules in determining the number
Pareto chart, control chart, and scatter diagram. Syn: of batches required to produce a given amount of
seven tools of quality. See: seven newer tools of quality. product.
basic stock–Syn: base inventory level. batch sheet–In many process industries, a document
batch–1) A quantity scheduled to be produced or in that combines product and process definition. See:
production. See: process batch, transfer batch. 2) batch card.
For discrete products, the batch is planned to be the baud–The number of bits transmitted per second.
standard batch quantity, but during production, the
standard batch quantity may be broken into smaller Bayesian analysis–Statistical analysis where
lots. See: lot. 3) In nondiscrete products, the batch is uncertainty is incorporated, using all available
a quantity that is planned to be produced in a given information to choose among a number of alternative
time period based on a formula or recipe that often is decisions.
developed to produce a given number of end items.
BCMS–Abbreviation for business continuity
4) A type of manufacturing process used to produce
management system.
items with similar designs; it also may cover a wide
range of order volumes. Typically, items ordered are of beginning available balance–Syn: available inventory.
a repeat nature, and production may be for a specific
customer order or for stock replenishment. See: beginning inventory–A statement of the inventory
project manufacturing. count at the end of the last period, usually from a
perpetual inventory record.
batch bill of materials–A recipe or formula in which
the statement of quantity per is based on the standard benchmarking–Comparing products, processes, and
batch quantity of the parent. Syn: batch formula. services to those of another organization thought
to have superior performance. The benchmark
batch card–A document used in the process target may or may not be a competitor or even in
industries to authorize and control the production the same industry. There are seven common forms
of a quantity of material. Batch cards usually contain of benchmarking. See: competitive benchmarking,
quantities and lot numbers of ingredients to be used, financial benchmarking, functional benchmarking,
processing variables, pack-out instructions, and performance benchmarking, process benchmarking,
product disposition. See: assembly parts list, batch product benchmarking, strategic benchmarking.
sheet, blend formula, fabrication order, manufacturing
order, mix ticket.

benchmark measures • bill of lading (international) (B/L)
benchmark measures–A set of measurements bid proposal–The response to the written request
(or metrics) that is used to establish goals for from a potential customer asking for the submission
B improvements in processes, functions, products, and

so on. Benchmark measures are often derived from
other firms that display best-in-class achievement.
of a quotation or proposal to provide goods or
services. The bid proposal is in response to a request
for proposal (RFP) or request for quote (RFQ).
bench stocks–Syn: floor stocks. big data–Collecting, storing, and processing massive
amounts of data for the purpose of converting it into
bespoke–A custom-made product or service. The
useful information.
term originally applied to clothing, but now applies to
software as well. big Q, little q–A term used to contrast the difference
between managing for quality in all business
best-in-class–In the benchmarking process, the
processes and products (big Q) and managing for
designation given to an organization (which may be
quality in a limited capacity—traditionally in only
from another industry) recognized for excellence in a
factory products and processes (little q).
specific process area. See: process benchmarking.
bilateral contract–An agreement wherein each party
best practice–1) A method or technique that
makes a promise to the other party.
consistently shows results superior to those
achieved through other means, often used as a bill-back–A penalty imposed on the supplier because
benchmark. Best practices can be defined within a late delivery or poor quality resulted in extra costs.
an organization, within an industry, or across
billing and collection costs–In transportation,
industries. 2) Practices that have had a proven and
the costs related to issuing invoices or bills. These
positive impact on organizational or supply chain
amounts can be reduced by combining shipments in
performance. They are categorized as follows:
an order to limit transportation frequency.
Current-Not emerging, not obsolete; Structured-
Feature a clearly stated goal, scope, process, and bill of activities–In activity-based cost accounting, a
procedure; Proven-Demonstrated in a working summary of activities needed by a product or other
environment and linked to key metrics; Repeatable- cost object. The bill of activities includes the volume
Proven in multiple organizations and industries. and cost of each activity.
beta distribution–A type of probability distribution bill of batches–A method of tracking the specific
often used to model activity times. multilevel batch composition of a manufactured item.
The bill of batches provides the necessary where-
beta release–A version of a product sent to certain
used and where-from relationships required for lot
customers prior to general release in order to receive
traceability.
feedback on product performance.
bill of capacity–Syn: bill of resources.
beta test–A term used to describe the pilot evaluation
of a good or service (i.e., “the second evaluation”). bill of distribution–Syn: distribution network structure.
bias–A consistent deviation from the mean in bill of labor–A structured listing of all labor
one direction (high or low). A normal property of a requirements for the fabrication, assembly, and
good forecast is that it is not biased. See: average testing of a parent item. See: bill of resources,
forecast error. capacity bill procedure, routing.
bid–A quotation specifically given to a prospective bill of lading (house) (B/L)–A bill of lading issued by
purchaser upon request, usually in competition with a non-vessel-operating common carrier (NVOCC),
other vendors. See: quotation. consolidator, or freight forwarder. It indicates the
carrier's name and lists the master bill of lading. See:
bid evaluation–A comparison of supplier quotes for
bill of lading (master).
a product based on price, quality, lead time, delivery
performance, and other criteria, and—based on that bill of lading (international) (B/L)–A bill of lading
comparison—supplier selection. used in international trade to help ensure exporters
are paid and importers receive the promised goods.
bid pricing–Offering a specific price for each job
When they are used for international transport, these
rather than setting a standard price that applies for all
include master bills of lading, house bills of lading,
customers.
intermodal bills of lading, and air waybills.

bill of lading (master) (B/L) • blanket release
bill of lading (master) (B/L)–A bill of lading issued bill of exchange payment–A promissory note that the
by carriers that are vessel owners, also known as importer uses to formally acknowledge its debt to the
steamship companies. See: bill of lading (uniform).
bill of lading (uniform) (B/L)–A carrier’s contract and

exporter. Syn: draft.
bin–1) A storage device designed to hold small B

receipt for goods the carrier agrees to transport from discrete parts. 2) A shelving unit with physical dividers
one place to another and to deliver to a designated separating the storage locations.
person. In case of loss, damage, or delay, the bill of
bin location file–A file that specifically identifies the
lading is the basis for filing freight claims.
location where each item in inventory is stored.
bill of material (BOM)–1) A listing of all the
bin reserve system–Syn: two-bin inventory system.
subassemblies, intermediates, parts, and raw
materials that go into a parent assembly, showing bin tag–1) A type of perpetual inventory record
the quantity of each required to make an assembly. designed for storekeeping purposes and maintained
It is used in conjunction with the master production at the storage area for each inventory item. 2) An
schedule to determine the items for which purchase identifying marking on a storage location.
requisitions and production orders must be
released. A variety of display formats exists for bills bin transfer–An inventory transaction to move a
of material, including the single-level bill of material, quantity from one valid location (bin) to another valid
indented bill of material, modular (planning) bill location (bin).
of material, transient bill of material, matrix bill of bin trips–Usually, the number of transactions per
material, and costed bill of material. 2) A list of all stockkeeping unit per unit of time.
the materials needed by a contract manufacturer to
make one production run of a product’s piece parts/ bit–Acronym for binary digit. It can have only the
components for its customers. The bill of material values 0 or 1.
may also be called the formula, recipe, or ingredients
B/L–Abbreviation for bill of lading.
list in certain process industries.
black belt–In six sigma, team leader for process
bill-of-material accuracy–The degree to which a
improvement. Responsibilities include defining,
list of specified items conforms to administrative
measuring, and controlling the improvement process.
specifications and with correct quantities.
black box design–When suppliers or company
bill-of-material explosion–The process of determining
functions are given general design guidelines and are
component identities, quantities per assembly, and
requested to complete the technical details.
other parent-component relationship data for a
parent item. Explosion may be single level, indented, blank check purchase order–An order with a signed
or summarized. blank check attached that is usually valid only up to a
specific amount.
bill-of-material processor–A computer program
for maintaining and retrieving bill-of-material blanket order–Syn: blanket purchase order.
information.
blanket order release–A message that is used to
bill-of-material structuring–The process of organizing release a quantity from a blanket order.
bills of material to perform specific functions.
blanket purchase order–A long-term commitment
bill of operations–Syn: routing. to a supplier for material against which short-term
releases will be generated to satisfy requirements.
bill of resources–A listing of the required capacity
Often blanket orders cover only one item with
and key resources needed to manufacture one unit of
predetermined delivery dates. Syn: blanket order,
a selected item or family. Rough-cut capacity planning
standing order.
uses these bills to calculate the approximate capacity
requirements of the master production schedule. blanket rate–A rate that does not depend on the
Resource planning may use a form of this bill. Syn: bill distance cargo is transported.
of capacity. See: bill of labor, capacity planning using
overall factors, product load profile, resource profile, blanket release–The authorization to ship and/or
rough-cut capacity planning, routing. produce against a blanket agreement or contract.

blanket routing • bonded warehouse
blanket routing–A routing that lists groups of they are modified to emphasize those aspects
operations needed to produce a family of items. The influencing reliability. See: flowchart.
B items may have small differences in size, but they use

the same sequence of operations. Specific times or
tools for each individual item can be included.
blocked operation–An upstream work center that
is not permitted to produce because of a full queue
at a downstream work center or because no kanban
bleeding edge–An innovative process that may be authorizes production.
unusual enough to pose a risk to the customer or client.
blocked operations–A group of operations identified
blemish–An imperfection that is severe enough to be separately for instructions and documentation but
noticed but should not cause any real impairment with reported as one.
respect to intended normal or reasonably foreseeable
blocking–The condition requiring a work center that
use. See: defect, imperfection, nonconformity.
has parts to process to remain idle as long as the
blend formula–An ingredient list for a product in queue to which the parts would be sent is full, or
process industries. See: batch card, manufacturing kanbans authorizing production are not present.
order, mix ticket.
blocking bug–A defect that prevents a thorough
blending–The process of physically mixing two investigation as to its cause or that prevents
or more lots or types of material to produce a shipment of a product.
homogeneous lot. Blends normally receive new
block scheduling–An operation scheduling technique
identification and require testing.
where each operation is allowed a “block” of time,
blending department–In process industries, the such as a day or a week.
name of the department where the ingredients are
block stacking–A storage method in which pallets,
mixed. See: final assembly department.
cases, or cartons are stacked upward from the floor to
blend off–In process industries, the rework of whatever practical height is available without the use
material by introducing a small percentage into of shelves.
another run of the same product.
block system–A system for selecting items to be
blend order–A manufacturing order to a blending cycle counted by a group or block of numbers.
department authorizing it to mix the ingredients of a
blowthrough–Syn: phantom bill of material.
product. See: assembly order.
blueprint–In engineering, a line drawing showing the
blockage–See: blocking.
physical characteristics of a part.
blockchain–A continuously growing list of records,
blue sky–Goodwill and unsupported value of an asset
called blocks, which are linked and secured using
above its acquisition value.
cryptography. Each block typically contains a
cryptographic hash of the previous block, a timestamp body of knowledge–The knowledge in a given area
and transaction data. The data in any given block that a person is expected to understand to be
cannot be altered retroactively without the alteration certified as a practitioner.
of all subsequent blocks, inherently making it resistant
to modification. See: cryptocurrency. boilerplate–The standard terms and conditions on a
purchase order or other document.
block control–Control of the production process
in groups, or “blocks,” of shop orders for products BOM–Abbreviation for bill of material.
undergoing the same basic processes. bond–A long-term debt of a firm.
block diagram–A diagram that shows the operations, bond (performance)–A guarantee of satisfactory
interrelationships, and interdependencies of work completion that is executed in connection with
components in a system. Boxes, or blocks (hence a contract and that secures the performance and
the name), represent the components; connecting fulfillment of all the undertakings, covenants, terms,
lines between the blocks represent interfaces. There conditions, and agreements contained in the contract.
are two types of block diagrams: (1) Functional block
diagrams that show a system’s subsystems and lower- bonded warehouse–Buildings or parts of buildings
level products, their interrelationships, and interfaces designated by the U.S. Secretary of the Treasury for
with other systems. (2) Reliability block diagrams, storing imported merchandise, operated under U.S.
which are similar to functional block diagrams except Customs supervision.

booked orders • break-bulk warehousing
booked orders–Demand that has been confirmed. See: BPM–Abbreviation for business process management.
customer order, demand, order penetration point.
B
BPR–Abbreviation for business process reengineering.
bookings–The value of all sales after discounts and
bracketed recall–Recall from customers of suspect
rebates have been applied.
lot numbers plus a specified number of lots produced
book inventory–An accounting definition of inventory before and after the suspect ones.
units or value obtained from perpetual inventory
brainstorming–A technique that teams use to
records rather than by actual count.
generate ideas on a particular subject. Each person on
book value–The accounting value of an asset. the team is asked to think creatively and write down as
many ideas as possible. The ideas are not discussed or
Boolean algebra–A form of algebra that, like ordinary
reviewed until after the brainstorming session.
algebra, represents relationships and properties with
symbols. However, Boolean algebra also has classes, branch and bound–Operations research models
propositions, on-off circuit elements, and operators for determining optimal solutions based on the
(and, or, not, except, if, then). Boolean algebra is useful enumeration of subsets of possible solutions, which
in defining the logic of a complex system. implicitly enumerate all possible solutions.
bottleneck–A facility, function, department, or branch warehouse–Syn: distribution center.

resource whose capacity is less than the demand
branch warehouse demand–Syn: warehouse demand.
placed upon it. For example, a bottleneck machine
or work center exists where jobs are processed branding–The use of a name, term, symbol, or design,
at a slower rate than they are demanded. Syn: or a combination of these, to identify a product.
bottleneck operation.
brand loyalty–The tendency of some consumers
bottleneck operation–Syn: bottleneck. to stay with a preferred product in spite of a
competitor’s advantages.
bottom-up estimating–A method of estimation
that involves disaggregating a piece of work brand manager–The person in charge of the marketing
into components, estimating each component program for a given brand. Syn: product manager.
requirement, and adding the resulting times and/or
costs to arrive at the estimate for the whole. brand name–A word or combination of words used
to identify a product and differentiate it from other
bottom-up planning–Planning for resource products; the verbal part of a trademark, in contrast
requirements by starting at the bottom of the bill to the pictorial mark; a trademark word.
of material or services, estimating the resources
required to produce each product or service, and then brand plan–Syn: market plan.
adding the resources up. brand recognition–The degree to which customers
bottom-up replanning–In MRP, the process of using recognize a particular brand identity and associate
pegging data to solve material availability or other it with a particular product line relative to other
problems. This process is accomplished by the available brands.
planner (not the computer system), who evaluates breadman–In kanban, an arrangement in which
the effects of possible solutions. Potential solutions the customer does not specify the quantity to be
include compressing lead time, cutting order delivered on a specific basis, but instead gives the
quantity, substituting material, and changing the supplier a set of guidelines. The delivery person
master schedule. determines the quantity according to these rules.
bounded–The adjustment of a shop order quantity of break-bulk–1) Dividing truckloads, railcars, or
a parent to use the remaining units of a component, containers of homogeneous items into smaller, more
raw material, or lot. appropriate quantities for use. 2) A distribution center
Box-Jenkins model–A forecasting method based on that specializes in break-bulk activities. 3) Unitized
regression and moving average models. The model cargo in bales, boxes, or crates that is placed directly
is based not on regression of independent variables, in a ship's holds rather than in containers.
but on past observations of the item to be forecast at break-bulk warehousing–A form of cross-docking
varying time lags and on previous error values from in which the incoming shipments are from a single
forecasting. See: forecast. source or manufacturer.

breakdown maintenance • buffer penetration
breakdown maintenance–Remedial maintenance bubble chart–A diagram that attempts to display the
that occurs when equipment fails and must be interrelationships of systems, functions, or data in a
B repaired on an emergency or priority basis. Syn:

irregular maintenance, reactive maintenance.
sequential flow. It derives its name from the circular
symbols used to enclose the statements on the chart.
break-even analysis–A study of the number of units, bucket–A time period, usually a week.
or amount of time, required to recoup an investment.
bucketed system–An MRP, DRP, or other time-phased
break-even chart–A graphical tool showing the total system in which all time-phased data is accumulated
variable cost and fixed cost curve along with the total into time periods called buckets. If the period of
revenue curve. The point of intersection is defined as the accumulation is one week, then the system is said to
break-even point (i.e., the point at which total revenues have weekly buckets.
exactly equal total costs). See: total cost curve.
bucketless system–An MRP, DRP, or other time-
break-even point–The level of production or the phased system in which all time-phased data is
volume of sales at which operations are neither processed, stored, and usually displayed using dated
profitable nor unprofitable. The break-even point is records rather than defined time periods (buckets).
the intersection of the total revenue and total cost
budget–A plan that includes an estimate of future
curves. See: total cost curve.
costs and revenues related to expected activities.
break-even time–The total elapsed time of a The budget serves as a pattern for and a control over
technology transfer beginning with a scientific future operations.
investigation and ending when the profits from a
budget at completion (BAC)–The total planned
new product offset the cost of its development.
budget for a project.
breeder bill of material–A bill of material that
budgeted capacity–The volume/mix of throughput
recognizes and plans for the availability and usage
on which financial budgets were set and overhead/
of by-products in the manufacturing process. The
burden absorption rates established.
breeder bill allows for complete by-product MRP and
product/by-product costing. budgeted cost of work performed–In project
management, this term has been replaced with the
bribes–A gift, money, or a favor given by one person to
term earned value.
another intending to influence the person's decision,
judgment, or conduct. Offering or accepting bribes budgeted cost of work scheduled–In project
is illegal in most countries and a violation of the UN management, this term has been replaced with the
Global Compact. A complicating factor is that bribes term planned value.
are expected parts of business transactions in some
cultures. Syn: facilitating payments. buffer–1) A quantity of materials awaiting further
processing. It can refer to raw materials, semifinished
bricks and mortar–A company that sells through a stores or hold points, or a work backlog that is purposely
physical location. Ant: clicks and mortar. maintained behind a work center. 2) In the theory of
constraints, buffers can be time or material and support
broadband–A coaxial cable offering several channels
throughput and/or due date performance. Buffers can
for text, voice, and/or video transmission.
be maintained at the constraint, convergent points (with
broadcast system–A sequence of specific units to a constraint part), divergent points, and shipping points.
be assembled and completed at a given rate. This
buffer management–In the theory of constraints, a
sequence is communicated to supply and assembly
process in which all expediting in a shop is driven by
activities to perform operations and position material
what is scheduled to be in the buffers (constraint,
so that it merges with the correct assembled unit.
shipping, and assembly buffers). By expediting this
broker–An organization that helps match carriers to material into the buffers, the system helps avoid
freight, adding value by helping the shipper and carrier idleness at the constraint and missed customer due
obtain better rates and more fully utilize their capacity dates. In addition, the reasons items are missing
and equipment. from the buffer are identified, and the frequency of
occurrence is used to prioritize improvement activities.
browser–Software used on the web to retrieve and
display documents on-screen, connect to other sites buffer penetration–The amount of inventory buffer
using hypertext links, display images, and play audio files. for a resource that has been depleted, typically
expressed as a percentage of the total buffer size.

buffer profile • business cycle
buffer profile–A group of parts with similar lead bundling–Combining two or more products or
time, variability, control, and order management services into a single transaction.
characteristics.
buffer status alerts–Alerts in demand-driven material

burden–Syn: overhead.
burden rate–A cost, usually in dollars per hour, that

B
requirements planning sent to purchasing, planning,
is normally added to the cost of every standard
and manufacturing personnel concerning the relative
production hour to cover overhead expenses.
priorities of purchase orders or manufacturing orders.
burn rate–The rate at which a company consumes
buffer stock–Syn: safety stock.
cash. It can be used to determine when more cash
buffer zone–A stratification layer within a stock buffer must be raised.
used in the drum-buffer-rope scheduling. Typically,
business clusters–When businesses locate in close
buffer zones are color-coded with red, yellow, and
proximity for competition purposes.
green categories.
business context summary–Used in the S: Set the
build cycle–The time period between a major setup
Scope phase of SCOR to identify and document
and a cleanup. It recognizes cyclical scheduling
the business and establish a high-level view
of similar products with minor changes from one
of the competitive landscape. The summary is
product/model to another.
composed of a business description, challenges and
build-to-order–Syn: make-to-order. opportunities, a value proposition, critical issues,
risks, financial performance, internal structure
build-up forecasts–A qualitative forecasting technique
profile, and external profile.
in which individuals who are familiar with specific
market segments estimate the demand within these business continuity management system (BCMS)–
segments. The overall forecast then is obtained by Part of the overall management system that
calculating the sum of the forecasts for these segments. establishes, implements, operates, monitors, reviews,
maintains, and improves an organization’s capability
bulk issue–Parts issued from stores to work-in-
of delivering products or services at acceptable
process inventory, but not based on a job order.
predefined levels following a disruptive incident.
They are issued in quantities estimated to cover
It is based upon identifying potential threats to an
requirements of individual work centers and
organization and the impact to business operations
production lines. The issue may be used to cover a
from those threats. The system provides a framework
period of time or to fill a fixed-size container.
for building organizational resilience with the
bulk packing–Placing several small packages in a capability of an effective response that safeguards
larger container to prevent damage or theft. the interests of its key stakeholders, reputation,
brand, and value-creating activities.
bulk storage–Large-scale storage for raw materials,
intermediates, or finished products. Each vessel business continuity planning–Plans to ensure that
normally contains a mixture of lots and materials an organization is capable of continuing to deliver
that may be replenished and withdrawn for use or products or services at acceptable predefined
pack-out simultaneously. levels following a disruptive incident. The plans are
developed by identifying potential threats to an
bullwhip effect–An extreme change in the supply organization and the impacts to business operations
position upstream in a supply chain generated those threats might cause. These plans provide a
by a small change in demand downstream in the framework for building organizational resilience with
supply chain. Inventory can quickly move from being the capability of an effective response to safeguard
backordered to being excess. This is caused by the the interests of key stakeholders, reputation, brand,
serial nature of communicating orders up the chain and value-creating activities.
with the inherent transportation delays of moving
product down the chain. The bullwhip effect can be business cycle–A period of time marked by long-
eliminated by synchronizing the supply chain. term fluctuations in the total level of economic
activity. Measures of business cycle activity include
bundle–One or more unassembled items shipped the rate of unemployment and the level of gross
together as a set of items. domestic product.

business environment • buyer
business environment–Syn: operating environment. improvements across the enterprise or supply chain.
It promotes business effectiveness and efficiency
B
business intelligence–Information collected by an
while striving for innovation, flexibility, and integration
organization on customers, competitors, products
with technology. Most process improvement
or services, and processes. Business intelligence
disciplines or activities can be considered as BPM.
provides organizational data in such a way that
the organizational knowledge filters can easily business process outsourcing–Contracting with third
associate with this data and turn it into information parties to perform non-core activities within a business.
for the organization. Persons involved in business Functions often outsourced include human resources,
intelligence processes may use application software accounts receivable, accounts payable, and payroll.
and other technologies to gather, store, analyze,
business process reengineering (BPR)–A procedure
and provide access to data, and to present that
that involves the fundamental rethinking and radical
data in a simple, useful manner. The software aids
redesign of business processes to achieve dramatic
in business performance management and aims
organizational improvements in such critical
to help consumers make better business decisions
measures of performance as cost, quality, service,
by offering them accurate, current, and relevant
and speed. Any BPR activity is distinguished by its
information. Some businesses use data warehouses
emphasis on process, rather than functions and
because they are a logical collection of information
products, and the customers for the process.
gathered from various operational databases for the
purpose of creating business intelligence. business rules–The rules for an organization, such
as policies or procedures, that define or constrain
business judgment rule–Under common law, an
some aspect of the business and are meant to provide
absence of liability for corporate directors and officers
guidance.
if they have used rational business judgment and have
no conflict of interest. business service–The software aspect of electronic
commerce. It performs activities (such as encryption)
business market–Syn: industrial market.
that are required to support business transactions.
business plan–1) A statement of long-range strategy
business strategy–A plan for choosing how to
and revenue, cost, and profit objectives usually
compete. Business strategies can be classified
accompanied by budgets, a projected balance sheet,
into three general categories: (1) least cost, (2)
and a cash flow (source and application of funds)
differentiation, and (3) focus.
statement. A business plan is usually stated in terms
of dollars and grouped by product family. The business business-to-business commerce (B2B)–Business
plan is then translated into synchronized tactical conducted over the internet between businesses.
functional plans through the production planning The implication is that this connectivity will cause
process (or the sales and operations planning process). businesses to transform themselves via supply chain
Although frequently stated in different terms (dollars management to become virtual organizations—
versus units), these tactical plans should agree with reducing costs, improving quality, reducing delivery
each other and with the business plan. See: long-term lead time, and improving due-date performance.
planning, strategic plan. 2) A document consisting
of the business details (organization, strategy, and business-to-consumer sales (B2C)–Business being
financing tactics) prepared by an entrepreneur to plan conducted between businesses and final consumers,
for a new business. largely over the internet. It includes traditional brick
and mortar businesses that also offer products online
business planning–The process of constructing the and businesses that trade exclusively on the internet.
business plan. See: business plan.
business unit–A division or segment of an
business process–A set of logically related tasks or organization generally treated as a separate profit-
activities performed to achieve a defined business and-loss center.
outcome.
buyer–An individual whose functions may include
business process management (BPM)–A business supplier selection, negotiation, order placement,
discipline or function that uses business practices, supplier follow-up, measurement and control of
techniques, and methods to create and improve supplier performance, value analysis, and evaluation
business processes. BPM is a holistic approach to of new materials and processes. In some companies,
the use of appropriate process-related business the functions of order placement and supplier
disciplines to gain business performance follow-up are handled by the supplier scheduler.

buyer’s market • capable-to-promise (CTP)
buyer’s market–A market in which goods can easily calendar time–The passage of days or weeks as in the
be secured and in which the economic forces of definition of lead time or scheduling rules, in contrast
business tend to cause goods to be priced at the to running time.
purchaser’s estimate of value.
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calendar unit–The smallest unit of time in a project plan.
buyer behavior–The way individuals or organizations
calibration–The comparison of a measurement
behave in a purchasing situation. The customer-oriented
instrument or system of unverified accuracy with
concept identifies the wants, needs, and desires of
a measurement instrument or system of known
customers and adapts the resources of the organization
accuracy to detect any variation from the required
to deliver need-satisfying goods and services.
performance specification.
buyer code–A code used to identify the purchasing
calibration frequency–The interval in days between
person responsible for a given item or purchase order.
tooling calibrations.
buyer cycle–The purchasing sequence that generally
call center–Facility housing personnel who respond
follows the buyer’s product and budget cycles.
to customer phone queries. These personnel may
buyer/planner–A buyer who also does material planning. provide customer service or technical support. Call
This term should not be confused with planner/buyer, center services may be in-house or outsourced.
which is a synonym for supplier scheduler.
CAM–Acronym for computer-aided manufacturing.
buying capacity–Syn: capacity buying.
campaign–A series of batches of the same product
buying down–For products that historically have run together (back to back).
experienced price swings, attempting to buy when the
cancellation charge–A fee charged by a seller to cover
price is low or down. See: hedging, speculative buying.
its costs associated with a customer’s cancellation
by-product–A material of value produced as a of an order. If the seller has started engineering work,
residual of or incidental to the production process. purchased raw materials, or started manufacturing
The ratio of by-product to primary product is usually operations, these charges could also be included in the
predictable. By-products may be recycled, sold as-is, cancellation charge.
or used for other purposes. See: co-product.
can-order point–An ordering system used when
multiple items are ordered from one vendor. The can-
C order point is a point higher than the original order

point. When any one of the items triggers an order by
reaching the must-order point, all items below their
can-order point are also ordered. The can-order point
C.P.M.–Abbreviation for Certified Purchasing Manager.
is set by considering the additional holding cost that
cache–A high-speed device used within a computer would be incurred should the item be ordered early.
to store frequently retrieved data.
capability study–Syn: process capability analysis.
CAD–Acronym for computer-aided design.
capable-to-promise (CTP)–The process of committing
CAD/CAM–The integration of computer-aided design orders against available capacity as well as inventory.
and computer-aided manufacturing to achieve This process may involve multiple manufacturing or
automation from design through manufacturing. distribution sites. Used to determine when a new or
unscheduled customer order can be delivered. Employs
CAE–Abbreviation for computer-aided engineering. a finite-scheduling model of the manufacturing system
cage–A secure area used to store valuable items. to determine when an item can be delivered. Includes
any constraints that might restrict the production,
CAIT–Abbreviation for computer-aided inspection such as availability of resources, lead times for raw
and test. materials or purchased parts, and requirements
for lower-level components or subassemblies. The
calculated capacity–Syn: rated capacity.
resulting delivery date takes into consideration
calculated usage–The determination of usage of production capacity, the current manufacturing
components or ingredients in a manufacturing environment, and future order commitments. The
process by multiplying the receipt quantity of a parent objective is to reduce the time spent by production
by the quantity per of each component or ingredient planners in expediting orders and adjusting plans
in the bill or recipe, accommodating standard yields. because of inaccurate delivery-date promises.

capacity • capacity requirements
capacity–1) The capability of a system to perform schedules (i.e., the production plan, master
its expected function. 2) The capability of a worker, production schedule, material requirements plan,
machine, work center, plant, or organization to and dispatch list). Capacity management is executed
produce output per time period. Capacity required at four levels: resource requirements planning,
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represents the system capability needed to make a rough-cut capacity planning, capacity requirements
given product mix (assuming technology, product planning, and input/output control.
specification, etc.). As a planning function, both
capacity pegging–Displaying the specific sources
capacity available and capacity required can be
of capacity requirements. This is analogous to
measured in the short term (capacity requirements
pegging in MRP, which displays the source of
plan), intermediate term (rough-cut capacity plan),
material requirements.
and long term (resource requirements plan). Capacity
control is the execution through the I/O control report capacity planning–The process of determining the
of the short-term plan. Capacity can be classified amount of capacity required to produce in the future.
as budgeted, dedicated, demonstrated, productive, This process may be performed at an aggregate or
protective, rated, safety, standing, or theoretical. product-line level (resource requirements planning),
See: capacity available, capacity required. 3) at the master-scheduling level (rough-cut capacity
Required mental ability to enter into a contract. planning), and at the material requirements planning
level (capacity requirements planning). See: capacity
capacity available–The capability of a system
requirements planning, resource planning, rough-cut
or resource to produce a quantity of output in a
capacity planning.
particular time period. Syn: available capacity.
See: capacity, available time. capacity planning using overall factors (CPOF)–A
rough-cut capacity planning technique. The master
capacity bill procedure–A rough-cut capacity
schedule items and quantities are multiplied by the
planning method that takes into account any shifts in
total time required to build each item to provide
product mix. Bill of material and routing information
the total number of hours to produce the schedule.
are required with direct labor-hour or machine-hour
Historical work center percentages are then applied
data available for each operation. See: bill of labor.
to the total number of hours to provide an estimate
capacity buying–A purchasing practice whereby a of the hours per work center to support the master
company commits to a supplier for a given amount of schedule. This technique eliminates the need for
its capacity per unit of time. Subsequently, schedules engineered time standards. Syn: overall factors.
for individual items are given to the supplier in See: bill of resources, capacity planning, resource
quantities to match the committed level of capacity. profile, rough-cut capacity planning.
Syn: buying capacity.
capacity-related costs–Costs generally related to
capacity-constrained resource (CCR)–A resource increasing (or decreasing) capacity in the medium- to
that is not a constraint but will become a constraint long-range time horizon. Personnel costs include
unless scheduled carefully. Any resource that, if hiring and training of direct laborers, supervisors, and
its capacity is not carefully managed, is likely to support personnel in the areas related to the capacity
compromise the throughput of the organization. increase. Equipment purchases to increase capacity
are also considered. In contrast, costs related to
capacity control–The process of measuring
decreasing capacity include layoffs, the fixed overhead
production output and comparing it with the
spread over fewer units, the impact of low morale, and
capacity plan, determining if the variance exceeds
the inefficiencies of lower production levels.
pre-established limits, and taking corrective action
to get back on plan if the limits are exceeded. See: capacity required–The capacity of a system or
input/output control. resource needed to produce a desired output in
a particular time period. Syn: required capacity.
capacity cushion–Extra capacity that is added to
See: capacity.
a system after capacity for expected demand is
calculated. Syn: safety capacity. See: protective capacity requirements–The resources needed to
capacity. produce the projected level of work required from a
facility over a time horizon. Capacity requirements are
capacity management–The function of establishing,
usually expressed in terms of hours of work or, when
measuring, monitoring, and adjusting limits or levels
units consume similar resources at the same rate,
of capacity in order to execute all manufacturing
units of production.

capacity requirements plan • carload lot
capacity requirements plan–A time-phased display capital-intensive–A situation in which the largest
of present and future load (capacity required) on all expenditure in an operation is capital as opposed to
resources, based on the planned and released supply labor. See: labor-intensive.
authorizations (i.e., orders) and the planned capacity
C
capital rationing–In financial management, the process
(capacity available) of these resources over a span of
of apportioning capital expenditures among prospective
time. See: load profile.
projects to conserve limited investment funds.
capacity requirements planning (CRP)–The function
capital recovery–1) Charging periodically to operations
of establishing, measuring, and adjusting limits or
amounts that will ultimately equal the amount of
levels of capacity. In this context, the term refers to
capital expenditure. See: amortization, depletion,
the process of determining in detail the amount of
depreciation. 2) The replacement of the original cost
labor and machine resources required to accomplish
of an asset plus interest. 3) The process of regaining
the tasks of production. Open shop orders and
the net investment in a project by means of revenue
planned orders in the MRP system are input to CRP,
in excess of the cost from the project. (Usually
which through the use of parts routings and time
implies amortization of principal plus interest on
standards translates these orders into hours of work
the diminishing unrecovered balance.)
by work center by time period. Even though rough-cut
capacity planning may indicate that sufficient capital structure–The combination of permanent
capacity exists to execute the MPS, CRP may show short-term debt, long-term debt, preferred stock, and
that capacity is insufficient during specific time common equity used to finance a firm.
periods. See: capacity planning.
CAPP–Acronym for computer-aided process planning.
capacity simulation–The ability to do rough-cut
capacity planning using a simulated master production carbon emissions–One of the five green SCOR metrics.
schedule or material plan rather than live data. A unit of measure currently used for greenhouse gas
emissions to measure the climate impact of carbon
capacity smoothing–Syn: load leveling. dioxide and other global warming
air emissions.
capacity strategy–One of the strategic choices a
firm must make as part of its manufacturing strategy. carbon footprint–A measure of carbon emissions
There are three commonly recognized capacity from a person, organization, building, or operation.
strategies: lead, lag, and tracking. A lead capacity
strategy adds capacity in anticipation of increasing carbon offsets–A way to compensate for an
demand. A lag strategy does not add capacity until the organization's carbon dioxide emissions, either
firm is operating at or beyond full capacity. A tracking by reducing carbon dioxide emissions elsewhere
strategy adds capacity in small amounts to attempt to in the business or by funding projects intended to
respond to changing demand in the marketplace. improve the environment, such as renewable energy
or forest conservation. This funding can be in the
capacity utilization–Goods produced, or customers form of credits purchased on an exchange to meet
served, divided by total output capacity. compliance legislation, cap and trade systems, or as
a voluntary effort.
capital–Money or resources used to invest in assets
that produce products. carcass–A nonserviceable item obtained from a
customer that is intended for use in remanufacturing.
capital asset–A physical object that is held by an
organization for its production potential and that cargo–A product shipped in an aircraft, railroad car,
costs more than some threshold value. ship, barge, or truck.
capital budgeting–Actions relating to the planning and cargo container capacity–The inside usable cubic
financing of capital outlays for such purposes as the volume of a container.
purchase of new equipment, the introduction of new
product lines, and the modernization of plant facilities. carload lot–A shipment that qualifies for a reduced
freight rate because it is greater than a specified
capital expenditure–Money invested in a long-term minimum weight. Since carload rates usually include
asset; i.e., one that is expected to last longer than one minimum rates per unit of volume, the higher LCL
year. The investment is expected to generate a stream (less than carload) rate may be less expensive for a
of future benefits. heavy but relatively small shipment.

carnet • cause-and-effect diagram
carnet–Temporary admission granted to goods cash flow statement–Syn: funds flow statement.
that are passing through a country rather than
cash in advance payment–Payment by the importer
being imported into it. The goods can cross several
to the exporter before the exporter ships the goods,
boundaries duty-free and tax-free without customs
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providing the maximum protection to the exporter
inspection. Disposable and consumable items are
and no protection to the importer.
excluded. Syn: ATA carnet.
cash spin or free cash spin–The advantage of reducing
carrier–A company that provides air, sea, or land
inventory in the supply chain and reallocating the
transportation services.
saved capital in a more profitable direction.
carrying cost–The cost of holding inventory, usually
cash-to-cash cycle time–An indicator of how
defined as a percentage of the dollar value of inventory
efficiently a company manages its assets to improve
per unit of time (generally one year). Carrying cost
cash flow. Calculated as inventory days plus accounts
depends mainly on the cost of capital invested as
receivable days minus accounts payable days. See:
well as costs of maintaining the inventory such as
cash conversion cycle.
taxes and insurance, obsolescence, spoilage, and
space occupied. Such costs vary from 10 percent to catalog channel–A facility that receives orders based
35 percent annually, depending on type of industry. on a published book of offerings and ships from its
Carrying cost is ultimately a policy variable reflecting warehouse to the customer.
the opportunity cost of alternative uses for funds
invested in inventory. Syn: holding costs. catchball–A business process of floating ideas and
comments around in an iterative manner, much like
cartel–A group of companies that agree to cooperate, tossing a ball back and forth.
rather than compete, in producing a product or
service, thus limiting or regulating competition. categorical plan–A method of selecting and
evaluating suppliers that considers input from
cascaded systems–Multistage operations. The input many departments and functions within the buyer’s
to each stage is the output of a preceding stage, organization and systematically categorizes that
thereby causing interdependencies among the stages. input. Engineering, production, quality assurance,
and other functional areas evaluate all suppliers
cascading yield loss–The condition where yield loss
for critical factors within their respective scopes
happens in multiple operations or tasks, resulting in
of responsibility. For example, engineering would
a compounded yield loss. Syn: cumulative yield. See:
develop a category evaluating suppliers’ design
composite yield.
flexibility. Rankings are developed across categories,
CASE–Acronym for computer-assisted software performance ratings are obtained, and supplier
engineering. selections are made. See: weighted-point plan.
cash budget–A budget based on the planned cash category management–In marketing, an
receipts and disbursements of a plant, division, or firm. organizational structure giving managers
responsibility for planning and implementing
cash conversion cycle–1) In retailing, the length of time
marketing systems for certain product lines.
between the sale of products and the cash payments
for a company’s resources. 2) In manufacturing, the causal forecast–A type of forecasting that uses
length of time from the purchase of raw materials to cause-and-effect associations to predict and
the collection of accounts receivable from customers explain relationships between the independent and
for the sale of products or services. dependent variables. An example of a causal model
is an econometric model used to explain the demand
cash cow–A highly profitable product in a low-growth
for housing starts based on consumer base, interest
market. See: growth-share matrix.
rates, personal incomes, and land availability.
cash discount–A price break offered for the early
cause-and-effect diagram–A tool for analyzing process
payment of an invoice.
dispersion. It is also referred to as the Ishikawa diagram
cash flow–The net flow of dollars into or out of the (because Kaoru Ishikawa developed it) and the fishbone
proposed project. The algebraic sum, in any time diagram (because the complete diagram resembles a
period, of all cash receipts, expenses, and investments. fish skeleton). The diagram illustrates the main causes
Also called cash proceeds or cash generated. and subcauses leading to an effect (symptom). The
cause-and-effect diagram is one of the seven tools of
cash flow management–Syn: funds flow management. quality. Syn: fishbone chart, Ishikawa diagram.

caveat emptor • certificate of origin
caveat emptor–A Latin phrase meaning, “Let the buyer centralized purchasing–A system in which all
beware.” (i.e., the purchase is at the buyer’s risk.) purchasing decisions are made from a corporate
purchasing office.
c chart–A control chart for evaluating the stability of
C
a process in terms of the count of events of a given central limit theorem–A theorem that states that
classification occurring in a sample. Syn: count chart, a distribution consisting of sample means can be
number defective chart. assumed to be normally distributed, even if the
population from which the samples are drawn is not
CCOR–Abbreviation for customer chain operations
normally distributed.
reference.
central point scheduling–A variant of scheduling
CCR–Abbreviation for capacity-constrained resource.
that employs both forward and backward scheduling,
cell–A manufacturing or service unit consisting starting from the scheduled start date of a particular
of a number of workstations and the materials operation.
transport mechanisms and storage buffers that
central processing unit (CPU)–The electronic
interconnect them.
processing unit of a computer where mathematical
cellular layout–An equipment configuration to calculations are performed.
support cellular manufacturing.
central storage–Using a central location for storing
cellular manufacturing–A manufacturing process all inventory items in order to obtain more control of
that produces families of parts within a single line or inventory and to improve inventory record accuracy.
cell of machines controlled by operators who work
CEP–Abbreviation for cost equalization point.
only within the line or cell.
certificated carrier–A regulated for-hire air carrier
center–In statistics, values near the middle of results
that provides service under an operating certificate.
from a process.
certificate of analysis–A certification of conformance
center-of-gravity approach–A methodology for
to quality standards or specifications for products or
locating distribution centers at approximately the
materials. It may include a list or reference of analysis
location representing the minimum transportation
results and process information. It is often required
costs between the plants, the distribution centers,
for material custody transfer.
and the markets, in order to maximize revenue.
certificate of compliance–A supplier’s certification
center-of-gravity models–Syn: gravity models.
that the supplies or services in question meet
centralized authority–Limiting the ability to make specified requirements.
decisions to a few managers.
certificate of free sale–A certificate that attests that
centralized computer network–A network in which the goods can be legally sold in the country of export.
there is one central computer (or possibly more) The intent is to prevent defective products from being
linked to all others in a given enterprise. exported.
centralized dispatching–The organization of the certificate of inspection–A certificate provided by an

dispatching function into one central location. This independent inspection organization attesting to the
structure often involves the use of data collection accuracy of the value and authenticity of the goods
devices for communication between the centralized as listed on the invoice. The exporter obtains this
dispatching function (which usually reports to preshipment certificate in the exporting country.
the production control department) and the shop
certificate of insurance–A certificate, required under
manufacturing departments.
some terms of trade, that attests that a particular
centralized inventory control–Inventory decision shipment has insurance coverage. It is provided by
making for all stockkeeping units exercised from one the exporter's insurance company.
office or department for an entire company.
certificate of manufacture–A certificate that attests
centralized marketing system–An organizational that the goods were manufactured in the exporter's
structure in which a central marketing group manages country. It is provided and signed by the exporter's
functionally divided areas such as advertising, sales, chamber of commerce.
and marketing research.
certificate of origin–A document attesting to a
shipment’s country of origin.

certificate of public convenience and necessity • channel equity
certificate of public convenience and necessity–A chain reaction–A chain of events proposed by W.
certificate that grants authority to a particular carrier, Edwards Deming: Improve quality and costs will go
enabling that carrier to act as a common carrier in down because of less scrap and rework, while revenues
serving and transporting commodities to a specific area. will go up because the company will be able to sell
C
more product at higher prices. Thus, better quality
certification–Documentation of competency by
means more profitability.
a supplier or by an organization, such as ISO 9000
certification. See: supplier certification, ISO 9000. champion–1) In quality control, sponsor of a six sigma
implementation project. 2) In general, sponsor of an
certification audits–Audits occurring within
improvement effort.
registration processes (e.g., for ISO 9000:2000).
chance variation–Variation in process results
Certified Fellow in Production and Inventory
occurring because of numerous small factors such
Management (CFPIM)–The APICS designation that is
as workers, equipment, raw material, work methods,
a recognition of superior knowledge of, performance
and environmental differences.
in, and contribution to the profession.
change agent–A person who facilitates change within
certified fixtures–The inspection models that
an organization. This person may or may not be within
conform to known specifications.
the organization and may or may not be the initiator of
Certified in Integrated Resource Management the change.
(CIRM)–The APICS designation that is a recognition of
change control–The process of determining,
a high level of professional knowledge in enterprise-
approving, or rejecting changes to a plan baseline.
wide processes and activities.
change management–The business process that
Certified in Production and Inventory Management
coordinates and monitors all changes to the business
(CPIM)–The APICS designation that is a recognition of
processes and applications operated by the business,
a high level of professional knowledge in production
as well as to its internal equipment, resources, operating
and inventory management.
systems, and procedures. The change management
Certified Purchasing Manager (C.P.M.)–1) discipline is carried out in a way that minimizes the risk
Certification from The Institute for Supply of problems that will affect the operating environment
Management (ISM), formerly NAPM. This certification and service delivery to the users.
is no longer available and can be recertified only.
change order–A formal notification that a purchase
certified supplier–A status awarded to a supplier order or shop order must be modified in some way. This
that consistently meets predetermined quality, cost, change can result from modifications such as a revised
delivery, financial, and count objectives. Incoming quantity, date, or customer specification; an engineering
inspection may not be required. change; or a change in inventory requirement date.
Certified Supply Chain Professional (CSCP)–The changeover–Syn: setup.

APICS designation that recognizes a high level of
changeover costs–Syn: setup costs.
professional knowledge in supply chain management.
changeover flexibility–Syn: setup flexibility.
ceteris paribus–Latin for "all other things being
the same." change request–An application to change scopes of
work, budgets, and/or schedules.
CFE–Abbreviation for cumulative forecast error.
channel–1) In queuing theory, a line for waiting.
CFPIM–Abbreviation for Certified Fellow in
2) In distribution, a route from raw materials
Production and Inventory Management.
through consumption. See: distribution channel,
chain of customers–The sequence of customers who marketing channel.
in turn consume the output of each other, forming
channel conflict–Two or more agencies of one
a chain. For example, individuals are customers of a
business competing for the same customer. For
department store, which in turn is the customer of a
example, retail, catalog, or web sales.
producer, which is the customer of a material supplier.
channel equity–Important affiliations between
suppliers and purchasers that improve value
for everyone.

channel integration • clerical/administration
channel integration–Strengthening relationships up churn–The process of customers changing their

and down the supply chain from suppliers’ suppliers buying preferences because they find better and/
to customers’ customers. or cheaper products and services elsewhere.
The internet makes it easy for customers to shop
C
channel partners–Suppliers, manufacturers,
electronically in search of a better deal.
distributors, and retailers that form a supply chain to
make and distribute a set of products. churn reduction–Losing fewer customers to the
competition.
channels of distribution–Any series of firms or
individuals that participates in the flow of goods and CIF–Abbreviation for cost, insurance, freight.
services from the raw material supplier and producer
CIM–Acronym for computer-integrated
to the final user or consumer. See: distribution channel.
manufacturing.
charge–The initial loading of ingredients or raw
circular economy–An economic system intended to
materials into a processor, such as a reactor, to begin
minimize waste and maximize the use of resources
the manufacturing process.
through a regenerative process achieved through
chargeback provisions–Contractual terms specifying long-lasting design, maintenance, repair, reuse,
how a company may charge a supplier for failure to remanufacturing, refurbishing, recycling, and
perform. upcycling. This is the opposite of the linear economy.
charge ticket–A document used for receiving goods CIRM–Acronym for Certified in Integrated Resource
and charging those goods to an operating cost center. Management.
chart of accounts–In accounting, a list of general CISG–Abbreviation for contracts for the international
ledger accounts used to track costs, revenues, assets, sale of goods.
liabilities, and so on by category.
city driver–A delivery person who drives a local route
chase-demand strategy–Syn: chase production as opposed to long-haul route.
method.
claim–A charge made against a company because of
chase production method–A production planning loss or damage.
method that maintains a stable inventory level while
classification–The designation of the job function
varying production to meet demand. Companies
that an employee is assigned to and is proficient in—
may combine chase and level production schedule
for example, assembler, machinist, or welder.
methods. Syn: chase strategy, chase-demand strategy.
classification of defects–The delineation of possible
chase strategy–Syn: chase production method.
defects in a unit, classified by seriousness: critical (A),
check digit–A digit added to each number in a coding major (B), minor (C), or incidental (D).
system that allows for detection of errors in the
clean technology–A technical measure taken to
recording of the code numbers. Through the use of
reduce or eliminate—at its source—the production of
the check digit and a predetermined mathematical
any nuisance, pollution, or waste, and to help save raw
formula, recording errors such as digit reversal or
materials, natural resources, and energy.
omission can be discovered.
cleanup–The neutralizing of the effects of production
checking–Verifying and documenting the order
just completed. It may involve activities such as
selection in terms of both product number and quantity.
cleaning residues, sanitation, and equipment
checklist–A tool used to ensure that important steps refixturing, for example.
or actions in an operation have been taken. Checklists
clearinghouse–An entity restricted to providing
contain items that are important or relevant to an
services such as settling accounts.
issue or situation.
clerical/administration–Several related activities
check sheet–A simple data-recording device. The
necessary for the organization’s operation, generally
check sheet is designed by the user to facilitate the
including but not limited to the following: updating
user’s interpretation of the results. The check sheet
records and files based on receipts, shipments,
is one of the seven tools of quality. Check sheets are
and adjustments; maintaining labor and equipment
often confused with data sheets and checklists.
records; and performing locating, order consolidation,
correspondence preparation, and similar activities.

clicks and mortar • collaborative planning, forecasting, and replenishment (CPFR)
clicks and mortar–Refers to a brick and mortar cloud computing–An emerging way of computing
company that also has succeeded in making online where data is stored in massive data centers that can
sales. Ant: bricks and mortar. be accessed from any connected computers over the
internet.
C
clickstream–The way a customer moves through a
website. CMI–Abbreviation for co-managed inventory.
client–In information systems, a software program CNC–Abbreviation for computer numerical control.
that is used to contact and obtain data from a server
co-design–Syn: participative design/engineering.
program on another computer. Each client program
is designed to work with one or more specific kinds of co-destiny–The evolution of a supply chain from
server programs, and each server requires a specific intraorganizational management to interorganizational
kind of client. A browser is one type of client. management.
client/server system–A distributed computing system coefficient of correlation–A value used to express
in which work is assigned to the computer best able to the relationship between two variables, whether
perform it from among a network of computers. there is a strong or weak correlation. The coefficient
of correlation varies from 0 to 1. Values close to 0
CLIN–Abbreviation for contract line items number.
indicate no relationship or a weak relationship, and
clock card–Syn: time card. values close to 1 indicate a strong relationship. The
existence of a relationship does not prove causality.
closed-loop feedback system–A planning and control
system that monitors system progress toward the plan coefficient of determination–Used to measure
and has an internal control and replanning capability. the expected accuracy of a forecast; measures the
variation in one variable due to a different variable.
closed-loop MRP–A system built around material
requirements planning that includes the additional coefficient of variation–In statistics, the ratio of the
planning processes of production planning (sales and standard deviation to the mean for a particular process.
operations planning), master production scheduling,
COFC–Abbreviation for container on a railroad flatcar.
and capacity requirements planning. Once this
planning phase is complete and the plans have been COGS–Abbreviation for cost of goods sold.
accepted as realistic and attainable, the execution
processes come into play. These processes include cold chain–A term referring to the storage, transfer,
the manufacturing control processes of input-output and supply chain of temperature-controlled products.
(capacity) measurement and detailed scheduling and Industries in the cold chain include food and
dispatching, as well as anticipated delay reports from agriculture, pharmaceuticals, and chemicals.
both the plant and suppliers, supplier scheduling, and collaborative forecasting–The process for collecting
so on. The term closed loop implies not only that each and reconciling information from within and outside
of these processes is included in the overall system, the organization to come up with a single projection
but also that feedback is provided by the execution of demand.
processes so the planning can be kept valid at all times.
collaborative planning–Syn: collaborative planning,
closed-loop systems–In reverse logistics, a system forecasting, and replenishment (CPFR).
that accounts for the return flow of products for
reuse, asset recovery, or recycling in a way that is collaborative planning, forecasting, and
cost-effective and maximizes returns. replenishment (CPFR)–1) A collaboration process
whereby supply chain trading partners can jointly
closed period–The accounting time period for which plan key supply chain activities from production
the adjusting and closing entries have been posted. and delivery of raw materials to production and
Ant: open period. delivery of final products to end customers.
closely held–A description of an organization owned Collaboration encompasses business planning,
by a small number of people. sales forecasting, and all operations required to
replenish raw materials and finished goods. 2) A
closeness ratings–In layout analysis, to begin yielding. process philosophy for facilitating collaborative
In layout analysis, measures of how beneficial it would communications. CPFR is considered a standard,
be for one department to be located near another. and is endorsed by the Voluntary Interindustry
Commerce Standards. Syn: collaborative planning.

collaborative supply relationship • compensation laws
collaborative supply relationship–Syn: supplier common carrier–Transportation available to the

partnership. public that does not provide special treatment to any
one party and is regulated as to the rates charged,
collaborative transportation management–A
the liability assumed, and the service provided. A
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method of sharing information among suppliers,
common carrier must obtain a certificate of public
buyers, and transporters to add value to the service.
convenience and necessity from the Federal Trade
collective bargaining–A highly regulated system Commission for interstate traffic. Ant: private carrier.
established to control conflict between labor and
common carrier duties–The requirements of common
management. It defines and specifies the rules and
carriers to offer reasonable services and rates and to
procedures of initiating, negotiating, maintaining,
avoid discrimination.
changing, and terminating the labor-management
relationship. common causes–Causes of variation that are
inherent in a process over time. They affect every
co-location–Placing project team members in
outcome of the process and everyone working in the
physical proximity to facilitate communication and
process. Syn: random cause. See: assignable cause,
working relationships.
assignable variation, common cause variability.
co-managed inventory (CMI)–Continuous
common cause variability–The variability in product
replenishment where the manufacturer is responsible
quality that results from numerous uncontrollable
for managing the inventory of standard merchandise
everyday factors, such as temperature, humidity, and
and the retailer manages promotional items.
tool wear. Syn: common variation. See: common causes.
combined lead time–Syn: cumulative lead time.
common cost–A cost that is incurred by the business
commercial invoice–An official document indicating as a whole.
the names of the seller and buyer, the product being
common law–Law flowing from judicial decisions over
shipped, and its value. The document is provided by
the years rather than from legislative action.
the seller.
common material–Readily available items used in
commercial-off-the-shelf (COTS)–A term describing
industry that require no special handling.
computer software made available for sale by
commercial developers. common parts bill–Syn: common parts bill of material.
commercial speech–Communication that is primarily common parts bill of material–A type of planning bill
for a business purpose. Such speech is protected that groups common components for a product or
under the First Amendment to the U.S. Constitution family of products into one bill of material, structured to
but to a lesser degree than noncommercial speech. a pseudoparent item number. Syn: common parts bill.
committed capability–The portion of the production common-size income statement–In accounting,

capability that is currently in use or is scheduled for use. an income statement having values expressed as a
percentage of sales rather than dollar values.
commodity–An item that is traded in commerce.
The term usually implies an undifferentiated product common variation–Syn: common cause variability.
competing primarily on price and availability.
communication management plan–A document
commodity buying–Grouping like parts or materials that describes the communications needs and
under one buyer’s control for the procurement of all expectations within a project, including format, dates,
requirements to support production. locations, and responsibilities.
commodity procurement strategy–The purchasing company culture–A system of values, beliefs,

plan for a family of items. Includes the plan to manage and behaviors inherent in a company. To optimize
the supplier base and solve problems. business performance, top management must define
and create the necessary culture.
commodity rate–A rate to ship a specific commodity
across a specific origin-destination pairing. compensation–The pay and benefits awarded for
services rendered to an organization.
commonality–A condition in which certain raw
materials or ingredients are used in multiple parents. compensation laws–Laws designed to pay employees
for injuries sustained on the job.

competitive advantage • computer-integrated manufacturing (CIM)
competitive advantage–The advantage a company composition–The makeup of an item, typically

has over its rivals in attracting customers and expressing chemical properties rather than physical
defending against competitors. Sources of the properties.
advantage include characteristics that a competitor
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compound interest–1) The type of interest that is
cannot duplicate without substantial cost and risk,
periodically added to the amount of investment (or loan)
such as a manufacturing technique, brand name, or
so that subsequent interest is based on the cumulative
human skill set. Syn: competitive edge.
amount. 2) The interest charges under the condition
competitive analysis–An analysis of a competitor that that interest is charged on any previous interest earned
includes its strategies, capabilities, prices, and costs. in any time period, as well as on the principal.
competitive benchmarking–Benchmarking a product compound yield–The cumulative effect of yield loss at

or service against competitors. Syn: performance multiple operations within the manufacturing cycle.
benchmarking. See: benchmarking.
comptroller–Syn: controller.
competitive bid–A price offering by one company that
computer-aided design (CAD)–The use of
a buyer will consider along with price offerings from
computers in interactive engineering drawing and
other companies.
storage of designs. Programs complete the layout,
competitive differentiator–A characteristic that makes geometric transformations, projections, rotations,
a company or product unique within a marketplace. magnifications, and interval (cross-section) views of a
part and its relationship with other parts.
competitive edge–Syn: competitive advantage.
computer-aided engineering (CAE)–The process of
competitive intelligence–The information required to
generating and testing engineering specifications on
conduct a competitive analysis about external events
a computer workstation.
and trends that can affect a company’s plans.
computer-aided inspection and test (CAIT)–The use
complete and on-time delivery (COTD)–A metric
of computer technology in the inspection and testing
defining customer service. To be considered as
of manufactured products.
complete and on time, all items in the order—in the
correct quantity and with the correct line items— computer-aided manufacturing (CAM)–The use of
must arrive on time. computers to program, direct, and control production
equipment in the fabrication of manufactured items.
component–The raw material, part, or subassembly that
goes into a higher-level assembly, compound, or other computer-aided process planning (CAPP)–A method
item. This term may also include packaging materials for of process planning in which a computer system
finished items. See: ingredient, intermediate part. assists in the development of manufacturing process
plans (defining operation sequences, machine and
component availability–The availability of component
tooling requirements, cut parameters, part tolerances,
inventory for the manufacture of a specific parent
inspection criteria, and other items). Artificial
order or group of orders or schedules.
intelligence and classification and coding systems may
component lead-time offset–Syn: lead-time offset. be used in the generation of the process plan.
composite lead time–Syn: cumulative lead time. computer-assisted software engineering (CASE)–
The use of computerized tools to assist in the process
composite manufacturing lead time–Syn: cumulative of designing, developing, and maintaining software
manufacturing lead time. products and systems.
composite part–A part that represents operations computer-integrated manufacturing (CIM)–The
common to a family or group of parts controlled by integration of the total manufacturing organization
group technology. Tools, jigs, and dies are used for the through the use of computer systems and managerial
composite part; therefore, any parts of that family can philosophies that improve the organization’s
be processed with the same operations and tooling. effectiveness; the application of a computer to bridge
The goal is to reduce setup costs. various computerized systems and connect them into
composite yield–A condition where loss occurs along a coherent, integrated whole. For example, budgets,
several operations resulting in a decreased yield for CAD/CAM, process controls, group technology
the end item. Syn: cumulative yield. systems, MRP II, and financial reporting systems are
linked and interfaced.

computer numerical control (CNC) • consignor
computer numerical control (CNC)–A technique in configurator–Software system that creates, uses,
which a machine tool controller uses a computer and maintains product models that allow complete
or microprocessor to store and execute numerical definition of all possible product options and
instructions. variations with a minimum of data entries.
concentration–The percentage of an active

ingredient within the whole. For example, a 40 percent
solution of hydrochloric acid.
confirming order–A purchase order issued to a
supplier before the usual purchase document, which
lists the goods or services and terms of an order placed
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orally or otherwise.
concept phase–In project management, the first phase
in which a project is defined and the scope is planned. confiscation–The taking of property without
adequate compensation for it.
concurrency–Syn: resource contention.
conflict minerals–Minerals mined in conditions of
concurrent design–Syn: participative design/
armed conflict and human rights abuses, and that are
engineering.
sold or traded by armed groups.
concurrent engineering–Syn: participative design/
conflict of interest–Any business activity, personal
engineering.
or company-related, that interferes with a company’s
conference room pilot–Simulation of all business goals or that entails unethical or illegal actions.
processes from end to end within the new information
conformance–An affirmative indication or judgment
system in a controlled environment.
that a product or service has met the requirements of
confidence interval–The range on either side of an a relevant specification, contract, or regulation.
estimated value from a sample that is likely to contain
conformance perspective–A measure of how closely
the true value for the whole population.
a product or service performs to its intended quality.
confidence level–The probability that a particular
connectivity–The ability to communicate
value lies between an upper and a lower bound, which
effectively with supply chain partners to facilitate
are its confidence limits.
interorganization synchronization.
confidence limit–The bounds of an interval. A
consideration–In contract law, an obligation that is to
probability can be given for the likelihood that the
the detriment of one party (promisee) or to the benefit
true value will lie between the confidence limits.
of the other party (promisor).
configuration–The arrangement of components as
consigned stocks–Inventories, generally of finished
specified to produce an assembly.
goods, that are in the possession of customers, dealers,
configuration audit–A review of the product against agents, brokers, etc., but remain the property of the
the engineering specifications to determine whether manufacturer by agreement with those in possession.
the engineering documentation is accurate, up Syn: consignment inventory, vendor-owned inventory.
to date, and representative of the components, See: consignment.
subsystems, or systems being produced.
consignee–The receiver of a shipment of freight.
configuration control–The function of ensuring that
consignment–1) A shipment that is handled by a
the product being built and shipped corresponds
common carrier. 2) The process of a supplier placing
to the product that was designed and ordered. This
goods at a customer location without receiving
means that the correct features, customer options,
payment until after the goods are used or sold. See:
and engineering changes have been incorporated
consigned stocks.
and documented.
consignment inventory–Syn: consigned stocks.
configuration management system–Formal procedures
See: consignment.
to identify and document the physical characteristics of
a product or project, control changes, and support an consignor–The sender of a shipment in a contract
audit to verify conformance. of transport.
configuration system–Syn: customer order

servicing system.

consolidation • contactless
consolidation–The grouping of shipments to consular invoice–A special invoice used for goods being
obtain reduced costs or improved utilization of the sent to the importer's country. The importing country's
transportation function. Consolidation can occur consulate provides the stationery. The invoice is written
by market area grouping, grouping according to in the language of the importing country and may
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scheduled deliveries, or using third-party pooling require a government employee's signature.
services such as public warehouses and freight
consumables–Supplies or materials (such as paint,
forwarders. Syn: freight consolidation. See: milk run.
cleaning materials, or fuel) that are consumed or
consolidation warehouses–Collection points that exhausted in the production or sale of a good or service.
receive less-than-truckload (LTL) shipments from Syn: consumable tooling, supplies; expendables.
regional sources and then ship them in cargo load or
consumable tooling, supplies–Syn: consumables.
truckload quantities to a manufacturing facility.
consumer–A person who purchases a good or service
consolidator–A company that groups together
for his or her own use (not for resale). See: customer.
various shipments or orders to facilitate movement.
consumer’s risk (ß)–For a given sampling plan,
consortia trade exchanges (CTX)–An online
the probability of acceptance of a lot, the quality
marketplace, usually owned by a third party, that
of which has a designated numerical value
allows members to trade with each other. Such sites
representing a level that is worse than some
lower members’ search costs and enable lower prices
threshold value. See: type II error.
for the buyer.
consumer durable goods–A division of durable
consortium–A group of companies that work together
goods that comprises items intended for consumer
to jointly produce a product, service, or project.
use, such as refrigerators—as opposed to industrial
constant–A quantity that has a fixed value. Ant: variable. goods, such as forklifts. See: durable goods.
constrained optimization–Achieving the best consumer market–A market composed of individuals

possible solution to a problem in terms of a specified and families who buy products and services for
objective function and a given set of constraints. consumption. See: government market, industrial
market, institutional market.
constraint–1) Any element or factor that prevents a
system from achieving a higher level of performance consumer price index–A measure of the overall level
with respect to its goal. Constraints can be physical, of prices. It attempts to relate the cost of buying a
such as a machine center or lack of material, but they specific set of goods and services with the cost of
can also be managerial, such as a policy or procedure. buying the same set of goods and services during an
2) One of a set of equations that cannot be violated in earlier time period.
an optimization procedure.
consumer surplus–The difference between the
constraint accounting–Syn: theory of constraints highest price a consumer is willing to pay for a good or
accounting. service and the price actually paid.
constraint-oriented finite loading–A finite loading consuming the forecast–The process of reducing the
technique that plans orders around bottleneck work forecast by customer orders or other types of actual
centers. The objective is to maximize total production demands as they are received. The adjustments yield
throughput. Orders in small lot sizes aggregate into the value of the remaining forecast for each period.
large lot sizes at the constraint and then load forward. Syn: forecast consumption.
Prior operations are then backward-scheduled, and
consumption–The amount of each bill-of-material
downstream operations are forward-scheduled. See:
component used in the production process to make
drum-buffer-rope, order-oriented finite loading.
the parent.
constraints management–The practice of managing
contact efficiency–A measure of how well an
resources and organizations in accordance with the
organization transforms website hits into visits.
theory of constraints (TOC) principles. See: theory of
constraints. contactless–Using radio frequency identification
or similar technologies to record data about an item
constraint theory–Syn: theory of constraints.
electronically without physical contact with the item.

container • contract
container–A large box in which commodities to be large, and price is almost always a key order-winning
shipped are placed. criterion. Examples of items produced by a continuous
process include gasoline, steel, fertilizer, glass, and
container design–The characteristics of the product
paper. Syn: continuous production.
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that make it transportable with ease of handling and
stowability. Container concepts include packaging, continuous process–Syn: continuous production.
monetary density, and physical density.
continuous process control–The use of transducers
containerization–A shipment method in which (sensors) to monitor a process and make automatic
commodities are placed in containers, and after initial changes in operations through the design of appropriate
loading, the commodities per se are not rehandled in feedback control loops. Although such devices have
shipment until they are unloaded at the destination. historically been mechanical or electromechanical,
there is now widespread use of microcomputers and
container on a flatcar (COFC)–A specialized form
centralized control.
of containerization in which rail, motor, and sea
transport coordinate. continuous process improvement (CPI)–A never-
ending effort to expose and eliminate root causes
container security initiative (CSI)–An agreement that
of problems; small-step improvement as opposed to
allows U.S. customs agents in foreign ports to identify
big-step improvement. Syn: continuous improvement.
and inspect high-risk containers prior to their being
See: kaizen.
loaded on a ship bound to a U.S. port.
continuous production–A production system
content management applications–Supports the
in which the productive equipment is organized
evolutionary life cycle of digital-based information
and sequenced according to the steps involved
and makes information dynamically updatable online;
to produce the product. This term denotes that
includes the ability to publish content to a repository
material flow is continuous during the production
and support access to digital-based content.
process. The routing of the jobs is fixed and setups are
contestable market–A market having low entry costs. seldom changed. Syn: continuous flow (production),
continuous process, continuous manufacturing. See:
contingency planning–A process for creating a mass production, project manufacturing.
document that specifies alternative plans to facilitate
project success if certain risk events occur. continuous replenishment–A process by which a
supplier is notified daily of actual sales or warehouse
contingency reserve–A budget of money or time shipments and commits to replenishing these sales
allowed over an initial estimate to reduce the (for example, by size or color) without stockouts and
likelihood of overruns. without receiving replenishment orders. The result is
contingent project–A project that can be accepted a lowering of associated costs and an improvement in
only if one or more other projects are accepted first. inventory turnover. See: rapid replenishment, vendor-
See: independent project, mutually exclusive project. managed inventory.
continuous flow (production)–Syn: continuous continuous review system–The inventory level on

production. hand and on order for a continuous review system is
checked whenever a change in inventory level occurs.
continuous flow distribution–A pull system diverting When the reorder point is reached, a restocking order
products in response to customer requirements while is released. See: fixed reorder cycle inventory model.
keeping distribution costs low.
continuous variable–A variable, such as height,
continuous improvement–The act of making temperature, or weight, that can be measured along a
incremental, regular improvements and upgrades to a continuous scale. See: discrete variable.
process or product in the search for excellence.
contract–An agreement between two or more
continuous manufacturing–A type of manufacturing competent persons or companies to perform or not
process that is dedicated to the production of a very to perform specific acts or services or to deliver
narrow range of standard products. The rate of product merchandise. A contract may be oral or written.
change and new product information is very low. A purchase order, when accepted by a supplier,
Significant investment in highly specialized equipment becomes a contract. Acceptance may be in writing or
allows for a high volume of production at the lowest by performance, unless the purchase order requires
manufacturing cost. Thus, unit sales volumes are very acceptance in writing.

contract accounting • control phase
contract accounting–The function of collecting contributory negligence–A rule under which a

costs incurred on a given job or contract, usually in a defendant may escape liability if it can be shown that
progress payment situation. Certain U.S. government the plaintiff was negligent to some extent.
contracting procedures require contract accounting.
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control–Comparing actual to planned performance
contract administration–Managing all aspects of a and taking corrective action, as needed, to align
contract to guarantee that the contractor fulfills his performance with plan.
obligations.
control board–A visual means of showing machine
contract carrier–A carrier that does not serve the loading or project planning, usually a variation of the
general public, but provides transportation for hire basic Gantt chart. Syn: dispatch(ing) board, planning
for one or a limited number of shippers under a board, schedule board. See: schedule chart.
specific contract.
control center–In a centralized dispatching
contract date–The date when a contract is accepted operation, the place at which the dispatching is done.
by all parties.
control chart–A graphic comparison of process
contract labor–Self-employed individuals or firms performance data with predetermined computed
contracted by an organization to perform specific control limits. The process performance data usually
services on an intermittent or short-term basis. consists of groups of measurements selected in the
regular sequence of production that preserve the
contract line items number (CLIN)–Specific items
order. The primary use of control charts is to detect
that are priced separately on a contract.
assignable causes of variation in the process as
contract manufacturing–A situation in which a opposed to random variations. The control chart is one
third party makes products that are packaged under of the seven tools of quality. Syn: process control chart.
another company’s label.
control decision–A decision about the planning or
contract pegging–Syn: full pegging. controlling of daily operations.
contract reporting–Reporting of and the accumulation controllable cost–A cost that is under the direct
of finished production against commitments to a control of a given level of management.
customer.
controlled access–Fenced or walled areas within
contracts for the international sale of goods a warehouse or yard usually monitored by security
(CISG)–Govern the sale of goods in the international cameras. These areas are used to store high-value
environment. They enable exporters to avoid choice- items.
of-law issues.
controlled issue–Syn: planned issue.
contract target cost–The estimated cost negotiated
controller–The person responsible for financial
in a contract.
and managerial accounting within a company. Syn:
contribution–The difference between sales price and comptroller.
variable costs. Contribution is used to cover fixed
control limit–A statistically determined line on a
costs and profits.
control chart (upper control limit or lower control
contribution margin–An amount equal to the limit). If a value occurs outside this limit, the process
difference between sales revenue and variable costs. is deemed to be out of control.
contribution margin pricing–A method of setting prices control number–Typically, the manufacturing order or
based on the contribution margin. It provides a ceiling schedule number used to identify a specific instance
and a floor between which the price setter operates. The or period of production.
ceiling is the target selling price—what the seller would
control phase–One of the six sigma phases of quality.
like to get—and the floor is the total variable costs of the
Process performance is observed, often with control
product using traditional accounting.
charts, for steady results.
contribution relativities–Situations in which an
investment by one stakeholder may benefit others in
the supply chain.

control points • cost, insurance, freight (CIF)
control points–In the theory of constraints, co-product–A product that is usually manufactured
strategic locations in the logical product structure together or sequentially because of product or
for a product or family that simplify the planning, process similarities. See: by-product.
scheduling, and control functions. Control points
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core competencies–Bundles of skills or knowledge
include gating operations, convergent points,
sets that enable a firm to provide the greatest level
divergent points, constraints, and shipping points.
of value to its customers in a way that is difficult
Detailed scheduling instructions are planned,
for competitors to emulate and that provides for
implemented, and monitored at these locations.
future growth. Core competencies are embodied
Other work centers are instructed to “work if they
in the skills of the workers and in the organization.
have work; otherwise, be prepared for work.” In this
They are developed through collective learning,
manner, materials flow rapidly through the facility
communication, and commitment to work across
without detailed work center scheduling and control.
levels and functions in the organization and with the
control system–A system that has as its primary customers and suppliers.
function the collection and analysis of feedback from
core process–That unique capability that is central to
a given set of functions for the purpose of controlling
a company’s competitive strategy.
the functions. Control may be implemented
by monitoring or systematically modifying the core team–A cross-functional team of specialists
parameters or policies used in those functions, or by formed to manage new product introduction. See:
preparing control reports that initiate useful action cross-functional team.
with respect to significant deviations and exceptions.
corporate culture–The set of important assumptions
convergent point–An operation in a production that members of the company share. It is a system
process where multiple materials/parts/components of shared values about what is important and beliefs
are combined into a single component. An assembly about how the company works. These common
operation is an example of a convergent point. assumptions influence the ways the company
operates.
conversion efficiency–In e-commerce, a measure
of how well an organization transforms visits to its corporate purchasing cards–Syn: procurement credit
website into customer orders. See: attractability card.
efficiency.
corrective action–The implementation of solutions
convertible security–An asset (stock or bond) that resulting in the reduction or elimination of an
may be changed for another asset at the owner’s identified problem.
request.
corrective maintenance–The maintenance required
conveyance–A term that refers to the object used to to restore an item to a satisfactory condition.
hold material as it is being transferred from one point
of use to another. As a verb it refers to the actual correlated demands–Demands that consistently
movement of the material. vary in the same direction because of the relationship
between the items demanded.
conveyor–A device following a fixed route that has
the capability of moving material between points in a correlation–The relationship between two sets of
facility. This device commonly is used when there is a data such that when one changes, the other is likely
high volume of flow along the route. to make a corresponding change. If the changes are
in the same direction, there is positive correlation.
CONWIP–An abbreviation for Constant Work in When changes tend to occur in opposite directions,
Process. A pull methodology that limits the amount there is negative correlation. When there is little
of work-in-process inventory in a system by releasing correspondence or changes are random, there is no
work only at the start of a sequence when other work correlation.
is completed at the end of that sequence.
correlation coefficient–A measure of the degree
cooperative training–An educational process in of correlation between two values. The coefficient
which students alternate formal studies with actual ranges from -1 to 1.
on-the-job experience. Successful completion of
the off-campus experience may be a prerequisite for cost, insurance, freight (CIF)–A freight term
graduation from the program of study. indicating that the seller is responsible for cost, the
marine insurance, and the freight charges on an
ocean shipment of goods.

cost accounting • cost performance index (CPI)
cost accounting–The branch of accounting that is cost equalization point (CEP)–A point or quantity at
concerned with recording and reporting business which the cost curves of two manufacturing methods
operating costs. It includes the reporting of costs by have an equal value.
departments, activities, and products.
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cost estimation–1) Specification of the relationship
cost allocation–The assignment of costs that cannot between cost and the underlying cost drivers. 2) In
be directly related to production activities via more project management, creating an approximation
measurable means (e.g., assigning corporate expenses of the resources and associated costs needed to
to different products via direct labor costs or hours). complete a project.
cost analysis–Review and evaluation of actual or cost management–Control of activities to eliminate

anticipated cost data. waste, improve cost drivers, and plan operations.
This process should affect the organization’s setting
cost-based contract–A type of purchasing contract
of strategy. Product pricing, introduction of new
where the price of goods or services is tied to the
products, and distribution of existing products are
cost of key inputs or other economic factors such as
examples of strategic decisions that are affected by
interest rates.
cost management.
cost-benefit ratio–A ratio of total measurable
cost object–In activity-based cost accounting,
benefits to the initial capital cost. This might be used
anything for which a separate cost measurement
in deciding which projects to pursue in a continuous
is desirable. This may include a product, customer,
improvement effort.
project, or other work unit.
cost-budgeting–In project management, accumulating
cost object driver–In activity-based cost accounting,
the estimated costs of individual activities to arrive at a
a numerical measure of the demand placed on one
cost baseline.
cost object by other cost objects.
cost center–The smallest segment of an organization,
cost of capital–The cost of maintaining a dollar of
typically a department, for which costs are collected
capital invested for a certain period, usually one
and formally reported. The criteria in defining cost
year. This cost is normally expressed as a percentage
centers are that the cost be significant and that the
and may be based on factors such as the average
area of responsibility be clearly defined. A cost center
expected return on alternative investments and
is not necessarily identical to a work center; normally,
current bank interest rate for borrowing.
a cost center encompasses more than one work
center, but this may not always be the case. cost of goods sold (COGS)–An accounting
classification useful for determining the amount of
cost control–Applying procedures that monitor the
direct materials, direct labor, and allocated overhead
progress of operations against authorized budgets
associated with the products sold during a given
and taking action to achieve minimal costs.
period of time. See: cost of sales.
cost driver–Syn: driver (first definition).
cost of lost sales–Profit that is foregone because of a
cost driver analysis–In activity-based cost accounting, stockout situation.
the examination of the impact of cost drivers. The
cost of poor quality– The costs associated with
results of this analysis are useful in the continuous
performing a task incorrectly and/or generating
improvement of cost, quality, and delivery times.
unacceptable output. These costs would include the
costed bill of material–A form of bill of material that costs of nonconformities, inefficient processes, and
extends the quantity per of every component in the lost opportunities. See: quality costs.
bill by the cost of the components.
cost of quality–See: quality costs.
cost element–In activity-based cost accounting, the
cost of sales–The total cost attached (allocated)
lowest subdivision of a resource, activity, or cost object.
to units of finished product delivered to customers
cost engineer–An engineer whose judgment and during the period. See: cost of goods sold.
experience are used in the application of scientific
cost performance index (CPI)–A measure of project
principles and techniques to problems of cost
efficiency. Earned value over actual costs.
estimation and cost control in business planning,
profitability analysis, project management and
production planning, scheduling, and control.

cost-plus contract • cranes and hoists
cost-plus contract–A pricing method where the activities.

buyer agrees to pay the seller all the acceptable
count chart–Syn: c chart.
costs of the product or service up to a maximum
cost plus a fixed fee. Syn: cost-type contract. counterpurchase–When an exporter buys unrelated
cost-plus-fixed-fee contract–A contract in which
the seller is paid for costs specified as allowable in
the contract plus a stipulated fixed fee.
goods or services from an importer.
countertrade–Any transaction in which partial or full

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payment is made with goods instead of money. This
often applies in international trade.
cost-plus-incentive-fee contract–A contract
in which the seller is paid for costs specified as count frequency–The number of times an item
allowable in the contract plus a profit, provided in inventory is counted during a period of time.
certain provisions are met. Generally, high-value inventories are counted more
frequently than low-value items, although properties
cost pool–In activity-based cost accounting, an
other than value can influence the frequency.
aggregation of resources assigned to activities or
activities assigned to cost objects. Items may be count-per-unit chart–Syn: U chart.
aggregated or disaggregated depending on how the
data is to be used. count point–A point in a flow of material or sequence
of operations at which parts, subassemblies, or
cost-ratio plan–A variation of the weighted-point plan assemblies are counted as being complete. Count
of supplier evaluation and selection. The cost ratio points may be designated at the ends of lines or upon
is obtained by dividing the bid price by the weighted removal from a work center, but most often they are
scores determined by the weighted-point plan. This designated as the points at which material transfers
procedure determines the true costs by taking into from one department to another. Syn: pay point.
account compensating factors. Suppliers are selected
and/or evaluated based on the lowest cost ratio. coupon–A promotional device offering special
savings when a product is purchased.
cost reduction–The act of lowering the cost of goods
or services by securing a lower price, reducing labor Cp–A widely used process capability index. It is
costs, and so forth. In cost reduction, the item usually calculated by dividing the difference between the upper
is not changed, but the circumstances around which specification limit (USL) and the lower specification limit
the item is secured are changed—as opposed to (LSL) by 6 times the standard deviation (s) or
value analysis, in which the item itself is actually
changed to produce a lower cost.
CPFR–Abbreviation for collaborative planning,
cost tradeoff–Considering the advantages and forecasting, and replenishment.
disadvantages of one method over another, such
as different avenues of distribution or providing CPI–1) Abbreviation for continuous process
customer service. improvement. 2) Abbreviation for cost performance
index.
cost-type contract–Syn: cost-plus contract.
CPIM–Abbreviation for Certified in Production and
cost variance–In cost accounting, the difference Inventory Management.
between what has been budgeted for an activity and
what it actually costs. Cpk–An index method of the variability of a process. A
widely used process capability index. It is expressed as:
cost-volume-profit analysis–The study of how profits
change with various levels of output and selling price.
COTD–Abbreviation for complete and on-time where m is the mean and s is the standard deviation.
delivery. CPM–Abbreviation for critical path method.
COTS–Abbreviation for commercial-off-the-shelf. CPOF–Abbreviation for capacity planning using
Council of Supply Chain Management Professionals overall factors.
(CSCMP)–A not-for-profit worldwide organization CPU–Abbreviation for central processing unit.
of logistics and supply chain managers. It provides
educational opportunities through a variety of cranes and hoists–Equipment capable of moving
items up and down or side to side.

crashing • CRM
crashing–In project management, adding resources to critical path activity–In project management, any
critical path or near-critical path activities on a project activity on a network’s critical path as determined by
to shorten project duration after analyzing the project the critical path method.
to identify the most cost-effective course of action.
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critical path lead time–Syn: cumulative lead time.
credit period–The time allowed a customer to pay an
critical path method (CPM)–A network planning
invoice in full.
technique for the analysis of a project’s completion
crew size–The number of people required to perform time used for planning and controlling the activities
an operation. The associated standard time should in a project. By showing each of these activities
represent the total time for all crew members to and their associated times, the critical path, which
perform the operation, not the net start to finish time identifies those elements that actually constrain
for the crew. the total time for the project, can be determined.
See: critical chain method, network analysis, critical
crew-size standard–A labor estimate of the number
activity, critical path.
of workers necessary to complete the required output
for a given shift. critical point backflush–Backflush performed at
a specific point in the manufacturing process, at
critical activity–Any activity on the critical path of a
a critical operation, or at an operation where key
project; an activity with no slack time (i.e., any delay in
components are consumed.
the activity will delay project completion). See: critical
path, critical path method. critical processes–Processes that have large
potential for loss—either money, property, or
critical chain–The longest sequence of dependent
human life.
events through a project network, considering both
technical and resource dependencies in completing the critical process parameters–A variable or a set of
project. The critical chain is the constraint of a project. variables that dominates the other variables. Focusing
on these variables will yield the greatest return in
critical chain method–In the theory of constraints,
investment in quality control and improvement.
a network planning technique for the analysis of a
project’s completion time, used for planning and critical ratio–A dispatching rule that calculates a
controlling project activities. The critical chain, priority index number by dividing the time to due date
which determines project duration, is based on remaining by the expected elapsed time to finish the
technological and resource constraints. Strategic job. For example,
buffering of paths and resources is used to increase
project completion success. See: critical chain,
critical path method. A ratio less than 1.0 indicates the job is behind
schedule, a ratio greater than 1.0 indicates the job is
critical characteristics–The attributes of a product
ahead of schedule, and a ratio of 1.0 indicates the job
that must function properly to avoid the failure of the
is on schedule.
product. Syn: functional requirements.
critical success factor–One of a few organizational
critical failure–The malfunction of those parts that
objectives whose achievement should be sufficient
are essential for continual operation or the safety of
for organizational success.
the user.
critical-to-quality characteristics (CTQs)–The
critical mass–Individuals who add value to the
important and measurable traits of a product or
product or service. These individuals include
process whose performance targets must be met
personnel working directly on the product, personnel
to satisfy the customer. They adjust improvement
providing a service to the customer, and personnel
efforts to meet consumer requirements. CTQs
who provide support for the product or service (e.g.,
represent customer expectations for a product.
after-sale service).
critical value analysis–A modified ABC analysis
critical path–The longest sequence of activities
where a subjective metric of the criticality of an item
through a network. The critical path defines the
is assigned to each item.
planned project duration. See: critical activity, critical
path method. CRM–Abbreviation for customer relationship
management and customer relations management.

Cross Chain Control Center (4C) • cultural environment
Cross Chain Control Center (4C)–A center for the cross-training–Providing training or experience in
coordination and direction of multiple supply chains several different areas (e.g., training an employee on
to enhance the flow of goods through the exchange of several machines). Cross-training provides backup
data between different logistics chains to maximize workers in case the primary operator is unavailable.
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utilization through information, financial, and
CRP–Abbreviation for capacity requirements planning.
transportation flows. The result is larger volumes to
increase transportation loads, cut costs, and enhance cryptocurrency–A digital asset that uses
accessibility to more locations. cryptography to secure its transactions and to verify
the transfer of assets. The decentralized control
cross-docking–The concept of packing products
of each cryptocurrency works through a public
on incoming shipments so they can be easily
transaction database (blockchain), functioning as a
sorted at intermediate warehouses or for outgoing
distributed ledger. Unlike other currencies, it is not
shipments based on final destination. The items are
tied to a banking system's control. See: blockchain.
carried from the incoming vehicle docking point to
the outgoing vehicle docking point without being CRT–Abbreviation for current reality tree.
stored in inventory at the warehouse. Cross-docking
reduces inventory investment and storage space CSCMP–Abbreviation for Council of Supply Chain
requirements. Syn: direct loading. Management Professionals.
cross-docking warehouse–A warehouse or portion CSCP–Abbreviation for Certified Supply Chain

of a warehouse used for cross-docking. See: Professional.
cross-docking. CSI–Abbreviation for container security initiative.
cross-functional integration–Thread that weaves the CSM–Abbreviation for customer service management.
entire organization and manufacturing process into
one fabric in which each of the different parts serves CSR–Abbreviation for customer service representative.
and supports the whole. See: integrated enterprise.
CTP–Abbreviation for capable-to-promise.
cross-functional organization–Organization in which
C-TPAT–Abbreviation for Customs-Trade Partnership
groups of directors, executives, and managers with a
Against Terrorism.
diversity of skills and backgrounds work on problems
outside the bounds of their functional responsibilities. CTQs–Abbreviation for critical-to-quality
See: integrated enterprise. characteristics.
cross-functional team–A set of individuals from cubage–Cubic volume of space being used or
various departments assigned a specific task such as available for shipping or storage.
implementing new computer software. See: core team.
cube rate–1) A rate used to improve warehouse order
cross plot–Syn: scatter chart. picker productivity by placing items with smaller total
cubic space requirements closer to the shipping area.
cross-selling–Occurs when customers buy additional
A larger total number of items can be stored near
products or services after the initial purchase.
the shipping area in this way, thereby reducing the
cross-shipment–Material flow activity where materials aggregate order-picking travel time. 2) A freight rate
are shipped to customers from a secondary shipping calculated on cargo volume rather than weight.
point rather than from a preferred shipping point.
cube utilization–In warehousing and transportation,
cross-sourcing–A method of sourcing that uses a measurement of the utilization of the total storage
one supplier in one area of business for a product or capacity of a vehicle storage bay, container, type of
service and uses a different supplier in a different warehouse equipment, or entire warehouse. The intent
area of business for similar products or services. The is to minimize unused horizontal or vertical space.
suppliers can then compete for future business.
cubic space–In warehousing, a measurement of space
cross-subsidy–In activity-based cost accounting, the available or required in transportation and warehousing.
situation of assigning too much or too little cost to a
cultural environment–The sociocultural factors of
cost object. This may lead to poor decision making
the organization’s external environment. It includes
relative to the economic goals of the organization.
values, work ethics, education, religion, and consumer
and ecological factors.

cumulative available-to-promise • customer acquisition
cumulative available-to-promise–A calculation based cumulative trauma disorder–An occupational injury

on the available-to-promise (ATP) figure in the master believed to be caused by repetitive motions such as
schedule. Two methods of computing the cumulative typing or twisting.
available-to-promise are used, with and without
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cumulative yield–Syn: cascading yield loss,
look-ahead calculation. The cumulative with look-
composite yield.
ahead ATP equals the ATP from the previous period
plus the MPS of the period minus the backlog of the current assets–An accounting/financial term
period minus the sum of the differences between the (balance sheet classification of accounts)
backlogs and MPSs of all future periods until, but not representing the short-term resources owned by a
to include, the period where point production exceeds company, including cash, accounts receivable, and
the backlogs. The cumulative without look-ahead inventories. See: assets, balance sheet.
procedure equals the ATP from the previous period
plus the MPS, minus the backlog in the period being current cost–1) The current or replacement cost of
considered. See: available-to-promise. labor, material, or overhead. Its computation is based on
current performance or measurements, and it is used to
cumulative forecast error (CFE)–The accumulated address today’s costs before production as a revision
total of all forecast errors, both positive and negative. of annual standard costs. 2) An asset’s value based on
This sum will approach zero if the forecast is the cost of an identical asset purchased today.
unbiased. Syn: sum of deviations.
current finish time–In project management, the
cumulative lead time–The longest planned length of present estimate of an activity’s finish time.
time to accomplish the activity in question. It is found
by reviewing the lead time for each bill of material current liabilities–The debts owed by a company and
path below the item; whichever path adds up to the expected to be paid within 12 months. See: liabilities,
greatest number defines cumulative lead time. Syn: balance sheet.
aggregate lead time, combined lead time, composite current on-hand alert–An alert in demand-driven
lead time, critical path lead time, stacked lead time. material requirements planning sent to purchasing,
See: planning horizon, planning time fence. planning and manufacturing personnel that depletion
cumulative manufacturing lead time–The of on-hand inventory has entered the red zone.
cumulative planned lead time when all purchased current price–The price currently being paid, as
items are assumed to be in stock. Syn: composite opposed to standard cost.
manufacturing lead time.
current ratio–Current assets divided by current
cumulative MRP–The planning of parts and liabilities.
subassemblies by exploding a master schedule, as
in MRP, except that the master-scheduled items and current reality tree (CRT)–A logic-based tool for
therefore the exploded requirements are time-phased using cause-and-effect relationships to determine
in cumulative form. Usually these cumulative figures root problems that cause the observed undesirable
cover a planning year. effects of the system. See: root cause analysis.
cumulative receipts–A cumulative number, or current start date–In project management, the
running total, as a count of parts received in a present estimate of an activity’s start date.
series or sequence of shipments. The cumulative
curve fitting–An approach to forecasting based on a
receipts provide a number that can be compared
straight line, polynomial, or other curve that describes
with the cumulative figures from a plan developed by
some historical time series data.
cumulative MRP.
customer–1) A person or organization receiving a
cumulative sum control chart–A control chart on
good, service, or information. See: external customer,
which the plotted value is the cumulative sum of
internal customer. 2) In project management, every
deviations of successive samples from a target value.
project has a customer who may be internal or
The ordinate of each plotted point represents the
external to the organization and who is responsible
algebraic sum of the previous ordinate and the most
for the final project acceptance.
recent deviations from the target.
customer acquisition–In marketing, the rate at which
cumulative system–A method for planning and
new customers are switching to an organization’s brand.
controlling production that makes use of cumulative
MRP, cumulative requirements, and cumulative counts.

customer-as-participant • customer service
customer-as-participant–A service system that customer/order fulfillment process–A series of

contains a high level of customer involvement in part customers’ interactions with an organization through
of the service delivery. the order filling process, including product/service
design, production and delivery, and order status
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customer-as-product–A service system designed to
reporting.
actually perform the service on the customer, such as
in health care or hair salons. customer order promising–Syn: order promising.
customer chain operations reference (CCOR)– customer order servicing system–An automated
Serves as the starting point for process modeling system for order entry where orders are keyed into
efforts by providing BPM modelers a core set of high- a local terminal and a bill-of-material translator
level common business processes for the customer converts the catalog ordering numbers into required
chain and a common language for the exchange of manufacturing part numbers and due dates for the
process knowledge and linking sales, operations, and MRP system. Advanced systems contain customer
customer support business processes. information, sales history, forecasting information,
and product option compatibility checks to facilitate
customer contact centers–Centers that combine
order processing, “cleaning up” orders before placing
phone centers and web contact services to enable
a demand on the manufacturing system. Syn:
customers to contact the center 24 hours a day via
configuration system, sales order-configuration.
phone, web, or email.
customer partner–A customer organization with
customer convergence–An internet-based marketing
which a company has formed a customer-supplier
concept in which organizations must provide
partnership. See: outpartnering.
descriptions of the goods and services they offer so
potential customers will locate or converge on the customer partnership–Syn: customer-supplier
appropriate websites. partnership.
customer coproduction–A system in which the customer profitability–Estimating the profit retained
customer is part of the service delivery process. For on business with a specific customer.
example, in grocery stores customers often have the
customer relationship management (CRM)–A
option to use self-checkout.
marketing philosophy based on putting the customer
customer defection analysis–Analyzing the customers first. Involves the collection and analysis of information
who have stopped buying to determine why. designed for sales and marketing decision support (in
contrast to enterprise resources planning information)
customer-defined attributes–The characteristics of
to understand and support existing and potential
a good or service that are viewed as being important
customer needs. Includes account management,
in addressing the needs of the customer. See: house
catalog and order entry, payment processing, credits
of quality.
and adjustments, and other functions. Syn: customer
customer driven–A company’s consideration of relations management.
customer wants and desires in deciding what is
customer relations management (CRM)–Syn:
produced and its quality.
customer relationship management.
customer facing–A hardware or software product,
customer satisfaction–The results of delivering a
technology, or any thing or person that a business’s
good or service that meets customer requirements.
customer deals with directly.
customer segmentation–The practice of dividing
customer managed inventory–Supply chain
a customer base into groups of individuals who
replenishment model wherein the customer controls
are similar in specific ways relevant to marketing.
the physical replenishment of spares or parts.
Traditional segmentation focuses on identifying
customer order–An order from a customer for a customer groups based on demographics and
particular product or number of products. It is often attributes such as attitude and psychological profiles.
referred to as an actual demand to distinguish it
customer service–1) The ability of a company
from a forecasted demand. See: booked orders.
to address the needs, inquiries, and requests of
customer order cycle time–Syn: order fulfillment customers. 2) A measure of the delivery of a product
lead time. to the customer at the time the customer specified.

customer service level • cycle counter
customer service level–Syn: customer service ratio. customer tolerance time–The amount of time
potential customers are willing to wait for the delivery
customer service life cycle–In information systems,
of a good or a service. Syn: demand lead time.
a model that describes the customer relationship
C
as having four phases: requirements, acquisition, custom product–A product that is made to meet the
ownership, and retirement. requirements of specific customers.
customer service management (CSM)–A process customs broker–A person who manages the paperwork
that enables a business to offer post-purchase service required for international shipping and tracks and moves
and information to the customer. the shipments through the proper channels.
customer service ratio–1) A measure of delivery custom service–A service that is created to meet the
performance of finished goods or other cargo, requirements of specific customers.
usually expressed as a percentage. In a make-to-
Customs-Trade Partnership Against Terrorism
stock company, this percentage usually represents
(C-TPAT)–A joint government-business endeavor
the number of items or dollars (on one or more
for imports (not exports) to increase the security
customer orders) that were shipped on schedule for
of supply chains and U.S. borders. Initiated by U.S.
a specific time period, compared to the total that
Customs, C-TPAT involves voluntary cooperation of
were supposed to be shipped in that time period.
supply chain participants such as importers, carriers,
Syn: customer service level, fill rate, order-fill ratio,
brokers, warehouse operators, and manufacturers.
percent of fill. Ant: stockout percentage. 2) In a
Participants audit their logistical system security
make-to-order company, usually some comparison
and answer a security questionnaire in exchange for
of the number of jobs or dollars shipped in a given
a likely (but not guaranteed) faster customs clearing
time period (e.g., a week) compared with the number
process and fewer inspections.
of jobs or dollars that were supposed to be shipped
in that time period. Syn: fill rate. cut-off control–A procedure for synchronizing cycle
counting and transaction processing.
customer service representative (CSR)–Personnel
assigned to customer relations who answer customer cwt–Abbreviation for hundredweight.
questions and provide technical support.
CyberCash–The technology that enables online
customer share–In marketing, a measurement (usually acceptance of credit cards, approving customers for
a percentage) of how many potential customers payment before delivery is made.
are attracted to a brand. It is a measurement of the
recognition of the brand in the marketplace and the cybermarketing–Any type of internet-based
predisposition of the customer to buy the brand when promotion. Many marketing managers use the term to
presented with a choice of competing brands. refer to any type of computer-based marketing.
customer-supplier partnership–A long-term cybernetics–The study of control processes in

relationship between a buyer and a supplier mechanical, biological, electrical, and information
characterized by teamwork and mutual confidence. systems.
The supplier is considered an extension of the cybernetic system–The information flow or
buyer’s organization. The partnership is based on information system (electronic, mechanical, logical)
several commitments. The buyer provides long-term that controls an industrial process.
contracts and uses fewer suppliers. The supplier
implements quality assurance processes so that cycle–1) The interval of time during which a
incoming inspection can be minimized. The supplier system or process, such as seasonal demand or a
also helps the buyer reduce costs and improve manufacturing operation, periodically returns to
product and process designs. Syn: customer similar initial conditions. 2) The interval of time during
partnership. See: outpartnering. which an event or set of events is completed.
customer surveys–Devices such as interviews or cycle counter–An individual who is assigned to do

questionnaires designed to collect user data and cycle counting.
preferences about product or service characteristics.

cycle counting • data governance
cycle counting–An inventory accuracy audit technique dashboard–An easy-to-read management tool
where inventory is counted on a cyclic schedule rather similar to an automobile’s dashboard designed to
than once a year. A cycle inventory count is usually address a wide range of business objectives by
taken on a regular, defined basis (often more frequently combining business intelligence and data integration
for high-value or fast-moving items and less frequently infrastructure. See: executive dashboard.
for low-value or slow-moving items). Most effective
D
data–Any representations, such as alphabetic or
cycle counting systems require the counting of a
numeric characters, to which meaning can be assigned.
certain number of items every workday with each item
counted at a prescribed frequency. The key purpose data acquisition–Obtaining data from a source,
of cycle counting is to identify items in error, thus such as a database, and communicating that data to
triggering research, identification, and elimination of another database or a data warehouse.
the cause of the errors.
database–A data processing file-management
cycle inventory–Syn: cycle stock. approach designed to establish the independence
of computer programs from data files. Redundancy
cycle reduction stock–Stock held to reduce
is minimized, and data elements can be added to, or
delivery time.
deleted from, the file structure without necessitating
cycle service level–The probability of not having a changes to existing computer programs.
stockout in any one ordering cycle, which begins at the
database management system (DBMS)–The software
time an order is placed and ends when the goods are
designed for organizing data and providing the
placed in stock. Syn: measure of service, service level.
mechanism for storing, maintaining, and retrieving
cycle stock–One of the two main conceptual that data on a physical medium (i.e., a database). A
components of any item inventory, the cycle stock DBMS separates data from the application programs
is the most active component. The cycle stock and people who use the data and permits many
depletes gradually as customer orders are received different views of the data.
and is replenished cyclically when supplier orders are
data cleansing–Sifting through a database to find and
received. The other conceptual component of the
fix mistakes such as misspelling, missing information,
item inventory is the safety stock, which is a cushion
and false data.
of protection against uncertainty in the demand or in
the replenishment lead time. Syn: cycle inventory. data collection–The act of compiling data for
recording, analysis, or distribution.
cycle time–1) In industrial engineering, the time
between the completion of two discrete units of data communications–Transmission of data in
production. For example, the cycle time of motors computer-readable form using various transmission
assembled at a rate of 120 per hour is 30 seconds. 2) In vehicles and paths.
materials management, the length of time from when
material enters a production facility until it exits. Syn: data date–The date through which a report has
throughput time. provided actual accomplishment. Syn: time-now date.
cyclical component–A component of demand, data dictionary–1) A catalog of requirements and

usually describing the impact of the business cycle on specifications for an information system. 2) A file
demand. See: decomposition, time series analysis. that stores facts about the files and databases for
all systems that are currently being used or for the
cyclical demand–Demand influenced by increases software involved.
and decreases in the economy over time.
data element–A group of characters that defines an
D
item at a basic level. Syn: data field.
data file–A collection of related data records

organized in a specific manner (e.g., one record for
each inventory item showing product code, unit of
dampeners–User-input parameters to suppress measure, production costs, transactions, selling price,
the reporting of insignificant or unimportant action and production lead time).
messages.
data governance–The overall management of data’s
dark factory–A completely automated production accessibility, usability, reliability, and security. Used to
facility with no labor. Syn: lightless plant. ensure data record accuracy.

data integrity • decision matrix
data integrity–Assurance that data accurately D chart–A control chart for evaluating a process in
reflects the environment it is representing. terms of a demerit (or quality score); for example,
a weighted sum of counts of various classified
data mining–The process of studying data to search
nonconformities. Syn: demerit chart.
for previously unknown relationships. This knowledge
is then applied to achieving specific business goals. DDMRP–Abbreviation for demand-driven material
D
requirements planning.
data normalization–A database maintenance term
used in the context of relational databases, which DDP–Abbreviation for distributed data processing.
helps to minimize the duplication of information or
deadhead–The return of an empty transportation
safeguard the database against certain types of
container to its point of origin. See: backhauling.
logical or structural data anomalies. It is often used
when merging data from one or more databases. debenture–A bond that is backed by the general
credit of the issuing firm.
data transfer–The movement by electronic means of
data from one location to another. The data can take deblend–The further processing of a product to
the form of voice, text, image, or other formats. The adjust specific physical and chemical properties to
movement is accomplished by communication links within specification ranges.
between computers and a variety of input/output
devices. debt–An amount owed to creditors. It is generally
equal to the total assets in a company less the equity.
data warehouse–A repository of data that has been See: liabilities.
specially prepared to support decision-making
applications. Syn: decision-support data. See: debt-to-equity ratio–The amount of bonds and
information data warehouse. preferred stocks relative to the owners’ equity
position. A measurement of the use of borrowed
date code–A label on products with the date of funds to leverage owners’ equity.
production. In food industries, it is often an integral
part of the lot number. decentralized authority–The process of dispersing
decision-making governance to staff people below
date effectivity–A technique used to identify the executive level of an organization.
the effective date of a configuration change. A
component change is controlled by the effective date decentralized computer network–A network where
within the bill of material for the unchanged parent there is no central computer or computers linked to
part number. all other computers in the group.
days of supply–1) Inventory-on-hand metric decentralized dispatching–The organization of the

converted from units to how long the units will last. dispatching function into individual departmental
For example, if there are 2,000 units on hand and the dispatchers.
company is using 200 per day, then there are 10 days decentralized inventory control–Inventory decision
of supply. 2) A financial measure of the value of all making exercised at each stocking location for SKUs
inventory in the supply chain divided by the average at that location.
daily cost of goods sold rate.
decentralized purchasing–When purchasing decisions
days outstanding–A term used to imply the amount are made locally and not at a central location.
of an asset or liability measured in days of sales.
For example, accounts payable days are the typical decision matrix–A matrix used by teams to evaluate
number of days that a firm delays payment of invoices problems or possible solutions. For example, after
to its suppliers. drawing the matrix, the team lists the solutions in the
far left vertical column. Next, the team selects criteria
days sale outstanding–A measure of the average to rate the possible solutions, writing them across the
number of days a company takes to collect revenue after top row. Third, each possible solution is rated on a scale
a sale has been made, calculated as the total accounts of 1 to 5 for each criterion and the rating recorded in the
receivable divided by the average daily sales rate. corresponding grid. Finally, the ratings of all the criteria
DBMS–Abbreviation for database management system. for each possible solution are added to determine its
total score. The total score is then used to help decide
DBR–Abbreviation for drum-buffer-rope. which solution deserves the most attention.
DC–Abbreviation for distribution center

decisions under certainty • de-expedite
decisions under certainty–Simple decisions that decoupled explosion–A special form of Material
assume complete information and no uncertainty Requirements Planning (MRP) explosion for items in
connected with the analysis of decisions. the Bill of Material that are managed using buffers.
The MRP explosion for these items occurs when the
decisions under risk–Decision problems in which the
on-hand balance hits the rebuild zone of its buffer.
analyst elects to consider several possible futures,
D
the probabilities of which can be estimated. decoupled lead time–An amount of lead time
maintained between entities in a manufacturing,
decisions under uncertainty–Decisions for which the
service, or distribution network to create
analyst elects to consider several possible futures,
independence between processes or entities. The
the probabilities of which cannot be estimated.
objective of decoupling lead time is to disconnect the
decision-support data–Syn: data warehouse. rate of use from the rate of supply.
decision support system (DSS)–A computer system decoupling–Creating independence between supply
designed to assist managers in selecting and and use of material. Commonly denotes allocating
evaluating courses of action by providing a logical inventory between operations so that fluctuations
(usually quantitative) analysis of the relevant factors. in the production rate of the supplying operation do
not constrain the production or use rates of the next
decision table–A means of displaying logical operation.
conditions in an array that graphically illustrates
actions associated with stated conditions. decoupling inventory–An amount of inventory
maintained between entities in a manufacturing
decision theory–A systematic approach to making or distribution network to create independence
decisions, particularly when uncertainty is present. between processes or entities. The objective of
decision tree–A method of analysis that evaluates decoupling inventory is to disconnect the rate of use
alternative decisions in a tree-like structure to estimate from the rate of supply of the item. See: buffer.
values and/or probabilities. Decision trees take into decoupling points–The locations in the product
account the time value of future earnings by using a structure or distribution network where inventory is
rollback concept. Calculations are started at the far placed to create independence between processes or
right-hand side, and then are traced back through the entities. Selection of decoupling points is a strategic
branches to identify the appropriate decision. decision that determines customer lead times and
decision variables–The variables that will be changed inventory investment. See: control points.
to find the optimal solution in an optimization problem. decryption–Transformation of encrypted text into a
declared value–The value of goods declared on a bill readable format.
of lading, used to determine a freight rate or limit the dedicated capacity–A work center that is designated
carrier’s liability. to produce a single item or a limited number of similar
declining practice–Practices used for long periods of items. Equipment that is dedicated may be special
time that have become obsolete or even harmful to equipment or may be grouped general-purpose
business and supply chain performance. equipment committed to a composite part.
decomposition–A method of forecasting where dedicated contract carrier–A third-party hauler that
time series data is separated into up to three works exclusively for a single customer.
components—trend, seasonal, and cyclical—where dedicated equipment–Equipment whose use is
trend includes the general horizontal upward or restricted to specific operations on a limited set of
downward movement over time; seasonal includes components.
a recurring demand pattern such as day of the
week, weekly, monthly, or quarterly; and cyclical dedicated line–A production line permanently
includes any repeating, nonseasonal pattern. A configured to run well-defined parts, one piece at a
fourth component is random—that is, data with no time, from station to station.
pattern. The new forecast is made by projecting the
de-expedite–The reprioritizing of jobs to a lower level
patterns individually determined and then combining
of activity. All extraordinary actions involving these
them. See: cyclical component, random component,
jobs stop.
seasonal component, trend component.

defamation • Delphi method
defamation–Injury to another’s reputation by a public dekitting–The removal of accessories or parts kits

utterance: print (libel) or oral (slander). from a product and returning either the kit or the main
product without the kit to the store. May also refer to
defect–A good’s or service’s nonfulfillment of an
the allowance of the resale of kits or products without
intended requirement or reasonable expectation
their parts kits.
for use, including safety considerations. There are
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four classes of defects: Class 1, Very Serious; leads delay report–Syn: anticipated delay report.
directly to severe injury or catastrophic economic
delay reporting–Reporting against the operation
loss. Class 2, Serious; leads directly to significant
status of a manufacturing order on an exception basis
injury or significant economic loss. Class 3, Major;
when delays are anticipated.
related to major problems with respect to intended
normal or reasonably foreseeable use. Class 4, Minor; delayed differentiation–Syn: postponement.
related to minor problems with respect to intended
normal or reasonably foreseeable use. See: blemish, delinquent order–Syn: past due order.
imperfection, nonconformity. deliver–The deliver process describes the activities
defects per million opportunities–The quantity of associated with the creation, maintenance, and
defects per one million defect opportunities—a fulfillment of customer orders. Detail activities
potential problem that is important to the customer. encompass the receipt, validation, and creation of
customer orders as well as scheduling order delivery,
defects per unit–The average number of blemishes on pick, pack, shipment, and invoicing. See: order shipment.
a particular product (e.g., a television cabinet).
deliverable–Any unique and verifiable product or
deficiency–Failure to meet quality standards. result that is needed to complete a process or project.
define, measure, analyze, improve, control (DMAIC) delivery appointment–The time at which goods are
process–A six sigma improvement process scheduled to arrive at a selected location.
composed of five stages: (1) Determine the nature
of the problem. (2) Measure existing performance delivery cycle–Syn: delivery lead time.
and commence recording data and facts that offer delivery lead time–The time from the receipt of a
information about the underlying causes of the customer order to the delivery of the product. Syn:
problem. (3) Study the information to determine the delivery cycle.
root causes of the problem. (4) Improve the process
by effecting solutions to the problem. (5) Monitor the delivery policy–The company’s goal for the time
process until the solutions become ingrained. required to ship the product after the receipt of a
customer’s order. The policy is sometimes stated as
define-measure-analyze-design-verify–A six sigma “our quoted delivery time.”
process that outlines the steps needed to create a
completely new business process or product at six delivery reliability–A performance criterion that
sigma quality levels. measures how consistently goods and services are
delivered on, or before, the promised time.
define-measure-analyze-improve-control (DMAIC)–
The sequence of steps for improvement projects delivery schedule–The required or agreed time or
within six sigma quality control. rate of delivery of goods or services purchased for
a future period.
define phase–A step in the six sigma DMAIC process
in which project goals and customer deliverables are delivery speed–A performance criterion that
identified. See: define-measure-analyze-improve- measures how quickly a product or service can be
control process. delivered once the demand is identified.
degrees of freedom–A statistical term indicating the delivery window–A time frame within which goods or
number of variables or data points used for testing services should be delivered.
a relationship. The greater the degree of freedom,
Delphi method–A qualitative forecasting technique
the greater the confidence that can be placed on the
where the opinions of experts are combined in a
statistical significance of the results.
series of iterations. The results of each iteration are
used to develop the next, so that convergence of
the experts’ opinions is obtained. See: management
estimation, panel consensus.

demand • demand pull
demand–A need for a particular product or demand forecasting–Forecasting the demand for a
component. The demand could come from any number particular good, component, or service.
of sources (e.g., a customer order or forecast, an
demand forecast updating–Recomputing a forecast
interplant requirement, a branch warehouse request
after deleting the oldest data and adding data
for a service part, or the manufacturing of another
generated since the last forecast revision.
product). At the finished goods level, demand data
D
is usually different from sales data because demand demand lead time–The amount of time potential
does not necessarily result in sales (i.e., if there is no customers are willing to wait for the delivery of a good
stock, there will be no sale). There are generally up or a service. Syn: customer tolerance time.
to four components of demand: cyclical component,
random component, seasonal component, and trend demand management–1) The function of recognizing
component. See: booked orders. all demands for goods and services to support the
marketplace. It involves prioritizing demand when
demand-based order quantity–An order system using supply is lacking. Proper demand management
forecast or derived demand for one or more future facilitates the planning and use of resources for
periods (rather than a fixed quantity, as in economic profitable business results. 2) In marketing, the process
order quantity). of planning, executing, controlling, and monitoring the
design, pricing, promotion, and distribution of products
demand chain–1) A demand chain is composed of the
and services to bring about transactions that meet
enterprises that sell a business’s goods or services.
organizational and individual needs. Syn: marketing
2) Supply chain as seen from the viewpoint of the
management. See: demand planning.
customer, the entity who chooses among competing
products and services and thus controls the demand. demand management process–A process that weighs
both customer demand and a firm’s output capabilities,
demand chain management–A supply chain inventory
and tries to balance the two. Demand management is
management approach that concentrates on demand
made up of planning demand, communicating demand,
pull rather than supplier push inventory models.
influencing demand, and prioritizing demand.
demand curve–A graphic description of the
demand manager–Person who assists sales and
relationship between price and quantity demanded
marketing in the development and maintenance
in a market, assuming that all other factors stay the
of sales forecasts and reconciles volume and mix
same. Quantity demanded of a product is measured
variations in the forecast.
on the horizontal axis for an array of different prices
measured on the vertical axis. demand planning–The process of combining statistical
forecasting techniques and judgment to construct
demand deposits–Deposits that can be withdrawn on
demand estimates for products or services (both high
demand or paid to a third party by check.
and low volume; lumpy and continuous) across the
demand-driven material requirements planning supply chain from the suppliers’ raw materials to the
(DDMRP)–A method for planning material needs that consumer’s needs. Items can be aggregated by product
enables a company to build more closely to actual family, geographical location, product life cycle, and so
market requirements. forth, to determine an estimate of consumer demand
for finished products, service parts, and services.
demand-driven supply network–A situation in which
Numerous forecasting models are tested and combined
a customer purchase initiates real-time information
with judgment from marketing, sales, distributors,
flows through the supply chain that consequently
warehousing, service parts, and other functions.
cause movement of product through the network.
Actual sales are compared to forecasts provided by
demand during lead time–The quantity of a product various models and judgments to determine the best
expected to be withdrawn from stock or to be integration of techniques and judgment to minimize
consumed during its replenishment lead time when forecast error. See: demand management.
usage is at the forecasted rate. See: expected demand.
demand pull–The triggering of material movement to
demand filter–A standard set to monitor sales data a work center only when that work center is ready to
for individual items in forecasting models. Usually set begin the next job. In effect, it shortens or eliminates
to be tripped when the demand for a period differs the queue from in front of a work center, but it can
from the forecast by more than some number of mean cause a queue at the end of a preceding work center.
absolute deviations. Demand pull also can occur within a supply chain, in
which case it often is called a demand chain.

demand rate • dependent demand
demand rate–A statement of requirements in terms of successfully applied company-wide quality control
quantity per unit of time (hour, day, week, month, etc.). based on statistical quality control and will keep up with
it in the future. Although the award is named in honor
demand risk–The risk that declining economic
of W. Edwards Deming, its criteria are not specifically
activity substantially reduces the demand for a firm’s
related to Deming’s teachings. There are three separate
products or services.
divisions for the award: the Deming Application Prize,
D
demand segmentation–Categorizing demand types the Deming Prize for Individuals, and the Deming
into groups that share similar characteristics (e.g., Prize for Overseas Companies. The award process is
government, large customers, seasonal products). overseen by the Deming Prize Committee of the Union
Similar segments can be treated alike in business or of Japanese Scientists and Engineers in Tokyo.
capacity planning.
demographics–The characteristics of a specific
demand shaping–The practice of using the four Ps population, such as a set of potential customers.
(product, pricing, placement, and promotion) and
demographic segmentation–In marketing,
other market variables to influence the demand of a
dividing potential markets by potential customers’
product or service so that demand better matches
characteristics, such as age, sex, income, and
available supply. See: four Ps.
education.
demand-side analysis–Techniques such as market
demonstrated capacity–Proven capacity calculated
research, surveys, focus groups, and performance/cost
from actual performance data, usually expressed as
modeling used to identify emerging technologies.
the average number of items produced multiplied
demand time fence (DTF)–1) That point in time by the standard hours per item. See: maximum
inside of which the forecast is no longer included demonstrated capacity.
in total demand and projected available inventory
demurrage–The carrier charges and fees applied
calculations; inside this point, only customer orders
when rail freight cars and ships are retained beyond
are considered. Beyond this point, total demand
a specified loading or unloading time. See: detention,
is a combination of actual orders and forecasts,
express.
depending on the forecast consumption technique
chosen. 2) In some contexts, the demand time fence denied party list–A list of organizations that are
may correspond to that point in the future inside unauthorized to submit a bid for an activity.
which changes to the master schedule must be
density–A measure of the weight of an item
approved by an authority higher than the master
compared to its volume. Because density can
scheduler. Note, however, that customer orders
influence the number of units that can be carried
may still be promised inside the demand time
by a particular truck, this is a factor in defining
fence without higher authority approval if there are
transportation charges.
quantities available-to-promise (ATP). Beyond the
demand time fence, the master scheduler may change departmental stocks–An informal system of holding
the MPS within the limits of established rescheduling some stock in a production department. This action
rules without the approval of higher authority. See: is taken as a protection from stockouts in the
option overplanning, planning time fence, time fence. stockroom or for convenience; however, it results
in increased inventory investment and possible
demand uncertainty–The uncertainty or variability in
degradation of the accuracy of the inventory records.
demand as measured by the standard deviation, mean
absolute deviation (MAD), or variance of forecast errors. department overhead rate–The overhead rate applied
to jobs passing through a department.
demerit chart–Syn: D chart.
dependent demand–Demand that is directly related
Deming’s 14 Points–Syn: 14 Points.
to or derived from the bill-of-material structure for
Deming circle–The concept of a continuously rotating other items or end products. Such demands are
wheel of plan-do-check-action (PDCA) used to show therefore calculated and need not and should not
the need for interaction among market research, be forecast. A given inventory item may have both
design, production, and sales to improve quality. See: dependent and independent demand at any given
plan-do-check-action. time. For example, a part may simultaneously be the
component of an assembly and sold as a service part.
Deming Prize–An award given annually to organizations
See: independent demand.
that, according to the award guidelines, have

depletion • design for service
depletion–The reduction in the value of a capital design chain operations reference (DCOR)–
asset (usually a natural resource) in the balance sheet A framework that links research and development
and charging this amount as an expense against processes, metrics, performance, best practices,
income for the period. See: capital recovery. and technology features into a unified structure
to support communication among design chain
deployment planning and scheduling–Planning
partners and to improve the effectiveness of the
D
how to use existing inventory to meet demand
extended supply chain.
requirements.
design changeover flexibility–The capability of the
deposition–The sworn questioning, outside of court,
existing production system to accommodate and
of a potential witness by the other side’s attorney.
introduce a large variety of major design changes
depreciation–An allocation of the original value quickly.
of an asset against current income to represent
design cycle–The interval of time between the start of
the declining value of the asset as a cost of that
the design process of one model and the completion
time period. Depreciation does not involve a cash
of the design process for the model.
payment. It acts as a tax shield and thereby reduces
the tax payment. See: capital recovery, depletion, design engineering–The discipline consisting of
double-declining-balance depreciation, straight line process engineering and product engineering.
depreciation, units-of-production depreciation.
design for logistics–The design of products that
depreciation of a currency–A decrease in the buying considers all aspects of a product’s movement and
power of a country’s currency in terms of other storage pertaining to manufacturing, packaging,
countries’ goods and services. shipping, warehousing, merchandising, and
repackaging for returns. The chosen design is
derived demand–Demand for component products
intended to control logistics costs, increase
that arises from the demand for final design products.
customer service levels, facilitate ease of transport,
For example, the demand for steel is derived from the
and facilitate ease of shelving within distribution
demand for automobiles.
centers and stores. Other considerations include
description by brand–A method to identify a environmental impacts and security.
product or service required; requesting by brand
design for maintainability–Syn: design for service.
usually means the product or service provides some
advantage over other brands. design for manufacturability–Simplification of parts,
products, and processes to improve quality and
description by market grade/industry standard–A
reduce manufacturing costs.
method to identify a product or service required when
there is a high level of understanding between user design for manufacture and assembly (DFMA)–A
and supplier. product development approach that involves the
manufacturing function in the initial stages of
description by performance characteristics–A
product design to ensure ease of manufacturing and
method to identify a product or service by specifying
assembly. See: early manufacturing involvement.
the performance required.
design for quality–A product design approach
description by specification–A method to identify
that uses quality measures to capture the extent
a product or service required by communicating its
to which the design meets the needs of the target
characteristics in detail.
market (customer attributes), as well as its actual
deseasonalized data–Data from which seasonality performance, aesthetics, and cost. See: total quality
has been removed using annual moving averages. engineering.
deshi–A Japanese word meaning student. design for remanufacture–Products developed in a

manner that allows components to be used in other
design–The conversion of a need or innovation products. This process is associated with green
into a product, process, or service that meets both manufacturing.
enterprise and customer expectations. The design
process consists of translating a set of functional design for service–Simplification of parts and
requirements into an operational product, process, processes to improve the after-sale service of a
or service. product. Syn: design for maintainability.

design for six sigma • differentiated oligopoly
design for six sigma–An approach to designing detail file–A file that contains manufacturing, routing,
products and processes that attempts to ensure the or specification details. See: master file.
firm can provide products or services that meet six
detention–Carrier charges and fees applied when
sigma quality levels. These quality levels correspond
truck trailers are retained beyond a specified loading
to approximately 3.4 defects per million opportunities.
or unloading time. See: demurrage, express.
D
design for the environment (DFE)–Considering
deterioration–Product spoilage, damage to the
health, safety, and environmental aspects of a
package, or other damage to the product. This is one
product during the design and development phase of
of the considerations in inventory carrying cost.
product development.
deterministic models–Models where no uncertainty
design for the supply chain–Enhancement of a firm’s
is included (e.g., inventory models without safety
product design in consideration of the issues that will
stock considerations).
arise in the supply chain, from raw materials to the
final stage of the product’s life cycle. deviation–The difference (usually the absolute
difference) between a number and the mean of a
design for X (DFX)–Also referred to as design for
set of numbers, or between a forecast value and the
excellence. A design process that ensures the
actual value.
outcome is manufacturable, maintainable, cost-
effective, and of high quality. Dewey’s reflective thinking–A problem-solving
technique with a formal sequence of (1) problem
designing in quality versus inspecting in quality–Syn:
definition, (2) problem analysis, (3) brainstorming
prevention versus detection.
solutions, (4) development of proposed solutions,
design of experiments (DOE)–1) A process for and (5) solution testing and validation.
structuring statistically valid studies in any science.
DFMA–Abbreviation for design for manufacture
2) A quality management technique used to evaluate
and assembly.
the effect of carefully planned and controlled changes
to input process variables on the output variable. The diagnostic journey and remedial journey–A two-
objective is to improve production processes. phase investigation used by teams to solve chronic
quality problems. In the first phase—the diagnostic
design phase–One of the six sigma phases of quality.
journey—the team journeys from the symptom of a
It involves improvement project identification and
chronic problem to its cause. In the second phase—
selection. See: define-measure-analyze-design-verify.
the remedial journey—the team journeys from the
design review–A technique for evaluating a proposed cause to its remedy.
design to ensure that the design: (1) is supported by
diagnostic study–A brief investigation or cursory
adequate materials and materials that are available
methods study of an operation, process, group,
on a timely basis; (2) will perform successfully during
or individual to discover causes of operational
use; (3) can be manufactured at low cost; and (4) is
difficulties or problems for which more detailed
suitable for prompt field maintenance.
remedial studies may be feasible. An appropriate
design simplification–A process of reducing the work measurement technique may be used to
number of pieces in a product or machine, eliminating evaluate alternatives or to locate major areas
features that are seldom needed, and eliminating requiring improvement.
steps in the production process.
die–A special form used in general-purpose
design-to-order–Syn: engineer-to-order. equipment to make specific parts.
destructive testing–Inspection that renders the differentiated marketing–Marketing to different

inspected part inoperable. market segments with a different marketing strategy
for each segment.
detailed planning and control–The planning of a
project in the short term, covering the present time differentiated oligopoly–A market in which a
and extending until a few weeks out. few companies produce partially differentiated
products or services that are marketed within a given
detailed scheduling–Syn: operations scheduling.
geographical area. Differentiation may be based on
quality, features, styling, or services offered along
with the product. See: industry structure types.

differentiation strategy • disbursement
differentiation strategy–A business strategy that direct labor cost–The compensation of workers who are
focuses on setting a product or service apart from involved in converting material into a finished product.
the competition—focusing on making the product or
direct loading–Syn: cross-docking.
service unique.
direct marketing–Communicating directly with
digital cash or money–An electronic currency
consumers in an effort to elicit a response or a
D
equivalent of currency or coins.
transaction.
dimensions of quality–An aspect of quality that is
direct material–Material that becomes a part of the
specified to enhance the ability to define quality. The
final product in measurable quantities.
most commonly used list for products was created
by David Garvin. His dimensions are aesthetics, direct materials cost–The acquisition cost of all
conformance, durability, features, perceived quality, materials used directly in the finished product.
performance, reliability, and serviceability. The most
commonly used list for service quality was created direct materials purchasing–Purchasing from
by Parasuraman, Zeithamel, and Berry. This list is suppliers on a contractual basis for a fixed period
assurance, availability, completeness, empathy, of time or amount of product. For job shops, the
pleasantness, professionalism, responsiveness, purchasing contract can be for only one job. For
service reliability, tangibles, and timeliness. repetitive manufacturing, the materials are usually
purchased on contracts that last for a model run or
direct costing–Syn: variable costing. at least a year.
direct costs–1) In traditional cost accounting, direct numerical control (DNC)–A system in which
variable costs that can be directly attributed to sets of numerical control machines are connected to
a particular job or operation. Direct material and a computer, allowing direct control of machines by
direct labor are traditionally considered direct costs. the computer without use of external storage media.
2) In activity-based cost (ABC) accounting, a cost
that can specifically be traced and is economically direct offset–Similar to bartering, trading goods or
feasible to track to a particular cost object (e.g., the services for related goods or services or agreeing
units produced, a production line, a department, a on coproduction.
manufacturing plant). direct sales–Sales from the manufacturer to
In contrast, if the cost must be allocated across the ultimate consumer without going through a
various cost objects, it is an indirect cost. Based on distributor or retailer.
the cost object under consideration, the classification direct store delivery (DSD)–A shipment that
of direct and indirect can change. ABC accounting bypasses the customer’s warehouse and goes directly
assumes that more costs traditionally viewed as fixed from the manufacturer’s plant to the retail store.
costs are variable and can be traced to cost objects.
direct truck shipment–Shipment made without any
direct-deduct inventory transaction processing–A additional stops, such as for loading or changing
method of inventory bookkeeping that decreases the trucks.
book (computer) inventory of an item as material is
issued from stock, and increases the book inventory disability–A limitation of capability that limits
as transactions are processed for each item. The functioning within a plant or a company.
key concept is that the book record is updated
disassembly bill of material–In remanufacturing,
coincidentally with the movement of material out
a bill of material used as a guide for the inspection
of or into stock. As a result, the book record is a
in the teardown and inspection process. On the
representation of what is physically in stock. Syn:
basis of inspection, this bill is modified to a bill of
discrete issue.
repair defining the actual repair materials and work
direct delivery–The consignment of goods directly required. Syn: teardown bill of material. See: repair
from the supplier to the buyer, frequently used where bill of material.
a third party acts as intermediary between supplier
disbursement–The physical issuance and reporting of
and buyer.
the movement of raw material, components, or other
direct labor–Labor that is specifically applied to the items from a storeroom or warehouse. Taking a part
good being manufactured or used in the performance out of inventory. See: issue.
of the service. Syn: touch labor.

disbursement list • dispersion
disbursement list–Syn: picking list. discrete order picking–A method of picking orders in
which the items on one order are picked before the
disciplinary action–An action taken to enforce
next order is picked. See: batch picking, order picking,
compliance with organizational rules and policies.
zone picking.
discontinuous demand–A demand pattern that
discrete order quantity–An order quantity that
is characterized by large demands interrupted by
D
represents an integer number of periods of demand.
periods with no demand, as opposed to a continuous
Most MRP systems employ discrete order quantities.
or steady (e.g., daily) demand. Syn: lumpy demand.
See: fixed-period requirements, least total cost, least
discount–An allowance or deduction granted by the unit cost, lot-for-lot, part period balancing, period
seller to the buyer, usually when the buyer meets order quantity, Wagner-Whitin algorithm.
certain stipulated conditions that reduce the price
discrete variable–A variable, such as number of
of the products purchased. A quantity discount is an
defects, that can take on only certain values (such as
allowance determined by the quantity or value of the
integers). See: continuous variable.
purchase. A cash discount is an allowance extended
to encourage payment of an invoice on or before a discussion list–A group of people who have all signed
stated date. A trade discount is a deduction from an up on a listserver to participate via email in the
established price for goods or services made by the discussion of a given topic.
seller to those engaged in certain businesses. See:
diseconomies of scale–Occurs when more outputs
price break.
are required than the efficient quantity the facility is
discounted cash flow–A method of investment designed to produce. Causes an increase in unit cost.
analysis in which future cash flows are converted, or
disintermediation–The process of eliminating an
discounted, to their value at the present time. The net
intermediate stage or echelon in a supply chain. Total
present value of an item is estimated to be the sum of
supply chain operating expense is reduced, total
all discounted future cash flows.
supply chain inventory is reduced, total cycle time is
discount period–The time allowed a customer to reduced, and profits increase among the remaining
receive a cash discount for timely payment of an echelons. See: echelon.
invoice.
dispatch(ing) board–Syn: control board.
discount rate–The rate of interest charged to
dispatcher–1) A production control person whose
commercial banks by a central banking authority.
primary function is dispatching. 2) A transportation
discrete available-to-promise–A calculation based on worker who sends out and tracks cars, buses, trucks,
the available-to-promise figure in the master schedule. railcars, and other vehicles.
For the first period, the ATP is the sum of the beginning
dispatching–The selecting and sequencing of
inventory plus the MPS quantity minus backlog for all
available jobs to be run at individual workstations and
periods until the item is master scheduled again. For
the assignment of those jobs to workers.
all other periods, if a quantity has been scheduled for
that time period, then the ATP is this quantity minus dispatching rule–The logic used to assign priorities to
all customer commitments for this and other periods jobs at a work center.
until another quantity is scheduled in the MPS. For
those periods where the quantity scheduled is zero, the dispatch list–A listing of manufacturing orders
ATP is zero (even if deliveries have been promised). The in priority sequence. The dispatch list, which is
promised customer commitments are accumulated usually communicated to the manufacturing floor
and shown in the period where the item was most via paper or electronic media, contains detailed
recently scheduled. Syn: incremental available-to- information on priority, location, quantity, and the
promise. See: available-to-promise. capacity requirements of the manufacturing order
by operation. Dispatch lists are normally generated
discrete issue–Syn: direct-deduct inventory daily and oriented by work center. Syn: work center
transaction processing. schedule, priority report.
discrete manufacturing–The production of distinct dispersion–The scattering of the observations of a
items such as automobiles, appliances, or computers. frequency distribution around its average.

dispute resolution • distribution planner
dispute resolution–The process of arbitration or this movement is made through one or more levels
mediation to settle arguments without going to court. of field warehouses. Syn: physical distribution. 2) The
systematic division of a whole into discrete parts
distinctive competency–A sustainable advantage
having distinctive characteristics.
that a company has over its competitors.
distribution by value–Syn: ABC classification.
distressed goods–Products that are damaged or close
D
to their expiration date and cannot be sold at full price. distribution center–A location used to store inventory.
Decisions driving warehouse management include site
distributed data processing (DDP)– A data processing
selection, number of facilities in the system, layout, and
organizational concept under which computer
methods of receiving, storing, and retrieving goods.
resources of a company are installed at more than
one location with appropriate communication links. distribution center (DC)–Typically a finished goods
Processing is performed at the user’s location generally warehouse designed for demand-driven rapid
on a smaller computer and under the user’s control distribution to retailers (retail distribution centers),
and scheduling, as opposed to processing for all users wholesalers, or direct shipments to customers (order
being done on a large, centralized computer system. fulfillment centers). Cross-docking warehouses
are another type of distribution center. See:
distributed inventory–Maintaining inventory in a
cross-docking.
variety of locations to provide better customer service.
distribution channel–The distribution route, from
distributed ledger technology (DLT)–A consensus
raw materials through consumption, along which
of replicated, shared, and synchronized digital data
products travel. See: channels of distribution,
geographically spread across multiple sites, countries,
marketing channel.
or institutions. There is no central administrator or
centralized data storage. See: blockchain. distribution cost–Those items of cost related to the
activities associated with the movement and storage
distributed numerical control–An approach to
of finished products. Distribution costs can include
automated machining in which each machine tool
inventory costs, transportation costs, and order
has its own dedicated microcomputer or computer
processing costs.
numerical control (CNC). Each machine tool’s CNC
is connected via a network with a minicomputer distribution curve–A graphic display of numerous
that handles distributed processing between data points showing the mean and frequency of
the host mainframe computer and the CNC. This occurrences of observations on a chart. See: normal
minicomputer handles part program transfers and distribution curve.
machine status data collection. This approach is
distribution inventory–Inventory, usually spare parts
considered more advanced than direct numerical
and finished goods, located in the distribution system
control, in which several machine tools are tied
(e.g., in warehouses or in transit between warehouses
directly to a central computer.
and the consumer).
distributed systems–Computer systems in multiple
distribution network structure–The planned
locations throughout an organization, working in a
channels of inventory disbursement from one or
cooperative fashion, with the system at each location
more sources to field warehouses and ultimately to
primarily serving the needs of that location but also
the customer. There may be one or more levels in the
able to receive and supply information from other
disbursement system. Syn: bill of distribution.
systems within a network.
distribution of forecast errors–Tabulation of
distribution–1) The activities associated with
the forecast errors according to the frequency
the movement of material, usually finished goods
of occurrence of each error value. The errors in
or service parts, from the manufacturer to the
forecasting are, in many cases, normally distributed
customer. These activities encompass the functions
even when the observed data does not come from a
of transportation, warehousing, inventory control,
normal distribution.
material handling, order administration, site
and location analysis, industrial packaging, data distribution planner–A person who plans inventories
processing, and the communications network and schedules replenishment shipments for the
necessary for effective management. It includes all distribution centers.
activities related to physical distribution, as well as the
return of goods to the manufacturer. In many cases,

distribution planning • double order point system
distribution planning–The planning activities dividend–A payment to stockholders in either cash

associated with transportation, warehousing, inventory or stock.
levels, materials handling, order administration, site and
dividend yield–The ratio of dividends per share over
location planning, industrial packaging, data processing,
stock price.
and communications networks to support distribution.
DMAIC–Acronym for define-measure-analyze-
D
distribution requirements planning (DRP)–1) The
improve-control.
function of determining the need to replenish
inventory at branch warehouses. A time-phased DMAIC process–Acronym for define, measure,
order point approach is used where the planned analyze, improve, and control process.
orders at the branch warehouse level are “exploded”
via MRP logic to become gross requirements of DNC–Abbreviation for direct numerical control.
the supplying source. In the case of multilevel dock receipt–A receipt recorded for a shipment
distribution networks, this explosion process can received or delivered at a pier or dock.
continue down through the various levels of regional
warehouses (master warehouse, factory warehouse, dock-to-stock–A program through which specific
etc.) and become input to the master production quality and packaging requirements are met before
schedule. Demand on the supplying sources is the product is released. Prequalified product is
recognized as dependent, and standard MRP logic shipped directly into the customer’s inventory.
applies. 2) More generally, replenishment inventory Dock-to-stock eliminates the costly handling of
calculations, which may be based on other planning components, specifically in receiving and inspection,
approaches such as period order quantities or and enables product to move directly into production.
“replace exactly what was used,” rather than being Sometimes referred to as ship-to-stock.
limited to the time-phased order point approach.
dock-to-stock inventory–A supplier-customer
distribution resource planning (DRP II)–The relationship where specified quality and packaging
extension of distribution requirements planning requirements are met before the product is released.
into the planning of the key resources contained in The product is then received directly into the
a distribution system (warehouse space, workforce, customer’s inventories. See: point-of-use inventory,
money, trucks, freight cars, etc.). stockless purchasing.
distribution system–A group of interrelated dock-to-stock time–Syn: put-away time.

facilities—manufacturing and one or more levels of
Dodge-Romig tables–Information about the correct
warehousing—linking the production, storage, and
sample size and maximum defective quantity in a
consumption activities for spare parts and finished
sample to satisfy lot acceptance; a quality control
goods inventory. See: pipeline stock.
measurement.
distribution warehouse–A facility where goods are
DOE–Abbreviation for design of experiments.
received in large-volume uniform lots, stored briefly,
and then broken down into smaller orders of different dog–A slang term used to refer to a low-growth,
items required by the customer. Emphasis is on low-market-share product. See: growth-share matrix.
expeditious movement and handling.
dojo–A Japanese word meaning hall.
distributor–A business that does not manufacture
its own products but instead purchases and resells domestic corporation–A company incorporated in a
these products. Such a business usually maintains a particular state or country.
finished goods inventory. Syn: wholesaler. double-declining-balance depreciation–A type of
divergent point–An operation in a production process accelerated depreciation. See: depreciation.
in which a single material/component enters and, double order point system–A distribution inventory
after processing, can then be routed to a number of management system that has two order points. The
different downstream operations. first is the original order point (the smaller of the two),
diversification strategy–An expansion of the scope of which covers demand during replenishment lead
the product line to exploit new markets. A key objective time. The second order point is the sum of the first
of a diversification strategy is to spread the company’s order point plus normal usage during manufacturing
risk over several product lines in case there should be a lead time. It enables warehouses to forewarn
downturn in any one product’s market. manufacturing of future replenishment orders.

double-sampling plan • duty-free zone
double-sampling plan–A way to control quality by drum-buffer-rope (DBR)–The theory of constraints

taking one sample and making an accept or reject method for scheduling and managing operations
decision, and, if the decision cannot be made, taking that have an internal constraint or capacity-
a second sample and making the accept or reject constrained resource.
decision by combining the results of both samples.
drum schedule–The detailed production schedule for
D
double smoothing–Syn: second-order smoothing. a resource that sets the pace for the entire system.
The drum schedule must reconcile the customer
downgrade–The substitution of a product of lower
requirements with the system’s constraint(s).
quality, value, or status for another, either in planning
or in fact. DSD–Abbreviation for direct store delivery.
downside supply chain adaptability–A discrete DSS–Abbreviation for decision support system.
measurement of the reduction in quantities ordered
DTF–Abbreviation for demand time fence.
sustainable at 30 days prior to delivery with no
inventory or cost penalties. dual-card kanban system–Syn: two-card kanban
system.
downstream–Used as a relative reference within
a firm or supply chain to indicate moving in the dual sourcing–A method for sourcing requirements by
direction of the end customer. using a few suppliers for the same products or services.
See: multisourcing, multiple sourcing, single sourcing.
downstream operation–The tasks subsequent to the
task currently being planned or executed. due date–The date when purchased material or
production material is due to be available for use. Syn:
downtime–Time when a resource is scheduled for
expected receipt date. See: arrival date.
operation but is not producing for reasons such as
maintenance, repair, or setup. due date rule–A dispatching rule that directs the
sequencing of jobs by the earliest due date.
draft–Syn: bills of exchange payment.
dummy activity–In activity-on-arrow diagramming, an
drawback–A refund of customs duties paid on
activity with zero duration used to express a precedence
material imported and later exported.
relationship that can’t otherwise be diagrammed. It is
drayage–In the shipping industry, the movement of shown graphically with a dashed arrow.
goods over a short distance, such as from a port to
dumping–Selling goods below costs in selected
warehouse storage.
markets.
driver–1) In activity-based cost accounting, an
dunnage–The packing material used to protect
operation that influences the quantity of work
a product from damage during transport. Some
required and cost of an activity. Syn: cost driver. 2) In
industries use the term to refer specifically to
the theory of constraints, an underlying cause that is
returnable packaging only.
responsible for several observed effects.
durability–1) A measurement of time or amount of use
drop-dead date–The last possible date to apply
before a product needs repair or replacement. 2) One
influence to a future activity.
of the eight dimensions of quality that refers to the
drop ship–To take the title of the product but not length of a product’s economic life.
actually handle, stock, or deliver it (i.e., to have one
durable goods–Generally, any goods whose
supplier ship directly to another or to have a supplier
continuous serviceability is likely to exceed three years
ship directly to the buyer’s customer).
(e.g., trucks, furniture). See: consumer durable goods.
DRP–Abbreviation for distribution requirements
duration–In project management, the estimated
planning.
length of time required by an activity.
DRP II–Abbreviation for distribution resource planning.
duty–A tax levied by a government on the importation,
drum–In the theory of constraints, the constraint is exportation, or use and consumption of goods.
viewed as a drum, and nonconstraints are like soldiers
duty-free zone–An area where merchandise is brought
in an army who march in unison to the drumbeat; the
into the country for further work to be done. Duty is paid
resources in a plant should perform in unison with the
only on the items brought in, normally at a lower rate
drumbeat set by the constraint.
than finished goods, and paid only at the time of sale.

duty paid warehouses • EBIT
duty paid warehouses–See: public warehouse. early finish date (EF)–In the critical path method of
project management, the earliest time at which a
dwell–The duration of time between when cargo
given activity is estimated to be completed. This date
arrives in a terminal’s in-transit storage area and
can change as the project is executed.
when it is shipped out by clearance transportation.
early manufacturing involvement–The process
dynamic buffers–Buffers that are adjusted based on
of involving manufacturing personnel early in the
changes to key part traits.
product design activity and drawing on their expertise,
insights, and knowledge to generate better designs
E
dynamic congruence–In simulation, the situation
where a physical system and a simulation model in less time and to generate designs that are easier
mimic one another closely. to manufacture. Early involvement of manufacturing,
field service, suppliers, customers, and so on means
dynamic kanban–An electronic signal using kanban drawing on their expertise, knowledge, and insight
to create an automatic purchase order to a supplier to improve the design. Benefits include increased
or a manufacturing order to a shop. Dynamic kanban functionality, increased quality, ease of manufacture
is one of the elements of a manufacturing execution and assembly, ease of testing, better testing
system that enables just-in-time deliveries to procedures, ease of service, decreased cost, and
production. See: kanban. improved aesthetics. See: design for manufacture
dynamic lot sizing–Any lot-sizing technique that and assembly, participative design/engineering.
creates an order quantity subject to continuous early start date (ES)–In the critical path method of
recomputation. See: least total cost, least unit cost, project management, the earliest time at which a
part period balancing, period order quantity, given activity is estimated to begin. This date can
Wagner-Whitin algorithm. change as the project is executed.
dynamic programming–A method of sequential early supplier involvement (ESI)–The process of
decision making in which the result of the decision at involving suppliers early in the product design
each stage affords the best possible means to exploit activity and drawing on their expertise, insights, and
the expected range of likely (yet unpredictable) knowledge to generate better designs in less time
outcomes in the following decision-making stages. and designs that are easier to manufacture with high
quality. See: participative design/engineering.
E earmarked material–The reserved material on hand

that is physically identified, rather than merely
reserved, in a balance-of-stores record.
EAC–Abbreviation for estimate at completion. earned hours–A statement reflecting the standard
EAP–Abbreviation for employee assistance program. hours assigned for actual production reported during
the period. Syn: earned volume.
earliest due date (EDD)–A priority rule that
sequences the jobs in a queue according to their earned value–In project management, the total
(operation or job) due dates. See: earliest operation value, including overhead, of approved estimates for
due date. completed activities or portions thereof.
earliest operation due date (ODD)–A dispatching rule earned value method–In project management, a
that selects the job having the earliest due date for comparison of planned activity time and cost to
the impending operation. See: earliest due date. actual activity time and cost to see if a project is on
schedule by time and budget.
earliest start date–The earliest date an operation or
order can start. It may be restricted by the current earned volume–Syn: earned hours.
date, material availability, or management-specified earnings before interest and taxes (EBIT)–Syn: net
“maximum advance.” operating income.
earliness–If a job is finished before its due date, the earnings before taxes (EBT)–Earnings before interest
difference between its completion date and the due and taxes minus interest charges.
date. See: lateness, tardiness.
EBIT–Acronym for earnings before interest and taxes.

eBPP• effectivity date
eBPP–Abbreviation for electronic bill presentment economic value added–In managerial accounting, the
and payment. net operating profit earned above the cost of capital
for a profit center.
EBT–Abbreviation for earnings before taxes.
economy of scale–A phenomenon whereby
e-business–Abbreviation for electronic business.
larger volumes of production reduce unit cost by
Refers to conducting business processes on an
distributing fixed costs over a larger quantity. See:
electronic network, typically the internet. See:
economy of scope.
e-commerce.
E
economy of scope–Using one versatile plant to
e-cash–An electronic system that provides for
produce many different products at a lower cost than
deposits and withdrawals of digital money. It permits
making each product in different plants at a higher
a payer using it to remain anonymous.
cost. See: economy of scale.
echelon–A level of supply chain nodes. For example,
ECR–Abbreviation for efficient consumer response.
a supply chain with two independent factory
warehouses and nine wholesale warehouses delivering EDD–Abbreviation for earliest due date.
product to 350 retail stores is a supply chain with three
EDI–Abbreviation for electronic data interchange.
echelons between the factory and the end customer.
One echelon consists of the two independent EDIFACT–Abbreviation for EDI For Administration,
factory warehouses, one echelon consists of the nine Commerce, and Transport.
wholesale warehouses, and one echelon consists of
the 350 retail stores. Each echelon adds operating EDI For Administration, Commerce, and Transport
expense, holds inventory, adds to the cycle time, and (EDIFACT)–A set of United Nations rules for
expects to make a profit. See: disintermediation. electronic data interchange. These are international
guidelines and standards for the electronic exchange
e-commerce–Abbreviation for electronic commerce. of data regarding trade.
econometric model–A set of equations intended EDT–Abbreviation for electronic data transfer.
to be used simultaneously to capture the way in
which dependent and independent variables are edutainment–Mixing entertainment and education
interrelated. elements to make learning more fun.
econometric modeling–The process of developing EEO–Abbreviation for equal employment opportunity.

econometric models. See: econometric model. EEOC–Abbreviation for Equal Employment
economic indicator–An index of total business Opportunity Commission.
activities at the regional, national, and global levels. EF–Abbreviation for early finish date.
economic infrastructure–A nation’s networks for effective capacity–Syn: rated capacity.
supporting commerce, including transportation,
communications, and finance. effective date–The date on which a component or
an operation is to be added or removed from a bill of
economic life–The time until a product is scrapped— material or an assembly process. The effective dates
not because it is unusable, but because repairs are are used in the explosion process to create demands
becoming too expensive to justify further use. for the correct items. Normally, bills of material
economic lot size–Syn: economic order quantity. and routing systems provide for an effectivity start
date and stop date, signifying the start or stop of a
economic order quantity (EOQ)–A type of fixed particular relationship. Effectivity control also may
order quantity model that determines the amount be by serial number rather than date. Syn: effectivity,
of an item to be purchased or manufactured at one effectivity date.
time. The intent is to minimize the combined costs of
acquiring and carrying inventory. The basic formula is: effective interest rate–Syn: annual percentage rate.
effectivity–Syn: effective date.
where A = annual usage in units, S = ordering costs effectivity date–Syn: effective date.
in dollars, i = annual inventory carrying cost rate as
a decimal, and C = unit cost. Syn: economic lot size,
minimum cost order quantity. See: total cost curve.

efficiency • empirical
efficiency–A measurement (usually expressed as electronic communities–Communities of people who

a percentage) of the actual output relative to the communicate exclusively electronically.
standard output expected. Efficiency measures how
electronic data interchange (EDI)–The paperless
well something is performing relative to existing
(electronic) exchange of trading documents, such as
standards; in contrast, productivity measures output
purchase orders, shipment authorizations, advanced
relative to a specific input (e.g., tons/labor hour).
shipment notices, and invoices, using standardized
Efficiency is the ratio of (1) actual units produced to
document formats.
the standard rate of production expected in a time
E
period, or (2) standard hours produced to actual hours electronic document–The electronic representation
worked (taking longer means less efficiency), or (3) of a document that can be printed.
actual dollar volume of output to a standard dollar
volume in a time period. For example: (1) There is a electronic form–An electronic version of a paper
standard of 100 pieces per hour and 780 units are form. These forms eliminate the cost of printing,
produced in one eight-hour shift; the efficiency is 780 storing, and distributing paper forms.
÷ 800 converted to a percentage, or 97.5 percent. (2) electronic funds transfer (EFT)–A computerized
The work is measured in hours and took 8.21 hours system that processes financial transactions and
to produce 8 standard hours; the efficiency is 8 ÷ information about these transactions or performs the
8.21 converted to a percentage, or 97.5 percent. (3) exchange of value between two parties.
The work is measured in dollars and produces $780
with a standard of $800; the efficiency is $780 ÷ $800 electronic invoice presentment and payment (EIPP)–
converted to a percentage, or 97.5 percent. Accepting and sending invoices and payments over
the internet.
efficiency variance–In cost accounting, the
difference between the actual volume of a resource electronic market–An internet-based market where
used and the budgeted volume multiplied by the most sales occur electronically.
budgeted or standard price.
electronic product codes (EPCs)–Codes that are
efficient consumer response (ECR)–Replenishment used with RFID tags to carry information on the
through a distribution network based on point-of-sale product that will support warranty programs.
information.
electronic publishing–Representation of text and
e-form–Abbreviation for electronic form. multimedia documents electronically.
EFT–Abbreviation for electronic funds transfer. electronic signature–An authentication that

validates a transaction by means of an authorization
EI–Abbreviation for employee involvement. code to identify an individual or group.
EIPP–Abbreviation for electronic invoice presentment embargo–A ban established by a nation’s government
and payment. that prohibits individuals or organizations
elasticity of demand (supply)–The ratio of the from conducting any trade with individuals or
percentage change in quantity demanded (supplied) organizations from another particular nation.
to the percentage change in price. embezzlement–The fraudulent taking of another’s
e-learning–Training or schooling done online. property while acting in a fiduciary capacity.
electronic bill presentment and payment (eBPP)–A EMC–Abbreviation for export management company.
system that connects the bill issuer, bill payer, and emerging practice–The introduction of new
the payer’s bank to facilitate electronic payment. technology, knowledge, or significantly different
Payment is usually by credit card. methods of organizing processes.
electronic commerce (e-commerce)–The use of empathy–A dimension of service quality referring to
computer and telecommunication technologies to caring, individualized attention from a service firm.
conduct business via electronic transfer of data and
documents. empirical–Pertaining to a statement or formula
based upon experience or observation rather than on
electronic commerce application–A computer deduction or theory.
interface between two organizations that is used to
carry out business transactions electronically.

employee assistance program (EAP) • engineering standard
employee assistance program (EAP)–Employer- end item–A product sold as a completed item or
provided service aimed at helping employees repair part; any item subject to a customer order
and their families with personal and work-related or sales forecast. Syn: end product, finished good,
problems. Examples include financial counseling finished product. See: good.
and chemical-dependency rehabilitation programs.
end-of-life-inventory–Inventory kept on hand to
employee empowerment–The practice of giving non- satisfy demand for products that are no longer being
managerial employees the responsibility and the power manufactured.
to make decisions regarding their jobs or tasks. It is
E
end-of-life management–Planning for the phase-out
associated with the practice of transfer of managerial
of one product and the phase-in of a new product to
responsibility to the employee. Empowerment allows
avoid both the excessive inventory of and an out-
the employee to take on responsibility for tasks
of-stock situation with the old product before the
normally associated with staff specialists. Examples
replacement product is available.
include allowing the employee to make scheduling,
quality, process design, or purchasing decisions. endogenous variable–A variable whose value is
determined by relationships included within the model.
employee involvement (EI)–The concept of using
the experience, creative energy, and intelligence of end product–Syn: end item.
all employees by treating them with respect, keeping
them informed, and including them and their ideas in end user–1) The final consumer of a product. 2) The
decision-making processes appropriate to their areas of recipient of an output from a computer system.
expertise. Employee involvement focuses on quality and end-user computing–Use of computer resources by
productivity improvements. Syn: people involvement. non-information system personnel to enter, retrieve,
employee stock ownership plan (ESOP)–In the manipulate, or print data.
United States, a program that encourages workers enforced problem solving–The methodology of
to purchase company stock—generally tied into intentionally restricting a resource (e.g., inventory,
the compensation/benefits package. The intention storage space, number of workers) to expose a
is to give workers a feeling of participation in the problem that must then be resolved.
management and direction of the company.
engineering change–A revision to a drawing or design
empowerment–A condition whereby employees have released by engineering to modify or correct a part. The
the authority to make decisions and take action in their request for the change can be from a customer or from
work areas without prior approval. For example, an production, quality control, another department, or a
operator can stop a production process if a problem supplier. Syn: engineering change notice, engineering
is detected, or a customer service representative can change order.
send out a replacement product if a customer calls
with a problem. engineering change notice–Syn: engineering change.
enable process–A description of the activities engineering change order–Syn: engineering change.
associated with the management of the supply
engineering characteristics–The technical features
chain, including management of business rules,
designed into a product.
performance management, data management,
resource management, facilities management, engineering drawings–A visual representation of the
contract management, supply chain network dimensional characteristics of a part or assembly at
management, managing regulatory compliance, some stage of manufacture.
and risk management.
engineering order–Syn: experimental order.
encryption–Changing readable words into another
form, called a cipher, which hides the text’s meaning. engineering standard–Design or test guidelines
intended to promote the design, production, and test
ending inventory–A statement of on-hand quantities of a part, component, or product in a manner that
or the dollar value of a SKU at the end of a period, promotes standardization, ease of maintenance,
often determined by a physical inventory. consistency, adequacy of test procedures, versatility
of design, ease of production and field service, and
minimization of the number of different tools and
special tools required.

engineer-to-order • equal runout quantities
engineer-to-order–Products whose customer eliminate environmental waste through innovation

specifications require unique engineering design, and improvements.
significant customization, or new purchased
environmentally responsible purchasing–
materials. Each customer order results in a unique
Syn: responsible procurement.
set of part numbers, bills of material, and routings.
Syn: design-to-order. environmentally sensitive engineering–Designing
with consideration of how a product or its packaging
en route–A term describing goods in transit.
will ultimately be disposed.
E
enterprise–Any undertaking, venture, initiative, or
Environmental Protection Agency (EPA)–A U.S.
business organization with a defined mission.
agency with regulatory authority over matters
enterprise performance management (EPM)– affecting the environment, including waste generation
The process of monitoring performance across and habitat destruction.
the enterprise with the goal of improving business
environmental scanning–Process used to expose
performance. An EPM system integrates and analyzes
an organization’s potential strengths, weaknesses,
data from many sources, including e-commerce
opportunities, and threats. Many experts emphasize
systems, front- and back-office applications, data
opportunities and threats because the tool is
warehouses, and external data sources. Advanced
primarily external.
EPM systems can support many performance
methodologies, such as the balanced scorecard. EOQ–Abbreviation for economic order quantity.
enterprise resources management–The planning, EOQ = 1–Reducing setup time and inventory to the
execution, control, and measurement functions point where it is economically sound to produce in
required to effectively operate an enterprise. batches with a size of one. Often EOQ = 1 is an ideal to
strive for, like zero defects.
enterprise resources planning (ERP)–Framework for
organizing, defining, and standardizing the business EOQ tables–Tables listing several ranges of monthly
processes necessary to effectively plan and control an usages in dollars and the appropriate order size in
organization so the organization can use its internal dollars or monthly usage for each usage range.
knowledge to seek external advantage. An ERP system
provides extensive databanks of information including EPA–Abbreviation for Environmental Protection Agency.
master file records, repositories of cost and sales, EPC–Abbreviation for electronic product code.
financial detail, analysis of product and customer
hierarchies, and historic and current transactional data. EPM–Abbreviation for enterprise performance
management.
enterprise resources portal–A means for a company
to share, exchange, or transact information with equal employment opportunity (EEO)–In the
an external business partner using internet-based United States, the laws prohibiting discrimination
technologies. An enterprise resources portal is often in employment because of race or color, sex, age,
associated with an enterprise resources planning handicap status, religion, and national origin.
system, which can be configured to share or present
Equal Employment Opportunity Commission
such information via an internet portal or hyperlink.
(EEOC)–An administrative agency in the United
An enterprise resources portal can also be one means
States that oversees Title VII of the Civil Rights Act,
of implementing a private trading exchange.
which prohibits employment discrimination based on
entrepreneur–One who organizes resources race, color, religion, sex, or national origin.
productively and bears the risk of the venture.
equal protection clause–A part of the Fourteenth
environmentally responsible business–A firm that Amendment to the U.S. Constitution requiring similar
operates in such a way as to minimize detrimental treatment of citizens in similar circumstances.
impacts on society. See: green manufacturing, green
equal runout method–Syn: equal runout quantities.
supply chain.
equal runout quantities–Order quantities for items
environmentally responsible manufacturing–
in a group that result in a supply that covers an equal
A collection of manufacturing activities that includes
time for all items. Syn: equal runout method. See: fair-
design of the product, facility, manufacturing processes,
share quantity logic.
logistics, and supplier relationships that reduce or

equilibrium point • excess capacity
equilibrium point–The point in a market where ETC–1) Abbreviation for export trading company. 2)
the demand for a product and the supply of that Abbreviation for estimate to complete.
product are exactly equal. If supply were greater, the
ethical standards–A set of guidelines for proper
price would fall. If demand were greater, the price
conduct by business professionals. For example,
would rise. Free markets tend to move toward their
the ISM (formerly NAPM) provides a set of principles
equilibrium point.
and standards for the proper conduct of purchasing
equipment class–A means to describe a group of activities.
equipment with similar characteristics for purposes
E
euro–Official currency of the Eurozone, which forms
of planning and scheduling.
a large part of the European Union.
equity–The part of a company’s total assets not
eurobond–An internationally marketed bond.
provided by creditors; owner-invested funds.
eurocurrency–Money that is deposited outside the
equivalent days–The standard hour requirements of a
country that issued it (outside the issuing country’s
job converted to days for scheduling purposes.
control).
equivalent unit cost–A method of costing that uses
eurodollar–A U.S. dollar held in a foreign bank.
the total cost incurred for all like units for a period of
time divided by the equivalent units completed during European Union (EU)–An economic and political
the same time period. union of European countries created to strengthen
economies and lower trade barriers.
equivalent units–A translation of inventories into
equivalent finished goods units or of inventories evaporating cloud–In the theory of constraints, a
exploded back to raw materials for period end logic-based tool for surfacing assumptions related
valuation of inventories. An equivalent unit can be the to a conflict or problem. Once the assumptions are
sum of several partially completed units. Two units surfaced, actions to break an assumption and hence
50 percent completed are equivalent to one unit 100 solve (evaporate) the problem can be determined.
percent completed.
event–An event is an identifiable point in time among
ergonomics–Approach to job design that focuses a set of related activities. Graphically, an event can be
on the interactions between the human operator represented by two approaches: (1) in activity-on-node
and such traditional environmental elements as networks, it is represented by a node; (2) in activity-on-
atmospheric contaminants, heat, light, sound, and all arrow networks, the event is represented by the arrow.
tools and equipment.
event-based marketing–Promoting goods or services
ERP–Abbreviation for enterprise resources planning. through specific events.
ES–Abbreviation for early start date. event-on-arrow network–Syn: activity-on-arrow
network.
escalation–An amount or percentage by which
a contract price may be adjusted if specified event-on-node network–Syn: activity-on-node network.
contingencies occur, such as changes in the
supplier’s raw material or labor costs. everyday low prices (EDLP)–A retail strategy of
keeping prices low across all products or services as
ESI–Abbreviation for early supplier involvement. opposed to having sales at certain times.
ESOP–Acronym for employee stock ownership plan. exception management–The practice of responding
only to issues or events that fall outside a predetermined
estimate at completion (EAC)–Estimated cost of an
threshold. Managers are prompted to respond to these
activity or project when the defined scope of work will
critical matters first. This practice is often applied to
be finished. It is the actual cost to date plus estimate
management of budgets, projects, and risks. Sometimes
to complete for uncompleted activities.
referred to as management by exception.
estimate of error–In statistics, a measure of dispersion.
exception message–Syn: action message.
See: standard deviation, standard error, variance.
exception report–A report that lists or flags only
estimate to complete (ETC)–Expected cost to
those items that deviate from the plan.
complete all remaining work for an activity or project.
excess capacity–Capacity that is not used to either
produce or protect the creation of throughput.

excess inventory • expected value
excess inventory–Any inventory in the system that exempt–Generally, a classification of employees/

exceeds the minimum amount necessary to achieve jobs for which compensation is not determined by
the desired throughput rate at the constraint or that extending the recorded hours worked by an hourly
exceeds the minimum amount necessary to achieve rate (e.g., pay is specified at an annual or monthly
the desired due date performance. Total inventory = rate). Exempt employees include most professionals,
productive inventory + protective inventory + excess administrative and management personnel, and
inventory. sales representatives. Specifically, the term refers to
and is fully defined by the U.S. Department of Labor
excess issue–The removal from stock and assignment
E
Fair Labor Standards Act, which regulates minimum
to a schedule of a quantity larger than the schedule
wages and overtime for nonexempt employees. See:
quantity. Syn: overissue.
exempt positions, nonexempt positions.
exchange rate–The rate at which one currency
exempt carrier–A for-hire carrier that is free from
converts to another.
economic regulation.
exchange unit–The number of units to be produced
exempt employee–A person filling an exempt
before changing the bit, tool, or die. See: process batch.
position. See: exempt positions.
exclusive use–Carrier vehicles assigned for the
exempt positions–Positions that do not require the
exclusive use of a particular shipper.
payment of overtime because they meet the tests of
executing processes–The processes performed to executive, supervisory, or administrative activity, as
complete a project plan to accomplish the objectives defined under the Fair Labor Standards Act.
set forth in the project scope.
exit interview–An interview given to an employee
execution horizon–The life span of purchase and who is leaving the company. The purpose is to find out
manufacturing orders covering the time from when why a person is leaving, what was liked and disliked
they are opened until the time they are closed . about the job and the company, and what changes
would make the department and the company a
executive dashboard–A set of cross-functional better place to work.
metrics for measuring company performance that
indicates the health of the company. It usually exogenous variable–A variable whose values are
includes the company’s key performance indicators. determined by considerations outside the model in
See: dashboard. question.
executive information system–A software application expansion–Any increase in the capacity of a plant,
used by top managers, without assistance, to access facility, or unit, usually by added investment. The
information on the current organizational status. scope of this increase extends from the elimination
of problem areas to the complete replacement of an
executive sales and operations planning–The existing facility with a larger one.
portion of sales and operations planning that defines
executive decision-making processes to balance expected completion quantity–The planned quantity
supply and demand at the volume level in families, of a manufacturing order after expected scrap.
fully integrates financial planning and operational
expected demand–The quantity expected to be
planning, and provides a forum for establishing and
consumed during a given time period when usage is at
linking high-level strategic plans with day-to-day
the forecast rate. See: demand during lead time.
operations. See: sales and operations planning.
expected demand during lead time–Syn: demand
executive sponsor–In SCOR implementation, the
during lead time.
person chosen to spearhead the change process who
is responsible for approving the change steps of the expected life–The average length of time a product
plan and selling the plan to the chief executives and remains in service or in a serviceable condition.
lower-level managers of the organization.
expected receipt date–Syn: due date.
exemplar–A particularly effective practice that
expected value–The average value that would be
should be imitated.
observed in taking an action an infinite number of
times. The expected value of an action is calculated
by multiplying the outcome of the action by the
probability of achieving the outcome.

expedite • express
expedite–To rush or chase production or purchase exponential smoothing forecast–A type of weighted
orders that are needed in less than the normal lead moving average forecasting technique in which past
time; to take extraordinary action because of an observations are geometrically discounted according
increase in relative priority. Syn: stockchase. to their age. The heaviest weight is assigned to the
most recent data. The smoothing is termed exponential
expeditor–A production control person whose
because data points are weighted in accordance with an
primary duty is expediting.
exponential function of their age. The technique makes
expendables–Syn: consumables. use of a smoothing constant to apply to the difference
E
between the most recent forecast and the critical sales
expense–Expenditures of short-term value, including data, thus avoiding the necessity of carrying historical
depreciation, as opposed to land and other fixed
sales data. The approach can be used for data that
capital. See: overhead.
exhibits no trend or seasonal patterns. Higher order
expensed stocks–Syn: floor stocks. exponential smoothing models can be used for data
with either (or both) trend and seasonality.
experience curve–Syn: learning curve.
export broker–A party that introduces the buyer to
experience curve pricing–An average cost pricing the seller and eventually withdraws, getting a fee for
method that uses an estimate of future average costs services rendered.
based on an experience (learning) curve.
export compliance–Cooperating with export rules
experimental design–A formal plan that details the regarding packaging and documentation.
specifics for conducting an experiment, such as
which statistical techniques and responses, factors, export license–A document received from a
levels, blocks, and treatments are to be used. governmental agency authorizing a certain quantity
of an export to be sent to a given country.
experimental order–An order generated by the
laboratory, research and development, or engineering export management company (EMC)–An organization
group that must be run through regular production that serves as a sales department for a domestic
facilities with potential future product or market organization’s international markets, earning
development as a project or team goal. Syn: engineering commissions on completed sales. EMCs select
order, laboratory order, pilot order, R&D order. distribution channels and markets, arrange promotional
campaigns, analyze customer credit information,
experimental research–A form of research (sometimes
advise on payment terms, administer documentation,
used in marketing research) where matched sets of
and collect international debts. They may also arrange
people are controlled for certain variables (such as
income, age, and so on) while other variables (such as transportation, provide warehouse space, manage
products offered) are varied to test research questions. export inventory, and provide break-bulk services.
See: marketing research. exports–Products produced in one country and sold
expert system–A type of artificial intelligence computer in another.
system that mimics human experts by using rules and export trading company (ETC)–An organization that
heuristics rather than deterministic algorithms. typically purchases goods outright in one country
explode–To perform a bill-of-material explosion. for resale in a different country at a profit. The
organization locates buyers and handles all inland and
explode-to-deduct–Syn: backflush. overseas transportation, documentation, and foreign
explosion–Syn: requirements explosion. Ant: implosion. government requirements. Some may perform these
services without formally taking title to the goods.
explosion level–Syn: low-level code.
exposures–The number of times per year the system
exponential distribution–A continuous probability risks a stockout. The number of exposures is arrived
distribution where the probability of occurrence either at by dividing the annual usage by the lot size.
steadily increases or decreases. The steady increase
case (positive exponential distribution) is used to model express–1) Carrier’s payment to its customers when
phenomena such as customer service level versus ships, rail cars, or trailers are unloaded or loaded in
cost. The steady decrease case (negative exponential less than the time allowed by contract and returned
distribution) is used to model phenomena such as to the carrier for use. See: demurrage, detention.
the weight given to any one time period of demand in 2) The use of priority package delivery to achieve
exponential smoothing. overnight or second-day delivery.

express warranty • failure analysis
F
express warranty–A positive representation made by
a seller—concerning the nature, character, use, and
purpose of goods—that induces the buyer to buy and
on which the seller intends the buyer to depend.
fabrication–Manufacturing operations for making
extended enterprise–The notion that supply chain components (as opposed to assembly operations).
partners form a larger entity. See: supply chain
community. fabrication level–The lowest production level. The
only components at this level are parts (as opposed to
extensible markup language (XML)–This language assemblies or subassemblies). These parts are either
facilitates direct communication among computers procured from outside sources or fabricated within
F
on the internet. Unlike the older hypertext markup the manufacturing organization.
language (HTML), which provides HTML tags giving
instructions to a web browser about how to display fabrication order–A manufacturing order to a
information, XML tags give instructions to a web component-making department authorizing it
browser about the category of information. to produce component parts. See: batch card,
manufacturing order.
external customer–A person or organization that
receives a good, a service, or information but is not fabricator–A manufacturer that turns the product of a
part of the organization supplying it. See: customer, converter into a larger variety of products. For example,
internal customer. a fabricator may turn steel rods into nuts, bolts, and
twist drills, or may turn paper into bags and boxes.
external environment–All the factors that exist
outside the boundary of the organization that have facilitating products–Products that support the
the possibility of affecting any part of the organization. operations of a firm but are not sold externally, such
See: internal environment, organizational environment. as furniture and computers.
external factory–A situation where suppliers are viewed facilities–The physical plant, distribution centers,
as an extension of the firm’s manufacturing capabilities service centers, offices, laboratories, and related
and capacities. The same practices and concerns that equipment.
are commonly applied to the management of the firm’s facility layout–Describes where machines and
manufacturing system should also be applied to the utilities will be located in a facility, as well as the
management of the external factory. arrangement of processes.
external failure costs–The costs related to problems facility planning–Long-range plan of what capacity is
found after the product reaches the customer. This needed, when it will be needed, and what facilities will
usually includes such costs as warranty and returns. meet these requirements; also, a plan for the layout of
externality–The costs or benefits of a firm’s activities these facilities.
borne or received by others. factory within a factory–A technique to improve
external setup time–The time associated with management focus and overall productivity by
elements of a setup procedure performed while the creating autonomous business units within a larger
process or machine is running. Ant: internal setup time. physical plant. Syn: plant within a plant.
extranet–A network connection to a partner’s failsafe techniques–Syn: failsafe work methods,

network using secure information processing and poka-yoke.
internet protocols to do business. failsafe work methods–Methods of performing
extrapolation–Estimation of the future value of some operations so that erroneous or faulty actions cannot
data series based on past observations. Statistical be completed. For example, a part without holes in
forecasting is a common example. Syn: projection. the proper place cannot be removed from a jig; a
computer system rejects invalid numbers or requires
extrinsic forecasting method–A forecast method double entry of transaction quantities outside the
using a correlated leading indicator; for example, normal range. Syn: failsafe techniques, mistake-
estimating furniture sales based on housing starts. proofing, poka-yoke.
Extrinsic forecasts tend to be more useful for large
aggregations, such as total company sales, than failure analysis–The collection, examination, review,
for individual product sales. Ant: intrinsic forecast and classification of failures to determine trends and
method. See: quantitative forecasting technique. to identify poorly performing parts or components.

failure costs • Federal Trade Commission (FTC)
failure costs–A term used within the cost of poor fast-tracking–A project schedule compression
quality model to include both internal and external technique that overlaps (or performs in parallel)
failure costs. See: cost of poor quality, external failure activities that would ordinarily be performed
costs, internal failure costs. sequentially.
failure mode analysis (FMA)–A procedure to fault isolation–A technique used to identify the cause
determine which malfunction symptoms appear of a defect.
immediately before or after the failure of a critical
fault tolerance–The ability of a system to avoid or
parameter in a system. After all the possible causes
minimize the disruptive effects of defects by using
are listed for each symptom, the product is designed
some form of redundancy or extra design margins.
to eliminate the problems.
failure mode effects analysis (FMEA)–A procedure in

which each potential failure mode in every sub-item
fault tree analysis–A logical approach to identify the
probabilities and frequencies of events in a system that
are most critical to uninterrupted and safe operation.
F
of an item is analyzed to determine its effect on other
This analysis may include failure mode effects
sub-items and on the required function of the item.
analysis (determining the result of component failure
failure mode effects and criticality analysis (FMECA)–A interactions toward system safety) and techniques for
procedure that is performed after a failure mode human error prediction.
effects analysis to classify each potential failure effect
FCL–Abbreviation for full container load.
according to its severity and probability of occurrence.
feasibility study–An analysis designed to establish
Fair Labor Standards Act (FLSA)–Federal law that
the practicality and cost justification of a given
governs the definitions of management and labor and
project and, if it appears to be advisable to do so, to
establishes wage payment, hours worked, and other
determine the direction of subsequent project efforts.
employment practices.
feasible economic order quantity–When solving
fair return–Within transportation, a profit level
a quantity discount problem, the economic order
accomplishing a rate of return on investment that
quantity is feasible if the computed number can
regulatory agencies deem acceptable given the level
be purchased at the cost used in the EOQ problem
of risk.
rather than at some other discount quantity. For
fair-share quantity logic–The process of equitably example, consider a product that sells for $10 for 1
allocating available stock among field distribution to 99 units, $9 for 100 to 499 units, and $8 for 500 for
centers. Fair-share quantity logic is normally used more units. If the quantity discount solution calls for
when stock available from a central inventory location purchasing 800 units at the $8 value, the solution is
is less than the cumulative requirements of the field feasible; however, if the quantity discount solution
stocking locations. The use of fair-share quantity logic calls for purchasing 250 units at this cost, the solution
involves procedures that “push” stock out to the field, is not feasible because the purchase quantity is not
instead of allowing the field to “pull” in what is needed. consistent with the purchase price for that quantity.
The objective is to maximize customer service from the
feature–A distinctive characteristic of a good or
limited available inventory. See: equal runout quantities.
service. The characteristic is provided by an option,
family–A group of end items whose similarity of accessory, or attachment. For example, in ordering a
design and manufacture facilitates their being new car, the customer must specify an engine type
planned in aggregate, whose sales performance is and size (option), but need not necessarily select
monitored together, and (occasionally) whose cost is an air conditioner (attachment). See: accessory,
aggregated at this level. attachment, option.
family contracts–A purchase order that groups feature code–An identifying code assigned to a
families of similar parts together to obtain pricing distinct product feature that may contain one or more
advantages and a continuous supply of material. specific part number configurations.
FAQs–Abbreviation for frequently asked questions. Federal Trade Commission (FTC)–The United States
governmental agency charged with protecting
FAS–1) Abbreviation for final assembly schedule.
businesses and consumers from unfair business
2) Abbreviation for free alongside ship.
practices. It also regulates advertising and promotion
at the national level.

fee • finishing lead time
fee–The charge for the use of the contractor’s final assembly schedule (FAS)–A schedule of end
organization for the period and to the extent specified items to finish the product for specific customers’
in the contract. orders in a make-to-order or assemble-to-order
environment. It is also referred to as the finishing
feedback–The flow of information back into the
schedule because it may involve operations other
control system so that actual performance can be
than the final assembly; also, it may not involve
compared with planned performance.
assembly (e.g., final mixing, cutting, packaging). The
feedback loop–The part of a closed-loop system that FAS is prepared after receipt of a customer order
allows the comparison of response with command. as constrained by the availability of material and
capacity, and it schedules the operations required
feeder workstations–An area of manufacture whose
F
to complete the product from the level where it is
products feed a subsequent work area. stocked (or master scheduled) to the end-item level.
feedstock–The primary raw material in a chemical financial accounting–The use of generally accepted
or refining process normally received by pipeline or accounting principles to prepare reports to external
large-scale bulk shipments. Feedstock availability agencies such as investors and governmental agencies.
is frequently the controlling factor in setting the
production schedule and rate for a process. financial benchmarking–Comparing one company’s
financial results to those of another company.
FEFO–Abbreviation for first expiry first out. This type of benchmarking need not involve direct
FEU–An abbreviation for forty-foot equivalent unit. contact between the initiator company and the
target company, as many financial records are
fiduciary–One having the duty to act on another’s publicly available. See: benchmarking.
behalf in a trustworthy and confidential fashion.
financial forecasting–Estimating a firm’s future
field–A specified area of a record used for a particular financial statements.
category of data.
financial leverage management ratios–A set of
field finished goods–Finished goods kept in measurements of the degree to which a firm is
distribution centers or warehouses. financing assets with fixed-charge instruments such
as debt or preferred stock.
field service–The functions of installing and
maintaining a product for a customer after the sale or financial management–The function concerned with
during the lease. Field service may also include training ensuring the availability of funds for research and
and implementation assistance. Syn: after-sale service. development, operations, and marketing.
field service parts–Service parts kept in distribution finish date–The time of completion of a project
centers or warehouses. or activity. It may be planned, actual, early, late,
baseline, or target.
field warehouse–Syn: distribution center.
finished good–Syn: end item.
FIFO–Acronym for first in, first out.
finished goods inventory–Those items on which all
file–An organized collection of records.
manufacturing operations, including final test, have
file structure–The manner in which records are stored been completed. These products are available for
within a file (e.g., sequential, random, index-sequential). shipment to the customer as either end items or repair
parts. Syn: finished products inventory. See: goods.
file transfer protocol (FTP)–A protocol used to
transfer files over the internet. finished good waivers–Approvals for deviation from
normal product specifications.
fill rate–Syn: customer service ratio.
finished product–Syn: end item.
final assembly–The highest level of assembled
product, as it is shipped to customers. finished products inventory–Syn: finished goods
inventory.
final assembly department–The name of the
manufacturing department where the product is finishing lead time–1) The time that is necessary
assembled. See: blending department, pack-out to finish manufacturing a good after receipt of a
department. customer order. 2) The time allowed for completing
the good based on the final assembly schedule.

finish-to-finish • fitness for use
finish-to-finish–In project management, a network first-come-first-served rule–A dispatching rule under

requirement that activity A must be finished before which the jobs are sequenced by their arrival times.
subsequent activity B can finish. See: logical See: first-in, first-out.
relationship.
first expiry first out (FEFO)–A picking methodology
finish-to-order–Syn: assemble-to-order. assuring that the usage shelf life of items is optimized.
Years ago, first in, first out (FIFO) was satisfactory
finish-to-start–In project management, a network
as the shelf-life days for items often didn’t vary and
requirement that activity A must be finished before
FIFO often coincided with the expiry dates. However,
activity B can start. See: logical relationship.
re-testing is frequently done to extend shelf-life dates
finite forward scheduling–An equipment scheduling on some lots or batches, while other lots may have
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
typical shelf-life dates shortened because of quality
or processes. Thus, FEFO was introduced by software
vendors to provide this picking methodology for use
F
used with this technique. See: finite loading. with shelf-life controlled items.
finite loading–Assigning no more work to a work first in, first out (FIFO)–A method of inventory
center than the work center can be expected to valuation for accounting purposes. The accounting
execute in a given time period. The specific term assumption is that the oldest inventory (first in) is the
usually refers to a computer technique that involves first to be used (first out), but there is no necessary
calculating shop priority revisions in order to level relationship with the actual physical movement
load operation by operation. Syn: finite scheduling. of specific items. See: first-come-first-served rule,
See: drum-buffer-rope. average cost system.
finite scheduling–Syn: finite loading. first-mover advantage–The phenomenon of market

leadership being gained through market innovation.
firewall–A device used to control access to a company’s
data from the internet or other outside sources. first-order smoothing–A single exponential
smoothing; a weighted moving average approach
firm fixed-price contract–A contract in which the that is applied to forecasting problems where the
seller is paid a set price without regard to costs. Syn: data does not exhibit significant trend or seasonal
fixed-price contract. patterns. Syn: single exponential smoothing, single
firm master production schedule–A part of the smoothing.
master production schedule in which changes can first pass yield–The ratio of products that conform to
occur only rarely. specifications without rework or modification to total
firm offer–A written offer to buy or sell goods that will input.
be held open for a stipulated period. first-piece inspection–Syn: first-article inspection.
firm planned order (FPO)–A planned order that first-tier supplier–One that supplies goods or
can be frozen in quantity and time. The computer services directly to a business.
is not allowed to change it automatically; this is
the responsibility of the planner in charge of the fishbone analysis–A technique to organize the elements
item that is being planned. This technique can aid of a problem or situation to aid in the determination
planners working with MRP systems to respond of the causes of the problem or situation. The analysis
to material and capacity problems by firming up relates the effect of the environment to the several
selected planned orders. In addition, firm planned possible sources of the problem.
orders are the normal method of stating the master
fishbone chart–Syn: cause-and-effect diagram.
production schedule. See: planning time fence.
fishbone diagram–Syn: cause-and-effect diagram.
first-article inspection–A quality check on the
first component run after a new setup has been fitness for use–A term used to indicate that a good or
completed. Syn: first-piece inspection. service fits the customer’s defined purpose for that
good or service.

five focusing steps • fixed-period requirements
five focusing steps–In the theory of constraints, a fixed-interval order system–Syn: fixed reorder cycle
process to continuously improve organizational profit inventory model.
by evaluating the production system and market mix
fixed-interval review system–A hybrid inventory
to determine how to make the most profit using the
system in which the inventory analyst reviews
system constraint. The steps consist of (1) identifying
the inventory position at fixed time periods. If the
the constraint to the system, (2) deciding how to
inventory level is found to be above a preset reorder
exploit the constraint to the system, (3) subordinating
point, no action is taken. If the inventory level is at or
all nonconstraints to the constraint, (4) elevating the
below the reorder point, the analyst orders a variable
constraint to the system, and (5) returning to step 1
quantity equal to M minus x, where M is a maximum
if the constraint is broken in any previous step, while
stock level and x is the current quantity on hand and
F
not allowing inertia to set in.
on order (if any). This hybrid system does not reorder
five-forces model of competition–A methodology at every review interval. It therefore differs from the
for analyzing competitive pressures in a market and fixed-interval order system, which automatically
assessing the strength and importance of each of places an order whenever inventory is reviewed.
those pressures.
fixed-location storage–A method of storage in which
five Ms–The branches of a cause-and-effect a relatively permanent location is assigned for the
(fishbone) diagram: manpower, methods, materials, storage of each item in a storeroom or warehouse.
machines, and measurements. Although more space is needed to store parts than
in a random-location storage system, fixed locations
five Ss–Five terms beginning with “S” used to create
become familiar, and therefore a locator file may not
a workplace suitable for lean production: sort,
be needed. See: random-location storage.
simplify, scrub, standardize, and sustain. Sort means
to separate needed items from unneeded ones and fixed order period system–A method of inventory
remove the latter. Simplify means to neatly arrange planning that measures actual inventory levels at
items for use. Scrub means to clean up the work regular intervals of time; either an order is placed
area. Standardize means to sort, simplify, and scrub every time, or a check of inventory levels is made and
daily. Sustain means to always follow the first four Ss. an order placed if needed. Often the quantity ordered
Sometimes referred to by the Japanese equivalents: varies from period to period as inventory is restored to
seiri, seiton, seiso, seiketsu, and shitsuke. a predetermined level. See: fixed order quantity system.
five whys–The common practice in total quality fixed order quantity–A lot-sizing technique in MRP or
management is to ask “why” five times when confronted inventory management that will always cause planned
with a problem. By the time the answer to the fifth or actual orders to be generated for a predetermined
“why” is found, the ultimate cause of the problem is fixed quantity, or multiples thereof, if net requirements
identified. Syn: five Ws. See: root cause analysis. for the period exceed the fixed order quantity.
five Ws–Syn: five whys. fixed order quantity system–An inventory system,
such as economic order quantity, in which the same
fixed assets–Assets acquired for use within a company
order quantity is used from order to order. The time
having an estimated useful life of one year or more.
between orders (order period) then varies from order
fixed-asset turnover–Sales divided by net fixed to order. Syn: fixed reorder quantity inventory model.
assets. Fixed assets reflect asset acquisition price See: fixed order period system.
less depreciation.
fixed overhead–Traditionally, all manufacturing costs—
fixed budget–A budget of expected costs based on a other than direct labor and direct materials—that
specific level of production or other activity. continue even if products are not produced. Although
fixed overhead is necessary to produce the product, it
fixed cost–An expenditure that does not vary with the cannot be directly traced to the final product.
production volume; for example, rent, property tax,
and salaries of certain personnel. fixed-period quantity–An MRP lot-sizing technique
that sets the lot size equal to the net requirements for
fixed-cost contribution per unit–An allocation a given number of periods.
process where total fixed cost for a period is divided
by total units produced in that given time period. fixed-period requirements–A lot-sizing technique
that sets the order quantity to the demand for a given
number of periods. See: discrete order quantity.

fixed-position layout • flexible capability
fixed-position layout–A factory layout that plans for hybrid inventory system, independent demand item
the product to be in a set place; the people, machines, management models, optional replenishment model,
and tools are brought to and from the product. order point, order point system, statistical inventory
control, time-phased order point.
fixed-position manufacturing–Similar to project
manufacturing, this type of manufacturing is mostly fixture–A device to hold and locate a work piece
used for large, complex projects where the product during inspection or production operations. See: jig.
remains in one location for its full assembly period or
flag of convenience–A ship registered in a nation
may move from location to location after considerable
with low taxes and lax safety regulations. Liberia and
work and time are spent on it. Examples of fixed-
Panama are two favorite flags of convenience.
position manufacturing include shipbuilding or
aircraft assembly, for which the costs of frequent
movement of the product are very high.
flatbed–A type of truck trailer that has a floor but
no enclosure. Sideboards or tie-downs are used to
prevent cargo from falling off.
F
fixed-price contract–Syn: firm fixed-price contract.
flatcar–A railroad car without sides used for hauling
fixed-price incentive fee contract–A contract in
machinery.
which the seller is paid a set price and can earn an
additional profit if certain stipulations are met. flexibility–1) The ability of the manufacturing system
to respond quickly, in terms of range and time, to
fixed property–Property attached to, and not easily
external or internal changes. Six different categories
removed from, the location.
of flexibility can be considered: mix flexibility, design
fixed reorder cycle inventory model–A form of changeover flexibility, modification flexibility, volume
independent demand management model in which flexibility, rerouting flexibility, and material flexibility
an order is placed every n time units. The order (see each term for a more detailed discussion). In
quantity is variable and essentially replaces the items addition, flexibility involves concerns of product
consumed during the current time period. If M is the flexibility. Flexibility can be useful in coping with
maximum inventory desired at any time and x is the various types of uncertainty (regarding mix, volume,
quantity on hand at the time the order is placed, then and so on). 2) The ability of a supply chain to mitigate,
in the simplest model, the order quantity equals M or neutralize, the risks of demand forecast variability,
minus x. The quantity M must be large enough to supply continuity variability, cycle time plus lead-time
cover the maximum expected demand during the lead uncertainty, and transit time plus customs-clearance
time plus a review interval. time uncertainty during periods of increasing or
diminishing volume.
The order quantity model becomes more complicated
whenever the replenishment lead time exceeds the flexibility responsiveness–The ability of the firm and
review interval, because outstanding orders then have its management to change rapidly in response to
to be factored into the equation. Syn: fixed-interval changes taking place in the marketplace.
order system, fixed order quantity system, order level
flexible automation–Automation that provides short
system, periodic review system, time-based order
setup times and the ability to switch quickly from one
system. See: fixed reorder quantity inventory model,
product to another.
hybrid inventory system, independent demand item
management models, optional replenishment model. flexible budget–A budget showing the costs and
revenues expected to be incurred or realized over a
fixed reorder quantity inventory model–An
period of time at different levels of activity, measured
independent demand item management model where
in terms of some activity base such as direct labor
the order quantity is the expected demand quantity
hours, direct labor costs, or machine hours. A flexible
during the replenishment lead time. Fixed reorder
manufacturing overhead budget gives the product
quantity models assume the existence of some form
costs of various manufacturing overhead items at
of a perpetual inventory record or some form of
different levels of activity. See: step budget.
physical tracking (e.g., a two-bin system that is able
to determine when the reorder point is reached). Syn: flexible capability–Machinery’s ability to be readily
fixed order quantity system, lot-size system, order adapted to processing different components on an
point-order quantity system, quantity-based order ongoing basis.
system. See: fixed reorder cycle inventory model,

flexible capacity • flow process chart
flexible capacity–The ability to operate manufacturing can draw without requisitions. Syn: bench stocks,
equipment at different production rates by varying expensed stocks.
staffing levels and operating hours or starting and
stopping at will. flowchart–The output of a flowcharting process;
a chart that shows the operations, transportation,
flexible machine center (FMC)–An automated system storages, delays, inspections, and so on related to a
that usually consists of computer numerical control process. Flowcharts are drawn to better understand
machines with robots loading and unloading the parts processes. The flowchart is one of the seven tools of
conveyed into, and through, the system. Its purpose is quality. Syn: flow diagram. See: block diagram, flow
to provide quicker throughput, changeovers, setups, process chart.
and so forth to enable the manufacturing of multiple
products. flowcharting–A systems analysis tool that graphically
F
presents a procedure. Symbols are used to represent
flexible manufacturing system (FMS)–A group of operations, transportations, inspections, storages,
numerically controlled machine tools interconnected delays, and equipment.
by a central control system. The various machining
cells are interconnected via loading and unloading flow control–A specific production control system
stations by an automated transport system. that is based primarily on setting production rates and
Operational flexibility is enhanced by the ability to feeding work into production to meet these planned
execute all manufacturing tasks on numerous product rates, then monitoring and controlling production.
designs in small quantities and with faster delivery. See: shop floor control.
flexible path equipment–Materials handling flow diagram–Syn: flowchart.

equipment such as forklifts that are not required to flow line–Syn: flow shop.
follow fixed paths.
flow manufacturing–Syn: flow shop.
flexible specialization–A strategy based on multi-use
equipment, skilled workers, and innovative senior flow order–An order filled by production made over
managers to accommodate the continuous change time and checked by a cumulative count until the flow
that occurs in the marketplace. order quantity is complete, as opposed to being filled by
moving material through production as an integral lot.
flexible workforce–A workforce whose members
are cross-trained and whose work rules permit flow plant–Syn: flow shop.
assignment of individual workers to different tasks.
flow process chart–A graphic, symbolic representation
flextime–An arrangement in which employees are of the work performed, or to be performed, on a
allowed to choose work hours as long as the standard product as it passes through some or all of the stages
number of work hours is worked. of a process. Typically, the information included in the
chart is quantity, distance moved, type of work done (by
float–1) The amount of work-in-process inventory symbol with explanation), and equipment used. Work
between two manufacturing operations, especially in times may also be included. The flow process chart
repetitive manufacturing. 2) In supply chains, the time symbols (ASME Standard Symbols) generally used are:
necessary for items such as documents and checks
to go from one supply chain partner to another. 3) O operation: A subdivision of a process that
In the critical path method of project management, changes or modifies a part, material, or product
the amount of time that an activity’s early start or and is done essentially at one workplace location
early finish time can be delayed without delaying the transportation (move): Change in location of a
➔
completion time of the entire project. There are three person, part, material, or product from one
types: total float, free float, and independent float. workplace to another
Syn: path float, slack. ■ inspection: Comparison of observed quality or
floating inventory location system–Syn: random- quantity of a product with a quality or quantity
location storage. standard
▼ storage: Keeping a product, material, or part
floating order point–An order point that is responsive protected against unauthorized removal
to changes in demand or to changes in lead time.
D delay: An event that occurs when an object or
floating storage location–Syn: random-location storage. person waits for the next planned action
floor-ready merchandise–Products shipped by a combined activity: Adjustment during testing
supplier having all needed tags, prices, security (e.g., combination of the separate operation and
devices, and so on already in place. inspection symbols)
floor stocks–Stocks of inexpensive production parts Syn: process flowchart, process flow diagram.
held in the factory, from which production workers See: flowchart, process flow.

flow processing • forecast
flow processing–In process systems development, FOB–Abbreviation for free on board.

work flows from one workstation to another at
FOB destination–The supplier pays for transportation to
a nearly constant rate and with no delays. When
the buyer’s location, where the buyer takes possession
producing discrete (geometric) units, the process
of the goods.
is called repetitive manufacturing; when producing
non-geometric units over time, the process is called FOB origination–The buyer takes possession of the
continuous manufacturing. A physical-chemical goods at the supplier’s location, and the buyer must
reaction takes place in the continuous flow process. provide transportation.
flow rack–A storage rack using metal shelves focused factory–A plant established to focus the
equipped with wheels or rollers allowing product to entire manufacturing system on a limited, concise,
flow from the back to the front of the rack to make the
product more accessible for order picking.
manageable set of products, technologies, volumes,
and markets precisely defined by the company’s
competitive strategy, technology, and economics.
F
flow rate–Running rate; the inverse of cycle time; for
See: cellular manufacturing.
example, 360 units per shift (or 0.75 units per minute).
focused low-cost strategy–Targeting a market with
flow shop–A form of manufacturing organization in
a low-cost product line in order to lower the cost of
which machines and operators handle a standard,
sales and increase gross margin.
usually uninterrupted, material flow. The operators
generally perform the same operations for each focus forecasting–A system that allows the user to
production run. A flow shop is often referred to as a simulate the effectiveness of numerous forecasting
mass production shop or is said to have a continuous techniques, enabling selection of the most effective one.
manufacturing layout. The plant layout (arrangement
of machines, benches, assembly lines, etc.) is focus group–A set of people who are interviewed
designed to facilitate a product “flow.” Some process together for the purpose of collecting marketing data.
industries (chemicals, oil, paint, etc.) are extreme focus strategy–Targeting a narrow market with
examples of flow shops. Each product, though specialized goods or services.
variable in material specifications, uses the same flow
pattern through the shop. Production is set at a given follow-up–Monitoring of job progress to see that
rate, and the products are generally manufactured in operations are performed on schedule or that
bulk. Syn: flow line, flow manufacturing, flow plant. purchased material or products will be received on
schedule.
flow time–The time between the release of a job to a
work center or shop until the job is finished. force field analysis–A technique for analyzing
the forces that will aid or hinder an organization
flow time efficiency–The ratio of theoretical flow time in reaching an objective. An arrow pointing to an
to the actual flow time through a process. objective is drawn down the middle of a piece
FLSA–Abbreviation for Fair Labor Standards Act. of paper. The factors that will aid the objective’s
achievement (called the driving forces) are listed on
fluctuation inventory–Inventory that is carried as the left side of the arrow; the factors that will hinder
a cushion to protect against forecast error. Syn: its achievement (called the restraining forces) are
fluctuation stock. See: inventory buffer. listed on the right side of the arrow.
fluctuation stock–Syn: fluctuation inventory. forecast–An estimate of future demand. A forecast
can be constructed using quantitative methods,
FMA–Abbreviation for failure mode analysis.
qualitative methods, or a combination of methods,
FMAPE–Abbreviation for forecast mean absolute and it can be based on extrinsic (external) or
percentage of error. intrinsic (internal) factors. Various forecasting
techniques attempt to predict one or more of the four
FMC–Abbreviation for flexible machine center.
components of demand: cyclical, random, seasonal,
FMEA–Abbreviation for failure mode effects analysis. and trend. Syn: sales forecast. See: Box-Jenkins
model, exponential smoothing forecast, extrinsic
FMECA–Abbreviation for failure mode effects and forecasting method, intrinsic forecasting method,
criticality analysis. moving average forecast, qualitative forecasting
FMS–Abbreviation for flexible manufacturing system. method, quantitative forecasting method.

forecast accuracy • forward scheduling
forecast accuracy–A measurement of how exact a formal culture–The visible segment of the
forecast is, often defined as 1- MAPE (Mean Absolute organizational culture, such as policies and
Percentage Error). See: forecast error. procedures, mission statement, and dress codes.
See: informal culture.
forecast bias–Tendency of a forecast to
systematically miss the actual demand (consistently format–The predetermined arrangement of the
either high or low). characters of data for computer input, storage, or
output.
forecast consumption–Syn: consuming the forecast.
form-fit-function–A term used to describe the process
forecast error–The difference between actual
of designing a part or product to meet or exceed the
demand and forecast demand. Forecast error can be
F
performance requirements expected by customers.
represented several different ways: mean absolute
deviation (MAD); mean absolute percentage error formula–A statement of ingredient requirements.
(MAPE); and mean squared error (MSE). See: mean A formula may also include processing instructions
absolute deviation (MAD), mean absolute percentage and ingredient sequencing directions. Syn:
error (MAPE), mean squared error (MSE). formulation, recipe.
forecast horizon–The period of time into the future formulation–Syn: formula.

for which a forecast is prepared.
form utility–The value created by changing a good’s
forecasting–The business function that attempts form through a production process.
to predict sales and use of products so they can be
forty-foot equivalent unit–A measure of container
purchased or manufactured in appropriate quantities
capacity that is equivalent to two 20-foot equivalency
in advance.
units; that is, a unit equivalent to 40 feet long, 8 feet
forecast interval–The time unit for which forecasts wide, and approximately 8 feet high.
are prepared, such as week, month, or quarter. Syn:
forward ADU–Average daily usage calculated using
forecast period.
a forecast.
forecast management–The process of making,
forward buying–The practice of buying materials in
checking, correcting, and using forecasts. It also
a quantity exceeding current requirements but not
includes determination of the forecast horizon.
beyond the point that the long-term need exists.
forecast mean absolute percentage of error
forward flow scheduling–A procedure for building
(FMAPE)–The absolute error divided by actual
process train schedules that starts with the first
demand for n periods, where absolute error is the
stage and proceeds sequentially through the process
variation between the actual demand and the
structure until the last stage is scheduled.
forecast for the period expressed as a positive value
(regardless of whether the actual value was negative). forward integration–Process of buying or owning
elements of the production cycle; the channel of
forecast period–Syn: forecast interval.
distribution forward toward the final customer. See:
foreign freight forwarder–An entity that picks vertical integration.
up goods at the production site and coordinates
forward pass–In the critical path method of project
transport to the foreign customer’s location.
management, working from the first node to the last
foreign/free trade zone (FTZ)–Designated areas node calculating early start times and early finish
within a country that are considered to be outside the times as well as the project’s duration. See: forward
country. Material in the zone is not subject to duties scheduling, backward pass, critical path method.
and taxes until the material is moved outside the zone
forward scheduling–A scheduling technique where
for consumption. There is no limit on the time material
the scheduler proceeds from a known start date and
may remain in the zone. Commonly referred to as
computes the completion date for an order, usually
"free" trade zone internationally and "foreign" trade
proceeding from the first operation to the last. Dates
zone in the United States.
generated by this technique are generally the earliest
forensic procurement–Analyzing root cause-and- start dates for operations. See: forward pass. Ant:
effect troubleshooting. back scheduling.

Fourier series • frozen master production schedule
Fourier series–A form of analysis useful for forecasting. freight claim–A formal legal claim filed by the
The model is based on fitting sine waves with increasing transportation buyer that the carrier failed to protect
frequencies and phase angles to a time series. the freight properly, seeking monetary compensation
for damaged freight, delayed or incorrect deliveries,
four Ps–A set of marketing tools to direct the business
overcharges, or other service failures. The amount of
offering to the customer. The four Ps are product, price,
damages can be up to the value of the goods had they
place, and promotion.
been safely delivered on time.
fourth-party logistics (4PL)–Fourth-party logistics
freight collect–The freight and charges to be paid by
differs from third-party logistics in the following ways:
the consignee.
(1) the 4PL organization is often a separate entity
F
formed by a joint venture or other long-term contract freight consolidation–Syn: consolidation.
between a client and one or more partners; (2) the
freight equalization–The practice by more distant
4PL organization is an interface between the client
suppliers of absorbing the additional freight charges to
and multiple logistics services providers; (3) ideally, all
match the freight charges of a supplier geographically
aspects of the client’s supply chain are managed by
closer to the customer. This helps eliminate the
the 4PL organization; and (4) it is possible for a major
competitive advantage of lower freight charges that
3PL organization to form a 4PL organization within its
the nearest supplier has.
existing structure. See: third-party logistics.
freight forwarder–The “middle man” between the
four-wall inventory–Syn: wall-to-wall inventory.
carrier and the organization shipping the product.
FPO–Abbreviation for firm planned order. Often combines smaller shipments to take advantage
of lower bulk costs.
franchise extension–The placement of a brand name
on products outside the company’s present sphere freight rate–In logistics, an established price for the
of activity. transport of goods, based on any number of factors;
e.g., distance, weight, measure, equipment type,
free alongside ship (FAS)–A term of sale indicating
package, or commodity.
the seller is liable for all changes and risks until the
goods sold are delivered to the port on a dock that will freight settlement–A document that compares the
be used by the vessel. freight order invoice as received to the invoice as
expected and authorizes payment if the documents
free float–In the critical path method of project
are consistent.
management, the amount of time that a given activity
can be delayed without delaying an immediately frequency distribution–A table that indicates
subsequent activity’s early start time. See: float, the frequency with which data falls into each of
independent float, total float. any number of subdivisions of the variable. The
subdivisions are usually called classes.
free on board (FOB)– A shipping term which indicates
at what point respective obligations, costs, and risk frequency of repair–Syn: repair factor.
involved in the delivery of goods shift from the seller
frequently asked questions (FAQs)–A list of commonly
to the buyer.
asked questions along with the answers to those
free slack–The amount of time by which the questions.
completion of an activity in a project network can
fringe benefits–Employer-granted compensations
increase without delaying the start of the next activity.
that are not directly tied to salary.
freight bill–A freight carrier’s invoice for a shipment.
front room–The place where the customer comes
freight broker–An individual or organization who into contact with the service operation. Many service
finds appropriate carriers for shippers needing operations contain front-room and back-room
transportation. The broker helps negotiate terms operations. See: back room.
and administers most of the documentation.
frozen master production schedule–The parts of
freight carriers–Companies that move cargo via a master production schedule that should not be
truck, rail, air, or sea. changed or should be changed rarely.
freight charge–The rate established for the

transportation of freight.

frozen zone • future order
frozen zone–In forecasting, the periods where no functional organizational structure–An

changes can be made to work orders based on organizational structure based on functional
changes in demand. This provides stability to the specialization, such as sales, engineering,
master production schedule. manufacturing, finance, and accounting.
FRT–Abbreviation for future reality tree. functional product–Mature products that tend to
have a low profit margin and a predictable demand.
FTC–Abbreviation for Federal Trade Commission.
functional requirements–Syn: critical characteristics.
FTL–Abbreviation for full truckload.
functional silo–A view of an organization where each
FTP–Abbreviation for file transfer protocol.
department is operated independently of the others.
F FTZ–Abbreviation for foreign trade zone.
Full-Baldrige approach–A quality award program

Each group is referred to as a silo. See: silo effect.
functional silo syndrome–Suboptimization of an

modeled after the Malcolm Baldrige National Quality organization’s goals due to members of specific
Award and using the same criteria. functions developing more loyalty to the function’s
group goals than to the organization’s goals.
full-container load (FCL)–A container that has been
filled close to its volume or weight limit, or that holds functional strategy–A strategy that is built from the
only one shipper’s order and the shipper has requested business strategy for various business functions
it be the only order in the container. See: full truckload. such as finance, marketing, and production. See:
strategic planning.
full cost pricing–Establishing price at some markup over
the full cost (absorption costing). Full costing includes functional systems design–The development
direct manufacturing as well as applied overhead. and definition of the business functions to be
accomplished by a computer system (i.e., preparing a
full pegging–The ability of a system to automatically statement of the proposed computer system’s data
trace requirements for a given component all the way input, data manipulation, and information output
up to its ultimate end item, customer, or contract in common business terms that can be reviewed,
number. Syn: contract pegging. understood, and approved by a user organization).
full truckload (FTL)–An agreement to ship a minimum This statement, after approval, provides the basis for
of an entire truckload or container load to a single the computer system’s design.
customer. The cargo is typically homogenous and stays functional test–Measure of a production component’s
on the same vehicle from the origin to the destination. ability to work as designed to meet a level of performance.
fully qualified domain name–The complete, registered funds flow management–The planning, execution,
address (URL) of an internet site. and control of cash receipts and disbursements with
functional benchmarking–Benchmarking a single the objective of maintaining the cash balance at a
function within an organization rather than the entire preset positive value. Syn: cash flow management.
organization. See: benchmarking. funds flow statement–A financial statement showing
functionality–The degree to which a product the flow of cash and its timing into and out of an
achieves its designed purpose. organization or project. Syn: cash flow statement,
statement of cash flows.
functional layout–A facility configuration in which
operations of a similar nature or function are grouped funnel experiment–An experiment that demonstrates
together; an organizational structure based on the effects of tampering. Marbles are dropped
departmental specialty (e.g., saw, lathe, mill, heat through a funnel in an attempt to hit a flat-surfaced
treat, press). Syn: job shop layout, process layout. target below. The experiment shows that adjusting
a stable process to compensate for an undesirable
functional manager–A manager responsible for result or an extraordinarily good result will produce
a specialized department such as accounting or output that is worse than if the process had been left
engineering. alone. See: tampering.
functional organization–A hierarchical organization future order–An order entered for shipment at some
in which each individual has one clear superior and future date.
staff areas are well defined.

future reality tree (FRT) • gemba
future reality tree (FRT)–In the theory of constraints, gap–The difference between actual performance level
a logic-based tool for constructing and testing and expected performance level.
potential solutions before implementation. The
gap analysis–A tool designed to assess the difference
objectives are to (1) develop, expand, and complete
that exists between a service that is offered and
the solution and (2) identify and solve or prevent new
customer expectations.
problems created by implementing the solution.
gapped schedule–A schedule in which every piece in
futures–Contracts for the sale and delivery of
a lot is finished at one work center before any piece
commodities at a future time, made with the
in the lot can be processed at the succeeding work
intention that no commodity be delivered or
center; the movement of material in complete lots,
received immediately.
causing time gaps between the end of one operation
future value–A present payment’s value at some and the beginning of the next. It is a result of using a
G
point in the future valued at a given interest rate. batched schedule at each operation (work center),
where process batch and transfer batch are assumed
future worth–1) The equivalent monetary value at
to be the same or equal. Syn: gap phasing, straight-
a designated future date based on the time value of
line schedule. Ant: overlapped schedule.
money. 2) The monetary sum, at a given future time,
that is equivalent to one or more sums at given earlier gap phasing–Syn: gapped schedule.
times when interest is compounded at a given rate.
gatekeeping–1) In group dynamics, a technique
See: time value of money.
applied by a team leader to effectively manage
fuzzy logic–A field of logic based on “fuzzy sets”; that a situation, discussion, or meeting. For example,
is, sets in which membership is probabilistic rather in a situation where a dominant spokesperson or
than deterministic. person of authority monopolizes a discussion, the
gatekeeper will intervene by requesting additional
G
group members’ input. 2) In logistics, the vetting
of return materials and issuing of return material
authorizations (RMAs) in accordance with the
organization’s returns policy. The intent is to
G&A–Abbreviation for general and administrative minimize returns and return costs while managing
expenses. customer interactions and expectations to maintain
intended customer service levels.
GAAP–Acronym for generally accepted accounting
principles. gate review–The formal review process occurring
between the major phases of a new product
gain sharing–A method of incentive compensation introduction effort. The determination to continue
where employees share collectively in savings from or to stop the project is formally made at each review
productivity improvements. Syn: gain sharing plans. point or gate.
gain sharing plans–Syn: gain sharing. gateway–The connection that allows data and other
GAMP–Acronym for generally accepted information to flow between two networks.
manufacturing practices. gateway operation–Syn: gateway work center.
Gantt chart–The earliest and best-known type of gateway work center–A work center that performs
planning and control chart, especially designed to the first operation of a particular routing sequence.
show graphically the relationship between planned
performance and actual performance over time. Named GATT–Acronym for General Agreement on Tariffs
after its originator, Henry L. Gantt, the chart is used for and Trade.
(1) machine loading, in which one horizontal line is used
gauge–An instrument for measuring or testing.
to represent capacity and another to represent load
against that capacity; or (2) monitoring job progress, GDSS–Abbreviation for group decision support system.
in which one horizontal line represents the production
schedule and another parallel line represents the actual gemba–The place where humans create value; the
progress of the job against the schedule in time. Syn: real workplace. Also a philosophy: “Go to the actual
job progress chart, milestone chart. place, see the actual work.”

gemba walk • global supply chains
gemba walk–A management approach in which GERT–Acronym for graphical evaluation and
managers observe the actual work being carried out in review technique.
order to understand it better, coach, guide, and follow up
GHS–Abbreviation for Globally Harmonized System
on corrective actions with the line manager. See: gemba.
of Classification and Labelling of Chemicals.
genchi genbutsu–A Japanese phrase meaning to visit
globalization–The interdependence of economies
the shop floor to observe what is occurring
globally that results from the growing volume and
general and administrative expenses (G&A)–The variety of international transactions in goods, services,
category of expenses on an income statement that and capital, and also from the spread of new technology.
includes the costs of general managers, computer
Globally Harmonized System of Classification and
systems, research and development, etc.
Labelling of Chemicals (GHS)–An international
generally accepted accounting principles (GAAP)– standard, created by the United Nations Economic
G Accounting practices that conform to conventions,

rules, and procedures that are generally accepted by
the accounting profession.
Commission for Europe (UNECE), for classifying
chemicals according to their health, physical,
and environmental hazards. The system defines
and classifies the hazards of chemical products,
generally accepted manufacturing practices
and communicates health and safety information
(GAMP)–A group of practices and principles,
on labels and material safety data sheets. See:
independent of any one set of techniques, that define
harmonized tariff schedule.
how a manufacturing company should be managed.
Included are such elements as the need for data global marketing–The use of one marketing strategy
accuracy, frequent communication between marketing in all countries in which a company operates, selling a
and manufacturing, top management control of the single product worldwide.
production planning process (sales and operations
global measurements–Measurements used to judge
planning process), systems capable of validly
the performance of the system as a whole.
translating high-level plans into detailed schedules,
and so on. Today, GAMP includes such paradigms global positioning system (GPS)–A system that uses
as just-in-time, theory of constraints, total quality satellites to locate an object’s position.
management, business process reengineering, and
supply chain management. Global Reporting Initiative (GRI)–A network-based
organization that pioneered the world’s most widely
general merchandise warehouse–A warehouse for used sustainability reporting framework.
the storage of goods that require no special handling.
Global Reporting Initiative (GRI) Reporting
general-purpose machinery–Manufacturing resources Framework–The framework that sets out the
that can perform several kinds of operations. principles and performance indicators organizations
can use to measure and report their human rights,
general stores–Syn: supplies.
labor, environment, and anticorruption practices
general warehouse–A location where goods usually and outcomes.
are stored for long periods of time. The primary
global sourcing–Using international sources
purpose is to protect goods until they are needed.
for supplies.
The general warehouse is used because either the
producer or owner does not have the necessary global strategy–A strategy that focuses on
warehouse space or the cost of storage is better improving worldwide performance through the
off-site. Usually use of a general warehouse involves sales and marketing of common goods and services
minimal handling, movement, and transportation. with minimum product variation by country. Its
competitive advantage grows through selecting
general warranty–An assurance that the product is
the best locations for operations in other countries.
fit for use. See: special warranty, warranty.
See: multinational strategy.
generic processing–A means of developing routings
global supply chains–Supply chains that include
or processes for the manufacture of products
international partners or markets.
through a family relationship, usually accomplished by
means of tabular data to establish interrelationships.
It is especially prevalent in the manufacture of raw
material such as steel, aluminum, or chemicals.

global trade identification number (GTIN) • green SCOR
global trade identification number (GTIN)–An See: critical path method, network analysis, program
identification number that uniquely identifies all evaluation and review technique.
products and services that are sold, delivered, and
graphical forecasting methods–The use of visual
invoiced at any point in the supply chain. GTINs are
information to predict sales patterns. Typically involves
typically found at points of sale and on cases and pallets
plotting information in a graphical form. It is relatively
of products in a distribution or warehouse environment.
easy to convert a spreadsheet into a graph that
global trade management–The management and conveys the information visually. Trends and patterns
optimization of shipments across international borders of data are easier to spot, and extrapolation of previous
to improve operating efficiencies and cash flows; demand can be used to predict future demands.
includes ensuring compliance with all international
graphical user interface (GUI)–A connection
regulations and documentation and streamlining and
between the computer and the user employing a
accelerating the movement of goods.
G
mouse and icons so that the user makes selections by
glocalization–A combination of “globalization” and pointing at icons and clicking the mouse.
“localization.” In a supply chain context, glocalization
gravity models–An approach used for locating
is a form of postponement where a product or service
facilities at the “center of gravity.” Gravity is
is developed for distribution globally but is modified to
determined by the product of the masses of two
meet the needs of a local market. The modifications are
bodies divided by the square of the distance between
made to conform with local laws, customs, cultures,
them. In gravity models, the population of each
and preferences.
neighborhood in the region is used as the mass, and
GNP–Abbreviation for gross national product. driving time is used as the distance.
going concern value–The value of the firm as a whole, gray box design–A situation in which the supplier and
rather than the sum of the values of the separate parts. client jointly design a product or service. See: black
box design.
go/no-go–The state of a unit or product. Two
parameters are possible: go (conforms to specification) green belt–A manager or team member who has been
and no-go (does not conform to specification). trained in six sigma improvement methods and will
have full-time responsibilities for process and quality
good–A tangible product, merchandise, or ware.
improvement.
goodness of fit–The degree to which a model
green field–The initiation of a new process where no
complies with observed data.
similar initiatives have previously existed.
goodwill–An intangible item that is recorded on a
green logistics–An effort to minimize the negative
company’s books only as the result of a purchase.
environmental impacts of logistics activities in the
Generally, it is inseparable from the enterprise but
supply chain to create sustainability for the organization.
makes the company more valuable; for example, a
good reputation. green manufacturing–A method of producing a good
or service that minimizes external cost and pollution.
government market–A market in which most or all
It includes design for reuse, design for disassembly,
buyers consist of agencies of federal, state, or local
and design for remanufacture. See: environmentally
governments. See: consumer market, industrial
responsible business.
market, institutional market.
green marketing–In advertising, promoting products
GPS–Abbreviation for global positioning system.
because of their environmental sensitivity.
grades–The sublabeling of items to identify their
green reverse logistics–The responsibility of
particular makeup and to separate one lot from other
the supplier to dispose of packaging materials
production lots of the same item.
or environmentally sensitive materials such as
grandfather clause–A provision that exempts existing heavy metals.
entities from a newly created regulation.
green SCOR–A version of the Supply Chain
graphical evaluation and review technique (GERT)–A Operation Reference (SCOR) Model that addresses
network analysis technique that allows for probability environmental sustainability efforts with best
distributions of activity durations and also conditions practices, metrics for measuring greening efforts,
under which some activities may not be carried out. and processes to deal with waste management.

green supply chain • GUI
green supply chain–A supply chain that considers group decision support system (GDSS)–The software
environmental impacts on its operations and designed to support groups in unstructured decision
takes action along the supply chain to comply with making by supporting brainstorming, conflict
environmental safety regulations and communicate resolution, voting, and other techniques.
this to customers and partners. See: environmentally
grouping–Matching like operations and running them
responsible business.
together sequentially, thereby taking advantage of a
green zone–The highest-level buffer zone in drum- common setup.
buffer-rope scheduling where the green color is used
group layout–A layout in which machine groups are
to indicate no problem in the buffer. This section of
arranged to process families of parts with similar
an inventory buffer indicates the buffer is full, or near
characteristics.
full. If available stock is in this zone no additional
supply is created. group replacement–Replacing an entire set of
G GRI–Abbreviation for Global Reporting Initiative.
grid technique–A quantitative model used for locating

components, whether failed or not, all at one time
(e.g., replacing all the light bulbs in a ceiling fixture).
group technology (GT)–An engineering and

plants and warehouses by finding the least cost point,
manufacturing philosophy that identifies the physical
given the positions of raw materials and markets.
similarity of parts (common routing) and establishes
grievance–A complaint by an employee concerning their effective production. It provides for rapid retrieval
alleged contract violations handled formally through of existing designs and facilitates a cellular layout.
contractually fixed procedures. If unsettled, a
group technology work cells–A concentrated area
grievance may lead to arbitration.
for producing parts based on similar operations and/
grievance procedures–Methods identified in a or characteristics to use equipment and labor more
collective bargaining agreement to resolve efficiently.
problems that develop or to determine if a contract
groupthink–A situation in which a team seizes on one
has been violated.
solution to a problem and does not consider other
gross inventory–The standard cost value of inventory viable solutions either because members are afraid of
before allowance for excess or obsolete items. confrontation or because they convince themselves
that other ideas aren’t worth discussing.
gross margin–The difference between total revenue
and the cost of goods sold. Syn: gross profit margin. growth-share matrix–In marketing, a division of
products by relative market share and market growth
gross national product (GNP)–The market value of all
rate. Products are divided as follows: (1) Cash cows—
goods and services produced in a nation in a given year.
high market share; low growth rate. (2) Stars—high
gross profit–Sales minus cost of goods sold. market share; high growth rate. (3) Dogs—low market
share; low growth rate. (4) Question marks—low market
gross profit margin–Syn: gross margin. share; high growth rate. Sometimes this same set of
gross profit margin rate–Sales minus cost of goods terms is used to categorize products by market share
sold then divided by sales. and profitability. See: cash cow, dog, question mark, star.
gross requirement–The total of independent and growth trajectory–Syn: ramp rate.

dependent demand for a component before the GT–Abbreviation for group technology.
netting of on-hand inventory and scheduled receipts.
GTIN–Abbreviation for global trade identification
gross sales–The total amount charged to all number.
customers during the accounting time period.
GTS–Abbreviation for grasps the situation.
gross weight–Vehicle weight including freight
or passengers. guarantee–A contractual obligation of one entity to
another asserting that a fact regarding a product is
group classification code–A part of a material true. See: warranty.
classification technique that provides for designation
of characteristics by successively lower-order groups GUI–Abbreviation for graphical user interface.
of code. Classification may denote function, type of
material, size, shape, and so forth.

handling cost • hedge inventory
H
hazardous materials–Any material that a country’s
relevant government agency has classified as a risk
to human, animal, or environmental health or to
property—either on its own or due to interaction
handling cost–The cost involved in the movement of with other elements. A government’s transportation
material. In some cases, the handling cost depends on authority may allow transportation only when proper
the size of the inventory. permits and safety precautions are implemented.
hansei–A Japanese word meaning reflection. Similarly, a government may regulate or supervise
hazardous material disposal. Categories include
hard automation–Use of specialized machines to explosives, flammable or corrosive liquids or gasses,
manufacture and assemble products. Each machine biohazards, and radioactive materials.
is normally dedicated to one function, such as milling.
hazardous waste–Waste, such as chemicals or
hard copy–A printed report, message, or special listing. nuclear material, that is hazardous to humans or
animals and requires special handling.
H
hardware–1) In manufacturing, relatively standard
items such as nuts, bolts, washers, or clips. 2) In data hazmat–Hazardous material defined by
processing, the computer and its peripherals. environmental laws and legal precedents. A product
has been defined as hazardous by regulations that
harmonic smoothing–An approach to forecasting
impose stiff fines if the regulations are ignored.
based on fitting some set of sine and cosine functions
to the historical pattern of a time series. Syn: seasonal hedge–1) An action taken in an attempt to shield
harmonics. the company from an uncertain event such as a
strike, price increase, or currency reevaluation.
harmonized system classification codes–An
2) In master scheduling, a scheduled quantity to
internationally standardized description of goods
protect against uncertainty in demand or supply.
that uses a system of numbers to provide increasingly
The hedge is similar to safety stock, except that a
detailed classification and descriptions.
hedge has the dimension of timing as well as amount.
Harmonized Tariff Schedule (HTS)–The U.S. A volume hedge or market hedge is carried at the
International Trade Commission’s mechanism by which master schedule or production plan level. The master
international tariffs are standardized. Importers and scheduler plans excess quantities over and above
exporters classify goods moved across international the demand quantities in given periods beyond some
borders using the harmonized system of the country time fence such that, if the hedge is not needed, it
of import. Then based on this classification the HTS is can be rolled forward before major resources must
used to determine the amount of tariff they must pay. be committed to produce the hedge and put it in
inventory. A product mix hedge is an approach where
hash total–A control process used to ensure that several interrelated optional items are overplanned.
all documents in a group are present or processed. Sometimes, using a planning bill, the sum of the
In practice, the arithmetic sum of data not normally percent mix can exceed 100 percent by a defined
added together is found, the checking (audit) process amount, thus triggering additional hedge planning.
adds the same data, and a comparison is made. If 3) In purchasing, any purchase or sale transaction
the sums do not agree, an error exists. For example, having as its purpose the elimination of the negative
assume the last digit of every part number in an aspects of price fluctuations. See: market hedge,
assembly is added, and the last digit of the sum option overplanning, planning bill of material, safety
becomes the last digit of the assembly. If the last digit stock, time fence, two-level master.
of the assembly is not the same as the last digits of
the components’ sum, the assembly must be missing hedge inventory–A form of inventory buildup to
a part or must have the wrong combination of parts. buffer against some event that may not happen.
Hedge inventory planning involves speculation
Hawthorne effect–A study was conducted from 1927 related to potential labor strikes, price increases,
to 1932 in which the Hawthorne Western Electric plant unsettled governments, and events that could
systematically improved productivity by simply having severely impair a company’s strategic initiatives.
management paying attention. Risk and consequences are unusually high, and top
management approval is often required.

hedging • horizontal merger
hedging–The practice of entering into contracts on holding costs–Syn: carrying costs.

a commodity exchange to protect against future
hold order–A written order directing that certain
fluctuations in the commodity. This practice allows a
operations or work be interrupted or terminated
company to isolate profits to the value-added process
pending a change in design or other disposition of the
rather than to uncontrolled pricing factors. See:
material. Syn: stop work order.
speculative buying.
hold points–Stockpoints for semifinished inventory.
heel–In the process industry, an item used in its own
manufacture. For example, in the manufacture of holonic network–1) A network of autonomous,
plastic, the ingredients will include the parent as well distributed human or computer systems that are
as the components. capable of acting in an integrated manner. 2) A
network of companies dynamically interacting to
heijunka–In just-in-time philosophy, an approach
act as one system. Each company, or holon, has
to level production throughout the supply chain to
a different process and core competency. Virtual
match the planned rate of end product sales.
enterprises are created by organizing the holons to
H helper application–Software that assists the browser

when audio, video, or large images are requested.
take advantage of core competencies.
homogeneous product–A product that is effectively

heuristics–A form of problem solving in which the identical from producer to producer.
results or rules have been determined by experience
honeycombing–The practice of moving, in an orderly
or intuition instead of by optimization. Heuristics can
fashion, a pallet of merchandise to an area where the
be used in such areas as forecasting, lot sizing, or
space is not exhausted, resulting in a vacant space
determining production, staff, or inventory levels.
not usable for the storage of other items. This is one
hierarchical database–A method of constructing of the hidden costs of warehousing.
a database that requires related record types to be
honeycomb loss–The usable empty storage space in
linked in tree-like structures where no child record
a stack created by storing only a single stockkeeping
can have more than one physical parent record.
unit in the stack to permit better access.
high-level language (HLL)–Relatively sophisticated
hopper cars–Rail cars that permit bulk commodities
computer language that allows users to employ a
to be loaded at the top and removed from the bottom
notation with which they are already familiar; for
of the car. Some hopper cars have permanent tops
example, COBOL (business), ALGOL (mathematical and
that provide protection from bad weather.
scientific), FORTRAN, BASIC, Java, and Visual Basic.
HOQ–Abbreviation for house of quality.
hi-low–A forklift truck with a standing operator.
horizontal dependency–The relationship between the
histogram–A graph of contiguous vertical bars
components at the same level in the bill of material
representing a frequency distribution in which the
in which all must be available at the same time and
groups or classes of items are marked on the x axis
in sufficient quantity to manufacture the parent
and the number of items in each class is indicated on
assembly. See: vertical dependency.
the y axis. The pictorial nature of the histogram lets
people see patterns that are difficult to see in a simple horizontally integrated firm–An organization
table of numbers. The histogram is one of the seven that seeks to produce or sell a type of product in
tools of quality. numerous markets. Horizontal integration exists
when an organization produces or sells similar
historical analogy–A judgmental forecasting
products in various geographical locations.
technique based on identifying a sales history that
Horizontal integration in marketing occurs more
is analogous to a present situation, such as the sales
frequently than horizontal integration in production.
history of a similar product, and using that past pattern
See: vertically integrated firm.
to predict future sales. See: management estimation.
horizontal marketplace–An online marketplace
historical labor standard–Determined by studying
used by buyers and sellers from multiple industries.
actual past labor data for the operation of interest.
This marketplace lowers prices by lowering
HLL–Abbreviation for high-level language. transaction costs.
holding company–In financial management, a firm horizontal merger–An alliance of two or more
that controls the voting stock of other firms. competing firms.

hoshin • hybrid production method
hoshin–A Japanese word meaning statement human-machine systems. Human factors engineering
of objectives. is based on a fundamental knowledge and study of
human physical and mental abilities and emotional
hoshin kanri–See: hoshin planning.
characteristics.
hoshin planning–Breakthrough planning. A Japanese
human-machine interface–The location where data is
strategic planning process in which a company
transferred from a worker to a computer or vice-versa.
develops up to four vision statements that indicate
where the company should be in the next five years. human resources–The portion or department of a
Company goals and work plans are developed based company that sets personnel policies and practices.
on the vision statements. Periodic audits are then
human resource utilization–Using labor to its fullest
conducted to monitor progress.
potential to maximize product or service output.
host computer–Any computer on a network that is a
hundredweight (cwt)–One hundred pounds.
repository for services available to other computers
on the network. It is common to have one host hurdle rate–The minimum acceptable rate of return
machine provide several services such as access to
the internet via the World Wide Web.
on a project.
hybrid EDI–A situation in which only one trading

H
housekeeping–The manufacturing activity of partner is EDI-enabled and the other continues to
identifying and maintaining an orderly environment use paper and fax. Usually the EDI-enabled partner
for preventing errors and contamination in the has its electronic documents converted to fax.
manufacturing process.
hybrid inventory system–An inventory system
house of quality (HOQ)–A structured process combining features of the fixed reorder quantity
that relates customer-defined attributes to the inventory model and the fixed reorder cycle inventory
product’s technical features needed to support and model. Features of the fixed reorder cycle inventory
generate these attributes. This technique achieves model and the fixed reorder quantity inventory model
this mapping by means of a six-step process: (1) can be combined in many different ways. For example,
identification of customer attributes; (2) identification in the order point-periodic review combination system,
of supporting technical features; (3) correlation of the an order is placed if the inventory level drops below a
customer attributes with the supporting technical specified level before the review date; if not, the order
features; (4) assignment of priorities to the customer quantity is determined at the next review date. Another
requirements and technical features; (5) evaluation hybrid inventory system is the optional replenishment
of competitive stances and competitive products; model. See: fixed reorder cycle inventory model,
and (6) identification of those technical features to fixed reorder quantity inventory model, optional
be used (deployed) in the final design of the product. replenishment model, order point system.
HOQ is part of the quality function deployment (QFD)
process and forces designers to consider customer hybrid layout–This layout combines two or more
needs and the degree to which the proposed designs layout types.
satisfy these needs. See: customer-defined attributes, hybrid manufacturing process–Syn: hybrid
quality function deployment. production method.
HTS–Abbreviation for Harmonized Tariff Schedule. hybrid organizational structure–An organizational
hub–A large manufacturer or retailer doing business structure that embodies multiple organizational forms
with many trading partners. (functional, product, or geographical) simultaneously.
For example, some functions may be centralized (such
hub-and-spoke systems–In warehousing, a system as finance and accounting), whereas others may be
that has a hub (or center point) where sorting or duplicated geographically (such as sales).
transfers occur, and the spokes are outlets serving
the destinations related to the hub. hybrid production method–A production planning
method that combines the aspects of both the
human factors engineering–A merging of those chase and level production planning methods. Syn:
branches of engineering and the behavioral sciences hybrid manufacturing process, hybrid strategy. See:
that concern themselves principally with the chase production method, level production method,
human component in the design and operation of production planning method.

hybrid purchasing organization • import/export license
hybrid purchasing organization–A mix of the idle time–The time when operators or resources (e.g.,
centralized and decentralized purchasing format— machines) are not producing product because of
usually decentralized at the corporate level and setup, maintenance, lack of material, lack of tooling,
centralized at the business unit level. or lack of scheduling.
hybrid strategy–Syn: hybrid production method. IFB–Abbreviation for invitation for bid.
hypermedia–An addition to hypertext to include IFRS–Abbreviation for International Financial

sound, pictures, or music. Reporting Standards.
hypertext–A system of relating information without IIE–Abbreviation for Institute of Industrial Engineers.
using menus or hierarchies.
IMC–Abbreviation for intermodal marketing company.
hypertext links–Links contained within text
imperfection–A quality characteristic’s departure
connecting to other websites or other pages on the
from its intended level or state. An imperfection does
current site.
not affect the conformance of a product or service
hypertext markup language (HTML)–A language to its specification requirements or usability. See:
used to create web pages that permits the user blemish, defect, nonconformity.
I to create text, hypertext links, and multimedia

elements within the page. HTML is not a programming
language, but a way to format text.
implementation–The act of installing a system into
operation. It concludes the system project with the
exception of appropriate follow-up or post-installation
hypertext transfer protocol (HTTP)–A protocol that review.
tells computers how to communicate with each other.
implied authority–The right of an agent, when
Most internet addresses begin with http://.
directed by a principal to accomplish a task, to do
hypothesis testing–Use of statistical models to test what is reasonably necessary to accomplish it.
conclusions about a population or universe based on
implied contract–A binding agreement inferred from
sample information.
the actions of the parties.
I
implied warranty–A warranty imposed on sellers
beyond any express agreement in the contract.
implode–1) Compression of detailed data in a

I2M–Abbreviation for integrated internet marketing. summary-level record or report. 2) Tracing a usage
and/or cost impact from the bottom to the top (end
IATA–Abbreviation for International Air Transport product) of a bill of material using where-used logic.
Association
implosion–The process of determining the where-
ICC–Abbreviation for Interstate Commerce used relationship for a given component. Implosion
Commission. can be single-level (showing only the parents on the
next higher level) or multilevel (showing the ultimate
ideal quality–A term used by Genichi Taguchi to refer
top-level parent). See: where-used list. Ant: explosion.
to the target value of a particular measure. Loss to
society increases with the square of the deviation of import broker or sales agent–Purchasing agent who
an actual product from this ideal point. charges a fee for transactions but does not take the
title to the goods.
idle capacity–The available capacity that exists on
nonconstraint resources beyond the capacity required importer of record (IOR)–The entity responsible
to support the constraint. Idle capacity has two for ensuring the imported/exported goods comply
components: protective capacity and excess capacity. with local laws and regulations, for filing the
documentation for duty entry, and for paying any
idle inventory–The inventory generally not needed
associated import duties or taxes.
in a system of linked resources. From a theory of
constraints perspective, idle inventory generally import/export license–Official authorization issued
consists of protective inventory and excess by a government allowing the shipping or delivery of a
inventory. See: excess inventory, productive product across national boundaries.
inventory, protective inventory.

import license • incremental cost
import license–An importing country’s government incentive contract–A contract where the buyer and
document that provides an importer with the express seller agree to a target cost and maximum price. Cost
authorization to import a particular product. savings below the target are shared between buyer
and seller. If actual cost exceeds the target cost, the
import merchant–Purchasing agent who buys and
cost overrun is shared between buyer and seller up to
takes the title to goods and then resells them.
the maximum price.
imports–Products bought in one country and
incentive pay system–A way to compensate
produced in another.
employees based on their job performance.
imposed date–A fixed date given to an activity,
incentive rate–In transportation, a discounted rate
usually “start no earlier than” or “finish no later than.”
designed to convince a shipper to ship a higher volume
improvement program champion–An implementation in a particular load.
expert in SCOR who sells the SCOR improvement
income–Syn: profit.
program to the executive team. See: champion.
income statement–A financial statement showing
improvement program charter–A document detailing
the net income for a business over a given period of
the structure of the improvement program including
I
time. See: balance sheet, funds flow statement.
resources, program schedule, organization, deliverables,
and expected benefits. incoming business–The number of orders, the dollar
value of orders, or the quantity of units that have been
improve phase–One of the six sigma phases of
received on orders from customers. This volume is
quality. In this phase, the improvements to products
particularly important to the forecaster, who must
and/or processes are adopted. See: define-measure-
compare incoming business against the forecast
analyze-improve-control process.
rather than against actual shipments when actual
impulse response–How quickly an estimate or shipments do not reflect true customer demand. This
forecast changes when the underlying data of the situation may exist because of back-ordered items,
estimate has changed. bottlenecks in the shipping room, and so forth.
inactive inventory–Stock designated as in excess of in-control process–A process in which the statistical
consumption within a defined period; stocks of items measure being evaluated is in a state of statistical
that have not been used for a defined period. control (i.e., the variations among the observed
sampling results can be attributed to a constant
inbound logistics–The group in charge of moving system of chance causes). Ant: out-of-control process.
materials from suppliers or vendors into production
processes or storage facilities; the actual movement Incoterms–A series of pre-defined commercial terms
of such material. published by the International Chamber of Commerce
relating to international commercial law. These terms
inbound stockpoint–A defined location next to the do not cover property rights.
place of use on a production floor. Materials are
brought to the stockpoint as needed and taken from it incremental analysis–A method of economic analysis
for immediate use. Inbound stockpoints are used with in which the cost of a single additional unit is compared
a pull system of material control. to its revenue. When the net contribution of an
additional unit is zero, total contribution is maximized.
incentive–A reward, financial or otherwise, that
compensates a worker for high or continued incremental available-to-promise–Syn: discrete
performance above standard. An incentive is also a available-to-promise.
motivating influence to induce effort above normal.
incremental cost–1) Cost added in the process of
incentive arrangements–Incentive contract that finishing an item or assembling a group of items.
allows for the sharing of the cost responsibility For example, if the cost of the components of a
between the buyer and seller. Incentives are given assembly equals $5 and the additional cost of
incorporated into the contract to motivate the assembling the components is $1, the incremental
supplier to improve its performance in areas such as assembly cost is $1, while the total cost of the finished
quality, on-time delivery, and customer satisfaction. assembly is $6. 2) Additional cost incurred as a result
There are three elements of an incentive agreement: of a decision.
target cost, target profit, and the sharing agreement.

incremental utilization heuristic • industrial market
incremental utilization heuristic–Using a worker’s independent project–A project which, whether or

full capacity by adding one task at a time (in priority not it is accepted, does not eliminate other projects
order) up to the maximum capacity, or waiting for the from eligibility. See: contingent project, mutually
utilization to fall and then adding more tasks. exclusive project.
indented bill of material–A form of multilevel bill of independent trading exchange–A business-to-
material. It exhibits the highest-level parents closest business marketplace ownership model. These are
to the left margin, and all the components going into public sites often used for indirect materials and
these parents are shown indented toward the right. commodity purchases where the price is the primary
All subsequent levels of components are indented factor and where any buyers and sellers for a particular
farther to the right. If a component is used in more market meet to gain access to a wider market to find
than one parent within a given product structure, it the best deals. See: public marketplaces.
will appear more than once, under every subassembly
index–A value, expressed as a percentage, giving
in which it is used.
the relationship of a measurement to a base value. A
indented tracking–The following of all lot numbers result of 100 is average, while numbers greater than
of intermediates and ingredients consumed in the 100 are above average and those less than 100 are
manufacture of a given batch of product down below average.
I through all levels of the formula.
indented where used–A listing of every parent item,

indicator–An index of business activities.
indifference point–The point at which two options

and the respective quantities required, as well as each create the same costs for a specific output level.
of their respective parent items, continuing until the
ultimate end item or level 0 item is referenced. Each indirect costs–Costs that are not directly incurred
of these parent items calls for a given component by a particular job or operation. Certain utility costs,
item in a bill-of-material file. The component item is such as plant heating, are often indirect. An indirect
shown closest to the left margin of the listing, with cost is typically distributed to the product through
each parent indented to the right and each of their the overhead rates.
respective parents indented even farther to the right.
indirect labor–Work required to support production
independent action–In transportation, the in general without being related to a specific product
publication of a freight rate that differs from that of (e.g., floor sweeping).
the rate bureau to which the publisher is a member. indirect labor cost–The compensation paid to workers
This is a permitted action. whose activities are not related to a specific product.
independent demand–The demand for an item that is indirect materials–Syn: supplies.
unrelated to the demand for other items. Demand for
finished goods, parts required for destructive testing, indirect retail locations–A retailer who sells
and service parts requirements are examples of products to the public but who buys products
independent demand. See: dependent demand. indirectly through a third-party distributor, rather
than directly from the seller.
independent demand item management models–
Models for the management of items whose industrial buyers–Buyers who purchase materials
demand is not strongly influenced by other items mainly for conversion.
managed by the same company. These models
industrial engineering–The engineering discipline
can be characterized as follows: (1) stochastic concerned with facilities layout, methods measurement
or deterministic, depending on the variability of and improvement, statistical quality control, job design
demand and other factors; or (2) fixed quantity, fixed and evaluation, and the use of management sciences
cycle, or hybrid (optional replenishment). See: fixed to solve business problems.
reorder cycle inventory model, fixed reorder quantity
inventory model, optional replenishment model. industrial facilities management–The installation and
maintenance of the physical plant, its surroundings,
independent float–In project management, the and the physical assets of an organization.
amount of float on an activity that does not affect
float on preceding or succeeding activities. See: float, industrial market–A market where most or all
free float, total float. customers are individuals or businesses that buy
products to produce other goods and services. Syn:
business market, producer market. See: consumer
market, government market, institutional market.

industrial revolution • innovation risk
industrial revolution–A movement to the use of information–Data that has been interpreted and that
factories and machines and away from activities done meets the need of one or more managers.
by hand without mechanical assistance.
information data warehouse–A repository (typically
industrial trucks–Vehicles powered by hand, large) of corporate data that can be accessed using
electricity, or propane for material handling activities specialized query tools. This technique separates
in a warehouse. More flexible but slower and less the analysis of data from the recording of data and is
constant than conveyors, and are not in a fixed often used to combine data from different computing
position. Industrial trucks are the most common form systems to make information access more convenient
of materials handling equipment. and coherent. See: data warehouse.
industry–A set of companies providing a product information distribution–Making needed data

or service where each company’s offering is a close available to stakeholders in a timely manner.
substitute for its competitors’ offerings.
information flow profile–A graph of the performance
industry analysis–A major study of an industry; its of information flow compared to some set of
major competitors, customers, and suppliers; and the performance criteria.
focus and driving forces within that industry.
I
information system–Interrelated computer hardware
industry structure types–Economists have developed and software along with people and processes
models of the types of competition faced by various designed for the collection, processing, and
firms. These types are: (1) Pure monopoly. Only one firm dissemination of information for planning, decision
provides a particular product or service. The monopoly making, and control.
may be regulated or unregulated. (2) Pure oligopoly. A
information system architecture–A model of how the
few companies produce essentially the same product
organization operates regarding information. The model
or service and market it within a given area. A company
considers four factors: (1) organizational functions;
is forced to price its product at the going rate unless it
(2) communication of coordination requirements; (3)
can differentiate its product. (3) Differentiated oligopoly.
data modeling needs; and (4) management and control
A few companies produce partially differentiated
structures. The architecture of the information system
products or services that are marketed within a given
should be aligned with and match the architecture of
area. Differentiation may be based on quality, features,
the organization.
styling, or services offered along with the product. (4)
Monopolistic competition. Many competitors offer information technology–The technology of computers,
partially differentiated products or services. Most telecommunications, and other devices that integrate
competitors focus on market segments where they can data, equipment, personnel, and problem-solving
meet customers’ needs somewhat better than their methods in planning and controlling business activities.
competitors. (5) Pure competition. Many competitors Information technology provides the means for
offer undifferentiated products or services. collecting, storing, encoding, processing, analyzing,
transmitting, receiving, and printing text, audio, or
inefficiency risk–The risk of losing customers
video information.
because another firm has lower unit costs.
information visibility–How extensive information is
infinite loading–Calculation of the capacity required
shared throughout a firm and with other stakeholders.
at work centers in the time periods required
regardless of the capacity available to perform this infrastructural elements–Elements of a strategy
work. Syn: infinite scheduling. including decision rules, policies, personnel
guidelines, and organizational structure.
infinite scheduling–Syn: infinite loading.
ingredient–In the process industries, the raw material
inflation–An ongoing rise in the overall level of prices.
or component of a mixture. See: component.
Inflation reduces the purchasing power of money.
initial public offering (IPO)–A firm’s first sale of
influence filter–In e-commerce, a device to make
common stock.
stakeholders better satisfied with a website.
innovation risk–The risk of losing customers because
informal culture–Organizational characteristics and
another firm creates more innovative products.
relationships that are not part of the formal structure
but that influence how the organization accomplishes
its goals.

innovative products • integrated services digital network (ISDN)
innovative products–Products that tend to have a Institute for Supply Management (ISM)–A nonprofit
high profit margin, be unique, have less competition, society for purchasing managers and others, formerly
and have dynamic demand. the National Association of Purchasing Management
(NAPM).
in-process inventory–Syn: work in process.
Institute of Industrial Engineers (IIE)–A nonprofit
in-process waiver requests–Requests for waivers on
educational organization whose members are
normal production procedures because of deviations
interested in the field of industrial engineering.
in materials, equipment, or quality metrics, where
normal product specifications are maintained. institutional market–A market in which most or
all customers are one of the following: schools,
input–Work arriving at a work center or production
hospitals, prisons, or other institutions that provide
facility.
products and services to individuals who are under
input control–Management of the release of work to their care. See: consumer market, government
a work center or production facility. market, industrial market.
input/output analysis–Syn: input/output control. instruction sheet–Syn: routing.
I
input/output control (I/O)–A technique for capacity intangible–One distinguishing feature of pure
control where planned and actual inputs and planned services. Pure services cannot be inventoried or
and actual outputs of a work center are monitored. carried in stock for long periods of time.
Planned inputs and outputs for each work center are
intangible costs–Those costs that are difficult to
developed by capacity requirements planning and
quantify, such as the cost of poor quality or of high
approved by manufacturing management. Actual
employee turnover.
input is compared to planned input to identify when
work center output might vary from the plan because integrated carrier–A company that provides a variety
work is not available at the work center. Actual of transportation services including ground, sea, air
output is also compared to planned output to identify carriage, and freight forwarding.
problems within the work center. Syn: input/output
integrated change control–In project management,
analysis. See: capacity control.
a system under which any changes are coordinated
input/output devices–Modems, terminals, or various across the entire project.
pieces of equipment whose designed purpose relates
integrated enterprise–A business or organization made
to manual, mechanical, electronic, visual, or audio
up of individuals who have acquired the knowledge
entry to and from the computer’s processing unit.
and skills to work with others to make the organization
input rate capacity–Measurement that takes rates of a greater success than the sum of each individual’s
different inputs and transforms them into a common output. Integration includes increased communication
unit to measure the input. See: capacity utilization. and coordination between individuals and within and
across teams, functions, processes, and organizations
insourcing–Using the firm’s internal resources to
over time. See: cross-functional integration.
provide goods and services. See: make-or-buy decision.
integrated internet marketing (I2M)–The use of
inspection–Measuring, examining, testing, or gauging
internet facilities to sell products, influence stakeholder
one or more characteristics of a good or service and
attitudes, and improve the company’s image.
comparing the results with specified requirements to
determine whether conformity is achieved for each integrated logistics–Syn: service response logistics.
characteristic.
integrated logistics service providers–Organizations
inspection order–An authorization to an inspection that provide one or many logistics services to a
department or group to perform an inspection customer for a fee.
operation.
integrated resource management (IRM)–Syn:
inspection ticket–Frequently used as a synonym for resource management.
an inspection order; more properly, a reporting of an
integrated services digital network (ISDN)–
inspection function performed.
International standard for using public phone lines
instantaneous receipt–The receipt of an entire lot- to transmit voice and data over the same line.
size quantity in a very short period of time.

integrating mechanism • international company
integrating mechanism–A physical, organizational, or intermediate part–Material processed beyond raw

informational entity that allows people and functions material and used in higher-level items. See: component.
to interact freely by transcending boundaries.
intermittent production–A form of manufacturing
intellectual property–Various legal entitlements that in which the jobs pass through the functional
attach to certain names, written and recorded media, departments in lots, and each lot may have a different
and inventions. routing. See: job shop.
intelligent agent–A program that regularly gathers intermodal marketing companies (IMCs)–
information without the owner being present. Organizations that are the intermediary for shippers
and intermodal rail carriers.
interactive computer system–A computer system
that supports real-time interaction with a user. The intermodal transport–1) Shipments moved by different
response time to the user is similar to the actual types of equipment combining the best features of
timing of the business or physical process. See: each mode. 2) The use of two or more different carrier
interactive system. modes in the through movement of a shipment.
interactive customer care–A generic term for a variety internal controls–The policies and procedures,
I
of services provided over the internet. These services documentation, and plan for an organization that
include customer service and technical support. authorize transactions, safeguard assets, and
maintain the accuracy of financial records.
interactive scheduling–Computer scheduling
where the process is either automatic or manually internal customer–The recipient (person or
interrupted to allow the scheduler the opportunity to department) of another person’s or department’s
review and change the schedule. output (good, service, or information) within an
organization. See: customer, external customer.
interactive system–Refers to those computer
applications in which a user communicates with internal environment–The chosen domain or scope of
a computer program via a system, entering data activities within which an organization operates; for
and receiving responses from the computer. See: example, the tasks associated with goods or services
interactive computer system. to be delivered by the organization. See: external
environment, organizational environment.
interarrival time–Time between the arrival of two
sequential customers or events. internal failure costs–The cost of things that go
wrong before the product reaches the customer.
interest–1) Financial share in a project or enterprise.
Internal failure costs usually include rework,
2) Periodic compensation for lending money. 3) In an
scrap, downgrades, reinspection, retesting, and
economy study, synonymous with required return,
process losses.
expected profit, or charge for the use of capital. 4)
The cost for the use of capital. Sometimes referred internal rate of return–The rate of compound interest
to as the time value of money. at which the company’s outstanding investment is
repaid by proceeds from the project.
interest rate–The ratio of the interest payment to
the principal for a given unit of time. It is usually internal setup time–The time associated with elements
expressed as a percentage of the principal. of a setup procedure performed while the process or
machine is not running. Ant: external setup time.
interleaving–Assigning multiple tasks to be
performed concurrently; it often involves the internal supply chain–A structure for sharing
assignment of multiple picking orders to a single information within a firm and creating an atmosphere
picker to pick concurrently. for cooperation between functions to strengthen
the firm.
intermediately positioned strategy–To position a
warehouse halfway between the supplier and the International Air Transport Association (IATA)–An
customer. international industry trade group that represents the
interests of the airline industry.
intermediately positioned warehouse–A warehouse
located between customers and manufacturing international company–Any organization conducting
plants to provide increased customer service and business in multiple countries.
reduced distribution cost.

International Financial Reporting Standards (IFRS) • intranet
International Financial Reporting Standards (IFRS)– internet service provider (ISP)–A business or
A common global language for business affairs so organization that sells access to the internet and
that company accounts are understandable and related services to consumers. For a monthly fee,
comparable across international boundaries. As a the service provider offers a software package,
result of growing international shareholding and username, password, and access to the internet (via
trade, they are rules to be followed by accountants various technologies which enable users to browse
to maintain books of accounts that are comparable, the World Wide Web and send and receive email.
understandable, reliable, and relevant whether the The ISP may also provide a combination of services,
users are internal or external. including internet transit, domain name registration
and hosting, web hosting, and colocation).
international logistics–All functions concerned with
the movement of materials and finished goods on a interoperation time–The time between the completion
global scale. of one operation and the start of the next.
International Organization for Standardization (ISO)– interplant demand–One plant’s need for a part or
Group of cooperating institutes from 155 countries product that is produced by another plant or division
working to develop and publish international standards. within the same organization. Although it is not a
It acts as a bridge between public and private sectors. customer order, it is usually handled by the master
I
production scheduling system in a similar manner.
international procurement office (IPO)–Establishes a See: interplant transfer.
global presence for a company by providing localized
supply management services in a region that is interplant transfer–The shipment of a part or product
strategically important. This management approach by one plant to another plant or division within the
is a long-term commitment that takes advantage of corporation. See: interplant demand, transfer pricing.
a region’s language and cultural capabilities to use
trusted local staff to execute procurement activities interpolation–The process of finding values of data or
that add value to the overall supply chain. Such tasks a function between two known values. Interpolation
as local supplier development, contract negotiations, may be performed numerically or graphically.
quality audits, and best practice operations provide interrelationship digraph–A technique used to
reduced dependence on third parties and improve define how factors relate to one another. Complex
overall efficiency and costs. multivariable problems or desired outcomes can be
international standards–Standards established displayed with their interrelated factors. The logical
by international standards-setting organizations and often causal relationships between the factors
to promote interoperability among operating can be illustrated.
environments. interrogate–Retrieve information from computer files
internet–A worldwide network of computers by use of predefined inquiries or unstructured queries
belonging to businesses, governments, and handled by a high-level retrieval language.
universities that enables users to share information in interrupt–A break in the normal flow of a computer
the form of files and to send electronic messages and routine such that the flow can be resumed from that
have access to a tremendous store of information. point at a later time. An interrupt is usually caused by
Internet of Things (IOT)–An environment in which a signal from an external source.
objects, animals or people are provided with unique interstate commerce–The movement of persons or
identifiers and the ability to transfer data over a property across one or more state lines for business
network without requiring human-to-human or purposes.
human-to-computer interaction. This allows objects
to be sensed and controlled remotely across existing Interstate Commerce Commission (ICC)–A
network infrastructure, creating opportunities for U.S. regulatory agency charged with enforcing
more direct integration between the physical world regulations controlling railroads, motor carriers,
and computer-based systems. pipelines, domestic water carriers, domestic surface
freight forwarders, and brokers.
internet operations–Operations performed over the
internet encompassing such things as email, telnet, intranet–A privately owned network that makes use
newsgroups, file transfer protocol, and the World of internet technology and applications to meet the
Wide Web. needs of an enterprise. It resides entirely within a
department or company and provides communication
and access to information, similar to the internet, for
internal use only.

in-transit inventory • inventory management
in-transit inventory–Material moving between two or The adjustment either increases or decreases the
more locations, usually separated geographically; for item record on-hand balance.
example, finished goods being shipped from a plant to
inventory balance location accuracy–When the
a distribution center.
inventory count is accurate at specific locations.
in-transit lead time–The time between the date Measuring accuracy includes comparing the actual
of shipment (at the shipping point) and the date part number to the record of the part number, the
of receipt (at the receiver’s dock). Orders normally actual count at the location to the record balance at
specify the date by which goods should be at the dock. the location, and the actual location to the record of
Consequently, this date should be offset by in-transit the location.
lead time for establishing a ship date for the supplier.
inventory buffer–Inventory used to protect the
intrastate commerce–Moving people or materials throughput of an operation or the schedule against
between points within a single state. the negative effects caused by delays in delivery,
quality problems, delivery of an incorrect quantity,
intrinsic forecast method–A forecast based on
and so on. Syn: inventory cushion. See: fluctuation
internal factors, such as an average of past sales. Ant:
inventory, safety stock.
extrinsic forecast.
I
inventory control–The activities and techniques of
inventory–1) Those stocks or items used to support
maintaining the desired levels of items, whether raw
production (raw materials and work-in-process
materials, work in process, or finished products. Syn:
items), supporting activities (maintenance, repair, and
material control.
operating supplies), and customer service (finished
goods and spare parts). Demand for inventory may be inventory conversion period–The time period
dependent or independent. Inventory functions are needed to produce and sell a product, measured
anticipation, hedge, cycle (lot size), fluctuation (safety, from procurement of raw materials to the sale of the
buffer, or reserve), transportation (pipeline), and product.
service parts. 2) All the money currently tied up in the
inventory costs–Costs associated with ordering and
system. As used in theory of constraints, inventory
holding inventory. See: carrying costs, ordering cost.
refers to the equipment, fixtures, buildings, and so
forth that the system owns—as well as inventory inventory cushion–Syn: inventory buffer.
in the forms of raw materials, work-in-process, and
finished goods. inventory cycle–The length of time between two
consecutive replenishment shipments.
inventory accounting–The branch of accounting
dealing with valuing inventory. Inventory may be inventory diversion–The shipment of parts against a
recorded or valued using either a perpetual or a project or contract other than the original project or
periodic system. A perpetual inventory record is contract for which the items were purchased.
updated frequently or in real time, while a periodic inventory drivers–Those conditions that would lead a
inventory record is counted or measured at fixed time company to hold inventory.
intervals (e.g., every two weeks or monthly). Both
recording systems use the LIFO, FIFO, or average inventory effectiveness index–A system to identify
costs inventory valuation method. non-value-adding inventory and make it visible. The
index provides a process to measure non-value-
inventory accuracy–When the on-hand quantity is adding inventory and sell or write it off to keep
within an allowed tolerance of the recorded balance. working capital in control.
This important metric usually is measured as the
percent of items with inventory levels that fall within inventory investment–The dollars that are in all levels
tolerance. Target values usually are 95 percent to of inventory.
99 percent, depending on the value of the item.
inventory issue–1) Items released from an inventory
For logistical operations (location management)
location for use or sale. 2) The inventory record
purposes, it is sometimes measured as the number
transaction reducing the inventory balance by the
of storage locations with errors divided by the total
amount released.
number of storage locations.
inventory management–The branch of business
inventory adjustment–A change made to an
management concerned with planning and
inventory record to correct the balance in order to
controlling inventories.
bring it in line with actual physical inventory balances.

inventory optimization software • IRM
inventory optimization software–A computer inventory tax–Tax based on the value of inventory on
application that can find optimal inventory strategies hand at a particular time.
and policies related to customer service and return on
inventory turnover–The number of times that an
investment over several echelons of a supply chain.
inventory cycles, or “turns over,” during the year. A
inventory ordering system–Inventory models for the frequently used method to compute inventory turnover
replenishment of inventory. Independent demand is to divide the annual cost of sales by the average
inventory ordering models include fixed reorder inventory level. For example, an annual cost of sales of
cycle, fixed reorder quantity, optional replenishment, $21 million divided by an average inventory of $3 million
and hybrid models, among others. Dependent means that inventory turned over seven times. Syn:
demand inventory ordering models include material inventory turns, turnover. See: inventory velocity.
requirements planning, kanban, and drum-buffer-rope.
inventory turns–Syn: inventory turnover.
inventory planner–Syn: material planner
inventory usage–The value or the number of units of
(first definition).
an inventory item consumed over a period of time.
inventory planning–The activities and techniques
inventory valuation–The value of the inventory at
of determining the desired levels of items, whether
I
either its cost or its market value. Because inventory
raw materials, work in process, or finished products
value can change with time, some recognition is taken
(including order quantities and safety stock levels).
of the age distribution of inventory. There are a variety
Syn: material planning.
of ways to calculate the cost value inventory to
inventory policy–A statement of a company’s goals establish the cost of goods sold. See: first in, first out
and approach to the management of inventories. (FIFO); last in, first out (LIFO); average cost system.
inventory pooling–The act of holding inventory in a inventory velocity–The speed with which inventory
single location instead of multiple locations. passes through an organization or supply chain at a
given point in time as measured by inventory turnover.
inventory receipt–An inventory record transaction
See: inventory turnover.
that records the receipt or arrival of inventory into
physical stores by increasing the inventory on-hand inventory visibility–The extent to which inventory
balance by the received quantity. Often associated information is shared within a firm and with supply
with receipt of a purchase or production order quantity. chain partners.
inventory record–A history of the inventory inventory write-off–A deduction of inventory dollars
transactions of a specific material. from the financial statement because the inventory is
of less value. An inventory write-off may be necessary
inventory reserve–1) An accounting entry that
because the value of the physical inventory is less
represents a deduction from earnings for the
than its book value or because the items in inventory
purpose of fairly and reasonably representing the
are no longer usable.
value of inventoried assets on a balance sheet. The
inventory reserve is used to make up for the fact that invitation for bid (IFB)–Syn: request for proposal.
all inventory will not be sold at the cost to the firm. 2)
invoice–A list of goods shipped by the supplier to the
A term relating to the allowance account to reduce
buyer that states prices, quantities, and other costs.
inventory from cost to market value by applying
the lower of cost or market value rule. The reserve involuntary services–Services that are not sought by
amount is usually calculated from inventory sheets customers; for example, those of hospitals and prisons.
for the specific items.
I/O–Abbreviation for input/output control.
inventory returns–Items returned to the manufacturer
as defective, obsolete, overages, and so forth. An IOR–Abbreviation for importer of record.
inventory item record transaction records the return IOT–Abbreviation for the Internet of Things.
or receipt into physical stores of materials from which
the item may be scrapped. IPO–1) Abbreviation for initial public offering. 2)
Abbreviation for international procurement office.
inventory shrinkage–Reductions of actual quantities
of items in stock, in process, or in transit. The loss may IRM–Abbreviation for integrated resource
be caused by scrap, theft, deterioration, evaporation, management.
and so forth. Sometimes referred to as shrinkage.

irregular maintenance • ISP
irregular maintenance–Syn: breakdown maintenance. ISO 73–Provides the definitions of generic terms
related to risk management. It aims to encourage
ISDN–Abbreviation for integrated services digital
a mutual and consistent understanding of, and a
network.
coherent approach to, the description of activities
Ishikawa diagram–Syn: cause-and-effect diagram. relating to the management of risk, and the use of
uniform risk management terminology in processes
islands of automation–Stand-alone pockets of and frameworks dealing with the management of risk.
automation (e.g., robots, CAD/CAM systems,
numerical control machines) that are not connected ISO 9000–A set of international standards on quality
to a cohesive system. management and quality assurance developed to help
companies effectively document the quality system
ISO–Abbreviation for International Organization for elements to be implemented to maintain an efficient
Standardization. quality system. The standards, initially published
ISO 14000 Series Standards–A series of generic in 1987, are not specific to any particular industry,
environmental management standards, developed by product, or service. The standards were developed by
the International Organization for Standardization, the International Organization for Standardization,
that provide structure and systems for managing known as ISO, a specialized international agency for
I
environmental compliance with legislative and standardization composed of the national standards
regulatory requirements and affect every aspect bodies of 91 countries. The standards underwent
of a company’s environmental operations. major revision in 2008 and now include ISO 9000:2008
(definitions), ISO 9001:2008 (requirements), and ISO
ISO 22301–An international standard that specifies 9004:2008 (continuous improvement). See: ISO/TS
requirements for setting up and managing an 16949, QS 9000.
effective business continuity management system.
ISO 9000:2000–A certification process requiring a
ISO 26000–An international standard adopted by third-party audit that defines in broad terms what
the International Organization for Standardization must be done to manage company quality and to
to assist organizations in contributing to sustainable document these quality processes. It recently was
development beyond legal compliance through a updated by ISO 9000:2008.
common understanding of social responsibility. ISO
26000 is not a management system standard and is ISO certification/registration–The independent audit
not intended or appropriate for certification purposes of an organization against a recognized management
or regulatory or contractual use. system standard such as ISO 9001 (Quality) or ISO
14001 (Environmental) by a third party. Third-party
ISO 28000–An international standard that specifies audits are known as certification or registration
the requirements for a security management system, audits. Once compliance to the relevant standard
including those aspects critical to security assurance and certification is achieved by the organization,
of the supply chain. the third party (referred to as the certification body
or registrar) issues a certificate valid for three years
ISO 31000–A standard adopted by the International
and visits annually to ensure maintenance of the
Organization for Standardization that outlines principles
management system. Such visits are known as
and a set of guidelines to manage risk in any endeavor.
surveillance audits.
The standard includes guidelines for understanding risk,
developing a risk management policy, integrating risk isolation–The determination of the location of a
management into organizational processes (including failure through the use of accessory support and
accountability and responsibility), and establishing diagnostic equipment.
internal and external risk communication processes.
ISO 31000 is not a management system standard ISO/TS 16949–A standard written by the International
and is not intended or appropriate for certification Automotive Task Force that applies only to automotive
purposes or regulatory or contractual use. companies. It includes quality management system;
management responsibility; resource management;
ISO 50001–An international standard that defines product realization; and measurement, analysis, and
the requirements for designing, implementing, and improvement. See: QS 9000.
maintaining an energy management system. It includes
documentation, reporting, and procurement guidance. ISP–An abbreviation for internet service provider.

issue • job rotation
issue–1) The physical movement of items from a enforced. Virtually every component must be delivered
stocking location. See: disbursement. 2) Often, the on time and be within specifications.
transaction reporting of this activity.
job–1) The combination of tasks, duties, and
issue cycle time–The time required to generate a responsibilities assigned to an individual employee
requisition for material, pull the material from an and usually considered his or her work assignment. 2)
inventory location, and move it to its destination. The contents of a work order.
item–Any unique manufactured or purchased part, job analysis–A process of gathering (by observation,
material, intermediate, subassembly, or product. interview, or recording systems) significant task-
oriented activities and requirements about work
item demand–Demand disaggregated into specific
required of employees.
configurations of goods or services. See: item.
jobbing–Syn: job shop.
item master file–A file containing all item master
records for a product, product line, plant, or company. job costing–A cost accounting system in which
See: master file. costs are assigned to specific jobs. This system can
be used with either actual or standard costs in the
item master record–Syn: item record.
manufacturing of distinguishable units or lots of
item number–A number that serves to uniquely products. Syn: job order costing.
identify an item. Syn: part number, product number,
J
job description–A formal statement of duties,
stock code, stock number.
qualifications, and responsibilities associated with a
item record–The “master” record for an item. Typically, particular job.
it contains identifying and descriptive data and control
job design–The function of describing a job with
values (lead times, lot sizes, etc.) and may contain data
respect to its content and the methods to be used.
on inventory status, requirements, planned orders,
Criteria such as the degree of job specialization,
and costs. Item records are linked by bill-of-material
job enrichment, and job enlargement are useful in
records (or product structure records), thus defining
designing work content.
the bill of material. Syn: item master record, part
master record, part record. job enlargement–An increase in the number of
tasks that an employee performs. Job enlargement
J
is associated with the design of jobs, particularly
production jobs, and its purpose is to reduce
employee dissatisfaction.
job enrichment–An increase in the number of tasks

Java–A general-purpose computer language created
that an employee performs and an increase in the
by Sun Microsystems.
control over those tasks. It is associated with the
jidoka–The Japanese term for the practice of design of jobs and especially the production worker’s
stopping the production line when a defect occurs. job. Job enrichment is an extension of job enlargement.
jig–A device that holds a piece of work in a desired job grade–A form of job evaluation that assigns jobs
position and guides the tool or tools that perform the to predetermined job classifications according to the
necessary operations. See: fixture. job’s relative worth to the organization. Pay scales are
usually set for each job grade.
jishuken–A Japanese word meaning voluntary
study groups. job lot–A specific quantity of a part or product that is
produced at one time.
JIT–Acronym for just in time.
job order–Syn: manufacturing order.
JIT master schedule–Syn: level schedule (second
definition). job order costing–Syn: job costing.
JIT supplier environment–To effectively participate job progress chart–Syn: Gantt chart.
as a supplier under just in time (JIT), a company must
job rotation–The practice of an employee periodically
supply components and subassemblies in exact
changing job responsibilities to provide a broader
quantities, delivery times, and quality. Shipments are
perspective and a view of the organization as a total
made within narrow time windows that are rigidly
system, in order to enhance motivation and provide
cross-training.

job sequencing rules • kaizen event
job sequencing rules–A set of priorities and conditions jury of executive opinion–A forecast given by a
that specify the order in which jobs are processed group of executives who are knowledgeable about
because of scarce resources. the industry, competition, and the firm.
job shop–1) An organization in which similar equipment just in time (JIT)–A philosophy of manufacturing based
is organized by function. Each job follows a distinct on planned elimination of all waste and on continuous
routing through the shop. 2) A type of manufacturing improvement of productivity. It encompasses the
process used to produce items to each customer’s successful execution of all manufacturing activities
specifications. Production operations are designed required to produce a final product, from design
to handle a wide range of product designs and are engineering to delivery, and includes all stages of
performed at fixed plant locations using general- conversion from raw material onward. The primary
purpose equipment. Syn: jobbing. See: intermittent elements of just in time are to have only the required
production, project manufacturing. inventory when needed; to improve quality to zero
defects; to reduce lead times by reducing setup
job shop layout–Syn: functional layout.
times, queue lengths, and lot sizes; to incrementally
job shop scheduling–The production planning and revise the operations themselves; and to accomplish
control techniques used to sequence and prioritize these activities at minimum cost. In the broad
production quantities across operations in a job shop. sense, it applies to all forms of manufacturing—job
shop, process, and repetitive—and to many service
job status–A periodic report showing the plan for industries as well. Syn: short-cycle manufacturing,
completing a job (usually the requirements and stockless production, zero inventories.
completion date) and the progress of the job against
that plan.
job ticket–Syn: time ticket.

just-in-time purchasing–This type of purchasing uses
few suppliers who have long-term commitments with
the organization. Long-term contracts are used, which
K
joint order–An order on which several items are enable the purchaser to develop and certify the quality
combined to obtain volume or transportation discounts. process at the supplier.
K
joint rate–A rate for a route involving two or more
carriers to move a shipment.
joint replenishment–Coordinating the lot sizing and

order release decision for related items and treating
kaizen–The Japanese term for improvement; refers
them as a family of items. The objective is to achieve
to continuing improvement involving everyone—
lower costs because of ordering, setup, shipping,
managers and workers. In manufacturing, kaizen
and quantity discount economies. This term applies
relates to finding and eliminating waste in machinery,
equally to joint ordering (family contracts) and to
labor, or production methods. See: continuous
composite part (group technology) fabrication
process improvement.
scheduling. Syn: joint replenishment system.
kaizen blitz®–A rapid improvement of a limited
joint replenishment system–Syn: joint replenishment.
process area; for example, a production cell. Part of
joint venture–An agreement between two or more the improvement team consists of workers in that
firms to risk equity capital to attempt a specific area. The objectives are to use innovative thinking to
business objective. eliminate non-value-added work and to immediately
implement the changes within a week or less.
judgment items–Those inventory items that cannot Ownership of the improvement by the area work team
be effectively controlled by algorithms because and the development of the team’s problem-solving
of age (new or obsolete product) or management skills are additional benefits. See: kaizen event.
decision (promotional product).
kaizen event–A time-boxed set of activities
Juran Trilogy–Syn: quality trilogy. carried out by the cell team during the week
jurisdiction–The authority of a governmental agency of cell implementation. The kaizen event is an
to undertake its activities. implementation arm of a lean manufacturing
program. See: kaizen blitz.

kanban • labor efficiency variance
kanban–A method of just-in-time production that kitting–The process of constructing and staging kits.
uses standard containers or lot sizes with a single
knowledge-based system–A computer program that
card attached to each. It is a pull system in which
employs knowledge of the structure of relations and
work centers signal with a card that they wish to
reasoning rules to solve problems by generating new
withdraw parts from feeding operations or suppliers.
knowledge from the relationships about the subject.
The Japanese word kanban, loosely translated, means
card, billboard, or sign, but other signaling devices knowledge creation–The propensity for generating
such as colored golf balls have also been used. The knowledge.
term is often used synonymously for the specific
scheduling system developed and used by the Toyota knowledge management–An integrated approach
Corporation in Japan. See: move card, production used by organizations to capture, share, develop, and
card, synchronized production. use organizational knowledge. This information is used
to more effectively produce product, interface with
kata–A set of procedural sequences involving thinking customers, and navigate through competitive markets.
and behavior patterns that when routinely repeated
creates an environment of continuous improvement. knowledge management tool–Provides an assortment
of information quickly to stakeholders for faster and
keiretsu–A form of cooperative relationship among better decisions.
companies in Japan where the companies largely
remain legally and economically independent, even knowledge worker–A worker whose job is the
though they work closely in various ways such as accumulation, transfer, validation, analysis, and
financial backing. A member of a keiretsu generally creation of information.
owns a limited amount of stock in other member KPI–Abbreviation for key performance indicator.
companies. A keiretsu generally forms around a bank
L and a trading company, but “distribution” (supply chain)

keiretsu alliances have been formed of companies
ranging from raw material suppliers to retailers. L
key performance indicator (KPI)–A financial or
nonfinancial measure that is used to define and L4L–Abbreviation for lot-for-lot.
assess progress toward specific organizational goals
labor–The people who produce value in a
and typically is tied to an organization’s strategy
product stream.
and business stakeholders. A KPI should not be
contradictory to other departmental or strategic laboratory order–Syn: experimental order.
business unit performance measures. A metric used
labor claim–A factory worker’s report that lists the
to measure the overall performance or state of affairs.
jobs an employee worked on (number of pieces,
SCOR level 1 metrics are considered KPIs.
number of hours, etc.) and often the amount of money
key points–An important operations step where at to which the employee is entitled. A labor claim is
least one of the following occurs: (1) A crucial process usually made on a labor chit or time ticket. Syn: labor
step is carried out that can ultimately make or break ticket, labor voucher.
the job; (2) safety is involved; and/or (3) the step is
labor cost–The dollar amount of labor performed
made easier to do. Part of standardized work.
during manufacturing. This amount is added to direct
key success factors–The product attributes, material cost and overhead cost to obtain total
organizational strengths, and accomplishments manufacturing cost.
with the greatest impact on future success in the
labor efficiency–The average of worker efficiency
marketplace.
for all direct workers in a department or facility.
key supply chain processes–Important steps in Syn: worker efficiency.
producing, marketing, and servicing goods and services.
labor efficiency variance–Labor efficiency variance
kit–1) The components of a parent item that have is the difference between the actual number of hours
been pulled from stock and readied for movement to a worked minus the standard number of hours worked,
production area. 2) A group of repair parts to be shipped multiplied by the standard labor wage rate. The
with an order. Syn: kitted material, staged material. variance is unfavorable if the actual hours exceed the
standard hours. Syn: labor usage variance.
kitted material–Syn: kit.

labor grade • leading indicator
labor grade–A classification of workers whose late finish date (LF)–In the critical path method of
capability indicates their skill level or craft. See: skill- project management, the last date upon which a
based compensation, skills inventories. given activity can be completed without delaying the
completion date of the project.
labor-intensive–When an operation has
more expenditures on labor than capital. See: lateness–Delivery date minus due date. Lateness may
capital-intensive. be positive or, in the case of early jobs, negative. See:
earliness, tardiness.
labor productivity–A partial productivity measure
in which the rate of output of a worker or group of late order–Syn: past due order.
workers per unit of time is compared to an established
late start date (LS)–In the critical path method of
standard or rate of output. Labor productivity can be
project management, the last date upon which a
expressed as output per unit of time or output per
given activity can be started without delaying the
labor hour. See: machine productivity, productivity.
completion date of the project.
labor rate variance–Labor rate variance is the sum of
launch phase–In this last phase of product
the actual wage rate minus the standard wage rate
development, either the product is fed into the supply
multiplied by the actual number of labor hours. The
chain or the service is made available to consumers.
variance is unfavorable if the actual rate is greater
than the standard rate. law of diminishing marginal returns–A principle
stating that as the quantity of a variable factor
labor standard–Under normal conditions, the
applied to a fixed factor is increased, the additional
quantity of worker minutes necessary to finish a
units of the variable factor will result in smaller and
product or process.
smaller increases in output. See: marginal product.
L
labor ticket–Syn: labor claim.
law of variability–The more variability that exists in a
labor usage variance–Syn: labor efficiency variance. process, the less productive that process will be.
labor voucher–Syn: labor claim. layoff–The process by which employees who are not
needed for some extended amount of time are given
lading–The cargo being transported by a vehicle.
notice that their services are being discontinued.
lag capacity strategy–Not adding capacity until the Benefits may or may not continue during a layoff.
firm is operating at or beyond full capacity. This keeps
layout–Physical arrangement of resources or centers
unit costs minimized by working at full capacity, but
of economic activity (machines, groups of people,
does not satisfy total demand.
workstations, storage areas, aisles, etc.) within a facility.
laid-down cost–The sum of the product and Layout types include product (linear or line), functional
transportation costs. The laid-down cost is useful in (job shop or process), cellular, and fixed position.
comparing the total cost of a product shipped from
LBO–Abbreviation for leveraged buyout.
different supply sources to a customer’s point of use.
L/C–Abbreviation for letter of credit.
LAN–Acronym for local area network.
LCA–Abbreviation for life cycle assessment.
land bridge–Moving goods over water, then land, and
then water again to the final point. LCL–1) Abbreviation for less-than-container-load or
less than carload (lot shipment). 2) Abbreviation for
landed cost–This cost includes the product cost
lower control limit.
plus the costs of logistics, such as warehousing,
transportation, and handling fees. LDI–Abbreviation for logistics data interchange.
lap phasing–Syn: overlapped schedule. lead capacity strategy–Adding capacity to a resource

in anticipation of increased future demand. This is
last in, first out (LIFO)–A method of inventory
done to ensure the ability to satisfy market demand
valuation for accounting purposes. The accounting
when increase occurs.
assumption is that the most recently received (last
in) is the first to be used or sold (first out) for costing leading indicator–A specific business activity index
purposes, but there is not necessarily any relationship that indicates future trends. For example, housing
with the actual physical movement of specific items. starts is a leading indicator for the industry that
See: average cost systems. supplies builders’ hardware.

lead logistics providers (LLPs) • learning organization
lead logistics providers (LLPs)–Organizations that customer, and to analyze and focus the value stream so
oversee the third-party logistics operations of their that it does everything from product development and
clients. production to sales and service in a way that actions
that do not create value are removed and actions that
lead management tool–A tool used by sales
do create value proceed in a continuous flow as pulled
personnel that helps them follow a specified sales
by the customer. Lean enterprise differs from a “virtual
process to close deals.
corporation” in which the organizational membership
lead time–1) A span of time required to perform a and structure keep changing.
process (or series of operations). 2) In a logistics context,
lean manufacturing–Syn: lean production.
the time between recognition of the need for an order
and the receipt of goods. Individual components of lean metric–A metric that permits a balanced
lead time can include order preparation time, queue evaluation and response—quality without sacrificing
time, processing time, move or transportation time, and quantity objectives. The types of metrics are financial,
receiving and inspection time. Syn: total lead time. behavioral, and core-process performance.
See: manufacturing lead time, purchasing lead time.
lean production–A philosophy of production that
lead-time alert–1) A signal that the actual lead time emphasizes the minimization of the amount of all
may exceed planned or expected lead time. 2) An the resources (including time) used in the various
alert/warning generated by a lead-time managed part. activities of the enterprise. It involves identifying
An alert will be triggered whenever the part enters a and eliminating non-value-adding activities in
different zone in its buffer. Green zone is the first alert design, production, supply chain management, and
to be encountered, followed by yellow, and then red, in dealing with customers. Lean producers employ
increasing criticality. teams of multiskilled workers at all levels of the
L
organization and use highly flexible, increasingly
lead-time alert zone–The buffer zone associated
automated machines to produce volumes of products
with the percentage of lead time that provides the
in potentially enormous variety. Lean production
definition for lead-time alerts.
contains a set of principles and practices to reduce
lead-time inventory–Inventory that is carried to cost through the relentless removal of waste and
cover demand during the lead time. through the simplification of all manufacturing and
support processes. Syn: lean, lean manufacturing.
lead-time managed part–A critical nonstocked
part that will have special attention paid to it over lean six sigma–A methodology that combines the
its execution horizon. Typically, these items are improvement concepts of lean and six sigma. It uses
critical, long lead-time components that do not have the seven wastes of lean and the DMAIC process from
sufficient volume to justify stocking. six sigma, and awards recognition of competence
through judo-style belts.
lead-time offset–A technique used in MRP where a
planned order receipt in one time period requires the learning curve–A curve reflecting the rate of
release of that order in an earlier time period based on improvement in time per piece as more units of an
the lead time for the item. Syn: component lead-time item are made. A planning technique, the learning
offset, offsetting. curve is particularly useful in project-oriented
industries in which new products are frequently
lead-time scheduling–Development of a schedule of phased in. The basis for the learning curve calculation
start and completion times of planned operations for is that workers will be able to produce the product
a manufacturing order by calculation of the lead time. more quickly after they get used to making it. Syn:
The calculation includes the duration of all operations, experience curve, manufacturing progress curve.
interoperation times, and order administration times.
See: back scheduling, central point scheduling, forward learning management system–A software system
scheduling, probable scheduling. for delivering and managing education and training
within an organization.
lean–Syn: lean production.
learning organization–1) A group of people who have
lean enterprise–A group of individuals, functions, woven a continuous, enhanced capacity to learn
and sometimes legally separate but operationally into the corporate culture. 2) An organization in
synchronized organizations. The value stream which learning processes are analyzed, monitored,
defines the lean enterprise. The objectives of the lean developed, and aligned with competitive goals.
enterprise are to correctly specify value to the ultimate

lease • level schedule
lease–A rental agreement lasting an extended period. agreed to by the buyer and seller are met. This method
of payment for sales contracts provides a high degree
least changeover cost–Determining the lowest cost
of protection for the seller.
of making machine changeovers between jobs by
sequencing the jobs accordingly. level–Every part or assembly in a product structure
is assigned a level code signifying the relative level at
least-squares method–A method of curve fitting
which that part or assembly is used within the product
that selects a line of best fit through a plot of data to
structure. Often the end items are assigned level 0,
minimize the sum of squares of the deviations of the
with the components and subassemblies going into it
given points from the line. See: regression analysis.
assigned level 1, level 2, and so on. The MRP explosion
least total cost–A dynamic lot-sizing technique that process starts at level 0 and proceeds downward one
calculates the order quantity by comparing the setup level at a time.
(or ordering) costs and the carrying cost for various
level-demand strategy–A strategy of keeping
lot sizes and selects the lot size where these costs
capacity level and not variable with demand.
are most nearly equal. See: discrete order quantity,
dynamic lot sizing. leveling–Syn: resource leveling.
least unit cost–A dynamic lot-sizing technique that level loading–Syn: load leveling.
adds ordering cost and inventory carrying cost for
level of effort–In project management, support activity
each trial lot size and divides by the number of units
(e.g., customer liaison) that is not easily measured by
in the lot size, picking the lot size with the lowest unit
discrete accomplishment. It usually has a uniform
cost. See: discrete order quantity, dynamic lot sizing.
work rate.
leg–A portion of a complete trip.
level of service–A measure (usually expressed as a
L
legacy systems–A computer application program percentage) of satisfying demand through inventory
that is old and interfaces poorly with other or by the current production schedule in time to
applications but is too expensive to replace. It often satisfy the customers’ requested delivery dates and
runs on antiquated hardware. quantities. In a make-to-stock environment, level of
service is sometimes calculated as the percentage of
legal environment–The governmental restrictions
orders picked complete from stock upon receipt of the
placed on an organization regarding the goods and
customer order, the percentage of line items picked
services provided by the business; for example,
complete, or the percentage of total dollar demand
environmental regulations, export/import
picked complete. In make-to-order and design-to-order
restrictions, safety regulations, and mandated
environments, level of service is the percentage of times
deregulations.
the customer-requested or acknowledged date was met
lessee–An entity to which a lease is given. by shipping complete product quantities. Syn: measure
of service, service level. See: cycle service level.
lessor–An entity that gives a lease.
level production method–A production planning
less-than-container-load (LCL)–A shipment that method that maintains a stable production rate while
occupies less than the maximum cubic or weight varying inventory levels to meet demand. Syn: level
capacity of a container and therefore is shipped strategy, production leveling. See: level schedule.
in the same container with other LCL cargo. See:
less-than-truckload. level production schedule–Syn: level schedule.
less-than-container/carload (LCL)–1) A small level schedule–1) In traditional management, a

shipment that does not fill the container/railcar. 2) A production schedule or master production schedule
shipment of insufficient weight to qualify for a carload that generates material and labor requirements that
quantity rate discount. are as evenly spread over time as possible. Finished
goods inventories buffer the production system
less-than-truckload (LTL)–1) A small shipment that against seasonal demand. See: level production
does not fill the truck. 2) A shipment of insufficient method. 2) In JIT, a level schedule (usually constructed
weight to qualify for a truckload quantity rate discount monthly) in which each day’s customer demand is
(usually set at about 10,000 lbs.) normally offered to a scheduled to be built on the day it will be shipped.
general commodity trucker. A level schedule is the output of the load-leveling
process. Syn: JIT master schedule, level production
letter of credit (L/C)–An assurance by a bank that
schedule. See: load leveling.
payment will be made as long as the sales terms

level strategy • linear production
level strategy–Syn: level production method. lightless plant–Syn: dark factory.
leverage-capital structure ratio–An indicator of LIMIT–Acronym for lot-size inventory management

whether or not a company has the ability to retire its interpolation technique.
long-term debts.
limited access–Securing inventory, usually in a locked
leveraged buyout (LBO)–A takeover of a company environment, to protect it from theft and to help
using borrowed funds where assets of the acquired improve inventory count accuracy.
company are used as partial collateral for the loan.
limited liability company–In the United States, a
leveraging purchase volume–Buying in large business organization that, as with a corporation,
quantities to take advantage of volume price or enjoys limited liability yet is not a taxable entity.
shipping discounts.
limited life material–Material having a finite shelf life.
LF–Abbreviation for late finish date.
limited partnership–A partnership having two types
liabilities–An accounting/financial term (balance of partners: (1) limited partners contribute assets to
sheet classification of accounts) representing debts the company without participating in management;
or obligations owed by a company to creditors. (2) general partners manage the company and are
Liabilities may have a short-term time horizon, such responsible for all debts.
as accounts payable, or a longer-term obligation, such
limiting operation–The operation with the least
as mortgage payable or bonds payable. See: assets,
capacity in a series of operations with no alternative
balance sheet, debt, owner’s equity.
routings. The capacity of the total system can be no
licensing–Paying a fee for permission to manufacture greater than the limiting operation, and as long as
L
and sell a product created by another. this limiting condition exists, the total system can
be effectively scheduled by scheduling the limiting
life cycle analogy method–A method for forecasting
operation and providing this operation with proper
the life cycle of a new product or service, including the
buffers. See: protective capacity, protective inventory.
introduction, growth, maturity, and decline phases.
In addition to time frames, this qualitative technique line–1) A specific physical space for the manufacture
tries to estimate demand levels. of a product that in a flow shop layout is represented
by a straight line. In actuality, this may be a series of
life cycle analysis–A quantitative forecasting
pieces of equipment connected by piping or conveyor
technique based on applying past patterns of
systems. 2) A type of manufacturing process used
demand data covering introduction, growth, maturity,
to produce a narrow range of standard items with
saturation, and decline of similar products to a new
identical or highly similar designs. Production
product family.
volumes are high, production and material handling
life cycle assessment (LCA)–Understanding the equipment is specialized, and all products typically
human and environmental impacts during the life pass through the same sequence of operations. See:
of a product, process, or service, including energy, assembly line.
material, and environmental inputs and outputs.
linear decision rules–A modeling technique using
Sometimes called cradle-to-grave analysis, LCA
simultaneous equations (e.g., the establishment of
includes raw material extraction through materials
aggregate workforce levels) based upon minimizing
processing, manufacture, distribution, use, repair and
the total cost of hiring, firing, holding inventory,
maintenance, and disposal or recycling.
backorders, payroll, overtime, and undertime.
life cycle costing–In evaluating alternatives, the
linearity–1) Production at a constant quantity. 2) Use
consideration of all costs—including acquisition,
of resources at a level rate, typically measured daily or
operation, and disposition costs—that will be
more frequently.
incurred over the entire time of product ownership.
linear layout–A layout of various machines in one
life testing–The simulation of a product’s life under
straight line. This type of layout makes it difficult to
controlled real-world conditions to see if it holds up
reallocate operations among workers and machinery.
and performs as required.
linear production–Actual production to a level
LIFO–Acronym for last in, first out.
schedule, so that a plotting of actual output versus
lighter–A short-haul flat-bottomed barge. planned output forms a straight line even when
plotted for a short segment of time.

linear programming • live load
linear programming–Mathematical models for solving line haul costs–Basic costs of carrier operation to
linear optimization problems through minimization move a container of freight, including drivers’ wages
or maximization of a linear function subject to linear and usage depreciation. These vary with the cost per
constraints. For example, in blending gasoline and mile, the distance shipped, and the weight moved.
other petroleum products, many intermediate
line item–One item on an order, regardless of quantity.
distillates may be available. Prices and octane ratings
as well as upper limits on capacities of input materials line loading–The loading of a production line by
that can be used to produce various grades of fuel are multiplying the total pieces by the rate per piece for each
given. The problem is to blend the various inputs in item to come up with a finished schedule for the line.
such a way that (1) cost will be minimized (profit will
be maximized), (2) specified optimum octane ratings line manager–A manager involved in managing a
will be met, and (3) the need for additional storage department that is directly involved in making a product.
capacity will be avoided. line manufacturing–Repetitive manufacturing
linear regression–A statistical data technique performed by specialized equipment in a fixed sequence.
that expresses a variable as a linear function of an line of balance planning–A project planning technique
independent variable. Linear regression can be used using a lead-time offset chart and a chart of required
to develop forecasting models. final assembly completions to graph a third bar
linear trend forecasting–Using simple linear chart showing the number of each component
regression to estimate future trends. that should be completed to date. This bar chart
forms a descending line, and aggregate component
line balancing–1) The balancing of the assignment of completions are then plotted against this line of
the tasks to workstations in a manner that minimizes balance. This is a crude form of material planning.
L
the number of workstations and minimizes the total
amount of idle time at all stations for a given output line of credit–A contract that enables a company to
level. In balancing these tasks, the specified time borrow funds at any time up to a predetermined limit.
requirement per unit of product for each task and its line scrap–The worth of work in process and raw
sequential relationship with the other tasks must be materials scrapped because of faulty processing
considered. See: uniform plant loading. 2) A technique as a percentage of the total value of production at
for determining the product mix that can be run down an standard cost.
assembly line to provide a fairly consistent flow of work
through that assembly line at the planned line rate. link–The transportation method used in a logistics
system to connect the nodes of the system.
line efficiency–A measure of actual work content
versus cycle time of the limiting operation in a liquidity–The ability of a firm to pay debts as they
production line. Line efficiency (percentage) is come due.
equal to the sum of all station task times divided by
liquidity ratio–Financial ratios that are indicators of a
the longest task time multiplied by the number of
firm’s ability to retire short-term financial obligations.
stations. In an assembly line layout, the line efficiency
is 100 percent minus the balance delay percentage. liquid waste generated–One of the five green SCOR
metrics. This includes waste that is either disposed
line functions–Areas involved in daily operations.
of or released to open water or sewer systems.
Logistics line functions include inventory control,
order processing, warehousing, and packaging. Little’s Law–When a system has fixed capacity and is
relatively stable, the lead time and work-in-process
line haul–The portion of a transportation journey
(WIP) inventory level are proportional and an increase
that moves between two transportation terminals.
or decrease in either WIP or lead time will produce a
It is distinguished from and excludes the pickup
proportional change in the other. The formula for the
and delivery portions of a journey used to acquire or
law is WIP equals throughput rate multiplied by lead
distribute LTL freight. For motor carrier transportation,
time, or, more generally, total entities equals entities
the shipment is loaded in a semi-permanent trailer
divided by unit time multiplied by total time.
configuration that maximizes the amount of freight
that each driver can legally haul over that portion of the live load–Syn: available work.
journey. This may involve hauling multiple trailers.

load • logistics social responsibility
load–The amount of planned work scheduled for location tag–A bar-coded sign situated at a
and actual work released to a facility, work center, warehouse location. The location number can be read
or operation for a specific span of time. Usually or scanned.
expressed in terms of standard hours of work or, when
locator file–A file used in a stockroom (or anywhere)
items consume similar resources at the same rate,
providing information on where each item is located.
units of production. Syn: workload.
See: locator system.
load center–Syn: work center.
locator system–A system for maintaining a record
load-distance analysis–In layout analysis, a method of the storage locations of items in inventory. See:
of choosing a facility layout based on selecting the locator file.
layout with the shortest product or material travel per
logbook–A daily record kept by an interstate driver of
time period.
time and miles driven and duty-related and non-duty-
loading port–The port where cargo is loaded onto an related activities.
exporting vessel.
logical relationship–In project management, a
load leveling–Spreading orders out in time or dependency between two activities or between
rescheduling operations so that the amount of work a milestone and an activity. The four possible
to be done in sequential time periods tends to be relationships are (1) finish-to-start—activity A must
distributed evenly and is achievable. Although both be finished before activity B can start; (2) finish-to-
material and labor are ideally level loaded, specific finish—activity A must be finished before activity B
businesses and industries may load to one or the other can finish; (3) start-to-start—activity A must start
exclusively (e.g., service industries). Syn: capacity before activity B can start; and (4) start-to-finish—
smoothing, level loading. See: level schedule. activity A must start before activity B can finish.
L load profile–A display of future capacity requirements

based on released and/or planned orders over a
logistics–1) In a supply chain management context,
it is the subset of supply chain management that
given span of time. Syn: load projection. See: capacity controls the forward and reverse movement, handling,
requirements plan. and storage of goods between origin and distribution
points. 2) In an industrial context, the art and science
load projection–Syn: load profile.
of obtaining, producing, and distributing material and
local area network (LAN)–A high-speed data product in the proper place and in proper quantities.
communication system for linking computer 3) In a military sense (where it has greater usage), its
terminals, programs, storage, and graphic devices meaning can also include the movement of personnel.
at multiple workstations distributed over a relatively
logistics channel–A set of supply chain partners
small geographic area such as a building or campus.
who participate in storage, transportation, and
local measures–The set of measurements that relates communications that contribute to the flow of goods.
to a resource, operation, process, or part and usually
logistics data interchange (LDI)–The electronic
has low correlation to global organization measures.
transmission of logistics information via computer
Examples are errors per printed page, departmental
systems.
efficiency, and volume discounts.
logistics management–The part of supply chain
local rate–A rate pertaining to two points served by a
management that oversees the planning and
single carrier.
execution of forward and reverse flows of goods and
locational determinants–Information or factors related information between points in the supply
considered in determining where to put a facility. chain to meet customer requirements.
location audit–A methodical verification of the logistics social responsibility–The subset of

location records for an item or group of items in corporate social responsibility that relates to
inventory to ensure that when the record shows an logistics, including minimizing negative impacts,
item’s location, it is, in fact, in that location. monitoring and controlling, reporting, and
continuously improving in social responsibility
location grid–A layout of a warehouse used to areas that include the environment, health and
improve inventory management and cycle counting. safety, and labor issues related to warehousing,
transportation, and other logistics areas.

logistics strategy • lot-size inventory
logistics strategy–A plan for the logistics elements lot–A quantity produced together and sharing the
of a business—including warehousing, information same production costs and specifications. See: batch.
systems, and transportation—that is aligned with the
lot control–A set of procedures (e.g., assigning unique
overall business strategy. See: strategic plan.
batch numbers and tracking each batch) used to
logistics system–The planning and coordination of maintain lot integrity from raw materials from the
the physical movement aspects of a firm’s operations supplier through manufacturing to consumers.
such that a flow of raw materials, parts, and finished
lot cost–In cost accounting, those costs associated
goods is achieved in a manner that minimizes total
with processing a common lot or quantity of parts
costs for the levels of service desired.
having the same specifications.
log normal distribution–A continuous probability
lot-for-lot (L4L)–A lot-sizing technique that generates
distribution where the logarithms of the variable are
planned orders in quantities equal to the net
normally distributed.
requirements in each period. See: discrete
longest-task-time (LTT) heuristic–The method of order quantity.
attaching additional jobs to a workstation based on
lot number–A unique identification assigned to
priority order, with the longest task scheduled first.
a homogeneous quantity of material. Syn: batch
long-term planning–Business planning that number, mix number.
addresses the strategic needs of the organization.
lot number control–Assigning a unique number
See: business plan, resource planning.
to each instance of receipt and carrying forth that
long-term production plan–Syn: aggregate number into subsequent manufacturing processes so
production plan. that, in review of an end item, each lot consumed from
L
raw materials through end item can be identified as
long ton–Two thousand two hundred and forty
having been used for the manufacture of this specific
(2,240) pounds.
end item lot.
loose standard–A standard time greater than that
lot number traceability–Tracking parts by lot
required by a qualified worker with normal skill
numbers to a group of items. This tracking can
and effort.
assist in tracing quality problems to their source. A
loss leader pricing–Pricing some products below cost lot number identifies a designated group of related
to attract customers into the store, in the expectation items manufactured in a single run or received from a
that they will buy other items as well. vendor in a single shipment.
loss to society–According to Genichi Taguchi, a loss lot operation cycle time–The length of time required
to society occurs whenever a dimension of a product from the start of setup to the end of cleanup for a
differs from its target value. This loss increases with production lot at a given operation, including setup,
the square of the deviation from the target. According production, and cleanup.
to this concept, a loss to society occurs even though
lot size–The amount of a particular item that is
a dimension is within tolerance—as long as the
ordered from the plant or a supplier or issued as a
dimension is not exactly on the target. For example,
standard quantity to the production process. Syn:
a loss to society might occur because an assembly
order quantity.
made of components that are within specification,
but not exactly on target, wears out faster than an lot-size code–A code that indicates the lot-sizing
assembly composed of components that are all technique selected for a given item. Syn: order
exactly on the target. policy code.
lost sale–A potential sale that was not completed, lot-size inventory–Inventory that results whenever
usually due to lack of availability of the item in question. quantity price discounts, shipping costs, setup costs,
or similar considerations make it more economical to
lost time factor–The complement of utilization; that
purchase or produce in larger lots than are needed for
is, one minus the utilization factor. It is the percentage
immediate purposes.
of time lost to machine, tool, and worker unavailability.
It can be calculated as the planned hours minus
actual hours used, divided by the planned hours. See:
balance delay, utilization.

lot-size inventory management interpolation technique (LIMIT) • machine productivity
M
lot-size inventory management interpolation
technique (LIMIT)–A technique for looking at the
lot sizes for groups of similar products to determine
the effect economic lot sizes will have on the total
inventory, total setup costs, and machine availability. M4SC–A supply chain management reference model
for describing processes, spanning activities from
lot-size system–Syn: fixed reorder quantity interpretation of business strategy to assigning
inventory model. critical supply chain resources. By describing supply
chain management using process building blocks,
lot sizing–The process of, or techniques used in,
the model can be used to identify and address critical
determining lot size. See: order policy.
supply chain management deficiencies.
lot splitting–Dividing a lot into two or more sublots
machine attachments–Additional machine parts that
and simultaneously processing each sublot on
decrease the time needed to complete a task and the
identical (or very similar) facilities as separate lots,
level of human involvement required.
usually to compress lead time or to expedite a small
quantity. Syn: operation splitting. machine center–A production area consisting of one
or more machines (and, if appropriate for capacity
lot tolerance percent defective (LTPD)–Expressed in
planning, the necessary support personnel) that can
percent defective, the poorest quality in an individual
be considered as one unit for capacity requirements
lot that should be accepted. Note: The LTPD is used as
planning and detailed scheduling.
a basis for some inspection systems and is commonly
associated with a value for a small consumer’s risk. machine downtimes–Periods during which a
machine is unavailable due to tool breakage, worker
lot traceability–The ability to identify the lot or batch
unavailability, machine breakdown, maintenance,
number of product in terms of one or all of the following:
teardown, setup, and other factors.
its composition, purchased parts, manufacturing
M
date, or shipped items. In certain regulated industries, machine flexibility–In work-cell design, choosing
lot traceability may be a legislative requirement. between general-purpose machinery versus special-
purpose machinery so that the lowest cost and most
low-cost-provider strategy–A strategy of offering the
adaptability is achieved.
lowest prices in the market to gain share and increase
sales volume in industries composed of numerous machine hours–The amount of time, in hours, that a
players offering the same type of products. machine is actually running. Machine hours, rather
than labor hours, may be used for planning capacity
lower control limit (LCL)–Control limit for points
for scheduling and for allocating costs.
below the central line in a control chart.
machine-limited capacity–A production environment
lower specification limit (LSL)–In statistical process
where a specific machine limits throughput of the
control, charting the line that defines the minimum
process. See: constraint, throughput.
acceptable level of random output. See: tolerance limits.
machine loading–The accumulation by workstation,
low-level code–A number that identifies the lowest level
machine, or machine group of the hours generated
in any bill of material at which a particular component
from the scheduling of operations for released orders
appears. Net requirements for a given component are
by time period. Machine loading differs from capacity
not calculated until all the gross requirements have
requirements planning in that it does not use the
been calculated down to that level. Low-level codes
planned orders from MRP but operates solely from
are normally calculated and maintained automatically
released orders. It may be of limited value because of
by the computer software. Syn: explosion level.
its limited visibility of resources.
LS–Abbreviation for late start date.
machine productivity–A partial productivity
LSL–Abbreviation for lower specification limit. measure. The rate of output of a machine per unit of
time compared to an established standard or rate of
LTL–Abbreviation for less than truckload. output. Machine productivity can be expressed as
LTPD–Abbreviation for lot tolerance percent defective. output per unit of time or output per machine hour.
See: labor productivity, productivity.
LTT–Abbreviation for longest-task-time.
lumpy demand–Syn: discontinuous demand.

machine utilization • management information system (MIS)
machine utilization–A measure of how intensively a Where options or accessories are stocked before
machine is being used. Machine utilization compares customer orders arrive, the term assemble-to-order
the actual machine time (setup and run time) to is frequently used. Syn: build-to-order. See: assemble-
available time. to-order, make-to-stock.
machining center–A machine capable of performing make-to-stock–A production environment where

a variety of metal, wood, or plastic removal operations products can be and usually are finished before receipt
on a part, usually operated by numerical control. of a customer order. Customer orders are typically
filled from existing stocks, and production orders are
macro environment–The environment external
used to replenish those stocks. Syn: produce-to-stock.
to a business including technological, economic,
See: assemble-to-order, make-to-order.
natural, and regulatory forces that marketing efforts
cannot control. Malcolm Baldrige National Quality Award (MBQA)–
An award established by Congress in 1987 to raise
MAD–Acronym for mean absolute deviation.
awareness of quality management and to recognize
maintainability–The characteristic of equipment U.S. companies that have implemented successful
design and installation that enables the equipment to quality management systems. Up to four awards
be repaired easily and efficiently. See: serviceability. may be given annually in each of three categories:
manufacturing company, service company, and small
maintenance, repair, and operating (MRO) supplies– business. The award is named after the late Secretary
Items used in support of general operations and of Commerce, Malcolm Baldrige, a proponent of quality
maintenance such as maintenance supplies, spare management. The U.S. Commerce Department’s
parts, and consumables used in the manufacturing National Institute of Standards and Technology
process and supporting operations. manages the award, and the American Society for
maintenance, repair, and overhaul (MRO)–An item for Quality (ASQ) administers it. Syn: Baldrige Award.
reprocessing in the remanufacturing industry.
M
management–The functions of planning, organizing,
major setup–The equipment setup and related and controlling the transformation process and its
activities required to manufacture a group of items utility in providing a good or service to customers.
in sequence, exclusive of the setup required for each management by objectives (MBO)–A participative
item in the group. goal-setting process that enables the manager or
make–The process that describes the activities supervisor to construct and communicate the goals
associated with the conversion of materials or of the department to each subordinate. At the same
creation of content for services. The process is time, the subordinate is able to formulate personal
characterized by adding value to products through goals and influence the department’s goals.
assembly, mixing, separating, forming, machining, management by walking around (MBWA)–The
and chemical processes. The SCOR “make” process is management technique of managers touring a facility
generic so as to cover all types of material conversion on a regular basis to talk with workers and staff about
and can be applied to make-to-stock, make-to-order, problems, trends, and potential solutions.
and engineer-to-order environments.
management estimation–A judgmental forecasting
make-or-buy cost analysis–A comparison of all the technique whereby responsible individuals predict
costs associated with making an item versus the cost the demand for new products or alter a quantitative
of buying the item. forecast for existing products largely on the basis
make-or-buy decision–The act of deciding whether of experience and intuition. Other judgmental
to produce an item internally or buy it from an forecasting techniques may be used in combination
outside supplier. Factors to consider in the decision with management estimation to improve the accuracy
include costs, capacity availability, proprietary and/ of the estimate. See: Delphi method, historical analogy,
or specialized knowledge, quality considerations, skill panel consensus, pyramid forecasting.
requirements, volume, and timing. management information system (MIS)–Integrated
make-to-order–A production environment where approach for providing interpreted and relevant
a good or service can be made after receipt of a data that can help managers make decisions. This
customer’s order. The final product is usually a information can reflect the progress or lack of
combination of standard items and items custom- progress made in achieving major objectives.
designed to meet the special needs of the customer.

management science • manufacturing layout strategies
management science–Syn: operations research. manufacturing capital asset value–The depreciated

value of manufacturing fixed assets.
managerial accounting–A branch of accounting that
uses techniques such as break-even analysis, cost- manufacturing cycle–Syn: manufacturing lead time.
volume-profit analysis, make-buy analysis, and others to
manufacturing cycle efficiency–The ratio of value-
provide information used in day-to-day decision making.
added time to manufacturing lead time or cycle time.
man-hour–A unit of measure representing one person Manufacturing cycle time can be improved by the
working for one hour. The combination of “n” people reduction of manufacturing lead time by eliminating
working for “h” hours produces “nh” man-hours. non-value-added activities such as inspecting,
Frequent qualifications to the definition include (1) moving, and queuing.
designation of work effort as normal effort and (2)
manufacturing data sheet–Syn: routing.
designation of time spent as actual hours.
manufacturing engineering–The engineering
manifest system–A production control system where
discipline concerned with designing and improving
the exact sequence of items to be assembled is required.
production processes. See: process engineering.
manual rescheduling–The most common method of
manufacturing environment–The framework in which
rescheduling open orders (scheduled receipts). Under
manufacturing strategy is developed and implemented.
this method, the MRP system provides information on
Elements of the manufacturing environment include:
the part numbers and order numbers that need to be
external environmental forces; corporate strategy;
rescheduled. Due dates and order quantity changes
business unit strategy; other functional strategies
required are then analyzed and changed by material
(marketing, engineering, finance, etc.); product
planners or other authorized persons. Syn: planner
selection; product/process design; product/process
intervention. Ant: automatic rescheduling.
technology; and management competencies. Often
manufacturability–A measure of the design of refers to whether a company, plant, product, or service
a product or process in terms of its ability to be is make-to-stock, make-to-order, or assemble-to-order.
M produced easily, consistently, and with high quality.
manufacturer’s agent–Syn: manufacturer’s

Syn: production environment.
manufacturing execution systems (MES)–Programs

representative. and systems that participate in shop floor control,
including programmed logic controllers and process
manufacturer’s representative–One who sells goods control computers for direct and supervisory control
for several firms but does not take title to them. Syn: of manufacturing equipment; process information
manufacturer’s agent, manufacturing representative. systems that gather historical performance
information, then generate reports; graphical displays;
manufacturing–A series of interrelated activities and
and alarms that inform operations personnel what
operations involving the design, material selection,
is going on in the plant currently and what occurred
planning, production, quality assurance, management,
during a very short history into the past. Quality
and marketing of discrete consumer and durable goods.
control information is also gathered and a laboratory
manufacturing authorization–Syn: manufacturing information management system may be part of this
order. configuration to tie process conditions to the quality
data that is generated. Cause-and-effect relationships
manufacturing automation protocol (MAP)– can thereby be determined. The quality data at times
An application-specific protocol based on the affects the control parameters that are used to meet
International Organization for Standardization’s product specifications either dynamically or off line.
open systems interconnection (OSI) standards.
It is designed to allow communication between a manufacturing instruction–A set of detailed
company’s computers and computers from different instructions for carrying out a manufacturing
vendors in the manufacturing shop floor environment. process. It is usually referenced by the routing and
thus can simplify the content of the routing.
manufacturing calendar–A calendar used in inventory
and production planning functions that consecutively manufacturing layout strategies–An element of
numbers only the working days so that the component manufacturing strategy. It is the analysis of physical
and work order scheduling may be done based on capacity, geography, functional needs, corporate
the actual number of workdays available. Syn: M-day philosophy, and product-market/process focus
calendar, planning calendar, production calendar, shop to systematically respond to required facility
calendar. See: resource calendar. changes driven by organizational, strategic, and
environmental considerations.

manufacturing lead time • manufacturing volume strategy
manufacturing lead time–The total time required manufacturing process development–The definition
to manufacture an item, exclusive of lower-level and implementation of an execution system for
purchasing lead time. For make-to-order products, making a part, good, or service that is consistent with
it is the length of time between the release of an the objectives of the firm.
order to the production process and shipment to the
manufacturing progress curve–Syn: learning curve.
final customer. For make-to-stock products, it is the
length of time between the release of an order to manufacturing ramp-up–The final phase of new
the production process and receipt into inventory. product and process development in which the new
Included are order preparation time, queue time, product moves from pilot production to full-scale
setup time, run time, move time, inspection time, and manufacturing.
put-away time. Syn: manufacturing cycle, production
cycle, production lead time. See: lead time. manufacturing release–The issuance of a
manufacturing order into the factory.
manufacturing order–A document, group of
documents, or schedule conveying authority for manufacturing representative–Syn: manufacturer’s
the manufacture of specified parts or products in representative.
specified quantities. Syn: job order, manufacturing manufacturing resource planning (MRP II)–A
authorization, production order, production release, method for the effective planning of all resources
run order, shop order, work order. See: assembly parts of a manufacturing company. Ideally, it addresses
list, batch card, blend order, fabrication order, mix operational planning in units and financial planning
ticket, work order. in dollars, and has a simulation capability to answer
manufacturing order reporting–See: production what-if questions. It is made up of a variety of
reporting and status control. processes, each linked together: business planning,
production planning (sales and operations planning),
manufacturing philosophy–The set of guiding master production scheduling, material requirements
M
principles, driving forces, and ingrained attitudes that planning, capacity requirements planning, and the
helps communicate goals, plans, and policies to all execution support systems for capacity and material.
employees and that is reinforced through conscious Output from these systems is integrated with
and subconscious behavior within the manufacturing financial reports such as the business plan, purchase
organization. commitment report, shipping budget, and inventory
projections in dollars. Manufacturing resource
manufacturing planning and control system
planning is a direct outgrowth and extension of
(MPC)–A closed-loop information system that
closed-loop MRP.
includes the planning functions of production
planning (sales and operations planning), master manufacturing strategy–A collective pattern
production scheduling, material requirements of decisions that acts upon the formulation and
planning, and capacity requirements planning. Once deployment of manufacturing resources. To be most
the plan has been accepted as realistic, execution effective, the manufacturing strategy should act in
begins. The execution functions include input-output support of the overall strategic direction of the business
control, detailed scheduling, dispatching, anticipated and provide for competitive advantages (edges).
delay reports (department and supplier), and supplier
scheduling. A closed-loop MRP system is one example manufacturing volume strategy–An element of
of a manufacturing planning and control system. manufacturing strategy that includes a series of
assumptions and predictions about long-term
manufacturing process–The series of operations market, technology, and competitive behavior in the
performed upon material to convert it from the raw following areas: (1) the predicted growth and variability
material or a semifinished state to a state of further of demand; (2) the costs of building and operating
completion. Manufacturing processes can be arranged different sized plants; (3) the rate and direction of
in a process layout, product layout, cellular layout, or technological improvement; (4) the likely behavior
fixed-position layout. Manufacturing processes can of competitors; and (5) the anticipated impact of
be planned to support make-to-stock, make-to-order, international competitors, markets, and sources of
assemble-to-order, and so forth, based on the strategic supply. It is the sequence of specific volume decisions
use and placement of inventories. See: production over time that determines an organization’s long-term
process, transformation process. manufacturing volume strategy.

many-to-many communication • marketing strategy
many-to-many communication–Communication that market boundary–The boundary where the laid-down

enables many people to exchange information with cost for two companies is equal. Laid-down cost is
many other people. product cost plus unit transportation cost.
MAP–Acronym for manufacturing automation protocol. market demand–In marketing, the total demand that
would exist within a defined customer group in a given
MAPE–Abbreviation for mean absolute percent error.
geographical area during a particular time period
MAPI method–1) A procedure for equipment given a known marketing program.
replacement analysis sponsored by the Machinery
market dominance–When a firm has very little
and Allied Products Institute. 2) A method of capital
competition.
investment analysis that has been formulated by the
Machinery and Allied Products Institute. This method market-driven–Responding to customers’ needs.
uses a fixed format and provides charts and graphs
market hedge–Scheduling or holding an inventory
to facilitate calculations. A prominent feature of this
quantity greater than the expected demand because
method is that it explicitly includes obsolescence.
of expected inaccuracy or volatility in the forecasted
mapping–Drawing the processes or relationships that demand. See: hedge.
form an organization’s business process.
marketing–The design, pricing, promotion, and
margin–A ratio of an organization’s operating profit to distribution of goods to create transactions with
revenues, measuring management’s ability to control businesses and consumers.
operating expenses.
marketing channel–A set of organizations through
marginal analysis–A decision rule that optimality occurs which a good or service passes as it goes from a
where incremental revenue equals incremental cost. raw state to the final consumer. See: channels of
distribution, distribution channel.
marginal cost–The incremental costs incurred when
M
the level of output of some operation or process is marketing cost analysis–The study and evaluation of
increased by one unit. the relative profitability or costs of different marketing
operations in terms of customers, marketing units,
marginal cost of capital–The cost of the next dollar,
commodities, territories, or marketing activities. Cost
after taxes, that a firm expects to raise for investment.
accounting is typically used.
marginal pricing–Pricing products at a markup over
marketing management–Syn: demand management.
the marginal cost of producing the next item. Marginal
costs generally include the variable cost of producing marketing mix–The concept that marketing strategy
and selling an additional item. determines product, price, promotion, and channel
targets in selected markets.
marginal product–In economics, the additional
quantity of total output following from a one-unit marketing research–The systematic gathering,
increase in variable input. See: law of diminishing recording, and analyzing of data about problems
marginal returns. relating to the marketing of goods and services. Such
research may be undertaken by impartial agencies
marginal revenue–The incremental sales dollars
or by business firms or their agents. Marketing
received when the level of output of some operation
research includes several types: (1) market analysis
is increased by one unit.
(product potential is a type) is the study of the size,
marginal utility–The additional usefulness and location, nature, and characteristics of markets; (2)
enjoyment received from consuming one more unit sales analysis (or research) is the systematic study
of a good or service. and comparison of sales (or consumption) data; (3)
consumer research (motivation research is a type)
market–A set of buyers and sellers exchanging is concerned with the discovery and analysis of
products. Prices tend to equalize through ongoing consumer attitudes, reactions, and preferences. Syn:
exchanges between buyers and sellers. Markets market research.
include institutional markets, government markets,
industrial markets, and consumer markets. See: marketing strategy–The basic plan the marketing
consumer market, government market, industrial function expects to use to achieve its business
market, institutional market. and marketing objectives in a particular market.
Includes marketing expenditures, marketing mix,
and marketing allocation.

market penetration • master pack
market penetration–The degree to which a market targeting–The process of developing

product has been accepted by the marketplace. measurements of the desirability of given market
Syn: market reach. segments and deciding in which market segments
to compete.
market plan–The output of the market planning
process. The market plan includes the current market market value-added–In financial management, the
position, opportunity and issue analysis, marketing surplus of a firm’s equity over the capital that has
objectives and strategies, action plans, programs, been invested in the firm.
projects, budgets, and pro forma profit and loss
marks and numbers–Identifying agents placed on
statement and management controls. Syn: brand
products or containers used to identify a shipment
plan, product plan.
or its parts.
market planning–The process of developing market
marquis partners–Key strategic relationships. By
plans for products and services. This process is
partnering with big players, via equity offerings if
composed of the following phases—identification;
necessary, a company creates barriers to entry into
research and analysis of market opportunities; selection
supply chain relationships for competitors.
of target markets; development of marketing strategies;
development of the marketing plans, programs, and mass customization– The use of mass production
projects; and management, execution, and control of techniques to create large volume of products in
the market plans, programs, and projects. a wide variety keeping production costs low while
enabling customized output primarily utilizing
market-positioned strategy–A location strategy that
postponement or delayed differentiation.
focuses on the customer by placing warehouses closer
to the customer. See: product-positioned strategy. mass marketing–The strategy of sending the same
message to all potential customers.
market-positioned warehouse–Warehouse
positioned to replenish customer inventory mass production–High-quantity production
assortments and to afford maximum inbound
transport consolidation economies from inventory
origin points with relatively short-haul local delivery.
characterized by specialization of equipment and
labor. See: continuous production. M
master black belt–In six sigma, a quality expert
market potential lead time–The lead time that capable of implementing strategic quality efforts
will allow an increase in price or the capture of as well as teaching other facilitators (black belts)
additional business either through existing or new the quality applications within all levels of the
customer channels. organization.
market reach–Syn: market penetration. master budget–The document that consolidates all
other budgets of an organization into an overall plan,
market research–Syn: marketing research.
including the projection of a cash flow statement,
market segment–A group of potential customers an operating statement for the budget period, and a
sharing some measurable characteristics based on balance sheet for the end of the budget period. Syn:
demographics, psychographics, lifestyle, geography, static budget.
benefits, and so forth.
master contract–1) A contract that lays out the general
market segmentation–A marketing strategy in which provisions of a long-term agreement and governs most
the total market is disaggregated into submarkets, or of the details of future individual contracts or purchase
segments, that share some measurable characteristic orders for a period of time. 2) In relation to unionized
based on demographics, psychographics, lifestyle, labor, the contract between the labor union and the
geography, benefits, and so forth. employer. Syn: master service agreement.
market share–The actual portion of current market master file–A main reference file of information, such
demand that a company or product achieves. as the item master file or work center file. See: detail
file, item master file.
market strategy–The marketing plan to support the
business strategy. master pack–A large, protective box used to
contain smaller boxes. This reduces materials
market surveys–Questionnaires designed to get
handling activities.
feedback from potential customers about demand for
a product or service.

master planning • material list
master planning–A group of business processes schedule for select items. Ideally, the person should
that includes the following activities: demand have substantial product, plant, process, and market
management (which includes forecasting and order knowledge because the consequences of this
servicing); production and resource planning; and individual’s actions often have a great impact on
master scheduling (which includes the master customer service, material, and capacity planning.
schedule and the rough-cut capacity plan). See: master production schedule.
master planning of resources–A grouping of business master scheduling–The process where the master
processes that includes the following activities: schedule is generated and reviewed and adjustments
demand management (the forecasting of sales, the are made to the master production schedule to
planning of distribution, and the servicing of customer ensure consistency with the production plan. The
orders); sales and operations planning (sales planning, master production schedule (the line on the grid) is
production planning, inventory planning, backlog the primary input to the material requirements plan.
planning, and resource planning); and master The sum of the master production schedules for
scheduling (the preparation of the master production the items within the product family must equal the
schedule and the rough-cut capacity plan). production plan for that family.
master production schedule (MPS)–A line on the master service agreement–Syn: master contract.
master schedule grid that reflects the anticipated
match capacity strategy–A capacity strategy that
build schedule for those items assigned to the master
strikes a balance between the lead and lag capacity
scheduler. The master scheduler maintains this
strategies by adding capacity at approximately the
schedule, and in turn, it becomes a set of planning
rate of actual demand increase.
numbers that drives material requirements planning.
It represents what the company plans to produce, material analyst–The person assigned responsibility
expressed in specific configurations, quantities, for and identification of the planning requirements
and dates. The MPS is not a sales item forecast that for specific items and responsibility for each order.
M
represents a statement of demand. It must take into
account the forecast, the production plan, and other material class–A grouping of materials with similar
important considerations such as backlog, availability characteristics for planning and scheduling purposes.
of material, availability of capacity, and management material constraint–Usually a misnomer. Material
policies and goals. See: master schedule. shortages are rarely the constraint; rather, temporary
master route sheet–The authoritative route process material shortages hinder effective constraint
sheet from which all other format variations and management by inhibiting the ability to fully exploit
copies are derived. and/or subordinate to the constraint.
master schedule–A format that includes time periods material control–Syn: inventory control.
(dates), the forecast, customer orders, projected material definition–A definition of the properties
available balance, available-to-promise, and the and characteristics of a substance.
master production schedule. It takes into account the
forecast; the production plan; and other important material-dominated scheduling (MDS)–A technique
considerations such as backlog, availability of that schedules materials before processors
material, availability of capacity, and management (equipment or capacity). This technique facilitates
policies and goals. See: master production schedule. the efficient use of materials. MDS can be used to
schedule each stage in a process flow scheduling
master schedule item–A part number selected to be system. MRP systems use material-dominated
planned by the master scheduler. The item is deemed scheduling logic. See: processor-dominated scheduling.
critical in its impact on lower-level components or
resources such as skilled labor, key machines, or material flexibility–The ability of the transformation
dollars. Therefore, the master scheduler, not the process to handle unexpected variations in material
computer, maintains the plan for these items. A master inputs.
schedule item may be an end item, a component, a
material index–The total of raw material weights
pseudo number, or a planning bill of material.
divided by final product weight.
master scheduler–Often the job title of the person
material list–Syn: picking list.
charged with the responsibility of managing,
establishing, reviewing, and maintaining a master

material lot • materiel
material lot–A uniquely identifiable amount of a materials efficiency–A concept that addresses the
material. Describes the actual quantity or amount of efficiency with which materials are obtained, converted,
material available, its current state, and its specific and shipped in the overall purchasing, production,
property values. and distribution process. It can be considered as a
companion concept to labor efficiency, and it becomes
material planner–1) The person normally responsible
potentially more significant as the materials portion
for managing the inventory levels, schedules, and
of cost of goods sold continues to grow.
availability of selected items, either manufactured
or purchased. Syn: inventory planner. 2) In an MRP materials handling–Movement and storage of goods
system, the person responsible for reviewing and inside the distribution center. This represents a
acting on order release, action, and exception capital cost and is balanced against the operating
messages from the system. Syn: parts planner, planner. costs of the facility.
material planning–Syn: inventory planning. materials handling system–The system of

transportation that receives, moves, and delivers
material receipt inspection–The receiving
materials during the production or distribution
department compares the incoming material to the
process.
purchase order to verify that the correct material
and quantity have been received. The material is materials handling time–The time necessary to move
then inspected for quality and general condition. A materials from one work center to the next work
material receipt report is prepared and copies are center. Includes waiting for the materials handling
distributed to the appropriate departments such as equipment and actual movement time.
purchasing and accounting.
materials management–The grouping of management
material release–The introduction of parts into a functions supporting the complete cycle of material
production process. flow, from the purchase and internal control of
production materials to the planning and control of
M
material requirements plan–The result from the
work in process to the warehousing, shipping, and
process of material requirements planning.
distribution of the finished product.
material requirements planning (MRP)–A set of
material specification–An explanation of the
techniques that uses bill of material data, inventory
characteristics of material to be produced
data, and the master production schedule to calculate
or purchased.
requirements for materials. It makes recommendations
to release replenishment orders for material. Further, materials requisition–1) An authorization that
because it is time-phased, it makes recommendations identifies the items and quantities to be withdrawn
to reschedule open orders when due dates and need from inventory. 2) An authorization that identifies
dates are not in phase. the items and quantities to be included in a purchase
order. Syn: production materials requisition.
Time-phased MRP begins with the items listed on the
MPS and determines (1) the quantity of all components materials system–Connecting material flows
and materials required to fabricate those items and contained in a production system.
(2) the date that the components and material are
material sublot–A uniquely identifiable subset of a
required. Time-phased MRP is accomplished by
material lot containing quantity and location. A sublot
exploding the bill of material, adjusting for inventory
may be a single item.
quantities on hand or on order, and offsetting the net
requirements by the appropriate lead times. material usage variance–The difference between the
planned or standard requirements for materials to
material requisition–The first step to placing a
produce a given item and the actual quantity used for
replenishment order; initiated by the material user.
a particular instance of manufacture.
material review board (MRB)–An organization
material yield–Syn: yield.
within a company, often a standing committee, that
determines the resolution or disposition of items that materiel–A term, used more frequently in
have questionable quality or other attributes. nonmanufacturing organizations, to refer to the
equipment, apparatus, and supplies used by an
material safety data sheet–See: safety data sheet (SDS).
organization.
materials–The components that are processed
by an operation.

mathematical programming • measure phase
mathematical programming–The general problem of MBO–Abbreviation for management by objectives.

optimizing a function of several variables subject to a
MBWA–Abbreviation for management by walking
number of constraints. If the function and constraints
around.
are linear in the variables and a subset of the constraints
restricts the variables to be nonnegative, a linear M-day calendar–Syn: manufacturing calendar.
programming problem exists.
M-days–Available manufacturing days excluding
matrix–A mathematical array having one, two, and holidays and weekends.
sometimes more dimensions, into which collections
of data may be stored and processed. MDS–Abbreviation for material-dominated
scheduling.
matrix bill of material–A chart made up from the
bills of material for a number of products in the same mean–The arithmetic average of a group of values.
or similar families. It is arranged in a matrix with Syn: arithmetic mean.
components in columns and parents in rows (or vice mean absolute deviation (MAD)–The average of the
versa) so that requirements for common components absolute values of the deviations of observed values
can be summarized conveniently. from some expected value. MAD can be calculated
matrix diagram–A graphical technique used to analyze based on observations and the arithmetic mean of
the relationship between two related groups of ideas. those observations. An alternative is to calculate
absolute deviations of actual sales data minus
matrix organizational structure–An organizational forecast data. This data can be averaged in the
structure in which two (or more) channels of usual arithmetic way or with exponential smoothing.
command, budget responsibility, and performance See: forecast error, tracking signal.
measurement exist simultaneously. For example, both
product and functional forms of organization could mean absolute percent error (MAPE)–A measure
be implemented simultaneously—that is, the product of statistical variation in a forecast. Computed by
M and functional managers have equal authority and dividing each absolute forecast error by the actual
employees report to both managers. demand, multiplying that by 100 to get the absolute
percentage error, and computing the average.
maverick spending–When employees or managers
purchase from nonqualified suppliers and bypass mean squared error (MSE)–A measure of statistical
established purchasing procedures. variation in a forecast. Computed by squaring the
forecast errors and then taking the average of the
maximum allowable cost–In service organizations, squared errors.
the limit of reimbursement allowed by an agency for
the cost of a supply item. mean time between failures (MTBF)–The average
time interval between failures for repairable product
maximum demonstrated capacity–The highest for a defined unit of measure (e.g., operating hours,
amount of actual output produced in the past when cycles, miles). See: reliability.
all efforts have been made to optimize the resource;
for instance, overtime, additional personnel, extra mean time for failures (MTFF)–Average time for
hours, extra shifts, reassignment of personnel, or use failure of a nonrepairable product (expected life) or
of any related equipment. Maximum demonstrated average time to first failure of a repairable product.
capacity is the most one could ever expect to produce See: reliability.
in a short period of time but represents a rate that mean time to repair (MTTR)–The average time that it
cannot be maintained over a long period of time. takes to repair a product.
See: demonstrated capacity.
measurement ton–A measurement equivalent
maximum inventory–The planned maximum to 40 cubic feet. A factor in water transportation
allowable inventory for an item based on its planned rate-setting.
lot size and target safety stock.
measure of service–Syn: level of service.
maximum order quantity–An order quantity modifier,
applied after the lot size has been calculated, that limits measure phase–A phase in the six sigma define-
the order quantity to a pre-established maximum. measure-analyze-improve-control process during
which current performance is evaluated. See: define-
MBNQA–Abbreviation for the Malcolm Baldrige measure-analyze-improve-control process.
National Quality Award.

measures constraint • minimum inventory
measures constraint–A common misnomer. Bad methods-time measurement (MTM)–A system of

measures are not the constraint. Rather, bad predetermined motion-time standards. A procedure
measures hinder effective constraint management by that analyzes and classifies the movements of any
inhibiting the ability to fully exploit and/or subordinate operation into certain human motions and assigns to
to the constraint. each motion a predetermined time standard selected
by the nature of the motion and the conditions under
median–The middle value in a set of measured values
which it will be made.
when the items are arranged in order of magnitude.
If there is no single middle value, the median is the metric–A standard of measurement used to monitor
mean of the two middle values. performance.
mediation–The introduction of a neutral third party microeconomics–The analysis of the behavior of

who attempts to provide alternatives to issues individual economic decision makers (individuals
causing conflict that have not been put forth by either and firms).
party or to change the way the parties perceive the
micro-land-bridge traffic–A multimodal
situation. It is often used in collective bargaining to
transportation solution that moves goods over water
reach an agreement.
and then land, with the final destination inland. See:
mental model–A paradigm of how the world works mini-land-bridge traffic.
formed by a person’s experiences and assumptions.
middleware–Software that interconnects
merchandising–The practices used by organizations incompatible applications software and databases
to promote and sell products to customers. Examples from various trading partners into decision-support
include packaging design and visual displays. tools such as ERP.
merchants–Buyers who purchase for the purpose milestone–In project management, an important
of reselling. event in a project, usually the realization of a
M
significant deliverable.
Mercosur–Southern Common Market.
milestone chart–Syn: Gantt chart.
merge in transit–Combining shipments from several
vendors at an intermediate point of shipment and milestone schedule–In project management, a high-
delivering the combined load to the customer. level schedule displaying important deliverables.
merger–The acquisition of the assets and liabilities military standards–Product standards and
of one company by another. specifications for military or defense contractors,
units, suppliers, and so forth. These standards
MES–Abbreviation for manufacturing execution
sometimes become de facto standards within the
systems.
civilian community.
message distribution–The software component of
milk run–A regular route for pickup of mixed loads
electronic commerce that enables the sending and
from several suppliers. For example, instead of each
receiving of messages.
of five suppliers sending a truckload per week to meet
metered issues–Issues of parts or materials from the weekly needs of the customer, one truck visits
stores in quantities that correspond to the rate at each of the suppliers on a daily basis before delivering
which materials are used. to the customer’s plant. Five truckloads per week are
still shipped, but each truckload contains the daily
methods analysis–That part of methods engineering requirement from each supplier. See: consolidation.
normally involving an examination and analysis of
an operation or a work cycle broken down into its mini-land-bridge traffic–A multimodal transportation
constituent parts to improve the operation, eliminate solution that moves goods over water and then land,
unnecessary steps, and/or establish and record in with the final destination being on the opposite coast.
detail a proposed method of performance. See: micro-land-bridge traffic.
methods study–An analysis to improve the efficiency minimum cost order quantity–Syn: economic
of work by studying the existing method to identify order quantity.
and eliminate wasted motion.
minimum inventory–The planned lowest amount or
level of inventory for an item.

minimum order quantity • model number
minimum order quantity–An order quantity modifier, sold that day. The mixed-model schedule governs the
applied after the lot size has been calculated, that making and the delivery of component parts, including
increases the order quantity to a pre-established those provided by outside suppliers. The goal is to build
minimum. every model every day, according to daily demand.
minimum weight–In transportation, the rate mixed-model scheduling–The process of developing

discount volume. one or more schedules to enable mixed-model
production. The goal is to achieve a day’s production
min-max system–A type of order point replenishment
each day. See: mixed-model production.
system where the minimum (min) is the order point,
and the maximum (max) is the “order up to” inventory mixed production strategy–Syn: hybrid production
level. The order quantity is variable and is the result of method. See: chase production method, level
the max minus available and on-order inventory. An production method.
order is recommended when the sum of the available
mix flexibility–The ability to handle a wide range of
and on-order inventory is at or below the min.
products or variants by using equipment that has
minor setup–The incremental setup activities short setup times.
required when changing from one item to another
mix forecast–Forecast of the proportion of products
within a group of items.
that will be sold within a given product family, or
MIS–Abbreviation for management information system. the proportion of options offered within a product
line. Product and option mix as well as aggregate
misguided capacity plans–Plans for capacity utilization
product families must be forecasted. Even though
that are based on erroneous data or assumptions.
the appropriate level of units is forecasted for a given
mission–The overall goal(s) for an organization set product line, an inaccurate mix forecast can create
within the parameters of the business scope. material shortages and inventory problems.
M
mission statement–The company statement mix number–Syn: lot number.
of purpose.
mix ticket–A listing of all the raw materials, ingredients,
mistake-proofing–Syn: failsafe work methods, components, and so on that are required to perform
poka-yoke. a mixing, blending, or similar operation. This listing
is often printed on a paper ticket, which also may be
mix–A breakdown of the total demand or production used as a turnaround document to report component
that identifies different products in an aggregate quantities actually used, final quantity actually
demand or production run. produced, etc. This term is often used in batch process
mix control–The control of the individual items going or chemical industries. See: assembly parts list, batch
through the plant. card, blend formula, manufacturing order.
mixed-flow scheduling–A procedure used in some modal split–The breakdown of use of transportation
process industries for building process train schedules modes. Statistics used for the calculation include
that start at an initial stage and work toward the passenger-miles, ton-miles, and revenue.
terminal process stages. This procedure is effective for mode–The most common or frequent value in a group
scheduling where several bottleneck stages may exist. of values.
Detailed scheduling is done at each bottleneck stage.
model–A representation of a process or system that
mixed loads–A load having both regulated and attempts to relate the most important variables in the
exempt items in the same vehicle. system in such a way that analysis of the model leads
mixed manufacturing–Make-to-stock and make-to- to insights into the system. Frequently, the model is
order manufacturing using a single plant and set of used to anticipate the result of a particular strategy
equipment. in the real system.
mixed-model assembly line–An assembly line with model number–An item number for a finished good.
more than one type of model passing through it. This number may encompass other parts, such as a
user’s manual.
mixed-model production–Making several different
parts or products in varying lot sizes so that a factory
produces close to the same mix of products that will be

modes of transportation • move time
modes of transportation–A basic method of moving monopolistic competition–A market in which many
items. Modes include road, rail, air, water (ocean or competitors offer partially differentiated products
inland waterway), pipeline, intermodal, and courier or or services within a given geographical area. Most
parcel services. competitors focus on market segments where they
can meet customers’ needs somewhat better than
modification flexibility–The capability of the
their competitors. See: industry structure types.
transformation process to quickly implement minor
product design changes. monopoly–Sole control of a market by a company. In
the United States, a monopoly is a violation of Article
modular architecture–A type of product architecture
2 of the Sherman Act.
where the functional pieces correspond to physical
pieces. The different physical pieces have their own Monte Carlo simulation–A subset of digital simulation
function, and there is little interaction between them. models based on random or stochastic processes.
modular bill of material–A type of planning bill that motion study–A type of methods study focused
is arranged in product modules or options. It is often on therbligs (basic hand and body movements).
used in companies where the product has many See: therblig.
optional features (e.g., assemble-to-order companies
motive–The first deliverable in a SCOR implementation
such as automobile manufacturers). See: pseudo bill
plan. Acts as the foundation for the implementation
of material.
improvement program and will guide SCOR team
modular design strategy–The strategy of planning members in the selection of SCOR framework
and designing products so that components or elements.
subassemblies can be used in current and future
motor carrier–Motor vehicles that use the road mode
products or assembled to produce multiple
of transportation.
configurations of a product. Automobiles and
personal computers are examples of modular designs. move–The physical transportation of inventory from
modularization–In product development, the use of
standardized parts for flexibility and variety. Permits
one location to another within a facility. Movements
are usually made under the direction and control of
the inventory system.
M
product development cost reductions by using the
same item(s) to build a variety of finished goods. move card–In a just-in-time context, a card or other
This is the first step in developing a planning bill of signal indicating that a specific number of units of a
material process. particular item are to be taken from a source (usually
an outbound stockpoint) and taken to a point of use
modular system–A system architecture design in
(usually an inbound stockpoint). It authorizes the
which related tasks are grouped in self-contained
movement of one part number between a single pair
packages. Each package, or module, of tasks
of work centers. The card circulates between the
performs all of the tasks related to a specific function.
outbound stockpoint of the supplying work center
Advances in functions can be implemented without
and the inbound stockpoint of the using work center.
affecting other packages or modules because of the
Syn: move signal, conveyance card. See: kanban.
loose coupling with other modules. One example is a
multitiered architecture in which application business movement inventory–A type of in-process inventory
rules are separated from the data management rules. that arises because of the time required to move
Another example is a client-server architecture in goods from one place to another.
which user interface tasks are separated from the
application software. See: open system architecture. move order–The authorization to move a particular
item from one location to another.
module–A self-contained unit of a computer program
that communicates with other parts of the program move signal–Syn: move card.
solely through inputs and outputs. move ticket–A document used in dispatching to
molds–Tools for plastic or chemical production. Term authorize or record movement of a job from one
used for the tools that shape plastic or other soft work center to another. It may also be used to report
material parts. other information, such as the actual quantity or the
material storage location.
monitoring–The process of comparing actual to
planned progress. move time–The time that a job spends in transit from
one operation to another in the plant.

moving average • multinational strategy
moving average–An arithmetic average of a certain multicriteria decision models–Models that enable
number (n) of the most recent observations. As each decision makers to evaluate various alternatives
new observation is added, the oldest observation across several decision criteria.
is dropped. The value of n (the number of periods to
multicurrency–Having the capability to handle orders
use for the average) reflects responsiveness versus
using monies from several countries for billing purposes.
stability in the same way that the choice of smoothing
constant does in exponential smoothing. There are multidomestic strategy–Syn: multicountry strategy.
two types of moving average: simple and weighted.
See: simple moving average, weighted moving average. multifactor productivity–Sometimes also referred
to as multiple-factor productivity; a measure of
moving average forecast–A forecasting technique productivity of two or more inputs such as labor,
that uses a simple moving average or a weighted capital costs, energy, and materials. See: single-factor
moving average projected forward as a forecast. productivity.
MPC–Abbreviation for manufacturing planning multilevel bill of material–A display of all the
and control. components directly or indirectly used in a parent,
together with the quantity required of each
MPS–Abbreviation for master production schedule.
component. If a component is a subassembly,
MRB–Abbreviation for material review board. blend, intermediate, etc., all its components and all
their components also will be exhibited, down to
MRO–1) Abbreviation for maintenance, repair, and
purchased parts and raw materials.
operating. 2) Abbreviation for maintenance, repair,
and overhaul. multilevel master schedule–A master scheduling
technique that allows any level in an end item’s bill
MRP–Abbreviation for material requirements
of material to be master scheduled. To accomplish
planning.
this, MPS items must receive requirements from
M
MRP II–Abbreviation for manufacturing resource independent and dependent demand sources. See:
planning. two-level master schedule.
MRP nervousness–See: nervousness. multilevel where-used–A display for a component

listing all the parents in which that component is
MSDS–Abbreviation for material safety data sheet. directly used and the next higher-level parents into
MSE–Abbreviation for mean squared error. which each of those parents is used, until ultimately
all top-level (level 0) parents are listed.
MTBF–Abbreviation for mean time between failures.
multilinear regression analysis–Model used for
MTFF–Abbreviation for mean time for failures. forecasting with more than one independent variable.
MTM–Abbreviation for methods-time measurement. multimedia–An interactive combination of two or
more of the following—text, graphics, video, audio,
MTTR–Abbreviation for mean time to repair.
and animation—all controlled by a personal computer.
muda (waste)–In lean manufacturing, costs are reduced
multimedia files–Digitized image, video, and audio
by reducing waste within a system. There are seven
files that can be retrieved and converted to a form
categories of waste: (1) overproduction—excess or too
usable by a human.
early; (2) waiting—queuing delays; (3) transportation—
unneeded movements; (4) processing—poor process multimodal solutions–Transportation plans that
design; (5) motion—activities that do not add value; (6) involve multiple means of transportation and
inventory—stock that is sitting and is accumulating coordinate the physical and information requirements.
cost without necessarily providing value; (7) defective
units—scrap or rework. multinational corporation–A company with capital
investments in more than a single country.
multiactivity chart–Shows how workers interact with
each other, or with machines, for different activities. multinational strategy–A strategy to out-compete rivals
that focuses on opportunities to achieve cross-business
multicountry strategy–A strategy in which each and cross-country coordination, thereby enabling
country market is self-contained. Customers have economies of scope and an improved competitive
unique product expectations that are addressed by local position with regard to reducing costs, cross-country
production capabilities. Syn: multidomestic strategy. subsidization, and so on. See: global strategy.

multiple-channel queuing system • net assets
multiple-channel queuing system–A waiting line NAFTA–Acronym for North American Free Trade
system that has parallel waiting lines with queues. Agreement.
multiple-item lot-sizing models–Processes or National Association of Purchasing Management

systems used to determine the total replenishment (NAPM)–A nonprofit society for purchasing managers
order quantity for a group of related items. and others, now known as the Institute for Supply
Management (ISM).
multiple-phase queuing system–Queuing system
that performs a service in two or more sequential nationalization–Public ownership and operation
steps when there are several waiting lines. Syn: of a business enterprise.
multiphase system. See: channel, queuing theory.
National Labor Relations Board (NLRB)–In the United
multiple regression models–A form of regression States, the federal agency that regulates labor law.
analysis where the model involves more than one
national stock number (NSN)–The individual
independent variable, such as developing a forecast
identification number assigned to an item to permit
of dishwasher sales based upon housing starts, gross
inventory management in the U.S. supply system.
national product, and disposable income.
natural variations–Variations in measurements that
multiple sourcing–Syn: multisourcing. See: dual
are caused by environmental elements and cannot
sourcing.
be removed. See: common cause variability.
multiprocessing–The simultaneous use by a computer
NC–Abbreviation for numerical control.
of two or more central processing units, with each
executing its own instruction set and each controlled near-critical activity–In project management,
by a single operating system. a project activity with a low slack or float value.
multiskilled–Individuals who are capable of carrying need date–The date when an item is required for its
out a variety of tasks. intended use. In an MRP system, this date is calculated
by a bill-of-material explosion of a schedule and the
multisourcing–Procurement of a good or service from
netting of available inventory against that requirement.
N
more than one independent supplier. Syn: multiple
sourcing. Ant: single sourcing. See: dual sourcing. negative float–In project management, the amount
of time that must be made up on an activity to get the
multivariate control chart–A control chart for
project back on schedule. See: float.
evaluating the stability of a process in terms of the
levels of two or more variables or characteristics. negligence–Causing injury to another by failing to
use reasonable care.
mura–A Japanese word meaning unevenness or
variability. negotiation–The process by which a buyer and a
supplier agree upon the conditions surrounding the
muri–A Japanese word meaning strain or overburden.
purchase of an item or a service.
mutually exclusive project–In capital budgeting,
nemawashi–A Japanese word meaning getting a
a project that will not be accepted if a competing
group to agree on a strategy before beginning to
project is accepted. See: contingent project,
implement it.
independent project.
nervousness–In an MRP system, a state in which
mystery shoppers–People who pose as customers
minor changes in higher-level (e.g., level 0 or 1) records
but who are really studying an organization’s service
or the master production schedule cause significant
quality to provide feedback to the organization for
timing or quantity changes in lower-level (e.g., level 5
improvement purposes.
or 6) schedules and orders. Syn: system nervousness.
N
nesting–The act of combining several small processes
to form one larger process.
net assets–Total assets minus total liabilities.

n–Sample size (the number of units in a sample).
N7–Abbreviation for seven new tools of quality.

net change MRP • network planning
net change MRP–An approach in which the network analysis–In project management, the
material requirements plan is continually retained calculation of early and late start and finish times for
in the computer. Whenever a change is needed in those activities not yet completed. See: critical path
requirements, open order inventory status, or bill method, graphical evaluation and review technique,
of material, a partial explosion and netting is made program evaluation and review technique (PERT).
for only those parts affected by the change. Ant:
network chain–A route through a chain involving
regeneration MRP.
multiple network paths, with switching of paths due
net income (loss)–The final figure in the income to resource conflicts.
statement.
network design–1) In supply chain management, the
net inventory–Syn: available inventory. design of a supply chain’s sourcing, manufacturing,
and distribution facilities and information flows
net operating cash flow–In finance management, the
to meet the organization’s strategic goals. These
difference between cash inflow and cash outflow for
strategic goals can include being efficient,
a given period. It is found by taking the change in net
responsive, customer-focused, or some other mix of
operating profit after taxes and adding the change
priorities. The design includes determining the best
in depreciation then subtracting the increase in net
locations, numbers, sizes, capacities, capabilities,
working capital requirements.
and ownership models of facilities to support these
net operating income–The income before interest goals. 2) In logistics, the design and periodic review
and taxes are subtracted. Syn: earnings before of inbound and outbound transportation networks—
interest and taxes (EBIT). all types of warehouses by number, location, size,
layout, and optimum mix of inventory levels per
net operating profit after taxes (NOPAT)–Operating location—to meet the organization’s strategic
profit less applicable taxes. goals. Considerations are made to balance tradeoffs
net present value (NPV)– The present (discounted) between warehouse costs, transportation times and
value of future earnings (for which operating expenses, and customer service goals.
expenses have been deducted from net operating network diagram–A graphical tool that shows the
N revenues) for a given number of time periods.
net profit–An absolute measure of financial

dependencies between activities in a project; i.e.,
which activities precede other activities and which
can be done in parallel.
performance that is calculated as the difference
between revenues and expenses. In throughput networking–Developing relationships with people
accounting, net profit is calculated as throughput who may be able to enhance the performance of
minus operating expense. duties or responsibilities.
net requirements–In MRP, the net requirements net working capital–The current assets of a firm
for a part or an assembly are derived as a result of minus its current liabilities. Syn: working capital.
applying gross requirements and allocations against
inventory on hand, scheduled receipts, and safety network logic–Activity dependencies that make up a
stock. After being lot-sized and offset for lead time, project schedule network diagram.
net requirements become planned orders.
network loop–A network path that crosses the
net sales–Sales dollars the company receives; gross same activity or node twice. A network loop cannot
sales minus returns and allowances. be analyzed by the critical path method, critical
chain, or other traditional network schedule analysis
netting–The process of calculating net requirements. techniques.
net weight–The weight of an article exclusive of the network path–Any continuous series of project
weights of all packing materials and containers. activities connected by precedence relationships in a
network–1) The interconnection of computers, project schedule network diagram.
terminals, and communications channels to facilitate network planning–A generic term for techniques that
file and peripheral device sharing as well as effective are used to plan complex projects. Two of the best
data communication. 2) A graph consisting of nodes known network planning techniques are the critical
connected by arcs. path method (CPM) and the program evaluation and
review technique (PERT).

neural network • nonscheduled hours
neural network–A software system loosely based nonconforming material–Any raw material,
on how the brain works. It tries to simulate the part, component, or product with one or more
multiple layers of elements called neurons. Each characteristics that depart from the specifications,
neuron is tied to several neighbors with a value that drawing, or other approved product description.
signifies the strength of the connections. Learning
nonconformity–Failure to fulfill a specified
is accomplished by changing the values to cause
requirement. See: blemish, defect, imperfection.
the network to report appropriate results. Neural
networks have been used for market forecasts and noncurrent assets–An accounting/financial
other applications. term (balance sheet classification of accounts)
representing the long-term resources owned by a
new product development team–Syn: participative
company, including property, plant, and equipment.
design/engineering.
nondurable goods–Goods whose serviceability is
new product introduction–The development and
generally limited to a period of less than three years
release of an item that is new to a company’s set of
(such as perishable goods and semidurable goods).
offerings.
nonevident failure–Failure occurring in either a product
newsvendor problem–A problem in inventory
or a production process that is not immediately evident.
management dealing with determining the single
This may be indicative of a faulty design.
period (e.g., day or week) order quantity that will
minimize the cost of sometimes having too much nonexempt employee–A person filling a nonexempt
inventory and sometimes having too little. This is position. See: nonexempt positions.
sometimes referred to as the newsvendor model.
nonexempt positions–Employees not meeting the
NLRB–Abbreviation for National Labor Relations Board. test of executive, supervisory, or administrative
personnel who are paid overtime, as defined by the
node–In project management, a point connected
Fair Labor Standards Act. See: nonexempt employee.
by arrows in a network.
nongovernmental organization (NGO)–A legally
noise–The unpredictable or random difference
N
constituted organization that operates independently
between the observed data and the “true process.”
from any government. The term is usually applied
nominal capacity–Syn: rated capacity. only to organizations that pursue some wider social
aim with political aspects, but that are not overtly
nominal group technique–A technique, similar to
political organizations such as political parties. These
brainstorming, used by teams to generate ideas on a
types of organizations may be called civil society
particular subject. Team members are asked to silently
organizations or other names in some jurisdictions.
come up with as many ideas as possible, writing them
down. Each member is then asked to share one idea, nonlinear programming–Programming similar to
which is recorded. After all the ideas are recorded, they linear programming but incorporating a nonlinear
are discussed and prioritized by the group. objective function and linear constraints, or a linear
objective function and nonlinear constraints, or
nominal interest rate–The noninflation-adjusted
both a nonlinear objective function and nonlinear
interest rate.
constraints.
nominal trading partner–Any organization external to
nonproduction material–Items (indirect materials
the firm that provides an essential material or service,
and supplies) in the manufacturing process or in the
but whose financial success is largely independent of
maintenance or operation of a facility that do not
the financial success of the supply chain community.
generally become part of the final product.
nomogram–A computational aid consisting of two
nonrecurring material–Tooling, gauges, and facilities
or more scales drawn and arranged so that the
necessary in the manufacturing of the final product
results of calculations may be found by the linear
that are not consumed during manufacturing or
connection of points on them. Historically, it was used
shipped with the final product.
for calculating economic lot sizes or sample sizes
for work measurement observations. Also called an nonscheduled hours–Hours when a machine is not
alignment chart. generally available to be scheduled for operation; for
example, nights, weekends, holidays, lunch breaks,
major repair, and rebuilding.

nonsignificant part number • Occupational Safety and Health Act (OSHA)
nonsignificant part number–A part number that NVOCC–Abbreviation for non-vessel-operating

is assigned to each part but does not convey any common carrier.
information about the part. Nonsignificant part
O
numbers are identifiers, not descriptors. Ant:
significant part number.
non-value-added–An activity that does not add

value to a product; for example, moving the product
obeya–A Japanese word meaning big room; a
from one work center to another inside a facility. One
command center.
aspect of continuous improvement is the elimination
or reduction of non-value-added activities. objective function–The goal or function that is to be
optimized in a model. Most often it is a cost function
non-vessel-operating common carrier (NVOCC)–A
that should be minimized subject to some restrictions
consolidator of ocean freight shipments that operates
or a profit function that should be maximized subject
similarly to a freight forwarder and issues its own bills
to some restrictions.
of lading, thus acting as a carrier even though it does
not own the means of transportation being used. object-oriented programming (OOP)–Within
computer programming, the use of coding techniques
NOPAT–Acronym for net operating profit after taxes.
and tools that reflect the concept of viewing the
normal and proper usage–Operation of the equipment business environment as a set of elements (or
with a program of regular maintenance in accordance objects) with associated properties (e.g., data, data
with generally accepted practices and within the rated manipulation/actions, inheritance). The objects
capacity and service classification for which it was encapsulate, through data and functions, the
specified and designed. properties of the business that are of interest.
normal distribution–A particular statistical distribution obligated material–Syn: reserved material.

where most of the observations fall fairly close to one
observational research–A form of research
mean, and a deviation from the mean is as likely to be
(frequently used in marketing research) where data is
plus as it is to be minus. When graphed, the normal
gathered by direct observation of consumers in the
distribution takes the form of a bell-shaped curve.
marketplace. See: marketing research.
O normalize–To adjust observed data to a standard base.
normal time–In time study, adjusting the actual time

obsolescence–1) The condition of being out of date.
A loss of value occasioned by new developments
that place the older property at a competitive
observed by a factor called pace rating. See: pace rating.
disadvantage. A factor in depreciation. 2) A decrease
North American Free Trade Agreement (NAFTA)– in the value of an asset brought about by the
An agreement among the United States, Canada, and development of new and more economical methods,
Mexico to promote economic prosperity by reducing processes, or machinery. 3) The loss of usefulness
trade barriers. or worth of a product or facility as a result of the
no-touch exchange of dies (NTED)–The exchange of appearance of better or more economical products,
dies without human intervention. methods, or facilities.
np chart–A control chart for evaluating the stability obsolete inventory–Inventory items that have
of a process in terms of the total number of units in met the obsolescence criteria established by the
a sample in which an event of a given classification organization. For example, inventory that has been
occurs. Syn: number of affected units chart. superseded by a new model or otherwise made
obsolescent. Obsolete inventory will never be used
NSN–Abbreviation for national stock number. or sold at full value. Disposing of the inventory may
reduce a company’s profit.
NTED–Abbreviation for no-touch exchange of dies.
Occupational Safety and Health Act (OSHA)–A U.S.
number defective chart–Syn: c chart.
law that applies to all employers in the United States
number of affected units chart–Syn: np chart. who are engaged in interstate commerce. Its purpose
is to ensure safe and healthful working conditions by
numerical control (NC)–A means of operating a authorizing enforcement of the standards provided
machine tool automatically by the use of coded under the act.
numerical instructions.

occurrence factor • on order
occurrence factor–Within the repair/remanufacturing offshore factory–A plant that imports or acquires
environment, the occurrence factor is associated with locally all components and then exports the finished
how often a repair is required to bring the average part product.
to a serviceable condition (some repair operations
OJT–Abbreviation for on-the-job training.
do not occur 100 percent of the time). The factor
is expressed at the operation level in the routing. on-demand–Work is completed only when demand
See: repair factor, replacement factor. occurs. More specifically, a process in which a
product or service is made only after an order is
OC curve–Abbreviation for operating characteristic
placed for that product or service.
curve.
one-card kanban system–A kanban system where
ocean bill of lading–A contract between an ocean
only a move card is employed. Typically, the work
carrier and a shipper arranging for carriage of freight.
centers are adjacent; therefore, no production card
It provides evidence of the carrier’s receipt of the
is required. In many cases, squares located between
cargo and lists the origin and destination ports,
work centers are used as the kanban system. An
rates, quantities, weight, and any special handling
empty square signals the supplying work center to
requirements. The shipper is responsible for all
produce a standard container of the item. Syn: single-
losses other than for negligence on the part of the
card kanban system. See: two-card kanban system.
ocean carrier.
one less at a time–A process of gradually reducing the
OCR–Abbreviation for optical character recognition.
lot size of the number of items in the manufacturing
OD–Abbreviation for organizational development. pipeline to expose, prioritize, and eliminate waste.
ODD–Abbreviation for earliest operation due date. one-piece flow–A concept in which items are processed
directly from one step to the next, one unit at a time. This
OECD–Abbreviation for Organization for Economic
helps to shorten lead times and lines of communication,
Cooperation and Development
thus more quickly identifying problems.
OEE–Abbreviation for overall equipment effectiveness.
one-to-one marketing–A marketing strategy for
OEM–Abbreviation for original equipment sending a particular message to a single customer,
manufacturer. often assisted by a marketing database.
offal material–The by-product or waste of production

processes (e.g., chips, shavings, turnings).
one-touch exchange of die (OTED)–The ideal of
reducing or eliminating the setup effort required O
between operations on the same equipment. An
offer–A contractual communication that proposes exchange performed in a single motion rather
definite terms. A contract is created if the other party than in multiple steps.
accepts those terms.
on-hand balance–The quantity shown in the inventory
off-grade–A product whose physical or chemical records as being physically in stock.
properties fall outside the acceptable ranges.
online processing–A method of computer processing
offline–Computer work completed when in which data is processed immediately on entry into
disconnected either from the internet or from an the computer.
intranet. This term also describes anytime a person,
operation, or work center not accessible or operating. online receiving–An unloading process characterized
by computers or terminals wherever shipments are
offload–To reschedule or use alternate routings received and employees enter delivery data into the
to reduce the workload on a machine, work center, system as the shipments are unloaded.
or facility.
online service–The processing of transaction data as
offset quantity–Syn: overlap quantity. soon as the transaction occurs (real-time processing
offsetting–Syn: lead-time offset. as opposed to batch processing). See: real time.
offshore–Outsourcing a business function to on order–The number or value of goods or services

another company in a different country than the that have been ordered but not received at a location.
original company’s country.

on-order stock • operating efficiency
on-order stock–The total of all outstanding open period–Accounting time period for which the
replenishment orders. The on-order balance increases books will still accept adjusting entries and postings.
when a new order is released and decreases when Ant: closed period.
material is received against an order or when an order
open system architecture–The capability of software
is canceled.
and diverse hardware environments to communicate
on-the-job training (OJT)–Learning the skills and with each other through the use of standard messaging
necessary related knowledge useful for the job at the and protocols, respectively. See: modular system.
place of work or possibly while at work.
open-to-buy–A control technique used in aggregate
on-time delivery–A metric measuring the percent of inventory management in which authorizations to
receipts that were received on time by customers. purchase are made without being committed to
See: on-time in full. specific suppliers. These authorizations are often
reviewed by management using such measures as
on-time in full (OTIF)–A delivery scoring system in
commodity in dollars and by time period.
which a target delivery goal—usually expressed as
a percentage—is set, and the deliverer tries to meet open-to-receive–Authorization to receive goods,
that delivery goal fully and by the delivery date. such as a blanket release, firm purchase order item, or
supplier schedule. Open-to-receive represents near-
on-time schedule performance–A measure
term impact on inventory and is often monitored as a
(percentage) of meeting the customer’s originally
control technique in aggregate inventory management.
negotiated delivery request date. Performance can be
The total of open-to-receive, other longer-term purchase
expressed as a percentage based on the number of
commitments, and open-to-buy represents the material
orders, line items, or dollar value shipped on time.
and services cash exposure of the company.
ontology–A formal representation of phenomena of a
operating assets–An accounting/financial term
universe of discourse with an underlying vocabulary
representing the resources owned by a company for
including definitions and axioms that make the
productive purposes (to generate a profit), including
intended meaning explicit and describe phenomena
cash, accounts receivable, inventories, equipment,
and their interrelationships. This representational
and facilities.
phenomena framework provides a set of terms for
O
consistent description (or “annotation” or “tagging”) operating characteristic curve (OC curve)–A graph
of data and information across disciplinary and used to determine the probability of accepting lots as
research community boundaries in order to promote a function of the quality level of the lots or processes
greater consistency in description of data. when using various sampling plans. There are three
types: (1) Type A curves, which give the probability of
OOP–Abbreviation for object-oriented programming.
acceptance for an individual lot coming from finite
open account payment–A method of payment for production (will not continue in the future); (2) Type B
goods shipped in advance of payment, in which the curves, which give the probability of acceptance for
buyer or importer sends the seller or exporter an lots coming from a continuous process; and (3) Type
invoice requesting payment by a certain date. C curves, which, for a continuous sampling plan, give
the long-run percentage of product accepted during
open-end purchase order–A purchase agreement the sampling phase.
similar to a blanket purchase order that provides
the added convenience of being able to negotiate operating cycle–The average period of time required
additional items and expiration dates. to perform the three primary activities of a company’s
operating cycle—purchasing, producing, and selling
open master production schedule–The part of the a product. The operating cycle is calculated by adding
master production schedule that still has available the inventory conversion period to the receivables
capacity for assigning new orders. conversion period.
open office–An office with movable partitions operating decision–Planning operations to meet
and furniture that deemphasizes the demand in the short or intermediate term.
compartmentalization of people.
operating efficiency–A ratio (represented as a
open order–1) A released manufacturing order or percentage) of the actual output of a piece of
purchase order. Syn: released order. See: scheduled equipment, department, or plant as compared to the
receipt. 2) An unfilled customer order. planned or standard output.

operating environment • operation priority
operating environment–The global, domestic, operational plan(s)–The set of short-range plans and
environmental, and stakeholder influences that schedules detailing specific actions. Operational
affect the key competitive factors, customer needs, plans are more detailed than strategic and tactical
culture, and philosophy of each individual company. plans and cover a shorter time horizon. See:
This environment becomes the framework in which operational planning, strategic plan, tactical plan.
business strategy is developed and implemented. Syn:
operational planning–The process of setting goals
business environment.
and targets and establishing measures constrained
operating expense–All the money an organization by and targeted for achieving the strategic and
spends in generating goal units. tactical plans. See: operational plan, strategic
planning, tactical planning.
operating exposure–The risk introduced by flexible
exchange rates when operating in the global operation chart–Syn: routing.
environment, including their effect on production,
operation costing–A method of costing used in batch
storage, and buying and selling prices.
manufacturing environments when the products
operating leverage–Comparing an organization’s produced have both common and distinguishing
annual sales to its annual costs. characteristics; for example, suits. The products are
identified and costed by batches or by production
operating profit margin ratio–Earnings before
runs, based on the variations.
interest and taxes divided by sales.
operation description–The details or description
operating system–A set of software programs
of an activity or operation to be performed. The
that controls the execution of the hardware and
operation description is normally contained in
application programs. The operating system manages
the routing document and could include setup
the computer and network resources through storage
instructions, operating instructions (feeds, speeds,
management, disk input/output, communications
heats, pressure, etc.), and required product
linkages, program scheduling, and monitoring system
specifications or tolerances.
usage for performance and cost allocations.
operation due date–1) The date when an operation
operation–1) A job or task, consisting of one or
should be completed so that its order due date can
more work elements, usually done essentially in one
O
be met. It can be calculated based on scheduled
location. 2) The performance of any planned work
quantities and lead times. 2) A job sequencing
or method associated with an individual, machine,
algorithm (dispatching rule) giving earlier operation
process, department, or inspection. 3) One or
due dates higher priority.
more elements that involve one of the following:
the intentional changing of an object in any of its operation duration–The total time that elapses
physical or chemical characteristics; the assembly between the start of the setup of an operation and
or disassembly of parts or objects; the preparation the completion of the operation. Syn: operation time.
of an object for another operation, transportation,
operation list–Syn: routing.
inspection, or storage; planning, calculating, or giving
or receiving information. operation number–A sequential number, usually two,
three, or four digits long (such as 010, 020, 030), that
operational availability–The portion of time a system
indicates the sequence in which operations are to be
is available to sustain operations in full.
performed within an item’s routing.
operational performance measurements–1) In
operation overlapping–Syn: overlapped schedule.
traditional management, performance measurements
related to machine, worker, or department efficiency operation priority–1) The relative importance an
or utilization. These performance measurements operation is given based on its scheduled due date
are usually poorly correlated with organizational and/or start date, usually as determined by the back-
performance. 2) In theory of constraints, performance scheduling process. 2) The relative importance a job
measurements that link causally to organizational is given in a queue of jobs by a priority dispatching
performance measurements. Throughput, inventory, heuristic such as shortest processing time first or
and operating expense are examples. See: global least slack remaining first.
performance measurements, local performance
measurements, strategic performance measurements.

operation/process yield • optical character
operation/process yield–The ratio of usable output operations scheduling–The actual assignment of

from a process, process stage, or operation to the starting or completion dates to operations or groups
input quantity, usually expressed as a percentage. of operations to show when these operations must
be done if the manufacturing order is to be completed
operation reporting–The recording and reporting
on time. These dates are used in the dispatching
of every manufacturing (shop order) operation
function. Syn: detailed scheduling, order scheduling,
occurrence on an operation-to-operation basis.
shop scheduling.
operations–The group that produces the goods and/
operations sequence–The sequential steps for an
or services that a company sells.
item to follow in its flow through the plant. This
operation setback chart–A graphical display of the bill information is normally maintained in the routing file.
of materials and lead-time information provided by the For instance, Operation 1: cut bar stock; Operation
routing for each part. The horizontal axis provides the 2: grind bar stock; Operation 3: shape; Operation 4:
lead time from raw materials purchase to component polish; Operation 5: inspect and send to stock.
manufacture to assembly of the finished product.
operations sequence analysis–Method of planning
operations finite loading–A finite loading technique a facility layout by using graphics to determine the
that aims to minimize possible delays to individual placement of departments.
operations and, thus, the potential delay of each
operations sequencing–A technique for short-term
scheduled order. Eligible operations from an order or
planning of actual jobs to be run in each work center
a group of orders are loaded period by period onto
based upon capacity (i.e., existing workforce and
a work center or a group of work centers, according
machine availability) and priorities. The result is a set
to operation-level priority rules. Syn: operations
of projected completion times for the operations and
sequencing. See: constraint-oriented finite loading,
simulated queue levels for facilities.
drum-buffer-rope, order-oriented finite loading.
operations strategy–The total pattern of decisions
operation sheet–Syn: routing.
that shape the long-term capabilities of an operation
operations management–1) The planning, scheduling, and their contribution to overall strategy. Operations
and control of the activities that transform inputs into strategy should be consistent with overall strategy.
finished goods and services. 2) A field of study that See: strategic plan.
O focuses on the effective planning, scheduling, use,

and control of a manufacturing or service organization
through the study of concepts from design
operation start date–The date when an operation
should be started so that its order due date can be
met. Can be calculated based on scheduled quantities
engineering, industrial engineering, management
and lead times or on the work remaining and the time
information systems, quality management, production
remaining to complete the job.
management, inventory management, accounting,
and other functions as they affect the operation. operation time–The total of setup and run time for a
specific task. Syn: operation duration.
operations plan–Syn: production plan.
operator flexibility–Training machine workers to
operations planning–The planning of activities that
perform tasks outside their immediate jobs and in
transform inputs into finished goods and services.
problem-solving techniques to improve process
operation splitting–Syn: lot splitting. flexibility. This is a necessary process in developing a
fully cross-trained workforce.
operations process chart–Syn: process chart.
opportunity cost–1) The return on capital that could
operations research–1) The development and have resulted had the capital been used for some
application of quantitative techniques to the solution purpose other than its present use. 2) The rate of
of problems. More specifically, theory and methodology return investors must earn to continue to supply
in mathematics, statistics, and computing are adapted capital to a firm.
and applied to the identification, formulation, solution,
validation, implementation, and control of decision- optical character–A printed character frequently
making problems. 2) An academic field of study used in utilities billing and credit applications that can
concerned with the development and application of be read by a machine without the aid of magnetic ink.
quantitative analysis to the solution of problems faced
by management in public and private organizations.
Syn: management science.

optical character recognition (OCR) • order delivery
optical character recognition (OCR)–A mechanized are available. The historical average of demand for
method of collecting data involving the reading of an item is quantified in a planning bill of material, and
hand-printed material or special character fonts. If option overplanning is accomplished by increasing
handwritten, the information must adhere to predefined this percentage to allow for demands greater than
rules of size, format, and locations on the form. forecast. See: demand time fence, hedge, planning bill
of material.
optical scanning–A technique for machine
recognition of characters by their images. order–A general term that may refer to such diverse
items as a purchase order, shop order, customer
optimal order period–Within a fixed order period
order, planned order, or schedule.
inventory system, the time between a status check
on the material that balances ordering costs with order backlog–A past due order or open order yet to
carrying costs. be fulfilled. Syn: backlog.
optimization–Achieving the best possible solution to order batching–The process of gathering a group
a problem in terms of a specified objective function. of orders or data before sending them out to the
next stage.
optimization models–A class of mathematical
models used when the modeler wishes to find the order complete manufacture to customer receipt of
ideal (maximum or minimum) value of some objective order–The average time from when an order is ready
function subject to a set of constraints. for delivery to a customer to when the customer
actually receives the delivery.
option–A choice that must be made by the customer
or company when customizing the end product. In order consolidation profile–The process of filling the
many companies, the term option means a mandatory entire order of one customer by bringing all parts of
choice from a limited selection. See: feature. the order together in one place. These items may or
may not come from different places or departments.
optional replenishment model–A form of independent
demand item management model in which a review order control–Control of manufacturing activities
of inventory on hand plus inventory on order is made by individual manufacturing, job, or shop orders,
at fixed intervals. If the actual quantity is lower than released by planning personnel and authorizing
some predetermined threshold, a reorder is placed production personnel to complete a given batch or lot
for a quantity M minus x, where M is the maximum
allowable inventory and x is the current inventory
quantity. The reorder point R may be deterministic
size of a particular manufactured item. Information
needed to complete the order (components required,
work centers and operations required, tooling
O
or stochastic, and in either instance is large enough required, etc.) may be printed on paper or tickets,
to cover the maximum expected demand during the often called shop orders or work orders, which are
review interval plus the replenishment lead time. The distributed to production personnel. This use of order
optional replenishment model is sometimes called a control sometimes implies an environment where
hybrid system because it combines certain aspects of all the components for a given order are picked and
the fixed reorder cycle inventory model and the fixed issued from a stocking location, all at one time, and
reorder quantity inventory model. See: fixed reorder then moved as a kit to manufacturing before any
cycle inventory model, fixed reorder quantity inventory activity begins. It is most frequently seen in job shop
model, hybrid inventory system, independent demand manufacturing. See: shop floor control.
item management models.
order cost–A direct labor cost incurred when a
option overplanning–Typically, scheduling extra purchaser places an order.
quantities of a master schedule option greater than
order cycle–The progression used by a company
the expected sales for that option to protect against
starting with receipt of a customer’s order and ending
unanticipated demand. This schedule quantity may
with delivery to that customer.
be planned only in the period where new customer
orders are currently being accepted, typically just order dating–Syn: order promising.
after the demand time fence. This technique is
usually used on the second level of a two-level master order delivery–The duration of time between when
scheduling approach to create a situation where more the transportation carrier picks up a shipment and
of the individual options than of the overall family when it is received by the customer.

order entry • order point/order quantity system
order entry–The process of accepting and translating order management–The planning, directing,
what a customer wants into terms used by the monitoring, and controlling of the processes related
manufacturer or distributor. The commitment should to customer orders, manufacturing orders, and
be based on the available-to-promise (ATP) line in the purchase orders. Regarding customer orders, order
master schedule. This can be as simple as creating management includes order promising, order entry,
shipping documents for finished goods in a make-to- order pick, pack and ship, billing, and reconciliation
stock environment, or it might be a more complicated of the customer account. Regarding manufacturing
series of activities, including design efforts for make- orders, order management includes order release,
to-order products. See: master schedule, order service. routing, manufacture, monitoring, and receipt into
stores or finished goods inventories. Regarding
order entry complete to start manufacture–The
purchasing orders, order management includes order
average time from when an order is placed by a
placement, monitoring, receiving, acceptance, and
customer to when the manufacturing of that order
payment of supplier.
is completed.
order multiples–An order quantity modifier applied
order fill rate–1) A measure of customer orders fulfilled
after the lot size has been calculated that increases
from stock, usually expressed as a percentage. In
the order quantity to a predetermined multiple.
a make-to-stock company, this percentage usually
represents the number of items or dollars (on one or order-oriented finite loading–A set of finite loading
more customer orders) that were shipped on schedule techniques to schedule orders according to order-
for a specific time period, compared to the total that level priority rules. The techniques aim to either
were supposed to be shipped in that time period. 2) In (1) maximize capacity utilization or (2) deliver a
a make-to-order company, usually some comparison high proportion of on-time orders with low work
of the number of jobs or dollars shipped in a given time in process. See: constraint-oriented finite loading,
period (e.g., a week) compared to the number of jobs or drum-buffer-rope.
dollars that were supposed to be shipped in that time
order penetration point–The key variable in a logistics
period. Syn: customer service ratio, fill rate.
configuration; the point (in time) at which a product
order-fill ratio–Syn: customer service ratio. becomes earmarked for a particular customer.
Downstream from this point, the system is driven by
order fulfillment cycle time–See: order fulfillment
customer orders; upstream processes are driven by
O
lead time.
forecasts and plans. Syn: principle of postponement.
order fulfillment lead time–The average amount See: booked orders.
of time between the customer’s order and the
order picking–Selecting or “picking” the required
customer’s receipt of delivery; this includes every
quantity of specific products for movement to a
manufacturing or processing step in between.
packaging area (usually in response to one or more
ordering cost–The costs that increase as the number shipping orders) and documenting that the material
of orders placed increases. Used in calculating order was moved from one location to shipping. Syn: order
quantities. Includes costs related to the clerical work selection. See: batch picking, discrete order picking,
of preparing, releasing, monitoring, and receiving zone picking.
orders; the physical handling of goods; inspections;
order placement–The commitment of a customer to
and setup costs, as applicable. See: acquisition cost,
buy a product and the subsequent administrative and
inventory costs.
data processing steps followed by the supplier.
order interval–The time period between the
order point– A set inventory level where, if the total
placement of orders.
stock on hand plus on order falls to or below that
order level system–Syn: fixed reorder cycle point, action is taken to replenish the stock. The order
inventory model. point is normally calculated as forecasted usage
during the replenishment lead time plus safety stock.
order losers–Areas or aspects of an organization in Syn: reorder point, statistical order point, trigger level.
which poor performance can cause loss of business. See: fixed reorder quantity inventory model.
For example, failure to meet customer expectations
with delivery of the product is an order loser. See: order point/order quantity system–Syn: fixed reorder
order qualifiers, order winners. quantity inventory model.

order point system • organizational change management
order point system–An inventory replenishment order reporting–Recording and reporting the start
system based on the stock on hand plus on order. and completion of the manufacturing order (shop
Syn: statistical order point system. See: order point, order) in its entirety.
reorder point, fixed reorder quantity inventory model,
order scheduling–Syn: operations scheduling.
hybrid inventory system.
order selection–Syn: order picking.
order policy–A set of procedures for determining
the lot size and other parameters related to an order. order service–The function that encompasses
See: lot sizing. receiving, entering, and promising orders from
customers, distribution centers, and interplant
order policy code–Syn: lot-size code.
operations. Order service is also typically responsible for
order preparation–All activities relating to the responding to customer inquiries and interacting with
administration, picking, and packaging of individual the master scheduler on availability of products. In some
customer or work orders. companies, distribution and interplant requirements are
handled separately. See: order entry, order promising.
order preparation lead time–The time needed to
analyze requirements and open order status and order shipment–Activity that extends from the time
to create the paperwork necessary to release a the order is placed upon the vehicle for movement
purchase order or a production order. until the order is received, verified, and unloaded at
the buyer’s destination.
order priority–The scheduled due date to complete all
the operations required for a specific order. order to cash cycle–The activities and processes
that take place from the time an order is placed by
order processing–The activity required to
a customer until payment is received and credited.
administratively process a customer’s order and make
The goal is to translate sales into financial benefit as
it ready for shipment or production.
rapidly as possible. See: cash conversion cycle.
order processing and communication–All activities
order-to-delivery cycle–The period of time that starts
needed to fill customer orders.
when the customer places an order and ends when
order promising–The process of making a delivery the customer receives the order.
commitment (i.e., answering the question, “When
O
order transmittal–The time interval between a
can you ship?”). For make-to-order products, this
customer placing an order and when the seller
usually involves a check of uncommitted material and
receives it.
availability of capacity, often as represented by the
master schedule available-to-promise. Syn: customer order-up-to level–Syn: target inventory level.
order promising, order dating. See: available-to-
order winners–Those competitive characteristics
promise, order service.
that cause a firm’s customers to choose that firm’s
order qualifiers–Those competitive characteristics goods and services over those of its competitors.
that a firm must exhibit to be a viable competitor in Order winners can be considered to be competitive
the marketplace. For example, a firm may seek to advantages for the firm. Order winners usually focus
compete on characteristics other than price, but in on one (rarely more than two) of the following strategic
order to “qualify” to compete, its costs and the related initiatives: price/cost, quality, delivery speed, delivery
price must be within a certain range to be considered reliability, product design, flexibility, after-market
by its customers. Syn: qualifiers. See: order losers, service, and image. See: order losers, order qualifiers.
order winners.
organizational breakdown structure–In project
order quantity–Syn: lot size. management, a representation of a project’s
organization relating work packages to
order quantity modifiers–Adjustments made to
organizational units.
a calculated order quantity. Order quantities are
calculated based upon a given lot-sizing rule, but it may organizational change management–The fostering
be necessary to adjust the calculated lot size because and support of people who champion new technologies,
of special considerations (scrap, testing, etc.). new operating practices, and new products and services
that will transform the organization, maintaining its
order release–The activity of releasing materials to a
viability and improving its competitive position in step
production process to support a manufacturing order.
with changes in the business environment in which it
See: planned order release.
functions.

organizational design • outpartnering
organizational design–The creation of an organizational OTED–Abbreviation for one-touch exchange of die.

structure to support the strategic business plans and
OTIF–Abbreviation for on-time in-full.
goals of an enterprise (e.g., for-profit versus not-for-profit
companies). Given the mission and business strategy, outbound consolidation–The gathering of a number
the organizational structure design provides the of small shipments to a variety of customers into a
framework within which the business operational larger load, which is then shipped to a point near the
and management activities will be performed. customers where it is broken down for delivery.
organizational development (OD)–The process of outbound logistics–Every process that is involved in
building and strengthening core competencies and the shipping and holding of products after they are
organizational capabilities that enable the execution completed until they are received by the customer.
of the business strategy and provide a sustainable
competitive advantage over time. Includes staffing outbound stockpoint–The designated locations near
the organization, building core competencies the point of use on a plant floor to which material
and organizational capabilities, and continuous produced is taken until it is pulled to the next
improvement initiatives in response to the changing operation.
business environment. outlier–A data point that differs significantly from
organizational environment–Consists of an external other data for a similar phenomenon. For example,
environment (e.g., laws and regulations, technology, if the average sales for a product were 10 units per
economy, competition) and an internal environment month, and one month the product had sales of 500
(e.g., the domain of products and services to units, this sales point might be considered an outlier.
be provided, the processes to be executed, the See: abnormal demand.
organizational structure). See: external environment, out-of-control process–A process in which the
internal environment. statistical measure being evaluated is not in a state
organization chart–A graphical depiction of of statistical control (i.e., the variations among the
relationships between people who work together. observed sampling results can be attributed to a
constant system of chance causes). Ant: in-control
Organization for Economic Cooperation and process.
Development (OECD) Guidelines for Multinational
O
Enterprises–A set of recommendations on responsible out-of-pocket costs–Costs that involve direct
business conduct addressed by governments to payments such as labor, freight, or insurance, as
multinational enterprises (MNEs) operating in or from opposed to depreciation, which does not.
adhering countries that encourage and maximize out of spec–A term used to indicate that a unit does
the positive impact MNEs can make to sustainable not meet a given specification.
development and enduring social progress. See:
multinational corporation. out of stock–A situation in which there is no inventory
at a location available for sale to the customer. See:
original equipment manufacturer (OEM)–A stockout.
manufacturer that buys and incorporates another
supplier’s products into its own products. Also, outpartnering–The process of involving the supplier
products supplied to the original equipment in a close partnership with the firm and its operations
manufacturer or sold as part of an assembly. For management system. Outpartnering is characterized
example, an engine may be sold to an OEM for use as by close working relationships between buyers and
that company’s power source for its generator units. suppliers, high levels of trust, mutual respect, and
emphasis on joint problem solving and cooperation.
orthogonal arrays–Tools that help maintain With outpartnering, the supplier is viewed not as
independence between different iterations of a an alternative source of goods and services (as
product design experiment; introduced to quality observed under outsourcing) but rather as a source
analysis by Genichi Taguchi. of knowledge, expertise, and complementary core
OS&D–Abbreviation for over, short, and damaged. competencies. Outpartnering is typically found during
the early stages of the product life cycle when dealing
OSHA–Acronym for Occupational Safety and with products that are viewed as critical to the
Health Act. strategic survival of the firm. See: customer-supplier
partnership, supplier partner, customer partner.
OSI–Abbreviation for open systems interconnection.

output • owner’s equity
output–The product being completed by a process overhead pool–The collection of overhead costs that
or facility. are to be allocated over a specified group of products.
output control–A technique for controlling output overissue–Syn: excess issue.

where actual output is compared to planned output
overlapped production–A method of production
to identify problems at the work center or facility.
in which completed pieces of a production lot are
output standard–The expected number of units from a processed at one or more succeeding stations while
process against which actual output will be measured. remaining pieces continue to be processed at the
original workstation. See: overlapped schedule.
outside shop–Suppliers. This term is used to convey
the idea that suppliers are an extension of the inside overlapped schedule–A manufacturing schedule that
shop or the firm’s production facilities. “overlaps” successive operations. Overlapping occurs
when the completed portion of an order at one work
outsourced cost of goods sold–Costs of goods sold
center is processed at one or more succeeding work
that are not created within the producing company’s
centers before the pieces left behind are finished
manufacturing process. Instead, they are outsourced
at the preceding work centers. Syn: lap phasing,
to another company and include the costs of
operation overlapping, telescoping. See: send ahead.
purchasing the service from another company.
Ant: gapped schedule, overlapped production.
outsourcing–The process of having suppliers provide
overlap quantity–The number of items that need to be
goods and services that were previously provided
run and sent ahead to the following “overlap” operation
internally. Outsourcing involves substitution—the
before the following operation can begin. Syn: offset
replacement of internal capacity and production by
quantity. See: process batch, transfer batch.
that of the supplier. See: subcontracting.
overload–A condition in which the total hours of
over, short, and damaged (OS&D) report–A report
work outstanding at a work center exceed that work
submitted by a freight agent showing discrepancies in
center’s capacity.
billing received and actual merchandise received.
overpack–1) Reducing total shipping costs by
overall equipment effectiveness (OEE)–Measuring
reducing the per-item shipping cost. This is done by
the effectiveness of all of the equipment of a company
including multiple smaller items in one larger box. 2)
O
based on usage, performance, and production quality.
Nesting or packing items into a larger container or box
overall factors–Syn: capacity planning using to simplify handling or provide additional protection
overall factors. against damage during shipment.
overall value at risk (VAR)–The sum of the probability overrun–1) The quantity received from manufacturing
of risk events times the monetary impact of the events; or a supplier that is in excess of the quantity ordered.
can impact any core supply chain functions (e.g. plan, 2) The condition resulting when expenditures exceed
source, make, deliver, and return) or key dependencies. the budget.
overhead–The costs incurred in the operation of overstated master production schedule–A schedule
a business that cannot be directly related to the that includes either past due quantities or quantities
individual goods or services produced. These costs, that are greater than the ability to produce, given
such as light, heat, supervision, and maintenance, are current capacity and material availability. An overstated
grouped in several pools (e.g., department overhead, MPS should be made feasible before MRP is run.
factory overhead, general overhead) and distributed to
overstock–A supply or quantity of inventory in excess
units of goods or services by some standard allocation
of demand or requirements.
method such as direct labor hours, direct labor dollars,
or direct materials dollars. Syn: burden. See: expense. overtime–Work beyond normal established working
hours that usually requires that a premium be paid to
overhead allocation–In accounting, the process
the workers.
of applying overhead to a product on the basis of a
predetermined rate. owner’s equity–An accounting/financial term (balance
sheet classification of accounts) representing
overhead base–The denominator used to calculate
the residual claim by the company’s owners or
the predetermined overhead rate used in applying
shareholders, or both, to the company’s assets less
overhead (e.g., estimated direct labor hours,
its liabilities. See: assets, balance sheet, liabilities.
estimated direct labor dollars).

P:D ratio • parallel engineering
P
pack-out department–The department that performs
the final steps (often including packaging and
labeling) before shipment to the customer. See: final
assembly department.
P:D ratio–A ratio where P is the manufacturing lead
time and D is the customer required delivery time. If paired-cell overlapping loops of cards with
the P:D ratio exceeds 1.00, either a customer’s order authorization (POLCA)– A special material control
will be delayed, or production will start as the result of and replenishment system developed to be used
a forecast (make-to-stock) or an anticipated customer with quick response manufacturing (QRM) in cellular
order (make-to-order). manufacturing environments. A hybrid push-pull
system where the push authority to proceed is
PAC–Acronym for production activity control. generated by high-level manufacturing resources
pacemaker–In lean, the resource that is scheduled planning. See: quick response manufacturing.
based on the customer demand rate for that pallet–A platform designed to be loaded with
specific value stream; this resource performs packages and moved by a forklift.
an operation or process that governs the flow of
materials along the value stream. Its purpose is to pallet jack–A type of materials handling equipment
maintain a smooth flow through the manufacturing that combines pallets horizontally but has no
plant. A larger buffer is provided for the pacemaker lifting capability.
than other resources so that it can maintain
pallet positions–A calculation that determines
continuous operation. See: constraint.
the space needed for the number of pallets for
pace rating–Estimating the level of effort of a subject inventory storage or transportation based on a
of methods study, where 100 percent would be the standard pallet size. Pallet dimensions vary around
sustainable pace of an average skilled worker. the globe, but are typically a constant in regional
markets. The term is frequently used to quote
pacing process–The process in a production line storage and transportation rates.
used to signal all other processes in line of the time to
produce another unit. It generally is the final process, pallet rack–A single- or multiple-level structure for
but it does not have to be. storage used to support high stacking of palletized
loads.
package to order–A production environment in which
a good or service can be packaged after receipt of pallet ticket–A label to track pallet-sized quantities
of end items produced to identify the specific sublot
P
a customer order. The item is common across many
different customers; packaging determines the with specifications determined by periodic sampling
end product. and analysis during production.
packaging–Materials surrounding an item to protect panel consensus–A judgmental forecasting

it from damage during transportation. The type of technique by which a committee, sales force, or group
packaging influences the danger of such damage. of experts arrives at a sales estimate. See: Delphi
method, management estimation.
packing and marking–The activities of packing for
safe shipping and unitizing one or more items of an paperless purchasing–A purchasing operation that
order, placing them into an appropriate container, and does not employ purchase requisitions or hard-copy
marking and labeling the container with customer purchase orders. In actual practice, a small amount
shipping destination data as well as other information of paperwork usually remains, normally in the form of
that may be required. the supplier schedule.
packing list–A list showing merchandise packed, a parallel conversion–A method of system
copy of which is sent to the consignee to help verify implementation in which the operation of the new
the shipment. Often used as part of the order picking system overlaps with the operation of the system
and processing. being replaced. The old system is discontinued
only when the new system is shown to be working
packing slip–A document that itemizes in detail the properly, thus minimizing the risk and negative
contents of a particular package, carton, pallet, or consequences of a poor system implementation.
container for shipment to a customer. The detail
includes a description of the items, the shipper’s or parallel engineering–Syn: participative design/
customer’s part number, the quantity shipped, and engineering.
the stockkeeping units (SKUs) of the items shipped.

parallel implementation strategy • partnering
parallel implementation strategy–A system not seek to gain and hold marketplace leadership. The
implementation technique whereby the current system goal is not to perform below this base benchmark.
and the new system are both executed for some period
parking lot–A meeting device whereby off-agenda
of time. The results of the two systems are compared to
items are noted for possible inclusion in future
ensure that the new system is executing properly. When
agendas. Often a flip chart or whiteboard is used.
a level of confidence is built that the new system is
executing properly, the old system is turned off and the par level–In service operations, the maximum supply
new system becomes the designated business system. volume based on established quotas from previous
use for a particular supply item, in a particular
parallel schedule–The use of two or more machines or
department and for a specified time period.
job centers to perform identical operations on a lot of
material. Duplicate tooling and setup are required. part–Generally, a material item that is used as a
component and is not an assembly, subassembly,
parameter–A coefficient appearing in a mathematical
blend, intermediate, etc.
expression, each value of which determines the specific
form of the expression. Parameters define or determine part coding and classification–A method used in group
the characteristics or behavior of something, as when technology to identify the physical similarity of parts.
the mean and standard deviation are used to describe a
set of data. part family–A collection of parts grouped for some
managerial purpose.
parameter design–Specifying the product
characteristics and production process that will partial order–Any shipment received or shipped that
create the expected product performance. is less than the amount ordered.
parametric estimating–The use of statistical and partial productivity factor–Syn: single-factor

historical data to estimate activity parameters such productivity.
as time or budget. participative design/engineering–A concept that
parent–Syn: parent item. refers to the simultaneous participation of all the
functional areas of the firm in the product design
parent/child relationship–Refers to the logical activity. Suppliers and customers are often also
linkage between higher- and lower-level items in the included. The intent is to enhance the design with
bill of material. the inputs of all the key stakeholders. Such a process
should ensure that the final design meets all the needs
P
parent item–The item produced from one or more
of the stakeholders and should ensure a product that
components. Syn: parent.
can be quickly brought to the marketplace while
Pareto’s law–A concept developed by Vilfredo maximizing quality and minimizing costs. Syn:
Pareto, an Italian economist, that states that a co-design, concurrent design, concurrent engineering,
small percentage of a group accounts for the new product development team, parallel engineering,
largest fraction of its impact or value. In an ABC simultaneous design/engineering, simultaneous
classification, for example, 20 percent of the engineering, team design/ engineering. See: early
inventory items may constitute 80 percent of the manufacturing involvement.
inventory value. See: ABC classification, 80-20.
participative management–A system that
Pareto analysis–Use of the Pareto principle in encompasses various activities of high involvement
prioritizing or ranking a range of items to separate in which subordinates share a significant degree
the vital few from the trivial many. See: 80-20. of decision-making power with their immediate
superiors. Participative management draws on
Pareto chart–A bar graph that displays the results of
the rationale that everyone in an organization is
a Pareto analysis. It may or may not display the 80-20
capable of and willing to help guide and direct the
variation, but it does show a distinct variation from
organization toward agreed-on goals and objectives.
the few compared to the many.
part master record–Syn: item record.
Pareto diagram–Syn: Pareto chart.
partnering–The act of one organization committing
parity–When performance of a company is basically
to a long-term relationship with another organization
equivalent to that of competitors in the same market
based on trust and a shared concept of how to satisfy
space. This criterion would be deemed sufficient for
the customer.
products and processes for which the company does

partner relationship management (PRM) • payment terms
partner relationship management (PRM)–A business part type–A code for a component within a bill of
strategy and set of application tools designed to material (e.g., regular, phantom, reference).
increase the long-term value of a firm’s customer
passenger-mile–One passenger transported one
channel network through partner recruitment,
mile. For example, a bus carrying 40 passengers for
development, and profiling; timely communication
100 miles would accrue 4,000 passenger miles.
of marketplace opportunities; sales management;
services management; collaboration to improve passive data gathering–Data gathered when a
sales, productivity, and competitiveness; and metrics customer initiates the transaction process by filling
ensuring that each trading partner contributes to out a card or sending an email. The firm develops the
customer satisfaction. feedback form but the customer initiates the use of it.
partnership–1) A form of business ownership that is not passive tag–A RFID tag that does not send out
organized as a separate legal entity (i.e., unincorporated data and is not self-powered. See: radio frequency
business), but entailing ownership by two or more identification (RFID) tag.
persons. See: corporation, private ownership, public
ownership, sole proprietorship. 2) In a supply chain, a past due order–A line item on an open customer
relationship based on trust, shared risk, and rewards order that has an original scheduled ship date that is
aimed toward achieving a competitive advantage. earlier than the current date. Syn: delinquent order,
late order, backorder. See: backlog.
part number–Syn: item number.
patent–A legal document giving exclusive rights to
part period balancing (PPB)–A dynamic lot-sizing the production, use, sale, or other action regarding a
technique that uses the same logic as the least total product or process.
cost method, but adds a routine called look ahead/look
back. When the look ahead/look back feature is used, a path–In project management, a set of serially related
lot quantity is calculated, and before it is firmed up, the activities in a network diagram.
next or the previous period’s demands are evaluated to path convergence–In project management, the point
determine whether it would be economical to include in a network diagram where one or more parallel
them in the current lot. See: discrete order quantity, paths come together. A delay on any of the parallel
dynamic lot sizing. paths can conceivably delay network completion.
part record–Syn: item record. path divergence–Having parallel network paths
parts bank–1) In the narrow sense, an accumulation exiting from a single node.
P of inventory between operations that serves to keep

a subsequent operation running despite there being
interruptions in the preceding operations. See: buffer.
path float–Syn: float.
pattern recognition–Classifying raw data based on

2) In the larger sense, a stockroom or warehouse. The experience or statistical information.
implication is that the contents of these areas should
payback–A method of evaluating an investment
be controlled like the contents of a bank.
opportunity that provides a measure of the time
parts list–A list of parts, materials, and components required to recover the initial amount invested
required to make an item. See: single level bill of material. in a project.
parts planner–Syn: material planner. payback period–The period of time required for the
stream of cash flows resulting from a project to equal
parts requisition–An authorization that identifies the the project’s initial investment.
item and quantity required to be withdrawn from an
inventory. Syn: requisition. See: purchase requisition. pay for knowledge–A pay restructuring scheme by
which competent employees are rewarded for the
part standardization–A program for planned knowledge they acquire before or while working for an
elimination of superficial, accidental, and deliberate organization, regardless of whether such knowledge
differences between similar parts in the interest of is actually being used at any given time.
reducing part and supplier proliferation.
payment terms–Conditions surrounding payment
part-to-picker system–A materials handling approach for a sale, providing a time frame in which a customer
for order picking where the pick location is brought to can pay without late penalties or additional fees. See:
the order picker (e.g., carousels). terms and conditions.

pay point • performance measurement baseline
pay point–Syn: count point. perfect order fulfillment–A measure of an

organization’s ability to deliver a perfect order.
P chart–A control chart for evaluating the stability
See: perfect order.
of a process in terms of the percentage of the total
number of units in a sample in which an event of a given performance–1) The degree to which an employee or
classification occurs over time. P charts are used where group applies skill and effort to an operation or task as
it is difficult or costly to make numerical measurements measured against an established standard. 2) One of
or where combining multiple types of defects into one the eight dimensions of quality that refers to product
measurement is desired. Syn: percent chart. attributes pertaining to the functioning of a product
(e.g., horsepower, signal-to-noise ratio, decibel output).
PDCA–Abbreviation for plan-do-check-action.
3) One of the four parts of the SCOR framework. This
PDF–Abbreviation for portable document format. section contains the standard metrics to describe
process performance and define strategic goals.
PDM–Abbreviation for product data management.
performance and event management systems–
peak demand–A specific time when the quantity Systems that record and measure the performance of
demanded is greater than at all other times. key supply chain processes. With this data, employees
pegged requirement–A requirement that shows the can determine when the key processes have changed
next-level parent item (or customer order) as the and why they have changed. This data then is utilized
source of the demand. to adjust the existent data.
pegging–In MRP and MPS, the ability to identify for a performance appraisal–Supervisory or peer analysis
given item the sources of its gross requirements and/or of work performance. May be made in connection
allocations. Pegging can be thought of as active where- with wage and salary review, promotion, transfer, or
used information. See: requirements traceability. employee training.
penetration pricing–Introducing a product below its performance benchmarking–Syn: competitive

long-run price to secure entry into a market. benchmarking. See: benchmarking, process
benchmarking.
people involvement–Syn: employee involvement.
performance criterion–The characteristic to be
PE ratio–Abbreviation for price to earnings ratio. measured (e.g., parts per million defective, business
profit). See: performance measure, performance
perceived quality–One of the eight dimensions of
measurement system, performance standard.
P
quality that refers to a subjective assessment of a
product’s quality based on criteria defined by the performance efficiency–A ratio, usually expressed as
observer. a percentage, of the standard processing time for a
part divided by its actual processing time. Setups are
percent chart–Syn: P chart.
excluded from this calculation to prevent distortion.
percent completed–A comparison of work completed A traditional definition includes setup time as part of
to the current projection of total work. operation time, but significant distortions can occur
as a result of dependent setups.
percent of fill–Syn: customer service ratio.
performance measure–In a performance
percent recycled waste–One of the five green SCOR measurement system, the actual value measured for
metrics representing the percentage of solid waste the criterion. Syn: performance measurement. See:
that is recycled. performance criterion, performance measurement
percent value-added time–The percentage of total system, performance standard.
cycle time that is spent on activities that provide performance measurement–Syn: performance
value to the product or customer. measure.
perfect order–1) An order in which the “seven Rs” are performance measurement baseline–An approved
satisfied: the right product, the right quantity, the plan used to compare against actual execution to
right condition, the right place, the right time, the identify variances for management control.
right customer, and the right cost. 2) A fulfillment
metric used to measure order proficiency; i.e., the
order meets the following criteria: on time, complete,
accurate, and undamaged.

performance measurement system • physical distribution
performance measurement system–A system period order quantity–A lot-sizing technique under
for collecting, measuring, and comparing a which the lot size is equal to the net requirements for
measure to a standard for a specific criterion for a given number of periods (e.g., weeks into the future).
an operation, item, good, service, business, etc. A The number of periods to order is variable, each order
performance measurement system consists of a size equalizing the holding costs and the ordering
criterion, a standard, and a measure. Syn: metrics. costs for the interval. See: discrete order quantity,
See: performance criterion, performance measure, dynamic lot sizing.
performance standard.
perishability–The fact that an item has a limited shelf
performance measurement units–Time, error rates, life and may be fragile and require special handling.
accuracy rates, cost, and other measures of system
permission marketing–Syn: relationship marketing.
performance.
perpetual inventory–An inventory recordkeeping
performance objectives–Measurements that enable
system where each transaction in and out is recorded
the firm to monitor whether or not the firm’s strategy
and a new balance is computed.
is being accomplished. Thus, the measurement should
be aligned to strategy. Performance objectives may perpetual inventory record–A computer record
differ based on the hierarchical level of the firm (e.g., or manual document on which each inventory
department, business unit, corporation) and should be transaction is posted so that a current record of the
aligned with the corresponding strategy for that level. inventory is maintained.
performance rating–Observation of worker personal discrimination–In transportation, charging
performance that rates the productivity of the different companies with similar deliveries different
workers as a percentage of the standard or normal rates for shipping. This is a policy decision, possibly
worker performance. based on importance of the customer.
performance standard–In a performance personal fatigue and unavoidable delay allowance–
measurement system, the accepted, targeted, or Factor by which the motion study term “normal
expected value for the criterion. See: performance time” is increased to allow for personal needs and
criterion, performance measure, performance unavoidable delays.
measurement system.
personnel class–A means to describe a grouping of
performance variance–The difference between a people with similar characteristics for purposes of
performance standard and actual performance.
P
scheduling and planning.
performing organization–The enterprise directly PERT–Acronym for program evaluation and review
involved in the execution of work. technique.
period capacity–The number of standard hours PFEP–Abbreviation for plan for every part.
of work that can be performed at a facility or work
center in a given time period. phantom bill of material–A bill-of-material coding and
structuring technique used primarily for transient
period costs–All costs related to a period of time (nonstocked) subassemblies. For the transient item,
rather than a unit of product (e.g., marketing costs, lead time is set to zero and the order quantity to
property taxes). lot-for-lot. A phantom bill of material represents an
item that is physically built but rarely stocked before
periodic inventory–A physical inventory taken at
being used in the next step or level of manufacturing.
some recurring interval (e.g., monthly, quarterly, or
This permits MRP logic to drive requirements straight
annual physical inventory). See: physical inventory.
through the phantom item to its components, although
periodic maintenance–Syn: preventive maintenance. the MRP system usually retains its ability to net against
any occasional inventories of the item. This technique
periodic replenishment–A method of aggregating
also facilitates the use of common bills of material for
requirements to place deliveries of varying quantities
engineering and manufacturing. Syn: blowthrough,
at evenly spaced time intervals rather than variably
transient bill of material. See: pseudo bill of material.
spaced deliveries of equal quantities.
physical distribution–Syn: distribution.
periodic review system–Syn: fixed reorder cycle
inventory model.

physical inventory • place utility
physical inventory–1) The actual inventory itself. 2) The piece rate–The amount of money paid for a unit of
determination of inventory quantity by actual count. production. It serves as the basis for determining
Physical inventories can be taken on a continuous, the total pay for an employee working in a piecework
periodic, or annual basis. Syn: annual inventory count, system.
annual physical inventory. See: periodic inventory.
piece rate pay system–A compensation system based
physical supply–The movement and storage of goods upon volume of output of an individual worker.
from suppliers to manufacturing. The cost of physical
piecework–Work done on a piece rate.
supply is ultimately passed on to the customer.
piggyback–Syn: trailer on a flatcar.
pick and place–Equipment that picks up parts from one
station on an assembly line and places them on the next. pilot–Syn: pilot test.
pick date–The start date of picking components for a pilot lot–A relatively small preliminary order for a
production order. On or before this date, the system product. The purpose of this small lot is to correlate
produces a list of orders due to be picked, pick lists, the product design with the development of an
tags, and turnaround cards. efficient manufacturing process.
picker-to-part system–A materials handling approach pilot order–Syn: experimental order.
for order picking in which the picker goes to the
product location (e.g., forklifts, order picking trucks). pilot plant–A small-scale production facility used to
develop production processes and to manufacture
picking–The process of withdrawing from stock the small quantities of new products for field testing and
components to make assemblies or finished goods. so forth. Syn: semiworks.
In distribution, the process of withdrawing goods
from stock to ship to a distribution warehouse or to pilot test–1) In computer systems, a test before final
a customer. acceptance of a new business system using a subset
of data with engineered cases and documented
picking list–A document that lists the material results. 2) Generally, production of a quantity to verify
to be picked for manufacturing or shipping orders. manufacturability, customer acceptance, or other
Syn: disbursement list, material list, stores issue management requirements before implementation of
order, stores requisition. ongoing production. Syn: pilot, walkthrough.
pick on receipt–Similar to cross-docking, a product is pipeline inventory–Syn: pipeline stock.
P
unloaded from an inbound vehicle and loaded directly
on an outbound vehicle. Product is received and picked pipeline stock–Inventory in the transportation network
simultaneously, never residing in the warehouse. and the distribution system, including the flow through
intermediate stocking points. The flow time through the
pick-to-light–A pick system that uses software to pipeline has a major effect on the amount of inventory
light up displays at each pick location and determines required in the pipeline. Time factors involve order
how much needs to be picked. The pickers use this as transmission, order processing, scheduling, shipping,
their requirement to pull for that particular order to transportation, receiving, stocking, review time, and
set of orders. so forth. Syn: pipeline inventory. See: distribution
system, transportation inventory.
pick-to-trailer–An order picking system that allows the
picker to transfer materials to the trailer from the pick place–One of the four Ps (product, price, place, and
source without any confirmation/checking stages. promotion) that constitute the set of tools used to
direct the business offering to the customer. Place is
pick-to-voice system–A method of performing order-
the distribution tactic used to provide the product to
picking activities in a warehouse or distribution center
the customer. Distribution answers the questions of
using verbal commands. Syn: voice-based picking.
where, when, and how the product is made available.
pickup and delivery costs–Carrier charges for each See: four Ps.
shipment pickup and the weight of that shipment.
place utility–Usefulness to the customer created by
Costs can be reduced if several smaller shipments are
having the product delivered to a desired location.
consolidated and picked up in one trip.
piece parts–Individual items in inventory at the simplest

level in manufacturing (e.g., bolts and washers).

plan • planning calendar
plan–A predetermined course of action over a computer, and may be changed or deleted by the
specified period of time that represents a projected computer during subsequent processing if conditions
response to an anticipated environment to change. Planned orders at one level will be exploded
accomplish a specific set of adaptive objectives. into gross requirements for components at the next
level. Planned orders, along with released orders,
plan deliver–Establishing plans for action over time
serve as input to capacity requirements planning to
that project appropriation of supply resources to
show the total capacity requirements by work center
meet delivery requirements.
in future time periods. See: planning time fence.
plan-do-check-act cycle–Syn: plan-do-check-action
planned order receipt–The quantity planned to be
(PDCA).
received at a future date as a result of a planned order
plan-do-check-action (PDCA)–A four-step process release. Planned order receipts differ from scheduled
for quality improvement. In the first step (plan), a plan receipts in that they have not been released. Syn:
to effect improvement is developed. In the second planned receipt.
step (do), the plan is carried out, preferably on a
planned order release–A row on an MRP table that
small scale. In the third step (check), the effects of
is derived from planned order receipts by taking the
the plan are observed. In the last step (action), the
planned receipt quantity and offsetting to the left by
results are studied to determine what was learned
the appropriate lead time. See: order release.
and what can be predicted. The plan-do-check-action
cycle is sometimes referred to as the Shewhart cycle planned receipt–An anticipated receipt against an
(because Walter A. Shewhart discussed the concept open purchase order or open production order. Syn:
in his book, Statistical Method from the Viewpoint of planned order receipt.
Quality Control) or as the Deming circle (because W.
planned start date–Syn: scheduled start date.
Edwards Deming introduced the concept in Japan
and the Japanese subsequently called it the Deming planned value–In project management, the total
circle). Syn: plan-do-check-act cycle, Shewhart circle value (including overhead) of approved estimates for
of quality, Shewhart cycle. See: Deming circle. planned activities.
plan for every part (PFEP)–A method of materials planner–Syn: material planner.
management which involves the use of kanban
signals to suppliers for replenishment along with planner/buyer–Syn: supplier scheduler.
timed delivery routes and supermarket locations planner intervention–Syn: manual rescheduling.
P
broken down by value stream.
planning–The process of setting goals for the
plan make–Establishing plans for action over organization and choosing various ways to use the
time that project the appropriation of production organization’s resources to achieve the goals.
resources to meet production requirements.
planning and control process–A process consisting
planned adjustment factor–See: seasonal index. of the following steps: plan, execute, measure, and
planned finish date–Syn: scheduled finish date. control.
planned issue–A disbursement of an item predicted planning bill–Syn: planning bill of material.
by MRP through the creation of a gross requirement planning bill of material–An artificial grouping of
or allocation. Syn: controlled issue. items or events in bill-of-material format used to
planned issue receipt–A transaction that updates facilitate master scheduling and material planning.
the on-hand balance and the related allocation or It may include the historical average of demand
open order. expressed as a percentage of total demand for all
options within a feature or for a specific end item
planned load–The standard hours of work required by within a product family. Used as the quantity per in
planned production orders. the planning bill of material. Syn: planning bill. See:
hedge, option overplanning, production forecast,
planned order–A suggested order quantity, release
pseudo bill of material.
date, and due date created by the planning system’s
logic when it encounters net requirements in planning board–Syn: control board.
processing MRP. In some cases, it can also be created
by a master scheduling module. Planned orders planning calendar–Syn: manufacturing calendar.
are created by the computer, exist only within the

planning fence • point reporting
planning fence–Syn: planning time fence. plant within a plant–Syn: factory within a factory.
planning horizon–The amount of time a plan extends platform products–A grouping of products to share
into the future. For a master schedule, this is normally common parts, components, and characteristics
set to cover a minimum of cumulative lead time plus (a common platform), so that design and production
time for lot sizing low-level components and time for resources can be used to reduce cost and time
capacity changes of primary work centers or of key to market.
suppliers. For longer-term plans, the planning horizon
PLC–Abbreviation for programmable logic controller.
must be long enough to permit any needed additions to
capacity. See: cumulative lead time, planning time fence. PLCOR–Abbreviation for product life cycle operations
reference.
planning time fence–A point in time denoted in the
planning horizon of the master scheduling process pledging of accounts receivable–The act of securing
that marks a boundary inside of which changes to the a loan by pledging a company’s accounts receivable.
schedule may adversely affect component schedules,
capacity plans, customer deliveries, and cost. Outside PLM–Abbreviation for product life cycle
the planning time fence, customer orders can be booked management.
and changes to the master schedule can be made within Plossl’s law of lead time–The premise that lead times
the constraints of the production plan. Changes inside will be what it is said they are and would be better if
the planning time fence must be made manually by the it is said they were shorter. Shorter stated lead times
master scheduler. Syn: planning fence. See: cumulative lead to the slower release of new orders, allowing the
lead time, demand time fence, firm planned order, plant to work off backlogs, thus shortening actual
planned order, planning horizon, time fence. lead times.
planning values–Values that decision makers use to PMBOK®–Abbreviation for project management body
translate the sales forecast into resource requirements of knowledge. A registered trademark of the Project
to determine the feasibility and costs of alternative Management Institute, Inc.
approaches.
POD–Abbreviation for proof of delivery.
planogram–A graph or map of allotted shelf space
based on an analysis of sales data indicating the best point-of-purchase (POP) display–A sales promotion
arrangement of products on a store shelf. tool located at a checkout counter.
plan source–Establishing plans for action over time point of sale (POS)–The relief of inventory and
that project the appropriation of material resources
to meet supply chain requirements.
computation of sales data at the time and place
of sale, generally through the use of bar coding or
magnetic media and equipment.
P
plan stability–The percent difference between the
production that was planned and the production point-of-sale information–Information about
that was actually completed. The numerator is the customers collected at the time of sale.
difference between actual and planned production,
point-of-use delivery–Direct delivery of material to a
divided by the planned production. This information
specified location on a plant floor near the operation
then is used to adjust production standards.
in which it is to be used.
plant finished goods–Finished goods inventory held
point-of-use inventory–Inventory placed in the
in the plant rather than being shipped to a customer.
production process near the operation in which it is to
plant layout–Configuration of the plant site with lines, be used. See: dock-to-stock inventory.
buildings, major facilities, work areas, aisles, and other
point-of-use storage–Keeping inventory in specified
pertinent data such as department boundaries.
locations on a plant floor near the operation in which
plant rate–The total value added by a plant divided it is to be used.
by the total direct labor hours in a particular time
point reporting–The recording and reporting of
period. This percentage allows the scheduling at the
milestone manufacturing order occurrences, typically
rough-cut and capacity requirements level of the plan.
done at checkpoint locations rather than operations
and easily controlled from a reporting standpoint.

Poisson distribution • practices
Poisson distribution–A type of statistical distribution portfolio–In project management, a collection of

frequently used to model the arrival of customers or projects that are grouped to facilitate management.
entities into a queuing system. They are not necessarily interdependent.
poka-yoke (mistake-proof)–Mistake-proofing POS–Abbreviation for point of sale.

techniques, such as manufacturing or setup
positioning strategy–Within manufacturing, a
activity, designed in a way to prevent an error from
plan for inventory, product design, and production
resulting in a product defect. For example, in an
process.
assembly operation, if each correct part is not used,
a sensing device detects that a part was unused possession utility–Product desirability created by
and shuts down the operation, thereby preventing marketing efforts.
the assembler from moving the incomplete part to
the next station or beginning another operation. post deduct–In a JIT system, when work-in-process
Sometimes spelled poke-yoke. Syn: failsafe materials used to build finished goods are relieved
techniques, failsafe work methods, mistake-proofing. from inventory by multiplying the number of units
completed by the number of parts in the bill of
POLCA–Abbreviation for paired-cell overlapping material. Effective only if the bill of material is
loops of cards with authorization. accurate and manufacturing lead times are short.
See: backflushing.
policies–Definitive statements of what should be
done in the business. post-deduct inventory transaction processing–
Syn: backflush.
policy constraint–A common misnomer. Bad policies
are not the constraint; rather, they hinder effective postponement–A product design, or supply chain
constraint management by inhibiting the ability to strategy that deliberately delays final differentiation
fully exploit and/or subordinate to the constraint. of a product (assembly, production, packaging,
tagging, etc.) until the latest possible time in the
political environment–External factors related to
process. This shifts product differentiation closer
the political process—including laws and regulations
to the consumer to reduce the anticipatory risk of
and taxation codes—at the local, state, federal, and
producing the wrong product. The practice eliminates
international levels of government.
excess finished goods in the supply chain. Sometimes
pooling–1) In transportation, placing shipments from referred to as Delayed Differentiation.
multiple companies together in the same shipment
P
post-release–The period after the product design
in order to reduce the costs of each shipment. 2) In
has been released to manufacturing, during which
production, that action that combines in parallel
the product has ongoing support and product
previously independent processes to reduce the total
enhancement.
variance compared to the variances that would occur
when the processes were independent. post-transaction elements–Customer services that
are provided after a product or service is sold, including
POP–Acronym for point of purchase.
warranties, returns, and complaint resolution.
population–The entire set of items from which a
potency–The measurement of active material in a
sample is drawn.
specific lot, normally expressed in terms of an active
portal–A multiservice website that provides access unit. Typically used for such materials as solutions.
to data that may be secured by each user’s role. Users
PPAP–Abbreviation for production part approval
can aggregate data and perform basic analysis. Portal
process.
ownership can be independent, private, or consortium-
based. Business portals are often connected with PPB–Abbreviation for part period balancing.
a customer relationship management or supplier
relationship management system. Portals can include PPP–Abbreviation for public-private partnering.
structured data such as ERP information, pictures, and practices–One of the four parts of the SCOR
documents. Unlike exchanges or marketplaces, portals framework that contains management activities
generally can display and aggregate data without producing significantly better process performance.
integration between application software.

precedence relationship • price
precedence relationship–In the critical path method preferred supplier–The supplier of choice.
of project management, a logical relationship that
prepaid–A term denoting that transportation charges
one node has to the succeeding node. The terms
have been or are to be paid at the point of shipment by
precedence relationship, logical relationship, and
the sender.
dependency are used somewhat interchangeably.
pre-receiving–Paying for materials before receipt to
predatory pricing–Lowering prices below cost to
prepare for incoming products and goods.
drive out competition and then raising prices again.
In the United States, this is a violation of Article 2 of prerelease–The period of product specification,
the Sherman Act. design, and design review.
predecessor activity–1) In project management, in prerequisite tree (PRT)–A necessity-based logic
an activity-on-arrow network, the activity that enters diagram that facilitates answering the third question
a node. 2) In project management, in an activity-on- in the change sequence: How do we effect the
node network, the node at the tail of the arrow. change? Shows the relationship between the injections,
desirable effects or ambitious target, and the obstacles
pre-deduct inventory transaction processing–A
that block the implementation of the injections. Includes
method of inventory bookkeeping where the book
the intermediate objectives required to overcome the
(computer) inventory of components is reduced before
obstacles and shows the sequence in which they must
issue, at the time a scheduled receipt for their parents
be achieved for successful implementation.
or assemblies is created via a bill-of-material explosion.
This approach has the disadvantage of a built-in present value–The value today of future cash flows.
differential between the book record and the amount For example, the promise of $10 a year from now is
of inventory physically in stock. See: backflush. worth something less than $10 in hand today.
predetermined motion time–An organized body of pre-transaction elements–Customer service elements
information, procedures, techniques, and motion times that pertain to the period before a product or service
employed in the study and evaluation of manual work is sold, including flexibility, customer policies, and
elements. It is useful in categorizing and analyzing all mission statement.
motions into elements whose unit times are computed
according to such factors as length, degree of muscle prevention costs–The costs caused by improvement
control, and precision. The element times provide the activities that focus on the reduction of failure and
basis for calculating a time standard for the operations. appraisal costs. Typical costs include education,
Syn: synthetic time standard. quality training, and supplier certification. Prevention
P
costs are one of four categories of quality costs.
predetermined time standards–A table of times of
basic motions used to prepare artificial standards (i.e., prevention versus detection–A term used to
without direct observation of a worker). See: therbligs. contrast two types of quality activities. Prevention
refers to those activities designed to prevent
predictable maintenance–Syn: predictive maintenance. nonconformances in goods and services. Detection
refers to those activities designed to detect
prediction–An intuitive estimate of demand taking
nonconformances already in goods and services.
into account changes and new factors influencing
Syn: designing in quality versus inspecting in quality.
the market, as opposed to a forecast, which is an
objective projection of the past into the future. preventive maintenance–The activities, including
adjustments, replacements, and basic cleanliness,
predictive maintenance–A type of preventive
that forestall machine breakdowns. The purpose is to
maintenance based on nondestructive testing and
ensure that production quality is maintained and that
statistical analysis, used to predict when required
delivery schedules are met. In addition, a machine
maintenance should be scheduled. Syn: predictable
that is well cared for will last longer and cause fewer
maintenance.
problems. Syn: periodic maintenance.
pre-expediting–The function of following up on open
price–One of the four Ps (product, price, place, and
orders before the scheduled delivery date to ensure the
promotion) that constitute the set of tools used to
timely delivery of materials in the specified quantity.
direct the business offering to the customer. Price
preferred stock–A type of stock entitling the owner is the amount charged for the product offering.
to dividends before common stockholders are The price set must take into account competition,
entitled to them. substitute products, and internal business costs to
return a desirable product margin. See: four Ps.

price analysis • priority rules
price analysis–The examination of a seller’s price prima facie–Latin for "at first sight" or "on the face of
proposal or bid by comparison with price benchmarks, it". Something is presumed to be true.
without examination and evaluation of all of the
primary demand–The demand for a category of
separate elements of the cost and profit making up
products rather than for a specific brand.
the price in the bid.
primary location–The designation of a certain storage
price break–A discount given for paying early, buying
location as the standard, preferred location for an item.
in quantity, and so forth. See: discount.
primary operation–A manufacturing step normally
price-break model–Syn: quantity discount model.
performed as part of a manufacturing part’s routing.
price discrimination–Selling the same products to Ant: alternate operation.
different buyers at different prices.
primary process–A process that performs the main
price elasticity–The degree of change in buyer demand value-added activities of an organization.
in response to changes in product price. Calculated by
primary work center–The work center where an
dividing the percentage of change in quantity bought by
operation on a manufactured part is normally
the percentage of change in price. Prices are considered
scheduled to be performed. Ant: alternate work center.
elastic if demand varies with changes in price. If demand
changes only slightly when the price changes, demand prime costs–Direct costs of material and labor.
is said to be inelastic. For example, demand for most Prime costs do not include general, sales, or
medical services is relatively inelastic, but demand for administrative costs.
automobiles is generally elastic.
prime operations–Critical or most significant
price erosion–Occurs when increased competition operations whose production rates must be
and efficiencies in production over time cause the closely planned.
price to gradually reduce.
prime rate–The interest rate charged by banks to their
price point–The relative price position at which the most preferred customers.
product will enter the market compared to direct and
indirect competitors’ prices. It is considered within principal–The party authorizing an agent to act on his
the context of the price-range options available: high, or her behalf.
medium, or low. principle of postponement–Syn: order penetration
point.
P
price prevailing at date of shipment–An agreement
between a purchaser and a supplier that the price prioritization matrix–A special type of matrix chart
of the goods ordered is subject to change at the used to show the priorities of items by applying
supplier’s discretion between the date the order is criteria and weighting factors to each item.
placed and the date the supplier makes shipment; the
subsequently established price is the contract price. priority–In a general sense, the relative importance
of jobs (i.e., the sequence in which jobs should be
price protection–An agreement between a supplier worked on). It is a separate concept from capacity.
and a purchaser to grant the purchaser any reduction
in price that the supplier may establish on its goods priority control–The process of communicating start
before shipment of the purchaser’s order or to grant and completion dates to manufacturing departments
the purchaser the lower price should the price increase in order to execute a plan. The dispatch list is the tool
before shipment. Price protection is sometimes normally used to provide these dates and priorities
extended for an additional period beyond the date based on the current plan and status of all open orders.
of shipment.
priority planning–The function of determining what
price schedule–The list of prices applying to varying material is needed and when. Master production
quantities or kinds of goods. scheduling and material requirements planning are the
elements used for the planning and replanning process
price skimming–Introducing a product above its to maintain proper due dates on required materials.
long-run price to maximize product margin before
others can enter the market. priority report–Syn: dispatch list.
price to earnings (PE) ratio–The current price of a priority rules–Simple heuristics used to select the
stock relative to its earnings per share. order in which jobs will be processed.

private brand • process capability
private brand–A brand applied by a distributor rather probability distribution–A table of numbers or a
than a manufacturer. mathematical expression that indicates the frequency
with which each of all possible results of an experiment
private carrier–A group that provides transportation
should occur.
exclusively within an organization. Ant: common carrier.
probability tree–A graphic display of all possible
private key–In information systems, an encryption
outcomes of an event based on the possible
key that is known only by the sender and receiver of
occurrences and their associated probabilities.
the message. See: public key.
probable scheduling–A variant of scheduling that
private label–Also known as store or dealer brands,
considers slack time to increase or decrease the
these are products that are designed and produced by
calculated lead time of an order. Interoperation and
one company but carry the name of the store that sells
administrative lead time components are expanded or
them. Oftentimes called generic to the purchaser.
compressed by a uniform “stretching factor” until no
private ownership–A form of business ownership in difference exists between the schedule of operations
which the business is either owned by a single person obtained by forward and backward scheduling. See:
(proprietorship) or organized under law as a separate lead time scheduling.
legal entity but for which company stock is not
problem-solving storyboard–A technique based on
publicly traded. See: partnership, public ownership.
the plan/do/check/action problem-solving process.
private trading exchange (PTX)–A trade exchange The steps being taken and the progress toward the
hosted by a single company to facilitate collaborative resolution of a problem are continuously planned and
e-commerce with its trading partners. As opposed updated.
to public e-marketplaces, a private exchange
procedure manual–A formal organization and indexing
provides the host company with control over many
of a firm’s procedures. Manuals are usually printed and
factors, including who may participate (and in what
distributed to the appropriate functional areas.
manner), how participants may be connected, and
what contents should be presented (and to whom). process–1) A planned series of actions or operations
The ultimate goal might be to improve supply chain (e.g., mechanical, electrical, chemical, inspection,
efficiencies and responsiveness through improved test) that advances a material or procedure from
process visibility and collaboration, advanced one stage of completion to another. 2) A planned
integration platforms, and customization capabilities. and controlled treatment that subjects materials or
procedures to the influence of one or more types of
P
private warehouse–A company-owned warehouse.
energy (e.g., human, mechanical, electrical, chemical,
proactive–A strategy of anticipating issues and thermal) for the time required to bring about the
presenting beneficial solutions to the customer. desired reactions or results.
probabilistic demand models–Statistical procedures process average–Expected value of the percentage

that represent the uncertainty of demand by a set of defective of a given manufacturing process.
possible outcomes (i.e., a probability distribution) and
process batch–The quantity or volume of output that is
that suggest inventory management strategies under
to be completed at a workstation before switching to a
probabilistic demands.
different type of work or changing an equipment setup.
probability–Mathematically, a number between 0 and 1
process benchmarking–Benchmarking focused
that estimates the fraction of experiments (if the same
on the target firm’s business processes (including
experiment were being repeated many times) in which
process flows, operating systems, and process
a particular result would occur. This number can be
technologies). See: benchmarking.
either subjective or based upon the empirical results of
experimentation. It can also be derived for a process to process capability–The ability of the process to produce
give the probable outcome of experimentation. parts that conform to (engineering) specifications.
Process capability relates to the inherent variability
probability and impact matrix–A matrix combining
of a process that is in a state of statistical control.
two dimensions of risk: (1) the likelihood of an event’s
See: Cp, Cpk, process capability analysis.
occurrence and (2) the impact if the event occurs.

process capability analysis • process-focused organization
process capability analysis–A procedure to estimate process flow–The sequence of activities that, when
the parameters defining a process. The mean and followed, results in a product or service deliverable.
standard deviation of the process are estimated See: flow process chart, process chart.
and compared to the specifications, if known. This
process flow analysis–A procedure to evaluate the
comparison is the basis for calculating capability
effectiveness of a sequence of business activities.
indexes. In addition, the form of the relative frequency
The analysis determines which elements of the
distribution of the characteristic of interest may be
flow are value-added and eliminates those that are
estimated. Syn: capability study. See: process capability.
not, determines which parts of the process can be
process capability index–The value of the tolerance automated, evaluates activities as to whether they
specified for the characteristic divided by the process contribute to the core competencies of the business
capability. There are several types of process capability or are candidates for outsourcing, and designs a
indices, including the widely used Cpk and Cp. structure for the remaining activities of the process
to improve productivity.
process chart–A chart that represents the sequence
of work or the nature of events in process. It serves as process flowchart–Syn: flow process chart.
a basis for examining and possibly improving the way
process flow diagram–A graphical and progressive
the work is carried out. Syn: operations process chart.
representation of the various steps, events, and tasks
See: flow process chart, process flow.
that make up an operations process. Provides the
process control–1) The function of maintaining viewer with a picture of what actually occurs when a
a process within a given range of capability by product is manufactured or a service is performed.
feedback, correction, and so forth. 2) The monitoring
process flow production–A production approach
of instrumentation attached to equipment (valves,
with minimal interruptions in the actual processing in
meters, mixers, liquid, temperature, time, etc.) from a
any one production run or between production runs
control room to ensure that a high-quality product is
of similar products. Queue time is virtually eliminated
being produced to specification.
by integrating the movement of the product into the
process control chart–Syn: control chart. actual operation of the resource performing the work.
process controllers–Computers designed to monitor process flow scheduling–A generalized method for
the manufacturing cycle during production, often with planning equipment usage and material requirements
the capability to modify conditions in order to bring that uses the process structure to guide scheduling
the production back to within prescribed ranges. calculations. Used in the flow environments common
P process costing–A cost accounting system in which the

costs are collected by time period and averaged over
in process industries.
process focused–A type of manufacturing

all the units produced during the period. This system organization in which both plant and staff
can be used with either actual or standard costs in management responsibilities are delineated by
the manufacture of a large number of identical units. the production process. A highly centralized staff
coordinates plant activities and intracompany
process decision program chart–A technique used
material movements. This type of organization is best
to show alternate paths to achieving given goals.
suited to companies whose dominant orientation is
Applications include preparing contingency plans
to a technology or material and whose manufacturing
and maintaining project schedules.
processes tend to be complex and capital-intensive.
process design–The design of the manufacturing See: product focused, process-focused organization.
method.
process-focused organization–An organization
process engineering–The discipline of designing that is oriented toward executing linked activities
and improving the manufacturing equipment and that constitute a given end-to-end business process
production process to support the manufacture with a given set of resources. Responsibilities of the
of a product line. See: manufacturing engineering. members of the organization are oriented toward the
performance of the process that creates the product
process flexibility–The design of the manufacturing or service and not toward a product or functional silo.
system, including operators and machinery, that See: process focused, product focused.
allows quick changeovers to respond to near-term
changes in product volume and mix. A necessary tool
in lean and just in time.

process-focused production • procurement lead time
process-focused production–A type of factory process planning–Determining the technological

operation that requires frequent machine changeover steps and sequence required to produce a product
and produces small batches of unique products that or service at the required quality level and cost.
flow along different paths.
process selection–An economic analysis used
process hours–The time required to perform any to decide which process should be used when
specific operation or task needed to process the operations can be performed by more than one
product. process.
process improvement–The activities designed to process sheet–Detailed manufacturing instructions

identify and eliminate causes of poor quality, process issued to the plant. The instructions may include
variation, and non-value-added activities. specifications on speeds, feed, temperatures, tools,
fixtures, and machines and sketches of setups and
process industries–Manufacturers that produce
semifinished dimensions.
products by mixing, separating, forming, and/or
performing chemical reactions. Paint manufacturers, process steps–The operations or stages within the
refineries, and breweries are examples of process manufacturing cycle required to transform components
industries. into intermediates or finished goods. From a larger
perspective, the operations or stages within any
process integration–Coordinating operations
business required to turn inputs into outputs.
and consolidating data to simplify processes and
increase efficiency. process stocks–Raw ingredients or intermediates
available for further processing into marketable
process layout–Syn: functional layout.
products.
process list–A list of operations and procedures in
process time–The time during which the material
the manufacture of a product. It may also include a
is being changed, whether through a machining
statement of material requirements.
operation or an assembly. Syn: residence time.
process manufacturing–Production that adds value
process train–A representation of the flow of materials
by mixing, separating, forming, and/or performing
through a process industry manufacturing system that
chemical reactions. It may be done in either batch or
shows equipment and inventories. Equipment that
continuous mode. See: project manufacturing.
performs a basic manufacturing step, such as mixing
process map–A diagram of the flow of a production or packaging, is called a process unit. Process units are
P
process or service process through the production combined into stages, and stages are combined into
system. Standardized symbols are used to designate process trains. Inventories decouple the scheduling
processing, flow directions, branching decisions, of sequential stages within a process train.
input/output, and other aspects of the process.
process yield–See: yield.
processor-dominated scheduling–A technique that
procurement–The business functions of procurement
schedules equipment (processor) before materials.
planning, purchasing, inventory control, traffic,
Facilitates scheduling equipment in economic run
receiving, incoming inspection, and salvage operations.
lengths and the use of low-cost production sequences.
A scheduling method used in some process industries. procurement credit card–Credit cards with a
See: material-dominated scheduling. predetermined credit limit issued to buyers.
Syn: corporate purchasing cards.
process organization structure–An organizational
structure in which people are removed from their procurement cycle–Syn: procurement lead time.
functional departments and placed into a group that
procurement lead time–The time required to design a
works as a single unit to perform the entire linked
product, modify or design equipment, conduct market
process, as opposed to a functional organization
research, and obtain all necessary materials. Lead
in which the activities that make up the process
time begins when a decision has been made to accept
are performed by people in multiple functionally
an order to produce a new product and ends when
oriented departments.
production commences. Syn: procurement cycle,
process oriented–An environment in which the total procurement lead time. See: time-to-market.
focus is on the interrelated processes in a business.
It includes the activities to transform inputs into
outputs that have value.

procurement services provider • product flexibility
procurement services provider–A company that multiple end-item configurations in the same product
has product, sourcing, and supply management family. Used to provide a transition linkage between
knowledge; acts as an outsourced process by other the end-item level and a two-level master production
companies; and provides procurement help. Most schedule. Also provides a correlation between the
often used as a third-party process by companies various units of upper level product definition.
where procurement is a significant part of business,
product configurator–A system, generally rule-based,
but the company lacks the expertise to effectively
to be used in design-to-order, engineer-to-order,
manage the process.
or make-to-order environments where numerous
procure to pay cycle–The activities and processes product variations exist. Product configurators
that take place from the time a purchase order is perform intelligent modeling of the part or product
placed until payment is made. attributes and often create solid models, drawings,
bills of material, and cost estimates that can be
producer–One who creates a good or service.
integrated into CAD/CAM and MRP II systems as
producer’s risk (α)–For a given sampling plan, the well as sales order entry systems.
probability of not accepting a lot, the quality of which
product cost–Cost allocated by some method to
has a designated numerical value representing a
the products being produced. Initially recorded in
level that is generally desired to accept. Usually the
asset (inventory) accounts, product costs become
designated value will be the acceptable quality level
an expense (cost of sales) when the product is sold.
(AQL). See: type I error.
product data management (PDM)–A system that
producer market–Syn: industrial market.
tracks the configurations of parts and bills of material
produce-to-stock–Syn: make-to-stock. and also the revisions and history of product designs.
It facilities the design release, distributes the design
producibility–The characteristics of a design that data to multiple manufacturing sites, and manages
enable the item to be produced and inspected in the changes to the design in a closed-loop fashion. It
quantity required at least cost and minimum time. provides the infrastructure that controls the design
product–1) Any good or service produced for sale, cycle and manages change.
barter, or internal use. 2) One of the four Ps (product, product differentiation–A strategy of making
price, place, and promotion) that constitute the a product distinct from the competition on a
set of tools for directing the business offering to nonprice basis such as availability, durability,
P
the customer. The product can be promoted as a quality, or reliability.
distinctive item. See: four Ps.
product diversification–A marketing strategy
product and market focus–Developing products that seeks to develop new products to supply
based on dimensions like service to similar current markets.
customers, volume, or customization.
product engineering–The discipline of designing a
product audit–The reinspection of any product product or product line to take advantage of process
to verify the adequacy of acceptance or rejection technology and improve quality, reliability, and so forth.
decisions made by inspection and testing personnel.
product family–A group of products or services that
product-based layout–A type of layout where pass through similar processing steps, have similar
resources are arranged sequentially according to the characteristics, and share common equipment prior
steps required to make a particular complex product. to shipment or delivery to the customer. Can be from
product benchmarking–Benchmarking used for different overlapping product lines that are produced
new product design or for a product upgrade. in one factory and often used in production planning
Often includes reverse engineering (dismantling) (or sales and operations planning). See: product line.
competing products to determine their strengths and product flexibility–The ease with which current
weaknesses. See: benchmarking. designs can be modified in response to changing
product configuration catalog–A listing of all upper- market demands.
level configurations contained in an end-item product
family. Its application is most useful when there are

product focused • production level
product focused–A type of manufacturing production calendar–Syn: manufacturing calendar.

organization in which both plant and staff
production capability–1) The highest sustainable
responsibilities are delineated by product, product line,
output rate that could be achieved for a given
or market segment. Management authority is highly
product mix, raw materials, worker effort, plant, and
decentralized, which tends to make the company more
equipment. 2) The collection of personnel, equipment,
responsive to market needs and more flexible when
material, and process segment capabilities. 3)
introducing new products. This type of organization is
The total of the current committed, available, and
best suited to companies whose dominant orientation
unattainable capability of the production facility. The
is to a market or consumer group and where flexibility
capability includes the capacity of the resource.
and innovation are more important than coordinated
planning and tight control. See: process focused, production card–In a just-in-time context, a card or
process-focused organization. other signal for indicating that items should be made
for use or that some items removed from pipeline
product-focused production–A type of operation
stock should be replaced. See: kanban.
designed to process only a few different products,
which are usually produced for inventory; production production control–The function of directing or
rates tend to be greater than the demand rate. regulating the movement of goods through the entire
manufacturing cycle from the requisitioning of raw
product genealogy–A record, usually on a computer
material to the delivery of the finished products.
file, of the history of a product from its introduction
into the production process through its termination. production cycle–Syn: manufacturing lead time.
The record includes lot or batch sizes used,
operations performed, inspection history, options, production cycle elements–Elements of
and where-used information. manufacturing strategy that define the span of an
operation by addressing the following areas: (1) the
product grade–The categorization of goods based established boundaries for the firm’s activities; (2)
upon the range of specifications met during the the construction of relationships outside the firm’s
manufacturing process. boundaries (i.e., suppliers, distributors, and customers);
(3) circumstances under which changes in established
product group–Syn: product line.
boundaries or relationships are necessary; and (4)
product group forecast–A forecast for a number the effect of such boundary or relationship changes
of similar products. See: aggregate forecast, on the firm’s competitive position. The production
product group. cycle elements must explicitly address the strategic
production–The conversion of inputs into finished

products.
implications of vertical integration in regard to (a)
the direction of such expansion, (b) the extent of the
process span desired, and (c) the balance among the
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production activity control (PAC)–The function of resulting vertically linked activities.
routing and dispatching the work to be accomplished
production environment–Syn: manufacturing
through the production facility and of performing
environment.
supplier control. PAC encompasses the principles,
approaches, and techniques needed to schedule, production forecast–A projected level of customer
control, measure, and evaluate the effectiveness of demand for a feature (option, accessory, etc.) of a
production operations. See: shop floor control. make-to-order or an assemble-to-order product.
Used in two-level master scheduling, it is calculated
production and inventory management–General
by netting customer backlog against an overall family
term referring to the body of knowledge and
or product line master production schedule and then
activities concerned with planning and controlling
factoring this product’s available-to-promise by the
rates of purchasing, production, distribution, and
option percentage in a planning bill of material. See:
related capacity resources to achieve target levels
assemble-to-order, planning bill of material, two-level
of customer service, backlogs, operating costs,
master schedule.
inventory investment, manufacturing efficiency, and
ultimately, profit and return on investment. production kanban–A signal, usually a card, used to
trigger the production of a part.
production and operations management (POM)–
Managing an organization’s production of goods or production lead time–Syn: manufacturing lead time.
services; managing the process of taking inputs and
production level–Syn: production rate.
creating outputs.

production leveling • production process
production leveling–Syn: level production method. production planning–A process to develop

tactical plans based on setting the overall level of
production line–A series of pieces of equipment
manufacturing output (production plan) and other
dedicated to the manufacture of a specific number of
activities to best satisfy the current planned levels of
products or families.
sales (sales plan or forecasts), while meeting general
production lot–A group of materials that is processed business objectives of profitability, productivity,
in one stage of production and put in inventory for competitive customer lead times, etc., as expressed
further production (or for shipment to customers). in the overall business plan.
production management–1) The planning, scheduling, The sales and production capabilities are compared,
execution, and control of the process of converting and a business strategy that includes a sales plan,
inputs into finished goods. 2) A field of study that a production plan, budgets, pro forma financial
focuses on the effective planning, scheduling, statements, and supporting plans for materials and
use, and control of a manufacturing organization. workforce requirements, and so on, is developed. A
Examines concepts from design engineering, industrial primary purpose is to establish production rates that
engineering, management information systems, quality will achieve management’s objective of satisfying
management, inventory management, accounting, customer demand by maintaining, raising, or lowering
and other functions to determine how they affect the inventories or backlogs, while usually attempting to
transformation process. keep the workforce relatively stable.
production material–Any material used in the Because this plan affects many company functions, it
manufacturing process. is normally prepared with information from marketing
and coordinated with the functions of manufacturing,
production materials requisition–Syn: materials sales, engineering, finance, human resources, etc.
requisition. See: aggregate planning, production plan, sales and
production network–The complete set of all work operations planning, sales plan.
centers, processes, and inventory points, from raw production planning and control strategies–An
materials sequentially to finished products and element of manufacturing strategy that includes the
product families. Represents the logical system design and development of manufacturing planning
that provides the framework to attain the strategic and control systems in relation to the following
objectives of the firm based on its resources and considerations: (1) market-related criteria—the required
the products’ volumes and processes. Provides the level of delivery speed and reliability in a given market
P
general sequential flow and capacity requirement segment; (2) process requirement criteria—consistency
relationships among raw materials, parts, resources, between process type (job shop, repetitive, continuous,
and product families. etc.) and the production planning and control system;
production order–Syn: manufacturing order. and (3) organization control levels—systems capable
of providing long-term planning and short-term
production part approval process (PPAP)–A Big control capabilities for strategic and operational
Three automotive process outlining requirements considerations by management. These strategies help
for approval of production parts. Its purpose is to firms develop systems that enable them to exploit
measure whether a supplier can, with regularity, fulfill market opportunities while satisfying manufacturing
these requirements. process requirements.
production plan–The agreed-upon plan that comes production planning methods–The approach taken
from the production planning (sales and operations in setting the overall manufacturing output to meet
planning) process—specifically, the overall level customer demand by setting production levels,
of manufacturing output planned to be produced, inventory levels, and backlog. Companies can use a
usually stated as a monthly rate for each product chase, level, or hybrid production planning method.
family (group of products, items, options, features, See: chase production method, hybrid production
and so on). Various units of measurement (e.g., units, method, level production method.
tonnage, standard hours, number of workers) can be
used to express the plan. Represents management’s production process–The activities involved
authorization for the master scheduler to convert in converting inputs into finished goods. See:
it into a more detailed plan—that is, the master manufacturing process, transformation process.
production schedule. See: sales and operations
planning, sales plan.

production rate • product line
production rate–The rate of production usually productivity–1) An overall measure of the ability to
expressed in units, cases, or some other broad produce a good or a service. It is the actual output
measure, expressed by a period of time (e.g., per hour, of production compared to the actual input of
shift, day, or week). Syn: production level. resources. Productivity is a relative measure across
time or against common entities (labor, capital, etc.).
production release–Syn: manufacturing order.
In the production literature, attempts have been made
production report–A statement of the output of to define total productivity where the effects of labor
a production facility for a specified period. The and capital are combined and divided into the output.
information normally includes the type and quantity One example is a ratio that is calculated by adding the
of output; workers’ efficiencies; departmental dollar value of labor, capital equipment, energy, and
efficiencies; costs of direct labor, direct material, and material, and so forth and dividing it into the dollar
the like; overtime worked; and machine downtime. value of output in a given time period. This is one
measure of total factor productivity. See: efficiency,
production reporting and status control–A vehicle labor productivity, machine productivity, utilization.
to provide feedback to the production schedule 2) In economics, the ratio of output in terms of dollars
and allow for corrective action and maintenance of sales to an input such as direct labor in terms of the
of valid on-hand and on-order balances. Normally total wages. Known as single factor productivity or
includes manufacturing order authorization, release, partial factor productivity.
acceptance, operation start, delay reporting,
move reporting, scrap and rework reporting, order product layout–Another name for flow process
close-out, and payroll interface. Syn: manufacturing layout. A system that is set up for a limited range
order reporting, shop order reporting. of similar products. Focused-factory production
is also considered to be in this category. See: flow
production schedule–A plan that authorizes the processing, focused factory.
factory to manufacture a certain quantity of a
specific item. Usually initiated by the production product life cycle–1) The stages a new product
planning department. goes through from beginning to end (i.e., the stages
that a product passes through from introduction
production scheduling–The process of developing through growth, maturity, and decline). 2) The time
the production schedule. from initial research and development to the time at
production sharing–A network of companies that which sales and support of the product to customers
participates in product design, production, marketing, are withdrawn. 3) The period of time during which a
P
distribution, and service. product can be produced and marketed profitably.
production standard–A time standard to produce product life cycle management (PLM)–The process
piece parts and assemblies. of facilitating the development, use, and support
of products that customers want and need. Helps
production system–A system that accepts inputs and professionals envision the creation and preservation of
converts them to the desired outputs. product information, both to the customer and along
the reverse-logistics portion of the supply chain.
production time–Setup time plus total processing
time, where total processing time is processing time product life cycle operations reference (PLCOR)–A
per piece multiplied by the number of pieces. reference model for innovation, product, and portfolio
management. Spans all product life cycle activities,
production validation–Demonstrating that a
from the first idea to broad adoption in the mass
production process will consistently lead to the
market. Applicable to the life cycles of both products
expected results.
and service offerings.
productive capacity–In the theory of constraints, the
product line–A group of products associated by
maximum of the output capabilities of a resource (or
function, consumer group, distribution channel,
series of resources) or the market demand for that
manufacturing characteristics, or price range.
output for a given time period. See: excess capacity,
Typically reflects the marketing and sales aspects of
idle capacity, protective capacity.
a product or service (similar in customer needs) and
productive inventory–In the theory of constraints, used in aggregate planning, marketing, costing, and
the inventory required to meet production sales planning. See: product family, product group.
requirements without allowance for unplanned
delays. See: idle inventory, protective inventory.

product load profile • profitability
product load profile–A listing of the required capacity 2) Removing material around a predetermined
and key resources needed to manufacture one unit of boundary by means of numerically controlled
a selected item or family. The resource requirements machining. The numerically controlled tool path is
are further defined by a lead-time offset to predict the automatically generated on the system.
impact of the product on the load of the key resources
product quality–Attribute that reflects the capability
by specific time period. The product load profile can
of a product to satisfy customers’ needs.
be used for rough-cut capacity planning to calculate
the approximate capacity requirements of the master product segments–The shared information between a
production schedule. See: bill of resources, resource plan-of-resources and a production rule for a specific
profile, rough-cut capacity planning. product. A logical grouping of personnel resources,
equipment resources, and material specifications
product manager–Syn: brand manager.
required to carry out the production step.
product manager concept–A marketing method in
product/service hierarchy–In sales and operations
which a manager is given complete responsibility
planning, a general approach to dividing products
for managing the introduction, stocking policy,
or services into families, brands, and subfamilies for
marketing, and sales of a specific product.
various planning levels. This ensures that a correct
product-market-focused organization–A firm top-down or bottom-up approach is taken to grouping
in which individual plants are dedicated to (or aggregating) demand at each subsequent level.
manufacturing a specific product or product group. Forecasts are more accurate the higher up the
product hierarchy they are developed; consequently,
product mix–The proportion of individual products
forecasts should usually be driven down from the top.
that make up the total production or sales volume.
Changes in the product mix can mean drastic product specification–A statement of acceptable
changes in the manufacturing requirements for physical, electrical, and/or chemical properties or an
certain types of labor and material. acceptable range of properties that distinguish one
product or grade from another.
product-mix flexibility–The ability to change over
quickly to other products produced in a facility, as product structure–The sequence of operations that
required by demand shifts in mix. components follow during their manufacture into
a product. A typical product structure shows raw
product number–Syn: item number.
material converted into fabricated components,
components put together to make subassemblies,
P
product or service liability–The obligation of a company
bears for loss related to personal injury, property subassemblies going into assemblies, and so forth.
damage, or other harm caused by its goods or services.
product structure record–A computer record
product plan–Syn: market plan. defining the relationship of one component to its
immediate parent and containing fields for quantity
product-positioned strategy–Locating operations required, engineering effectivity, scrap factor,
close to the sources of supply. See: market- application selection switches, and so forth.
positioned strategy.
product tree–A graphical (or tree) representation of
product-positioned warehouse–A warehouse the bill of material.
located close to the manufacturing plants that acts
as a consolidation point for products. product velocity–Units sold per period.
product positioning–The marketing effort involved profit–1) Gross profit is earnings from an ongoing
in placing a product in a market to serve a particular business after direct costs of goods sold have been
niche or function. Syn: service positioning. deducted from sales revenue for a given period.
2) Operating profit is earnings or income after all
product profiling–1) A graphical device used to expenses (selling, administrative, depreciation) have
ascertain the level of fit between a manufacturing been deducted from gross profit. 3) Net profit is
process and the order-winning criteria of its products. earnings or income after adjusting operating profit
Can be used at the process or company level to for miscellaneous income, expenses (patent royalties,
compare the manufacturing capabilities with the interest, capital gains, etc.), and tax. Syn: income.
market requirements to determine areas of mismatch
and identify steps needed for realignment. profitability–A measure of the excess income over
expenditure during a given period of time.

profitability analysis • project calendar
profitability analysis–In activity-based cost program evaluation and review technique (PERT)–In
accounting, the examination of profit received from project management, a network analysis technique
cost objects to attempt to optimize profitability. A in which each activity is assigned a pessimistic,
variety of views may be examined, including customer, most likely, and optimistic estimate of its duration.
distribution channel, product, and regions. The critical path method is then applied using a
weighted average of these times for each node. PERT
profitability index–In financial management, the
computes a standard deviation of the estimate of
net present value of a projected stream of income
project duration. See: critical path method, graphical
from a project (potential investment) divided by the
evaluation and review technique, network analysis.
investment in the project. It is used to select among
competing potential investments. programmable logic controller (PLC)–An electronic
device that is programmed to test the state of input
profitability ratio–An indicator of whether or not a
process data and to set output lines in accordance
company is generating profits at an acceptable rate.
with the input state, thus providing control instructions
It includes such measurements as return on total
or branching to another set of tests. Programmable
assets, return on equity, and profit margin.
controllers provide factory floor operations with the
profit center–An assigned responsibility center that ability to monitor and rapidly control hundreds of
has authority to affect both the revenues earned and parameters such as temperature and pressure.
the costs incurred by and allocated to the center.
program management–The activities involved in
Operational effectiveness is evaluated in terms of the
the realization of a product or service offered to
amount of profit generated.
customers. Responsibilities include planning, directing,
profit margin–1) The difference between the sales and controlling one or more projects of a new or
and cost of goods sold for an organization, sometimes continuing nature; initiating any acquisition processes
expressed as a percentage of sales. 2) In traditional necessary to get the project work under way; and
accounting, the product profit margin is the product monitoring performance. See: program manager.
selling price minus the direct material, direct labor,
program manager–A person assigned program
and allocated overhead for the product, sometimes
management responsibilities for the implementation
expressed as a percentage of selling price.
activities associated with a new or ongoing product
profit ratio–Profit divided by sales. or service offering to customers. See: program
management.
profit sharing–A plan by which employees receive
P
compensation above their normal wages, based on progressive operations–Passing work from station
company profitability. The purpose is to motivate to station.
employees and recognize their efforts.
progress payments–Payments arranged in connection
pro forma financial statements–Financial statements with purchase transactions requiring periodic
that are based on an assumed scenario rather than an payments in advance of delivery for certain amounts
actual experience. or for certain percentages of the purchase price.
pro forma invoice–A quote provided by a seller/exporter project–An endeavor with a specific objective
prior to the delivery of products or services, informing to be met within predetermined time and dollar
the buyer/importer of the price. This document is limitations and that has been assigned for definition
submitted to customs for valuation purposes. or execution. See: project manufacturing, project
management.
profound knowledge–A quality-related concept created
by W. Edwards Deming. The four aspects of profound project-based layout–A type of layout where the
knowledge are appreciation of a system, knowledge good or product is stationary and the workers come
about variation, theory of knowledge, and psychology. to the site to work on it.
program–In project management, a coordinated set project calendar–A calendar of working days and
of related projects, usually including ongoing work. nonworking days that shows when scheduled activities
are idle. Typically, it includes holidays and weekends.
program directive–A report by the program manager See: resource calendar.
to inform supporting departments concerning an
active or planned program or project.

project costing • promissory note
project costing–An accounting method of assigning project manufacturing–A type of manufacturing

valuations generally used in industries where services process used for large, often unique, items or structures
are performed on a project basis. Each assignment is that require a custom design capability (engineer-to-
unique and costed without regard to other assignments. order). This type of process is highly flexible and can
Examples are shipbuilding, construction projects, and cope with a broad range of product designs and design
public accounting firms. Project costing is different changes. Usually uses a fixed-position type layout.
from process costing, where the products to be See: batch (fourth definition), continuous production,
valued are homogeneous. job shop (second definition), process manufacturing,
project, repetitive manufacturing.
project duration–The elapsed duration from project
start date through project finish date. project model–A time-phased project planning and
control tool that itemizes major milestones and points
projected available balance–An inventory balance
of user approval.
projected into the future. It is the running sum of on-
hand inventory minus requirements plus scheduled project network–A diagram showing the technological
receipts and planned orders. Syn: projected available relationships among activities in a project.
inventory.
project phase–In project management, a set of
projected available inventory–Syn: projected related project activities that usually go together to
available balance. define a project deliverable.
projected finish date–The current estimate of the project plan–In project management, a document
date when an activity will be completed. that has been approved by upper management for use
in executing and controlling a project. It documents
projected on hand–Projected available balance,
assumptions, facilitates communication, and
excluding planned orders.
documents the approved budget and schedule. May
projected start date–The current estimate of the date exist at a summary or a detailed level.
when an activity will begin.
project production–Production in which each unit
projection–Syn: extrapolation. or small group of units is managed by a project team
created especially for that purpose.
project life cycle–In project management, a set of
project phases (objectives definition, requirements project risk management–In project management,
definition, external and internal design, construction, a systematic process of controlling project risk.
P system test, and implementation and maintenance), Includes maximizing the likelihood and effect of
whose definition is determined by the needs of those positive events and minimizing the likelihood and
controlling the project. effect of negative events.
project management–The use of skills and knowledge project schedule–In project management, a list of
in coordinating the organizing, planning, scheduling, activities and their planned completion dates that
directing, controlling, monitoring, and evaluating collectively achieve project milestones.
of prescribed activities to ensure that the stated
project scope–In project management, the work
objectives of a project, manufactured good, or service
required to create a product with given features
are achieved. See: project.
and options.
Project Management Body of Knowledge (PMBOK®)–
project summary work breakdown structure–
All the knowledge within the project management
A work breakdown structure that is developed
profession. Includes all published and unpublished
down to the subproject level of detail. See: work
material, knowledge that rests with practitioners and
breakdown structure.
academics, and practices that range from traditional
to innovative. project team–An inclusive term incorporating
the workers assigned to the project, the project
project management team–In project management,
managers, and sometimes the project sponsor.
the personnel assigned to a project who are directly
involved in management activities. project team directory–A list of team member names,
roles, and communication information.
promissory note–An agreement to pay a stipulated

amount during an agreed time period.

promotion • public-private partnering
promotion–One of the four Ps (product, price, place, and protocol–In information systems, a set of rules for
promotion) that constitute the set of tools used to direct defining the format and relationships for sharing
the business offering to the customer. Promotion is the information between devices. These rules govern the
mechanism whereby information about the product transmission of data across a network and serve as
offering is communicated to the customer. It includes the grammar of data communication languages.
public relations, advertising, sales promotions, and
prototype–1) A product model constructed for testing
other tools used to persuade customers to purchase
and evaluation to see how the product performs
the product offering. See: four Ps.
before releasing the product to manufacture. 2)
promotional product–A product that is subject to Model consisting of all files and programs needed for
wide fluctuations in sales because it is usually sold at a business application.
a reduced price or with some other sales incentive.
prototyping–1) A specialized product design and
proof of delivery (POD)–Carrier’s records indicating development process for developing a working model
the person signing for delivery with the date, time, and of a product. 2) A specialized system development
other related information. process for performing a determination where user
needs are extracted, presented, and developed by
proportional rate–A lower rate applied to specific
building a working model of the system. Generally,
parts of a shipment instead of charging the entire rate
these tools make it possible to create all files and
for only one part of the shipment.
processing programs needed for the evaluation of a
proprietary assembly–An assembly designed by business application in a matter of days or hours.
a manufacturer that may be serviced only with
provisioning–The process of identifying and
component parts supplied by the manufacturer and
purchasing the support items and determining the
whose design is owned or licensed by its manufacturer.
quantity of each support item necessary to operate
proprietary data–Any financial, technical, or other and maintain a system.
information that is developed at the expense of the
proxy–1) A written document authorizing an agent to
person or other entity submitting it and deemed to be
vote a shareholder’s stock at a shareholder meeting.
of strategic or tactical importance to the company. It
2) The agent designated in 1).
may be offered to customers on a restricted-use basis.
PRT–Abbreviation for prerequisite tree.
protection time–Syn: safety lead time.
pseudo bill of material–An artificial grouping of items
P
protective capacity–The resource capacity needed
that facilitates planning. See: modular bill of material,
to protect system throughput—ensuring that some
phantom bill of material, planning bill of material,
capacity above the capacity required to exploit the
super bill of material.
constraint is available to catch up when disruptions
inevitably occur. Nonconstraint resources need psychographics–The grouping of consumers
protective capacity to rebuild the bank in front of the according to their behavior patterns and lifestyles.
constraint or capacity-constrained resource (CCR)
public key–In information systems, a system where
and/or on the shipping dock before throughput is lost
one person holds a private key (an encryption code
and to empty the space buffer when it fills.
defining access rights) but shares another key
protective inventory–In the theory of constraints, the with a set of people with whom that person will
amount of inventory required relative to the protective communicate. See: private key.
capacity in the system to achieve a specific throughput
publicly traded corporation–A corporation whose
rate at the constraint. See: limiting operation.
stock is available on a national exchange.
protective packaging–Wrapping or covering of
public ownership–A business formed under law as a
material that provides containment, protection, and
separate legal entity and for which stock is publicly
identification of inventory in a warehouse. The material
traded. See: partnership, private ownership.
must be contained in such a way that will support
movement and storage and will fit into the dimension public-private partnering–Cooperation between
of storage space and transportation vehicles. a government entity and one or more private
enterprises to perform work or utilize facilities.

public warehouse • push-back rack
public warehouse–The warehouse space that is rented purchase price variance–The difference in price
or leased by an independent business providing a between the amount paid to the supplier and the
variety of services for a fee or on a contract basis. planned or standard cost of that item.
These services can include product inspection,
purchase requisition–An authorization to the
product rating, and repackaging. These facilities are
purchasing department to purchase specified
typically located near primary roads, railways, or inland
materials in specified quantities within a specified
waterways to facilitate rapid receiving and shipping of
time. See: parts requisition.
products. Syn: duty paid warehouse.
purchasing–The term used in industry and management
pull signal–Any signal that indicates when to produce
to denote the function of and the responsibility for
or transport items in a pull replenishment system. For
procuring materials, supplies, and services.
example, in just-in-time production control systems,
a kanban card is used as the pull signal to replenish purchasing agent–A person authorized by the company
parts to the using operation. See: pull system. to purchase goods and services for the company.
pull system–1) In production, the production of purchasing capacity–The act of buying capacity or
items only as demanded for use or to replace those machine time from a supplier. A company can then
taken for use. See: pull signal. 2) In material control, schedule and use the capacity of the machine or a
the withdrawal of inventory as demanded by the part of the capacity of the machine as if it were in its
using operations. Material is not issued until a signal own plant.
comes from the user. 3) In distribution, a system
for replenishing field warehouse inventories where purchasing lead time–The total lead time required
replenishment decisions are made at the field to obtain a purchased item. Included here are order
warehouse itself, not at the central warehouse or plant. preparation and release time; supplier lead time;
transportation time; and receiving, inspection, and
pull-through distributions–Supply chain activities put-away time. See: lead time, supplier lead time,
that are started by the consumer. Instead of the time-to-product.
manufacturer “pushing” products to stores, in a
pull-through distribution consumers purchase items, purchasing performance measurement–
which signals the manufacturer to produce more of Syn: supplier measurement.
that product. Effectively, the consumer is “pulling” purchasing unit of measure–Syn: unit of measure
products to the store. (purchasing).
P
punitive damages–The money awarded a plaintiff pure competition–A market in which many competitors
not as payment for the plaintiff’s losses, but as offer undifferentiated products or services within
punishment for the defendant’s conduct. a given geographical area. Competitors are forced
pup–A 28-foot trailer, usually used in trucking to accept the market price for their product. See:
enterprises. industry structure types.
purchase consolidation–The pooling of purchasing pure monopoly–A market in which only one firm
requirements by multiple areas in a company, or even provides a particular product or service within a given
across companies. area. The monopoly may be regulated or unregulated.
See: industry structure types.
purchased part–An item sourced from a supplier.
pure oligopoly–A market in which a few companies
purchase order–The purchaser’s authorization used produce essentially the same product or service and
to formalize a purchase transaction with a supplier. market it within a given area. A company is forced
A purchase order, when given to a supplier, should to price its product at the going rate unless it can
contain statements of the name, part number, differentiate its product. See: industry structure types.
quantity, description, and price of the goods or
services ordered; agreed-to terms as to payment, pure services–Services that result in few or no
discounts, date of performance, and transportation; tangible products to the customer (e.g., education).
and all other agreements pertinent to the purchase push-back rack–A wheeled rack structure on which
and its execution by the supplier. palletized materials are stored and pushed up a
purchase price discount–A pricing strategy in which slightly sloping ramp from which they can eventually
a seller offers a customer a cheaper price in exchange slide down to an aisle.
for purchasing more goods.

push-pull boundary • quality, cost, delivery (QCD)
Q
push-pull boundary–The decoupling point at which
a system changes from being driven by forecast to
being driven by customer demand.
push system–1) In production, the production of QCD–Abbreviation for quality, cost, delivery.
items at times required by a given schedule planned in
advance. 2) In material control, the issuing of material Q chart–A control chart for evaluating the stability of
according to a given schedule or issuing material to a a process in terms of a quality score. The quality score
job order at its start time. 3) In distribution, a system is the weighted sum of the count of events of various
for replenishing field warehouse inventories where classifications, where each classification is assigned
replenishment decision making is centralized, usually a weight. Syn: quality chart, quality score chart.
at the manufacturing site or central supply facility. QFD–Abbreviation for quality function deployment.
See: pull system.
QRM–Abbreviation for quick-response manufacturing.
push technology–The automatic updates in selected
services, such as news or weather, that occur QRP–Abbreviation for quick-response program.
periodically as information is sent via the internet.
QS 9000–A variation of ISO 9000 certification with
The source of the information “pushes” it onto the
additional requirements tailored for the automobile
customer. Syn: webcasting.
industry, including suppliers. QS 9000 is being
put-away–Removing the material from the dock (or superseded by ISO/ TS 16949, which incorporates many
other location of receipt), transporting the material European standards. See: ISO 9000, ISO/TS 16949.
to a storage area, placing that material in a staging
qualifiers–Syn: order qualifiers. See: order losers,
area and then moving it to a specific location, and
order winners.
recording the movement and identification of the
location where the material has been placed. qualitative forecasting techniques–An approach to
forecasting that is based on intuitive or judgmental
put-away time–The lead time between when a raw
evaluation. It is used generally when data is scarce,
material or component arrives and when the items are
not available, or no longer relevant. Common types of
available in the store. Syn: dock-to-stock time.
qualitative techniques include personal insight, sales
put-to-light–A process that uses lights to ensure force estimates, panel consensus, market research,
materials are placed in the correct locations. Also visionary forecasting, and the Delphi method.
used to ensure that picked items are placed correctly. Examples include developing long-range projections
and new product introductions.
pyramid forecasting–A forecasting technique that
Q
enables management to review and adjust forecasts quality–Conformance to requirements or fitness for
made at an aggregate level and to keep lower-level use. Quality can be defined through five principal
forecasts in balance. The approach combines the approaches: (1) Transcendent quality is an ideal; a
stability of aggregate forecasts and the application condition of excellence. (2) Product-based quality is
of management judgment with the need to forecast based on a product attribute. (3) User-based quality
many end items within the constraints of an is fitness for use. (4) Manufacturing-based quality is
aggregate forecast or sales plan. conformance to requirements. (5) Value-based quality
is the degree of excellence at an acceptable price.
The procedure begins with the roll up (aggregation) Also, quality has two major components: (1) quality
of item forecasts into forecasts by product group. of conformance—quality is defined by the absence
The management team establishes a (new) forecast of defects, and (2) quality of design—quality is
for the product group. The value is then forced down measured by the degree of customer satisfaction with
(disaggregation) to individual item forecasts so a product’s characteristics and features.
they are consistent with the aggregate plan. See:
management estimation, planning bill of material, quality, cost, delivery (QCD)–Key measurements
product group forecast. of customer satisfaction. Kaizen activity strives to
improve these measurements.

quality assurance/control • quality tree
quality assurance/control–Two terms that have recognized categories: internal failure costs, external
many interpretations because of the multiple failure costs, appraisal costs, and prevention costs.
definitions for the words “assurance” and “control.” Internal failure costs relate to problems before
For example, “assurance” can mean the act of giving the product reaches the customer. These usually
confidence, the state of being certain, or the act of include rework, scrap, downgrades, reinspection,
making certain; “control” can mean an evaluation retest, and process losses. External failure costs
to indicate needed corrective responses, the act relate to problems found after the product reaches
of guiding, or the state of a process in which the the customer. These usually include such costs as
variability is attributable to a constant system of warranty and returns. Appraisal costs are associated
chance causes. One definition of quality assurance is with the formal evaluation and audit of quality in the
all the planned and systematic activities implemented firm. Typical costs include inspection, quality audits,
within the quality system that can be demonstrated testing, calibration, and checking time. Prevention
to provide confidence that a good or service will fulfill costs are those caused by improvement activities
requirements for quality. One definition for quality that focus on reducing failure and appraisal costs.
control is the operational techniques and activities Typical costs include education, quality training, and
used to fulfill requirements for quality. Often, however, supplier certification. See: cost of poor quality.
quality assurance and quality control are used
quality engineering–The engineering discipline
interchangeably, referring to the actions performed to
concerned with improving the quality of products
ensure the quality of a good, service, or process. See:
and processes.
quality control.
quality function deployment (QFD)–A methodology
quality at the source–A producer’s responsibility to
designed to ensure that all the major requirements
provide 100 percent acceptable quality material to the
of the customer are identified and subsequently
consumer of the material. The objective is to reduce
met or exceeded through the resulting product
or eliminate shipping or receiving quality inspections
design process and the design and operation of the
and line stoppages as a result of supplier defects.
supporting production management system. QFD can
quality audit–A systematic, independent be viewed as a set of communication and translation
examination and review to determine whether quality tools. QFD tries to eliminate the gap between what
activities and related results comply with planned the customer wants in a new product and what the
arrangements and whether these arrangements are product is capable of delivering. QFD often leads to a
implemented effectively and are suitable to achieve clear identification of the major requirements of the
the objectives. customers. These expectations are referred to as the
voice of the customer (VOC). See: house of quality.
quality characteristic–A property of a product or
Q service that is important enough to count or measure.

See: performance measurement system.
quality loss function–A parabolic approximation of the
quality loss that occurs when a quality characteristic
deviates from its target value. The quality loss function
quality chart–Syn: Q chart.
is expressed in monetary units: The cost of deviating
quality circle–A small group of people who normally from the target increases quadratically as the quality
work as a unit and meet frequently to uncover characteristic moves farther from the target. The
and solve problems concerning the quality of formula used to compute the quality loss function
items produced, process capability, or process depends on the type of quality characteristic being
control. Syn: quality control circle. See: small group used. The quality loss function was first introduced in
improvement activity. this form by Genichi Taguchi.
quality control–The process of measuring quality quality policy–A top-management statement of the
conformance by comparing the actual with a standard overall quality direction of an organization as required
for the characteristic and taking corrective actions on by ISO 9001.
the difference. See: quality assurance/contol.
quality score chart–Syn: Q chart.
quality control circle–Syn: quality circle.
quality tree–An analytical tool that visualizes quality
quality costs–The overall costs associated with being composed of four layers of achievement: (1)
prevention activities and the improvement of inspection, (2) process measurement and improvement,
quality throughout the firm before, during, and after (3) process control, and (4) design for quality.
production of a product. These costs fall into four

quality trilogy • quotation expiration date
quality trilogy–A three-pronged approach to managing job to the queue originally scheduled.
quality proposed by Joseph Juran. The three legs
queue time–The amount of time a job waits at a work
are quality planning (developing the products and
center before setup or work is performed on the job.
processes required to meet customer needs), quality
Queue time is one element of total manufacturing
control (meeting product and process goals), and
lead time. Increases in queue time result in direct
quality improvement (achieving unprecedented levels
increases to manufacturing lead time and work-in-
of performance). Syn: Juran Trilogy.
process inventories.
quantitative forecasting techniques–An approach
queuing analysis–The study of waiting lines. See:
to forecasting where historical demand data is
queuing theory.
used to project future demand. Extrinsic and
intrinsic techniques are typically used. See: extrinsic queuing theory–The collection of models dealing
forecasting method, intrinsic forecasting method. with waiting line problems; for example, problems
for which customers or units arrive at some service
quantity-based order system–Syn: fixed reorder
facility at which waiting lines or queues may build.
quantity inventory model.
Syn: waiting line theory. See: queuing analysis.
quantity discount–A price reduction allowance
quick asset ratio–A measure of a firm’s financial
determined by the quantity or value of a purchase.
stability. It is defined as (current assets minus inventory)
quantity discount model–A variation of the economic divided by current liabilities. A value greater than 1 is
order quantity model in which the assumption of a desirable. Syn: quick ratio, acid test, acid test ratio.
single price is relaxed and there is a schedule of prices
quick changeover–The ability to shorten machine
based on specific volumes. Syn: price-break model.
setups between different machine operation
quantity per–The quantity of a component to be used requirements to increase process flexibility. Highest
in the production of its parent. This value is stored in concentration is on first reducing external setup time,
the bill of material and is used to calculate the gross then on internal setup issues. This reduces economic
requirements for components during the explosion order quantity, queue and manufacturing lead times,
process of MRP. and work-in-process inventory; it improves quality,
process, and material flows.
quarantine–The setting aside of items from availability
for use or sale until all required quality tests have been quick ratio–Syn: quick asset ratio.
performed and conformance certified.
quick response manufacturing–A company-wide
quasi manufacturing–A type of service operation that strategy to cut lead times in all phases of manufacturing
Q
closely resembles a manufacturing process; focus is and office operations. With its roots in the time-based
on production process, technology, costs, and quality. competition strategies, quick-response manufacturing
focuses on the relentless pursuit of lead time reduction.
question mark–In marketing, a slang term for a low
Using manufacturing resources planning for higher-level
market share but high growth rate product. See:
planning, it often uses a replenishment technique called
growth-share matrix.
paired-cell overlapping loops of cards, which combines
queue–A waiting line. In manufacturing, the jobs at a the best of push and pull strategies. See: paired-cell
given work center waiting to be processed. As queues overlapping loops of cards.
increase, so do average queue time and work-in-
quick-response program (QRP)–A system of linking
process inventory.
final retail sales with production and shipping schedules
queue discipline–A parameter in queuing theory back through the chain of supply; employs point-of-sale
that determines the order in which customers are scanning and electronic data interchange, and may use
to be served. direct shipment from a factory to a retailer.
queue length–The quantity of items in a queue that quotation–A statement of price, terms of sale, and
are awaiting service. description of goods or services offered by a supplier
to a prospective purchaser; a bid. When given in
queue management–Tactics to deal with an excess response to an inquiry, it is usually considered an offer
number of items, such as products or customers, to sell. See: bid.
waiting in line for service.
quotation expiration date–The date on which a
queue ratio–The ratio of the hours of slack within the quoted price is no longer valid.

R&D • rapid replenishment
R
random events–1) occurrences that have no
discernable pattern. 2) In statistics, unexplained
movements occurring in historical (time series) data.
See: random variation.
R&D–Abbreviation for research and development.
random-location storage–A storage technique in
R&D order–Syn: experimental order. which parts are placed in any space that is empty
RACI (responsible, accountable, consulted, and when they arrive at the storeroom. Although this
informed) analysis–An acronym used to describe a random method requires the use of a locator file to
document that identifies who is Responsible; who identify part locations, it often requires less storage
is Accountable; who should be Consulted; and who space than a fixed-location storage method. Syn:
should be kept Informed for various aspects of a floating inventory location system, floating storage
project or process. location. See: fixed-location storage.
rack–A storage device for handling material in pallets. random numbers–A sequence of integers or group
A rack usually provides storage for pallets arranged in of numbers (often in the form of a table) that show
vertical sections with one or more pallets to a tier. Some absolutely no relationship to each other anywhere in the
racks accommodate more than one-pallet-deep storage. sequence. At any point, all values have an equal chance
of occurring, and they occur in an unpredictable fashion.
racking–A function performed by a rack-jobber—a
full-function intermediary who performs all regular random sample–A selection of observations taken
warehousing functions and some retail functions, from all the observations of a phenomenon in such
typically stocking a display rack. a way that each chosen observation has the same
possibility of selection.
radio frequency identification (RFID)–A system using
electronic tags to store data about items. Accessing random variation–A fluctuation in data that is caused by
or retrieving this data is accomplished through a uncertain or random occurrences. See: random events.
specific radio frequency and does not require close range–In statistics, the spread in a series of
proximity or line-of-sight access. See: active tag, observations. For example, the anticipated demand
passive tag, semi-passive tag. for a particular product might vary from a low of 10 to
rail gauge–The spacing of the width of the rails on a high of 500 per week. The range would therefore be
a railway track, measured between the inner sides 500 – 10, or 490.
of the rails. In rail transport, this is a key parameter range chart–Syn: R chart.
in determining interoperability, since all vehicles
must have running gear that is compatible with the rapid prototyping–1) The transformation of product
spacing. This can vary between countries and cause designs into physical prototypes. Rapid prototyping
relies on techniques such as cross-functional
R
compatibility issues.
teams, data sharing, and advanced computer
rail waybill–A freight document that indicates goods and communication technology (e.g., CAD, CAM,
have been received for shipment by rail. The shipper stereolithography, data links). Rapid prototyping
receives a copy as a receipt for acceptance. involves producing the prototype on production
RAM–Abbreviation for responsibility assignment matrix. equipment as often as possible. It improves product
development times and allows for cheaper and faster
ramp rate–The speed at which a company expands or product testing, assessment of the ease of assembly
grows. Syn: growth trajectory. and costs, and validation before actual production
tooling. 2) The transformation of system designs into
random access–A manner of storing records in a
computer system prototypes with which the users
computer file so that an individual record may be
can experiment to determine the adequacy of the
accessed without reading other records.
design to address their needs. See: 3D printing.
random cause–Syn: common causes.
rapid replenishment–A replenishment strategy
random component–A component of demand usually in which the supplier prepares shipments at
describing the impact of uncontrollable variation on predetermined intervals and varies the quantity based
demand. See: decomposition, time series analysis. on recent sales data. Sales data may be supplied via a
point-of-sale system. See: continuous replenishment.

rate-based scheduling • record accuracy
rate-based scheduling–A method for scheduling and real time–The technique of coordinating data
producing based on a periodic rate (e.g., daily, weekly, processing with external related physical events as
monthly). This method has traditionally been applied they occur, thereby permitting prompt reporting of
to high-volume and process industries. The concept conditions. See: online service.
has also been applied within job shops using cellular
reasonable rate–A pricing strategy that allows a
layouts and mixed-model level schedules where the
company to profit but not to achieve monopolistic
production rate is matched to the selling rate.
profits. Normally determined by industry pricing
rate basis point–The center of shipping in a specific analysis.
area; used to determine shipping rates.
recalls–A step in the reverse logistics process where
rated capacity–The expected output capability of a parts or products are returned due to a product
resource or system. Capacity is traditionally calculated defect or potential hazard resulting from government
from such data as planned hours, efficiency, and regulations or liability concerns.
utilization. The rated capacity is equal to hours available
receipt–1) The physical acceptance of an item into
× efficiency × utilization. Syn: calculated capacity,
a stocking location. 2) The transaction reporting of
effective capacity, nominal capacity, standing capacity.
this activity.
rate of return on investment–The efficiency ratio
receivables conversion period–The length of time
relating profit or cash flow incomes to investments.
required to collect sales receipts. Syn: average
Several different measures of this ratio are in
collection period.
common use.
receiving–The function encompassing the physical
rate variance–The difference between the actual output
receipt of material, the inspection of the shipment
rate of product and the planned or standard output rate.
for conformance with the purchase order (quantity
ratification–The situation wherein a principal that has and damage), the identification and delivery to
failed to denounce an agent’s unauthorized conduct destination, and the preparation of receiving reports.
is consequently bound by the conduct.
receiving point–The location to which material is
rationalization exercise–A process of reducing the being shipped. Ant: shipping point.
population of figures such as stockkeeping unit
receiving report–A document used by the receiving
counts or supplier lists.
function of a company to inform others of the receipt
rationing–The allocation of product among consumers. of goods purchased.
When price is used to allocate product, it is allocated to
recency, frequency, monetary (RFM)–Giving the
those willing to pay the most.
highest rating to customers who have bought recently,
raw material–Purchased items or extracted materials bought many times, and bought in large amounts.
R
that are converted via the manufacturing process into
reconciling inventory–Comparing the physical
components and products.
inventory figures with the perpetual inventory
raw materials inventory–Inventory of material that record and making any necessary corrections.
has not undergone processing at a facility.
reconsignment–Permission by a carrier to alter the
RCCP–Abbreviation for rough-cut capacity planning. destination and/or consignee after the shipment has
reached its original destination.
R chart–A control chart in which the subgroup range,
R, is used to evaluate the stability of the variability record–1) A collection of data fields arranged in a
within a process. Syn: range chart. predefined format. 2) A set of related data that a
computer program treats as a unit.
reach–The percentage of target customers who
receive an advertising message. record accuracy–A measure of the conformity of
recorded values in a bookkeeping system to the
reactive maintenance–Syn: breakdown maintenance.
actual values; for example, the on-hand balance of an
reactor–A special vessel to contain a chemical reaction. item maintained in a computer record relative to the
actual on-hand balance of the items in the stockroom.
real property–Land and associated rights
improvements, utility systems, buildings,
and other structures.

recovery • release-to-start manufacturing
recovery–A reverse logistics strategy for the activities through all bills of material. New requirements
involved in the collection of used and discarded and planned orders are completely recalculated or
products, components, and materials. It focuses “regenerated” at that time. Ant: net change MRP.
on reuse, repair, refurbishment, remanufacturing,
registration to standards–A process in which an
recycling, or disposal. The objective is to recover as
accredited, independent third-party organization
much of the economic value as possible, reduce waste,
conducts an on-site audit of a company’s operations
and minimize environmental impact.
against the requirements of the standard to which
recovery time–In periods of insufficient capacity, the company wants to be registered. Upon successful
jobs back up indefinitely. This leads to increased lead completion of the audit, the company receives a
times and missed due dates. Recovery time is a period certificate indicating that it has met the standard
of time when capacity exceeds demand to allow the requirements.
system to empty out. If there is not enough recovery
regression analysis–A statistical technique for
time before the next episode of insufficient capacity,
determining the best mathematical expression
in-process inventory and lead times continue to grow.
describing the functional relationship between one
recycle–1) The reintroduction of partially processed response and one or more independent variables. See:
product or carrier solvents from one operation or task least-squares method.
into a previous operation. 2) A recirculation process.
regularized schedule–A schedule having certain
red bead experiment–An experiment developed by items produced at regular intervals.
W. Edwards Deming to illustrate the impossibility
rejected inventory–Inventory that does not meet
of putting employees in rank order of performance.
quality requirements but has not yet been sent to
The experiment shows that it would be a waste of
rework, scrapped, or returned to a supplier.
management’s time to try to find out why one worker
produced more errors than another; management rejection–The act of identifying an item as not
should instead improve the system, making it possible meeting quality specifications.
for everyone to achieve higher quality.
relational database–A software program that allows
red zone–The lowest-level buffer zone in drum-buffer- users to obtain information drawn from two or more
rope scheduling where the red color is used to indicate databases that are made up of two-dimensional
a serious situation for the buffer. arrays of data.
redundancy–1) A backup capability, coming either from relationship map–A graphic map of the relationship
extra machines or from extra components within a between the business functions. It shows the inputs
machine, to reduce the effects of breakdowns. 2) The and outputs flow across functions. It is useful to
use of one or more extra or duplicating components in show how processes are currently performed,
a system or equipment (often to increase reliability). disconnections in processes, and proposed
R redundant component–A backup part of a machine

or product.
processes. Relationship maps show the products
and services of a given unit, how work flows through
organizational boundaries, and the relationships
reference capacity model–A simulation model with between functions represented by boxes in the map.
accurate operational details and demand forecasts
relationship marketing–A form of target marketing
that can provide practical capacity utilization
in which the type and time of communications are
predictions. Various alternatives for system operation
determined by the customer. Syn: permission marketing.
can be evaluated effectively.
release–The authorization to produce or ship material
refurbished goods–Syn: remanufactured parts.
that has already been ordered.
refurbished parts–Syn: remanufactured parts.
released order–Syn: open order.
regen–Slang abbreviation for regeneration MRP.
release-to-start manufacturing–The time it takes from
Pronounced “ree-jen.”
when an order is released until the beginning of the
regeneration MRP–An MRP processing approach manufacturing process. This delay occurs because of
where, to maintain valid priorities, the master the movement of materials and the changing of lines. It
production schedule is totally reexploded down is non-productive time that increases lead time.

relevant costs • replacement cost systems
relevant costs–Those costs incurred because of a plus on-order) falls to or below the reorder point. 2)
decision. The costs would not have resulted unless In a variable reorder quantity system, the amount
the decision was made and implemented. They are ordered from time period to time period varies. Syn:
relevant to the decision. replenishment order quantity.
relevant range–The range of activity planned for a firm. repairables–Items that are technically feasible to
repair economically.
reliability–1) The probability that a product will
perform its specified function under prescribed repair bill of material–In remanufacturing, the bill of
conditions without failure for a specified period of material defining the actual work required to return a
time. 2) A design parameter that can be made part of product to service. Constructed based on inspection
a requirements statement. 3) A SCOR performance and determination of actual requirements. See:
attribute. The reliability attribute addresses the ability disassembly bill of material.
to perform tasks as required. Reliability focuses on
repair factor–The percentage of time on average that
the predictability of the outcome of a process. Typical
an item must be repaired for return to a serviceable
metrics for the reliability attribute include on-time,
condition. The repair factor is also expressed as a
the right quantity, and the right quality. Reliability is a
percentage applied to the quantity per assembly on
customer-focused attribute. See: mean time between
the bill of material. It is useful for forecasting materials
failures, mean time for failures.
and capacity requirements for planning purposes.
reliability engineering–The function responsible for Syn: frequency of repair. See: occurrence factor,
the determination and application of appropriate replacement factor.
reliability tasks and criteria during the design,
repair order–Syn: rework order.
development, manufacture, test, and support of
a product that will result in achievement of the repair parts–Syn: service parts.
specified product reliability.
repair parts demand–Syn: service parts demand.
remanufactured parts–Components or assemblies
that are refurbished or rebuilt to perform the original repeatability of measurement–The variation in
function. Syn: refurbished goods, refurbished parts. measurements obtained when one measurement
instrument is used several times by an appraiser while
remanufacturing–1) An industrial process in measuring the identical characteristic on the same part.
which worn-out products are restored to like-new
condition. In contrast, a repaired product normally repetitive industries–The group of manufacturers
retains its identity, and only those parts that have that produce high-volume, low-variety products such
failed or are badly worn are replaced or serviced. 2) as spark plugs, lawn mowers, and paper clips. See:
The manufacturing environment where worn-out repetitive manufacturing.
products are restored to like-new condition.
R
repetitive manufacturing–The repeated production
remanufacturing resource planning–A of the same discrete products or families of products.
manufacturing resource planning system designed Repetitive methodology minimizes setups, inventory,
for remanufacturing facilities. and manufacturing lead times by using production
lines, assembly lines, or cells. Work orders are no longer
remedial maintenance–Unscheduled maintenance necessary; production scheduling and control are
performed to return a product or process to a specified based on production rates. Products may be standard
performance level after a failure or malfunction. or assembled from modules. Repetitiveness is not a
function of speed or volume. Syn: repetitive process,
remote diagnostics–The capability of determining the
repetitive production. See: project manufacturing.
cause of a problem from an off-site location.
repetitive process–Syn: repetitive manufacturing.
reneging–A queuing theory term for leaving a line after
entering it but before receiving service. See: balking. repetitive production–Syn: repetitive manufacturing.
reorder cycle–Syn: replenishment lead time. replacement cost–A method of setting the value of
inventories based upon the cost of the next purchase.
reorder point (ROP)–Syn: order point.
replacement cost systems–A method of inventory
reorder quantity–1) In a fixed reorder quantity system
valuation that assigns an item cost based on the next
of inventory control, the fixed quantity that should
item price incurred.
be ordered each time the available stock (on-hand

replacement factor • rescheduling notice
replacement factor–The percentage of time on request for information (RFI)–An inquiry to a

average that an item will require replacement. The potential supplier about that supplier’s product or
replacement factor is also expressed as a percentage service for potential use in the business. The inquiry
applied to the quantity per assembly on the bill of can provide certain business requirements or be of
material. It is useful for forecasting materials and a more general exploratory nature. See: request for
capacity requirements for planning purposes. See: proposal (RFP).
occurrence factor, repair factor.
request for proposal (RFP)–A document used
replacement order–An order for the replacement of to solicit vendor responses when the functional
material that has been scrapped. requirements and features are known but no specific
product is in mind. Syn: invitation for bid (IFB). See:
replacement parts–Parts that can be used
request for information (RFI).
as substitutes but differ from completely
interchangeable service parts in that they require request for quote (RFQ)–A document used to solicit
some physical modification (e.g., boring, cutting, vendor responses when a product has been selected
drilling) before they can replace the original part. and price quotations are needed from several vendors.
replan cycle–The time it takes to implement a new required capacity–Syn: capacity required.
production plan into the plant’s actual production
requirements definitions–Specifying the inputs,
plan. Occurs after completion of the last cycle and
files, processing, and outputs for a new system,
takes the form of a rolling document.
but without expressing computer alternatives and
replanning frequency–In an MRP system, the amount technical details.
of time between successive runs of the MRP model. If
requirements explosion–The process of calculating
the planner does not run MRP frequently enough, the
the demand for the components of a parent item
material plan becomes inaccurate because material
by multiplying the parent item requirements by the
requirements and inventory status change with the
component usage quantity specified in the bill of
passage of time.
material. Syn: explosion.
replenishment–Relocating material from a bulk
requirements traceability–The capability to
storage area to an order pick storage area and
determine the source of demand requirements
documenting this relocation.
through record linkages. It is used in analyzing
replenishment interval–Syn: replenishment period. requirements to make adjustments to plans for
material or capacity. See: pegging.
replenishment lead time–The total period of time
that elapses from the moment it is determined that a requisition–Syn: parts requisition.
product should be reordered until the product is back
rerouting flexibility–Accommodating unavailability
on the shelf available for use. Syn: reorder cycle.
R
of equipment by quickly and easily using alternate
replenishment order quantity–Syn: reorder quantity. machines in the processing sequence.
replenishment period–The time between successive rescheduling–The process of changing order or

replenishment orders. Syn: replenishment interval. operation due dates, usually as a result of their being out
See: review period. of phase with production or customer commitments.
reprocessed material–Goods that have gone through rescheduling assumption–A fundamental

selective rework or recycle. assumption of MRP logic that existing open orders
can be rescheduled in nearer time periods far more
reproducibility–A production program’s ability to
easily than new orders can be released and received.
regularly produce products of the correct quantity
As a result, planned order receipts are not created
and quality.
until all scheduled receipts have been applied to cover
repurpose–To take something and use it for gross requirements.
something else not originally intended. The materials
rescheduling notice–A message from planning
may be repaired, reconditioned, and repackaged
system software to change the planned start and/
for resale or used in a different manner through
or finish date of an order. This often is the result of a
remanufacturing, recycling, or salvage.
change in plans of a parent item. See: nervousness.

research and development (R&D) • resource planning
research and development (R&D)–A function that resource driver–The objects that are linked to an
performs basic and applied research and develops activity that consumes resources at a specified rate.
potential new products. For example, a resource driver is a purchase order
(the object) that when placed (the activity) consumes
resellers–Organizations intermediate in the
hours (the rate) of purchasing (the resource).
manufacturing and distribution process, such as
wholesalers and retailers, that purchase goods or resource leveling–The process of scheduling (and
services with the intention of selling them rather than rescheduling) the start and finish dates of operations (or
consuming or using them. activities) to achieve a consistent rate of resource usage
so that resource requirements do not exceed resource
reservation–The process of designating stock for a
availability for a given time period. Syn: leveling.
specific order or schedule. See: allocation.
resource limited schedule–Project schedule with
reserve–Contingency funds set aside to mitigate risk.
no early or late start or finish dates. The activity and
reserved material–Material on hand or on order that scheduled start and finish dates show the expected
is assigned to specific future production or customer availability of resources. Syn: resource-constrained
orders. Syn: allocated material, assigned material, schedule.
obligated material.
resource-limited scheduling–The scheduling of
reserve stock–Syn: safety stock. activities so that predetermined resource availability
pools are not exceeded. Activities are started as soon
residence time–Syn: process time. as resources are available (with respect to logical
residual income–The net operating income that an constraints), as required by the activity. When not
investment center earns above the minimum required enough of a resource exists to accommodate all
return on its operating assets. activities scheduled on a given day, a priority decision
is made. Project finish may be delayed, if necessary, to
residual inventory–Inventory created by the alter schedules constrained by resource usage.
canceling or rescheduling of an order or left over
because of lot sizing. resource management–1) The planning and validation
of all organizational resources. 2) The effective
resiliency–In the supply chain, the ability to return identification, planning, scheduling, execution, and
to a position of equilibrium after experiencing an control of all organizational resources to produce a
event that causes operational results to deviate from good or service that provides customer satisfaction
expectations. Resiliency is increased by strategically and supports the organization’s competitive edge
increasing the number of response options and/ and ultimately, its organizational goals. 3) An
or decreasing the time to execute those options. emerging field of study emphasizing the systems
Resiliency is improved by risk monitoring and control. perspective, encompassing both the product and
R
process life cycles, and focusing on the integration
resource–Anything that adds value to a good or
of organizational resources toward the effective
service in its creation, production, or delivery.
realization of organizational goals. Resources include
resource breakdown structure–A hierarchical materials; maintenance, repair, and operating supplies;
structure that breaks resources into categories and production and supporting equipment; facilities; direct
types; can be useful for plan resource schedules, and indirect employees; staff; administrative and
including human resources. professional employees; information; knowledge; and
capital. Syn: integrated resource management.
resource calendar–A calendar of working days and
nonworking days that shows when resources are resource planning–Capacity planning conducted at
idle. Typically, the calendar includes holidays and the business plan level. The process of establishing,
weekends. See: manufacturing calendar. measuring, and adjusting limits or levels of long-range
capacity. Resource planning is normally based on the
resource-constrained schedule–Syn: resource- production plan but may be driven by higher-level
limited schedule. See: drum-buffer-rope. plans beyond the time horizon of the production plan
resource contention–Simultaneous need for a (e.g., the business plan). It addresses those resources
common resource. Syn: concurrency. 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.

resource profile • return on supply chain fixed assets
resource profile–The standard hours of load placed retrofit–An item that replaces components originally
on a resource by time period. Production lead-time installed on equipment; a modification to in-service
data is taken into account to provide time-phased equipment.
projections of the capacity requirements for
return–The activities associated with the reverse flow
individual production facilities. See: bill of resources,
of goods. Detail activities encompass identification
capacity planning using overall factors, product load
of the need to return, disposition decision making,
profile, rough-cut capacity planning.
scheduling of the return, and shipment and receipt of
resource requirements planning–Syn: resource the returned goods.
planning.
return disposal costs–The costs that occur from
response time–The elapse of time or average delay discarding or recycling products that are returned
between the initiation of a transaction and the results because they have reached the end of their useful
of the transaction. life or are obsolete. Commonplace in the consumer
goods industry.
responsibility assignment matrix (RAM)–A tool to
ensure that each component of work in a project is return goods handling–The work a company puts into
assigned to a responsible person. accepting returned goods from its customers.
responsible landfill–Landfill operations designed return material authorization (RMA)–1) A form

to turn waste into recoverable resources, minimize that must be completed that describes the product
the amount of space consumed, and maximize the returned and why it was returned. 2) A number given
operational life of the landfill. to authorize the acceptance of returned items. 3) The
signatory authorization that is normally required to
responsible procurement–Assuring the use of
return the goods.
ethical sources of goods and services where a firm
does business to bring about a positive impact return merchandise authorization–Syn: return
and minimize the negative impact on societies and material authorization.
environments—including reduce, reuse, and recycle
return on assets (ROA)–Net income for the previous
of materials. Includes processes for identifying,
12 months divided by total assets. See: return on
assessing, and managing the environmental,
owner’s equity (ROE).
social, and ethical risk in the supply chain. Syn:
environmentally responsible purchasing. return on investment (ROI)–A relative measure of
financial performance that provides a means for
responsiveness–Refers to the speed or promptness
comparing various investments by calculating the
with which an organization or supply chain provides
profits returned during a specified time period. In the
products and services to the customer. A SCOR
theory of constraints, ROI is calculated as throughput
performance attribute.
minus operating expense divided by investment.
R retailer–A business that takes title to products and

resells them to final consumers.
return on net assets–Profit divided by assets
excluding depreciation.
retail method–A method of inventory valuation in which
return on owner’s equity (ROE)–A financial
the value is determined by applying a predetermined
measurement of how successful a company is in
percentage based on retail markup to the retail price, to
creating income for the owners of the organization.
determine its inventory value based on cost.
A comparison of the ROE with the ROA indicates the
retainage–A percentage of a contract value that is effectiveness of financial leverage employed by the
withheld pending project completion and approval. firm. The measurement is calculated by dividing net
income by average owner’s equity. See: return on
retention efficiency–In marketing, a measurement of
assets (ROA).
how well a company creates repeat customers.
return on supply chain fixed assets–The return an
retirement of debt–The termination of a debt
organization receives on its invested capital in supply
obligation by appropriate settlement with the
chain fixed assets. Includes the fixed assets used to
lender. Understood to be in full amount unless
plan, source, make, deliver, and return. Calculated
partial settlement is specified.
as (supply chain revenue – COGS – supply chain
management costs) ÷ supply chain fixed assets.

return on working capital • risk analysis
return on working capital–A measure of profit on the reverse logistics–A complete supply chain dedicated
amount of capital consumed. Calculated as after-tax to the reverse flow of products and materials for the
operating income divided by net working capital. purpose of returns, repair, remanufacture, and/or
recycling.
returns–A step in the reverse logistics process where
a customer sends a product back for any of several reverse logistics service–A service that arranges for
possible reasons including the product being defective, the disposal of returned products.
damaged, out of season, or outdated (end-of-life), or
reverse supply chain–The planning and controlling
that it failed to meet expectations or represented
of the processes of moving goods from the point of
excess inventory.
consumption back to the point of origin for repair,
returns inventory costs–All of the costs associated reclamation, recycling, or disposal. See: reverse logistics.
with handling returned inventory.
review period–The time between successive
returns management process–A process of handling evaluations of inventory status to determine whether
returns that includes environmentally sound disposal to reorder. See: replenishment period.
or recycling, composition of repair instructions,
revision level–A number or letter representing the
warranty repairs, and collection of return data.
number of times a part drawing or specification has
returns processing cost–All of the costs associated been changed.
with dealing with returned items after they have been
rework–Reprocessing to salvage a defective item
received. These costs occur when returned items are
or part.
repaired, discarded, or replaced.
rework lead time–The time required to rework
return to supplier–Material that was rejected by the
material in-house or at a supplier’s location.
buyer’s inspection department and is awaiting shipment
back to the supplier for repair or replacement. rework order–A manufacturing order to rework and
salvage defective parts or products. Syn: repair order,
reuse–1) The use of an item for a new purpose (e.g.
spoiled work order.
repurpose) or similar purpose with only minimal
reprocessing. Reuse differs from remanufacture as it RFID–Abbreviation for radio frequency identification.
assumes less repair or reclamation activity to the reused
good. 2) Part of the 3 R's of waste management: Reduce, RFM–Abbreviation for recency, frequency, monetary.
Reuse, and Recycle–the global effort to reduce waste RFP–Abbreviation for request for proposal.
and minimize consumption of the world's resources.
RFQ–Abbreviation for request for quote.
revenue–The income received by a company from
sales of products or services. Revenues can come right the first time–A term used to convey the concept
from other sources including stock owned in other that it is beneficial and more cost-effective to take the
companies, income from selling property, or other
company assets that are not a typical part of the
core business.
necessary steps the first time to ensure that a good or
service meets its requirements than to provide a good
or service that will need rework or not meet customers’
R
needs. In other words, an organization should engage
reverse auction–An internet auction in which in defect prevention rather than defect detection.
suppliers attempt to underbid their competitors.
Company identities are known only by the buyer. right-to-work state–A state that allows workers to
choose whether or not to join a union.
reverse engineering–The process of disassembling,
evaluating, and redesigning a competitor’s product risk acceptance–A decision to take no action to deal
for the purpose of manufacturing a product with with a risk or an inability to format a plan to deal with
similar characteristics without violating any of the the risk.
competitor’s proprietary manufacturing technologies.
risk adjusted discount rate–A discount rate that
reverse flow scheduling–A scheduling procedure is higher for more risky projects and lower for less
used in some process industries for building process risky projects.
train schedules. Starts with the last stage and
risk analysis–A review of the uncertainty associated
proceeds backward (countercurrent to the process
with the research, development, and production of
flow) through the process structure.
a product, service, or project.

risk appetite • RORO
risk appetite–Amount and type of risk that an RMA–Abbreviation for return material authorization.
organization is willing to pursue or retain.
ROA–Abbreviation for return on assets.
risk avoidance–Changing a plan to eliminate a risk or
road waybill–A shipping document used to control
to protect plan objectives from its impact.
shipments of goods for road transport. The document
risk breakdown structure–A tool that helps identify travels with the shipment and serves as a receipt for
potential project risks, organized by risk categories goods and evidence of the contract of carriage.
and subcategories.
robotics–Replacing activities previously performed
risk category–A cluster of risk causes with a label such by humans with mechanical devices or robots that
as external, environmental, technical, or organizational. can either be operated by humans or run by computer.
Difficult-to-do, dangerous, or monotonous tasks are
risk management–The identification, assessment,
likely candidates for robots to perform.
and prioritization of risks followed by coordinated
and economical application of resources to minimize, robust design–Type of design for a product or service
monitor, and control the probability and/or impact that plans for intended performance even in the face
of unfortunate events or to maximize the realization of a harsh environment.
of opportunities.
robustness–The condition of a product or process
risk management planning–The process of defining design that remains relatively stable with a minimum
how to identify and minimize risk factors for a project. of variation even though factors that influence
operations or usage, such as environment and wear,
risk mitigation–Reducing exposure to risk in terms of
are constantly changing.
either its likelihood or its impact.
ROE–Abbreviation for return on owner’s equity.
risk pooling–A method often associated with the
management of inventory risk. Manufacturers and ROI–Abbreviation for return on investment.
retailers that experience high variability in demand for
rolling forecast–Moving the forecast horizon forward
their products can pool together common inventory
to new periods by adding recent data (and perhaps
components associated with a broad family of
dropping the oldest data).
products to buffer the overall burden of having to
deploy inventory for each discrete product. rolling wave planning–A form of planning where the
work to be performed in the near term is planned in
risk rating–A numerical assessment of the risk
detail and longer-term work is planned at a lesser level
associated with a supplier, customer, or product,
of detail.
normalized and used for comparison purposes.
roll-on/roll-off container ship–A ship that allows trailers
risk register–A report that has summary information
to be driven on and off without the use of cranes.
R
on qualitative risk analysis, quantitative risk analysis,
and risk response planning. This register contains all root cause analysis–Analytical methods to determine
identified risks and associated details. the core problem(s) of an organization, process,
product, market, and so forth. See: current reality
risk response plan–A document defining known risks
tree, five whys, stratification analysis.
including description, cause, likelihood, costs, and
proposed responses. It also identifies current status ROP–Abbreviation for reorder point.
on each risk.
rope–One of the three devices required for proper
risk response planning–The process of developing a management of operations. (The other two are drum
plan to avoid risks and to mitigate the effect of those and buffer.) The rope is the information flow from the
that cannot be avoided. drum to the front of the line (material release), which
chokes the release of materials to match the flow
risk tolerance–An organization’s or stakeholder’s
through the constraint.
readiness to accept a threat or potential negative
outcome in order to achieve its objectives. RORO–Acronym for roll-on/roll-off container ship.

rough-cut capacity planning (RCCP) • safety capacity
rough-cut capacity planning (RCCP)–The process run order–Syn: manufacturing order.

of converting the master production schedule into
run-out list–1) A list of items to be scheduled into
requirements for key resources often including labor,
production in sequence by the dates at which the
machinery, warehouse space, suppliers’ capabilities,
present available stock is expected to be exhausted.
and, in some cases, money. Comparison to available
2) A statement of ingredients required to use up an
or demonstrated capacity is usually done for each
available resource (e.g., how much “y” resource is
key resource. This comparison assists the master
required to consume 300 pounds of “x”).
scheduler in establishing a feasible master production
schedule. Three approaches to performing RCCP are run-out method–A method of assigning available
the bill of labor (resources, capacity) approach, the production or storage capacity to products based on
capacity planning using overall factors approach, and the product’s demand and inventory level.
the resource profile approach. See: bill of resources,
capacity planning, capacity planning using overall run sheet–A log-type document used in continuous
factors, product load profile, resource profile. processes to record raw materials used, quantity
produced, in-process testing results, and so on. It may
route sheet–Syn: routing. serve as an input document for inventory records.
routing–1) Information detailing the method of run size–Syn: standard batch quantity.
manufacture of a particular item. It includes the
operations to be performed, their sequence, the run standards–Syn: run time.
various work centers involved, and the standards for run time–The time required to process a piece or lot at
setup and run. In some companies, the routing also a specific operation. Run time does not include setup
includes information on tooling, operator skill levels, time. Syn: run standards.
inspection operations and testing requirements,
and so on. Syn: bill of operations, instruction sheet, rush order–An order that for some reason must be
manufacturing data sheet, operation chart, operation fulfilled in less than normal lead time.
list, operation sheet, route sheet, routing sheet.
S
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.
routing guide–A shipping tool used to manage

S&OP–Abbreviation for sales and operations
logistics activities for shipments between two points.
planning.
It contains mode and carrier information, freight
rates, and service requirements. SA8000–A widely recognized international standard
for managing human rights in the workplace. It provides
routing sheet–Syn: routing.
an auditable framework for assuring that social
run–A quantity of production being processed. accountability is being stewarded by an organization.
SaaS–Abbreviation for software-as-a-service
S
run chart–A graphical technique that illustrates how
a process is performing over time. By statistically
safety capacity–In the theory of constraints, the
analyzing a run chart, a process can be determined to
planned amount by which available capacity exceeds
be under or out of control. The most common types of
current productive capacity. This capacity provides
data used to construct the charts are ranges, averages,
protection from planned activities (such as resource
percentages/counts, and individual process attributes
contention) and preventive maintenance and
(e.g., temperature). Syn. run diagram. See: c chart,
unplanned activities (such as resource breakdown,
P chart, R chart, U chart, X-bar chart.
poor quality, rework, or lateness). Safety capacity
run diagram–Syn: run chart. plus productive capacity plus excess capacity equals
100 percent of capacity. Syn: capacity cushion. See:
running sum of forecast errors–The arithmetic sum protective capacity.
of the differences between actual and forecasted
demand for the periods being evaluated.

safety data sheet (SDS) • sales plan
safety data sheet (SDS)–A document that is part of plans for the business (sales, marketing, development,
the materials information system and accompanies manufacturing, sourcing, and financial) into one
the product. Formerly referred to as the manufacturing integrated set of plans.
safety data sheet (MSDS). The document is prepared by
S&OP is performed at least once a month and is
the manufacturer and provides information regarding
reviewed by management at an aggregate (product
the safety and chemical properties to downstream
family) level. The process must reconcile all supply,
users and (if necessary) the long-term storage, handling,
demand, and new product plans at both the detail
and disposal of the product. Among other factors, the
and aggregate levels and tie to the business plan. It
SDS describes: the hazardous components of a product;
is the definitive statement of the company’s plans
how to treat leaks, spills, and fires; and how to treat
for the near to intermediate term, covering a horizon
improper human contact with the product.
sufficient to plan for resources and to support the
safety factor–1) The ratio of average strength to the annual business planning process.
worst stress expected. It is essential that the variation,
Executed properly, the S&OP process links the
in addition to the average value, be considered in design.
strategic plans for the business with its execution and
2) The numerical value used in the service function
reviews performance measurements for continuous
(based on the standard deviation or mean absolute
improvement. See: aggregate planning, executive
deviation of the forecast) to provide a given level of
sales and operations planning, production plan,
customer service. For example, if the item’s mean
production planning, sales plan, tactical planning.
absolute deviation is 100 and a .95 customer service
level (safety factor of 2.06) is desired, then a safety stock sales cycle time–Time from a product entering a floor
of 206 units should be carried. This safety stock must until it is completely sold out.
be adjusted if the forecast interval and item lead times
differ. Syn: service factor. See: service function. sales forecast–Syn: forecast.
safety lead time–An element of time added to normal sales mix–The proportion of individual product-type
lead time to protect against fluctuations in lead time sales volumes that make up the total sales volume.
so that an order can be completed before its real sales operations management–The management
need date. When used, the MRP system, in offsetting of activities and processes to ensure that the sales
for lead time, will plan both order release and order function runs efficiently, is well integrated with other
completion for earlier dates than it would otherwise. functional areas, and supports the overall business
Syn: protection time, safety time. strategy.
safety stock–1) In general, a quantity of stock planned sales order configuration–Syn: customer order
to be in inventory to protect against fluctuations servicing system.
in demand or supply. 2) In the context of master
production scheduling, the additional inventory and sales order number–A unique control number assigned
capacity planned as protection against forecast errors to each new customer order, usually during order entry.
and short-term changes in the backlog. Overplanning It is often used by order promising, master scheduling,
S
can be used to create safety stock. Syn: buffer stock, cost accounting, invoicing, and so forth. For some
reserve stock. See: hedge, inventory buffer. make-to-order products, it can also take the place of an
end item part number by becoming the control number
safety time–Syn: safety lead time. that is scheduled through the finishing operations.
salable goods–A part or assembly authorized for sale sales plan–A time-phased statement of expected
to final customers through the marketing function. customer orders anticipated to be received
sale-and-leaseback–An agreement by which a firm (incoming sales, not outgoing shipments) for each
first sells its assets to a financial institution and then major product family or item. Represents sales and
leases these same assets from the financial institution. marketing management’s commitment to take all
reasonable steps necessary to achieve this level of
sales and operations planning (S&OP)–A process actual customer orders. Is a necessary input to the
to develop tactical plans that provide management production planning process (or sales and operations
the ability to strategically direct its businesses to planning process). Expressed in units identical to
achieve competitive advantage on a continuous basis those used for the production plan (as well as in sales
by integrating customer-focused marketing plans for dollars). See: aggregate planning, production plan,
new and existing products with the management of production planning, sales and operations planning.
the supply chain. The process brings together all the

sales planning • scatter chart
sales planning–The process of determining the sampling–1) A statistical process where generalizations
overall sales plan to best support customer needs regarding an entire body of phenomena are drawn
and operations capabilities while meeting general from a relatively small number of observations. 2) In
business objectives of profitability, productivity, marketing, the delivery of free trial goods to consumers.
competitive customer lead times, and so on,
sampling distribution–The distribution of values of a
as expressed in the overall business plan. See:
statistic calculated from samples of a given size.
production planning, sales and operations planning.
sampling plan–Within acceptance sampling, the
sales promotion–1) Sales activities that supplement
determination of the sample size and the number of
both personal selling and marketing, coordinate the
defectives that will trigger rejection of a lot.
two, and help to make them effective (e.g., displays).
2) More loosely, the combination of personal selling, sawtooth diagram–A quantity-versus-time graphic
advertising, and all supplementary selling activities. representation of the order point/order quantity
3) Promotion activities—other than advertising, inventory system showing inventory being received
publicity, and personal selling—that stimulate and then used up and reordered.
interest, trial, or purchase by final customers or
others in the marketing channel. SBQ–Abbreviation for standard batch quantity.
sales quota–The level of sales that an individual or SBT–Abbreviation for scan-based trading.
group is expected to meet. SBU–Abbreviation for strategic business unit.
sales representative–An employee authorized scalability–1) How effectively a company can grow its
to accept a customer’s order for a product. Sales business in order to meet demand. 2) How effectively
representatives usually go to the customer’s location the solution to a problem can be scaled up as the
when industrial products are being marketed. problem’s size increases.
salvage–Property that, because of its worn, damaged, scan-based trading (SBT)–As an item is sold, scanned
deteriorated, or incomplete condition or specialized information is sent to the manufacturer and creates a
nature, has no reasonable prospect of sale or use replacement order of that item. Used often in large retail
as serviceable property without major repairs or store chains as well as large volume product producers.
alterations, but that has some value in excess of its
scrap value. Scanlon plan–A system of group incentives on a
company-wide or plant-wide basis that sets up one
salvage value–1) The cost recovered or that could be measure that reflects the results of all efforts. The
recovered from used property when removed, sold, universal standard is the ratio of labor costs to sales
or scrapped. A factor in appraisal of property value value added by production. If there is an increase
and in computing depreciation. 2) The market value in production sales value with no change in labor
of a machine or facility at any point in time. Normally, costs, productivity has increased while unit cost
an estimate of an asset’s net value at the end of its has decreased.
estimated life.
S
scanner–An electronic device that optically converts
sample–A portion of a universe of data chosen to coded information into electrical control signals for
estimate some characteristics about the whole data collection or system transaction input.
universe. The universe of data could consist of sizes
of customer orders, number of units of inventory, scarcity–A concept central to economics that
number of lines on a purchase order, and so forth. means less of a good is freely available than
consumers would like.
sample average–A key measure that represents the
central tendency of a sample. scatter chart–A graphical technique to analyze the
relationship between two variables. Two sets of
sample range–The largest value in a sample minus the data are plotted on a graph, with the y axis used for
smallest value in the sample. the variable to be predicted and the x axis used for
sample size–The number of elements selected for the variable to make the prediction. The graph will
analysis from the population. show possible relationships (although two variables
might appear to be related, they might not be—those
sample standard deviation–A key measure that who know most about the variables must make that
represents the spread or dispersion of a sample. evaluation). The scatter chart is one of the seven tools
of quality. Syn: cross plot, scatter diagram, scatterplot.

scatter diagram • SCOR
scatter diagram–Syn: scatter chart. scheduled start date–In project management, an

activity’s planned start time, normally between the
scatterplot–Syn: scatter chart.
early start time and the late start time. It may reflect
SCEM–Abbreviation for supply chain event resource limitations. Syn: planned start date.
management.
schedule harmony–In supply chains, the arrival of goods
scenario forecasts–Plans for how an organization will at a transfer point with a small buffer time in front of
respond to anticipated future situations. their departure via a different transportation mode.
scenario planning–A planning process that identifies schedule performance index (SPI)–Earned value
critical events before they occur and uses this (EV) divided by planned value (PV), which measures a
knowledge to determine effective alternatives. project’s schedule efficiency.
schedule–A timetable for planned occurrences (e.g., scheduler–A general term that can refer to a material
shipping schedule, master production schedule, planner, dispatcher, or a combined function.
maintenance schedule, supplier schedule). Some
schedule variance (SV)–Earned value (EV) minus
schedules include the starting and ending time for
planned value (PV), which measures a project’s
activities (e.g., project schedule).
schedule performance.
schedule activity–During a project, a specific piece of
scheduling–The act of creating a schedule, such as
work performed that has estimated costs, duration,
a shipping schedule, master production schedule,
and resource requirements.
maintenance schedule, or supplier schedule.
schedule board–Syn: control board.
scheduling algorithm–Syn: scheduling rules.
schedule chart–Usually a large piece of graph paper
scheduling rules–Basic rules that can be used
used in the same manner as a control board. Where
consistently in a scheduling system. Scheduling
the control board often uses strings and markers to
rules usually specify the amount of time to allow for
represent plans and progress, the schedule chart is
a move, queue, load calculation, and so forth. Syn:
typically filled in with pencil. See: control board.
scheduling algorithm.
schedule control–Control of a plant floor by schedules
scientific inventory control–Syn: statistical inventory
rather than by job orders (called order control).
control.
Schedules are derived by taking requirements over a
period of time and dividing by the number of workdays scientific management–Managing a production
allowed to run the parts or assemblies. Production system using scientific principles. Usually refers to
completed is compared with the schedule to provide the principles established by Frederick Taylor.
control. This type of control is most frequently used in
scope–In project management, the totality of
repetitive and process manufacturing.
products to be created by a project.
scheduled downtime–Planned shutdown of
S
scope change–In project management, a change to a
equipment or plant to perform maintenance or to
project’s scope, usually requiring an adjustment to the
adjust to softening demand.
project’s budget and schedule.
scheduled finish date–In project management, an
scope creep–The informal addition of unfunded
activity’s planned finish time, normally between the
features and services to a project. Scope creep is
early finish time and the late finish time. It may reflect
closely monitored and controlled to ensure that
resource limitations. Syn: planned finish date.
agreed-upon output of a project can be achieved
scheduled load–The standard hours of work required within the budgeted timeline and costs.
by scheduled receipts (i.e., open production orders).
scope definition–In project management, subdividing
scheduled receipt–An open order that has an a project into smaller components to facilitate
assigned due date. See: open order. management.
SCOR–An acronym for Supply Chain Operations

Reference model.

SCOR beginner • seasonal harmonics
SCOR beginner–A SCOR competency level. A beginner SCOR processes–One of the four parts of the SCOR
has not fully mastered work skills and has a limited framework. This section contains the standard
“situational perception” of work activities. A beginner descriptions of management procedures and their
is familiar with the basic process and can sequence the relationships.
steps. The experienced beginner remains task-oriented
SCOR proficient–A SCOR competency level. A
rather than goal-oriented, but is starting to get some
proficient professional sees the situation as a whole
perspective. A beginner treats all aspects of work
and acts from personal knowledge and conviction.
treated separately with equal importance.
Proficient company professionals prioritize the
SCOR competency level–A SCOR measure that importance of situations and use their knowledge
describes the level or state of qualification to and skills to focus on problem solving.
perform a certain role or tasks.
SCOR team leader–In SCOR implementation, the
SCOR competent–A SCOR competency level. It primary coordinator and manager of the planning and
represents an employee who acts consciously to execution phases of the SCOR improvement program.
satisfactorily perform long-term goals and plans. At
scrap–Material outside of specifications and possessing
this level, an employee is goal-oriented and able to
characteristics that make rework impractical.
figure out a sequence of tasks to accomplish a goal.
scrap factor–A factor that expresses the quantity of a
scorecard–This is a performance measurement
particular component that is expected to be scrapped
tool used by a company that summarizes its key
upon receipt from a vendor, completion of production,
performance indicators. Another use of scorecards
or while that component is being built into a given
is to measure the supply chain members and
assembly. It is usually expressed as a decimal value. For
ensure that their performance is meeting company
a given operation or process, the scrap factor plus the
standards.
yield factor is equal to 1. For example, if the scrap factor
SCOR expert–A SCOR competency level. The expert is 30 percent (or .3), then the yield is 70 percent (or .7).
has an intuitive understanding of the situation and
In manufacturing planning and control systems,
zooms in on the central aspects to apply analytical
the scrap factor is usually related to a specific item
reasoning, problem-solving techniques, and leadership.
in the item master, but may be related to a specific
Experts understand what is possible and apply
component in the product structure. For example, if
experience and knowledge to master new situations.
50 units of a product are required by a customer and
SCOR metrics–In SCOR, metrics measure the ability a scrap factor of 30 percent (a yield of 70 percent) is
of processes to achieve the strategic objectives expected, then 72 units (computed as 50 units divided
associated with performance attributes. SCOR by .7) should be started in the manufacturing process.
recognizes three levels of predefined metrics: Level Syn: scrap rate. See: yield, yield factor.
1 metrics are diagnostics for the overall health of the
scrap rate–Syn: scrap factor.
supply chain. Level 2 metrics serve as diagnostics for
the level 1 metrics. Level 3 metrics serve as diagnostics s-curve–In project management, graphic display of
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for level 2 metrics. cumulative project attributes such as costs, labor
hours, or percentage of work. The name derives from
SCOR novice–A SCOR competency level. A novice is
the typical shape of the curve.
an untrained beginner new to the field or activity. A
novice needs standard/written procedures or step- SDS–Abbreviation for single-digit setup.
by-step detailed instructions. A novice has no ability
to make judgments based on a problem situation. search models–Operations research models that
Novices can neither judge whether the instructions attempt to find optimal solutions with adaptive
are working nor judge which ones are important, searching approaches.
because they have no context to assess them against. seasonal adjustment–Syn: seasonal index.
SCOR performance attribute–A classification for seasonal component–A component of demand,
metrics used to formulate strategic direction. The SCOR usually describing the impact on demand of variations
performance attributes are reliability, responsiveness, that occur because of the time of year (quarter, month,
agility, cost, and asset management efficiency. week). See: decomposition, time series analysis.
seasonal harmonics–Syn: harmonic smoothing.

seasonal index •semivariable costs
seasonal index–1) A number used to adjust data to seiri–A term that refers to organizing or throwing
seasonal demand. 2) Manipulations to the buffer size away things that are not needed. See: five Ss.
that affect inventory positions by adjusting buffers to
seiso–A term that states that a productive workplace
follow seasonal patterns. Syn: seasonal adjustment.
is found through cleanliness. See: five Ss.
See: base series.
seiton–A term that refers to neatness in the
seasonal inventory–Inventory built up to smooth
workplace that is achieved by straightening offices
production in anticipation of a peak seasonal demand.
and work areas. See: five Ss.
Syn: seasonal stock.
self-directed work team–Generally, a small,
seasonality–A predictable repetitive pattern of
independent, self-organized, and self-controlling
demand measured within a year where demand grows
group in which members flexibly plan, organize,
and declines. These are calendar-related patterns that
determine, and manage their duties and actions, as
can appear annually, quarterly, monthly, weekly, daily
well as perform many other supportive functions.
and/or hourly. Syn: seasonal variation. See: base series.
It may work without immediate supervision and
seasonal stock–Syn: seasonal inventory. can often have authority to select, hire, promote, or
discharge its members.
seasonal variation–See: seasonality.
seller’s market–A market condition in which goods
SEC–Abbreviation for the U.S. Securities and
cannot easily be secured (purchased) and when the
Exchange Commission.
economic forces of business tend to cause goods to
secondary highways–Highways that are predominantly be priced at the supplier’s estimate of value.
rural in nature.
selling, general, and administrative (SG&A)
second-order smoothing–A method of exponential expenses–The fixed costs associated with a company.
smoothing for trend situations that employs two Examples are salaries, marketing costs, customer
previously computed averages, the singly and doubly service, occupancy expenses, and other overhead. In
smoothed values, to extrapolate into the future. Syn: retail, called the “cost of selling.”
double smoothing.
selling and administrative cost–Those costs that
second-tier suppliers (or customers)–A supplier’s are associated with the marketing, sales, and
suppliers (or customer’s customers). administrative functions of a plant or company. Is
a function of overhead costing and an important
secular trend–The general direction of the long-run number in the COGS (costs of goods sold) calculation.
change in the value of a particular time series.
selling expense–An expense or class of expense
secure electronic transaction (SET)–In e-commerce, incurred in selling or marketing (e.g., salespersons’
a system for guaranteeing the security of financial salaries and commissions, advertising, samples,
transactions conducted over the internet. shipping costs).
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secure server–In e-commerce, a web server that semifinished goods–Products that have been stored
protects users’ messages from interception while in an uncompleted state and are awaiting final
being transmitted over the internet. operations that will adapt them to different uses or
Securities and Exchange Commission (SEC)–A U.S. customer specifications.
government agency that has primary responsibility for semipassive tag–An RFID tag that sends out data,
enforcing the federal securities laws and regulating is self-powered, and widens its range by harnessing
the securities industry. The SEC was created by the power from the reader. See: radio frequency
Securities Exchange Act of 1934 with a mission to identification (RFID).
protect investors; maintain fair, orderly, and efficient
markets; and facilitate capital formation. semiprocess flow–A manufacturing configuration in
which most jobs go through the same sequence of
SED–Abbreviation for shipper’s export declaration. operations even though production is in job lots.
segment customers–Grouping customers by semivariable costs–Costs that change in increments.
common characteristics to facilitate sales. They remain fixed over a given range, and outside that
seiketsu–A term that refers to standardization (e.g., range, change to a new level.
standard locations for tools and equipment). See: five Ss.

semiworks • service function
semiworks–Syn: pilot plant. server–A computer or software package that provides

a specific kind of service to client software running on
send ahead–The movement of a portion of a lot of
other computers. The term can refer to a particular
material to a subsequent operation before completion
piece of software; for example, a web server or the
of the current operation for all units of the lot. The
machine on which the software is running. A single
purpose of sending material ahead is to reduce the
server machine could have several different server
manufacturing lead time. See: overlapped schedule.
software packages running on it, thus providing many
sensei–A Japanese word meaning teacher or one different servers to clients on the network.
with experience.
server address–The internet address of a server.
sensitivity analysis–A technique for determining
server factory–A facility making minor improvements
how much an expected outcome or result will change
to products; set up primarily to avoid the host
in response to a given change in an input variable.
country’s barriers to trade.
For example, given a projected level of resources,
determining the effect on net income if variable costs service–Sometimes used to describe those activities
of production increased 20 percent. that support the production or distribution functions
in any organization, such as customer service and
sensors–Devices that can monitor differences in
field service.
conditions to control equipment on a dynamic basis.
serviceability–1) Design characteristic that facilitates
separable cost–A cost that is assignable to a given
the easy and efficient performance of service
portion of a business.
activities. Service activities include those activities
sequencing–Determining the order in which a required to keep equipment in operating condition,
manufacturing facility is to process a number of such as lubrication, fueling, oiling, and cleaning. 2) A
different jobs in order to achieve certain objectives. measurement of the degree to which servicing of an
item will be accomplished within a given time under
sequential–In numeric sequence, usually in specified conditions. See: maintainability. 3) The
ascending order. competitive advantage gained when an organization
sequential development process–A process in which focuses on aspects such as the speed and courtesy
the product or services idea must clear specific hurdles with which customer complaints and questions
before it can go on the next development phase. are answered, following up with customers after
the sale to ensure satisfaction, and offering on-site
sequential-sampling plan–Controlling quality by service for product repairs. 4) Measure of repairs and
repeatedly sampling units and each time making a maintenance based on cost, speed, and convenience.
decision to accept or reject a batch or to continue
sampling. service blueprint–A service analysis method that
allows service designers to identify processes
serial number–A unique number assigned for involved in the service delivery system, isolate
identification to a single piece that will never be potential failure points in the system, establish time
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repeated for similar pieces. Serial numbers are usually frames for the service delivery, and set standards for
applied by the manufacturer but can be applied at each step that can be quantified for measurement.
other points, including by the distributor or wholesaler.
service bureau model–A business strategy in
serial shipping container code–An 18-character which a company outsources certain products and
designation identifying boxes or pallets that are part of services from another company. The company prefers
a shipment covered by an automated shipment notice. to concentrate on its core business rather than
expending resources on the outsourced item.
serpentine picking–A picking technique aimed at
reducing travel time by 50 percent and improving the service capacity–The number of daily customers a
flow of pickers down each aisle. This technique involves firm is designed to serve; actual throughput may be
picking from both sides of each aisle as the picker goes larger or smaller.
down it. This is in contrast to picking from one side of
the aisle and then crossing to the other side. service factor–Syn: safety factor.
service function–The mathematical relationship of

the safety factor to the service level (e.g., the fraction
of demand routinely met from stock).

service industry • SG&A
service industry–1) In its narrowest sense, an service time–The time taken to serve a customer
organization that provides an intangible product (e.g., the time required to fill a sales order or the time
(e.g., medical or legal advice). 2) In its broadest required to fill a request at a tool crib).
sense, all organizations except farming, mining, and
service vs. investment chart–A curve showing
manufacturing. Includes retail trade; wholesale trade;
the amount of investment that will be required to
transportation and utilities; finance, insurance, and
give various levels of customer service. Typical
real estate; construction; professional, personal,
investments include inventory, infrastructure, and
and social services; and local, state, and federal
other resources to improve customer service.
governments.
servo system–A control mechanism linking a system’s
service level–Syn: level of service.
input and output, designed to feed back system output
service level agreement (SLA)–A document that data to regulate the operation of the system.
represents the terms of performance for organic
SET–Acronym for secure electronic transaction.
support.
setup–1) The work required to change a specific
service-oriented architecture (SOA)–A style of
machine, resource, work center, or line from making the
information technology (IT) design that guides all
last good piece of item A to making the first good piece
aspects of creating and using business services
of item B. 2) The refitting of equipment to neutralize
throughout their life cycles, as well as defining
the effects of the last lot produced (e.g., teardown of
and provisioning the IT infrastructure that enables
the just-completed production, preparation of the
different computer applications to exchange data
equipment for production of the next scheduled item).
and participate in business processes, regardless of
Syn: changeover, turnaround time.
the operating systems or programming languages
underlying those applications. setup costs–Costs such as scrap costs, calibration
costs, downtime costs, and lost sales associated
service parts–Those modules, components, and
with preparing the resource for the next product. Syn:
elements that are planned to be used without
changeover costs, turnaround costs.
modification to replace an original part. Syn: repair
parts, spare parts. setup flexibility–The ability for changeover to a
different product to take place with little delay.
service parts demand–The need or requirement for
a component to be sold by itself, as opposed to being setup lead time–Syn: setup time.
used in production to make a higher-level product.
Syn: repair parts demand, spare parts demand. setup time–The time required for a specific machine,
resource, work center, process, or line to convert from
service parts revenue–The value of sales of the production of the last good piece of item A to the
replacement parts to external and internal customers, first good piece of item B. Syn: setup lead time.
net of discounts and coupons.
seven new tools (N7)–A set of quality improvement
service phases–The number of phases necessary to tools developed by the Union of Japanese Scientists
S service a new arrival in the system.
service positioning–Syn: product positioning.

and Engineers (JUSE). The N7 are affinity diagram,
interrelationship digraph, matrix diagram, tree
diagram, prioritization matrix, process decision
service rate–In queuing theory, the rate at which program chart, and activity network diagram. See:
arrivals are processed through the production or basic seven tools of quality.
service system; the number of processed arrivals per
seven tools of quality–Syn: basic seven tools of quality.
unit of time. See: queuing theory.
seven zeros–The seven zeros are an essential part of
service reliability–A dimension of service quality
the Toyota Production System. They are zero defects,
referring to the capability of a service provider to
zero excess lot size, zero setups, zero breakdowns,
perform dependably and accurately.
zero excess handling, zero lead time, and zero surging.
service response logistics–Obtaining, producing, and
SG&A–Abbreviation for selling, general and
distributing material for wholesaling and retailing;
administrative.
supply chain management logistics focus on location,
service, and capacity issues. Syn: integrated logistics.

shape • shop order
shape–An element of variability results that measures shipping manifest–A document that lists the pieces
the output of a process. If a process results in product in a shipment. A manifest usually covers an entire
dimensions falling within a bell-shaped curve, then load regardless of whether the load is to be delivered
the process is running normally. to a single destination or to many destinations.
Manifests usually list the items, piece count, total
shared services–Consolidation of support processes
weight, and the destination name and address for
to form a separate unit to provide services to the
each destination in the load.
parent company and external customers. This lowers
costs and may improve support because the shared shipping order debit memo–The document used to
services unit is more focused. authorize the shipment of rejected material back to the
supplier and create a debit entry in accounts payable.
shareholder wealth–The present value of all
anticipated payments to the shareholders of a firm. shipping point–The location from which material is
sent. Ant: receiving point.
shelf life–The amount of time an item may be held in
inventory before it becomes unusable. shipping tolerance–An allowable deviation that the
supplier can ship over or under the contract quantity.
shelf life control–A technique of physical first-in,
first-out usage aimed at minimizing stock obsolescence. shitsuke–The effort and discipline required to
continually enforce changes made in an organization.
Shewhart circle of quality–Syn:
See: five Ss.
plan-do-check-action.
shojinka–Continually balancing the number of workers
Shewhart cycle–Syn: plan-do-check-action.
in a work center to meet demand with a minimum
Shingo’s seven wastes–Shigeo Shingo, a pioneer in number of workers to improve flow. It requires a line
the Japanese just-in-time philosophy, identified seven design—for example, U-shaped—that supports
barriers to improving manufacturing. They are the varying the number of workers.
waste of overproduction, waste of waiting, waste of
shop calendar–Syn: manufacturing calendar.
transportation, waste of stocks, waste of motion, waste
of making defects, and waste of the processing itself. shop committee–The committee that represents the
union in its relations and negotiations with a company
ship-age limit–The date after which a product cannot
or plant. This is the first stage for the unionized
be shipped to a customer.
employees to vet complaints.
ship-to-stock–See: dock-to-stock.
shop floor control–A system for using data from
shipper’s export declaration (SED)–An export/import the shop floor to maintain and communicate
document prepared by the shipper before a shipment status information on shop orders (manufacturing
can be exported and presented to a government orders) and on work centers. Shop floor control
authority of the country in which the shipper resides. can use order control or flow control to monitor
Specifies details on the goods to be shipped, including material movement through the facility. The major
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their value, weight, and destination. subfunctions of shop floor control are: (1) assigning
priority of each shop order; (2) maintaining working-
shipper-carriers–Companies that ship goods in their process quantity information; (3) conveying shop
own vehicles. Many large retailers are shipper-carriers order status information to the office; (4) providing
because they own their own fleets. actual output data for capacity control purposes; (5)
shipping–The function that performs tasks for providing quantity by location by shop order for work-
the outgoing shipment of parts, components, and in-process inventory and accounting purposes; and
products. It includes packaging, marking, weighing, (6) providing measurement of efficiency, utilization,
and loading for shipment. and productivity of the workforce and machines.
The major subfunctions for flow control are based
shipping lane–A specific route that ocean liners take primarily on production rates and feeding work
between ports to help traffic flow and to avoid the into production to meet these planned rates, then
most dangerous areas of the ocean. monitoring and controlling production. See: flow
control, order control, production activity control.
shipping lead time–The number of working days
normally required for goods to move between a shop order–Syn: manufacturing order.
shipping and receiving point, plus acceptance time in
days at the receiving point.

shop order close-out station • simple interest
shop order close-out station–A stocking point short-sea shipping–A form of water transportation
on the shop floor where completed production that does not cross an ocean, but instead utilizes
of components is transacted (received) into and coastal and inland waterways to move shipments
subsequently transacted (issued) to assembly or other from maritime ports to their destination. Often used
downstream operations. This technique is used to as an alternative to road transportation.
reduce material handling by avoiding the need to move
short shipment–A situation in which a piece of
items into and out of stockrooms while simultaneously
freight designated by the shipping document is
enabling a high degree of inventory record accuracy.
missing from delivery.
shop order reporting–Syn: production reporting and
short-term planning–The function of adjusting limits
status control.
or levels of capacity within relatively short periods of
shop packet–A package of documents used to plan time, such as parts of a day, a day, or a week.
and control the shop floor movement of an order. The
shrinkage–See: inventory shrinkage.
packet may include a manufacturing order, operations
sheets, engineering blueprints, picking lists, move shrinkage factor–A percentage factor used to
tickets, inspection tickets, and time tickets. compensate for the expected loss during the
manufacturing cycle of an item. This factor differs
shop planning–The function of coordinating the
from the scrap factor in that it affects all components
availability of material handling, material, resources,
of the item, where the scrap factor relates to only one
setup, and tooling so that an operation or job can
component’s usage. Syn: shrinkage rate.
be done on a particular machine. Shop planning is
often part of the dispatching function. The term shrinkage rate–Syn: shrinkage factor.
shop planning is sometimes used interchangeably
with dispatching, although dispatching does not SIC–Abbreviation for standard industrial classification.
necessarily include shop planning. For example, the sigma–A Greek letter (Σ) commonly used to designate
selection of jobs might be handled by the centralized the standard deviation of a population.
dispatching function, while the actual shop planning
might be done by the foreman or a representative. signed message–In information systems, a message
for which the sender can be authenticated.
shop scheduling–Syn: operations scheduling.
significant part number–A part number that is
shop traveler–Syn: traveler. intended to convey certain information, such as the
shortage cost–The marginal profit that is lost when source of the part, the material in the part, or the
a customer orders an item that is not immediately shape of the part. Using numbers to represent this
available in stock. information usually makes these part numbers longer
than corresponding nonsignificant part numbers. Ant:
shortage gaming–When suppliers ration or apportion nonsignificant part number.
supplies and buyers, in response, inflate their orders
in an attempt to receive what they actually need. significant variances–Those differences between
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planned and actual performance that exceed
short-cycle manufacturing–Syn: just in time. established thresholds and that require further
review, analysis, and action.
shortest processing time (SPT) rule–A dispatching
rule that directs the sequencing of jobs in ascending silo effect– A mindset affecting an organization
order by processing time. If this rule is followed, the in which departments or groups do not share
most jobs at a work center per time period will be information, goals, priorities, tools and/or processes
processed. As a result, the average lateness of jobs at with other departments or functions. Sometimes
that work center is minimized, but some jobs will be referred to as a siloed organization.
very late. Syn: smallest processing time rule.
simple interest–1) Interest that is not compounded
short-haul discrimination–A pricing strategy in which (i.e., interest not added to the income-producing
more is charged for a shorter haul than for a longer investment or loan). 2) The interest charged under
haul, when the route and the delivery are the same. the condition that interest in any time period is only
Used to push the long-haul process. charged on the principal.
short-range planning horizon–A planning/forecasting
time frame encompassing a few days to at most a
few weeks.

simple moving average • six sigma
simple moving average–A moving average where single-level backflush–A form of backflush that
the oldest data point is dropped and the newest data reduces inventory of only the parts used in the next
point is included in the calculation. All data points level down in an assembly or subassembly.
are assigned equal weights. See: moving average,
single-level bill of material–A display of components
weighted moving average.
that are directly used in a parent item. It shows only
simple regression–Regression analysis involving only the relationships one level down.
one independent variable.
single-level where-used–Documentation for a
simplex algorithm–A procedure for solving a general component that lists each parent in which that
linear programming problem. component is directly used and in what quantity.
Usually made available through the technique known
simplex method–An approach to solving linear
as implosion.
programming models.
single-minute exchange of die (SMED)–The concept
simplification–Improving quality and cutting costs by
of setup times of less than 10 minutes, developed by
removing complexity from a product or service.
Shigeo Shingo in 1970 at Toyota. See: single-digit setup.
simulation–1) The technique of using representative
single-period inventory models–Inventory models
or artificial data to reproduce in a model various
used to define economical or profit maximizing lot-
conditions that are likely to occur in the actual
size quantities when an item is ordered or produced
performance of a system. Frequently used to test
only once (e.g., newspapers, calendars, tax guides,
the behavior of a system under different operating
greeting cards, or periodicals) while facing uncertain
policies. 2) Within MRP II, using the operational data
demands. Syn: static inventory models.
to perform what-if evaluations of alternative plans
to answer the question, “Can we do it?” If yes, the single-sampling plan–A quality control method of
simulation can then be run in the financial mode to taking only one sample and then making a decision to
help answer the question, “Do we really want to?” See: accept or reject a batch of items.
what-if analysis.
single smoothing–Syn: first-order smoothing.
simultaneous design/engineering–Syn: participative
single-source supplier–A company that is selected
design/engineering.
to have 100 percent of the business for a part
simultaneous engineering–Syn: participative although alternate suppliers are available.
design/engineering. See: sole-source supplier.
single-card kanban system–Syn: one-card kanban single sourcing–A method whereby a purchased
system. part is supplied by only one supplier. Traditional
manufacturers usually have at least two suppliers
single-channel, single-phase system–A queuing
for each component part they purchase to ensure
system that has only one channel for arrivals to enter
continuity of supply and (more so) to foster price
and only one phase to completely service the arrival.
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competition between the suppliers. A JIT manufacturer
single-digit setup (SDS)–The idea of performing frequently has only one supplier for a purchased
setups in less than 10 minutes. See: single-minute part so close relationships can be established with a
exchange of die. smaller number of suppliers. These close relationships
(and mutual interdependence) foster high quality,
single exponential smoothing–Syn: first-order reliability, short lead times, and cooperative action.
smoothing. Ant: multisourcing. See: sole source.
single-factor productivity–The average amount SIPOC–Acronym for “supplier, input, process, output,
of a given product (output) attributed to a unit of customer” (pronounced “sye-pahk”).
a given resource (input). Factors include labor and
capital. Syn: partial productivity factor. See: multiple- six sigma–A methodology that furnishes tools for the
factor productivity. improvement of business processes. The intent is to
decrease process variation and improve product quality.
single integrator solution–An enterprise resources
planning implementation chosen entirely from one
vendor.

six sigma quality • social responsibility
six sigma quality–The six sigma approach is a set slot based production–A term used in lean
of concepts and practices that focus on reducing manufacturing that describes a production schedule
variability in processes and reducing deficiencies in that is held level but leaves some openings to meet
the product. Important elements are (1) producing unexpectedly high levels of demand. Part of the “extra
only 3.4 defects for every one million opportunities capacity” planning process.
or operations, and (2) process improvement
slow-moving items–Those inventory items with a
initiatives striving for six sigma-level performance.
low turnover; items in inventory that have a relatively
Six sigma is a business process that permits
low rate of usage compared to the normal amount of
organizations to improve bottom-line performance,
inventory carried.
creating and monitoring business activities to
reduce waste and resource requirements while smallest processing time rule–Syn: shortest
increasing customer satisfaction. processing time rule.
skew–The degree of nonsymmetry shown by a small group improvement activity–An organizational
frequency or probability distribution. technique for involving employees in continuous
improvement activities. See: quality circle.
skill-based compensation–A method of employee
compensation that bases the employee’s wage rate SMART–Abbreviation for organizational goals that are
on the number of skills the employee is qualified specific, measurable, achievable/attainable, relevant/
to perform. People who are qualified to do a wider realistic, and timely.
variety of skills are paid more. See: labor grade.
smart label–A label with an embedded radio
skills inventories–An organized file of information frequency identification (RFID) tag.
on each employee’s skills, abilities, knowledge, and
experience, usually maintained by a personnel office. SMED–Abbreviation for single-minute exchange of die.
See: labor grade. smoothing–The process of averaging data by a
skills matrix–A visual tool to show the skills/skill mathematical process or by curve fitting, such as the
levels of employees. Used primarily when forming a least-squares method or exponential smoothing.
team so the leader knows what skills are necessary smoothing constant–In exponential smoothing, the
to accomplish the team’s goals. Also used when weighting factor that is applied to the most recent
implementing a full-cross training process to ensure demand, observation, or error. In this case, the error is
that all workers are cross trained to the same levels. defined as the difference between actual demand and
SKU–Abbreviation for stockkeeping unit. the forecast for the most recent period. The weighting
Pronounced “skew.” factor is represented by the symbol α. Theoretically, the
range of α is 0.0 to 1. Syn: alpha factor, smoothing factor.
SLA–Abbreviation for service level agreement.
smoothing factor–Syn: smoothing constant.
slack–Syn: float, slack time.
smoothing inventories–Inventories used
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slack time–In project management, the amount of when upstream production levels are less than
time that an activity may be delayed from its early start downstream demand.
without delaying the project finish date. Syn: slack.
smoothing models–Another name for forecasting
slack time rule–A dispatching rule that directs the models that utilize moving averages. The forecast
sequencing of jobs based on slack time. Slack time is “smoothed” in the sense that averages have less
is calculated as (days left until due date multiplied variability than individual periods.
by hours per day) minus standard hours of work left
on a specific job. For example, (5 × 8) – 12 = 28 hours SOA–Abbreviation for service-oriented architecture.
of slack. The smaller the amount of slack time for a social responsibility–Commitment by top
specific job, the higher the priority that job becomes management to behave ethically and to contribute
in the sequence. to community development. This may also entail
slip sheet–Thin sheets of fiberboard or plastic on improving the workforce’s quality of life.
which product is stacked, used as an alternative to
wood pallets because they take up little space in
warehouses or shipping containers.

software-as-a-service (SaaS) • spend analysis
software-as-a-service (SaaS)–A software licensing Southern Common Market (Mercosur)–A market/

and distribution model that provides access to customs alliance between Argentina, Brazil, Paraguay,
applications via the internet on a subscription basis. and Uruguay created by the Treaty of Asunción (1991).
A service provider hosts the application at its data
space buffer–Physical space immediately after the
center and customers access it through a web browser.
constraint that can accommodate output from the
Often referred to as “on-demand” software and used
constraint when there is a stoppage downstream that
by companies to avoid purchasing, implementing and
would otherwise force the constraint to stop also.
maintenance costs.
spare parts–Syn: service parts.
sole proprietorship–A form of business in which one
person has ownership and control. See: corporation, spare parts demand–Syn: service parts demand.
partnership.
SPC–Abbreviation for statistical process control.
sole source–The situation where the supply of a product
is available from only one organization. Usually technical special cause–Syn: assignable cause.
barriers such as patents preclude other suppliers from specialization–Producing a limited product
offering the product. See: single sourcing. line in order to focus on a product or a process.
sole-source supplier–The only supplier capable of Specialization is often intended to improve
meeting (usually technical) requirements for an item. productivity and reduce costs.
See: single-source supplier. special-purpose machinery–Machines that are
solid waste generated–One of the five green designed to perform a small number of activities.
SCOR metrics that measures the total solid waste They are not as flexible as general purpose machinery
generated by the process. but they may be faster and more accurate.
sorting–The function of physically separating a special warranty–An assurance that the product is fit
homogeneous subgroup from a heterogeneous for the specific purpose for which the product will be
population of items. used. See: general warranty, warranty.
source–The activities involved in scheduling product specification–A clear, complete, and accurate
deliveries, receiving products, verifying products, statement of the technical requirements of a
transferring (moving) products, and authorizing material, an item, or a service, and of the procedure to
supplier payment. Activities associated with supplier determine if the requirements are met.
search, qualification, and contract negotiation are not specification limits–Syn: tolerance limits.
described using these process elements.
specific identification–This method keeps track of
source document–An original written or printed the units of the beginning inventory and the units
record of some type that is to be converted into purchased—that is, specific identification of the
machine-readable form. purchase cost of each item. This may be done through
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source inspection–Inspection at the source of supply a coding method or serial number identification.
or production (e.g., the supplier or the work center) specific performance–A contract remedy requiring
as opposed to inspection following receipt from the defendants to do what they have contracted to do.
supplier or following transfer of the items from one
work center to another. speculative buying–Purchasing an item not
immediately needed in anticipation of future price
sourcing–The process of identifying a company that increase. See: buying down, hedge, hedging.
provides a needed good or service.
speed of design process–The time frame within which
sourcing decisions–High-level decisions regarding a product or service is designed to satisfy customer
which products or services will be produced within a needs and regulations and field-tested before
company and which will be purchased from external entering a market.
supply chain partners. These decisions normally are
based on supplier cost and capability by comparison spend analysis–A purchasing activity in which a firm
to producing the product in house. explores its spending patterns to identify opportunities
to reduce costs or improve quality. Part of value
analysis as well as cost-benefit analysis.

spend management • standard allowance
spend management–Managing the outflow of can be approximated by multiplying the total amount
funds in order to buy goods and services. The of inventory in existing facilities by the square root of
term is intended to encompass such processes as the ratio of number of future facilities divided by the
outsourcing, procurement, e-procurement, and number of existing facilities.
supply chain management.
SQC–Abbreviation for statistical quality control.
SPI–Abbreviation for schedule performance index.
SQL–Abbreviation for structured query language.
spike–A significant large upward or downward
SRM–Abbreviation for supplier relationship
movement of a value level in a short period of time.
management.
split-case order picking–A process for filling less-
stabilization stock–An inventory that is carried
than-full case orders. Requires items to be picked
on hand above the base inventory level to provide
from a case or other container.
protection against incurring overtime or downtime.
split delivery–A method by which a larger quantity is
stable demand–Products that keep a similar demand
ordered on a purchase order to secure a lower price,
pattern no matter what the season or time. Staple
but delivery is divided into smaller quantities and
products fall into this category.
spread out over several dates to control inventory
investment, save storage space, and so forth. stacked lead time–Syn: cumulative lead time.
split lot–A manufacturing order quantity that has staged material–Syn: kit.
been divided into two or more smaller quantities,
usually after the order has been released. The staging–Pulling material for an order from inventory
quantities of a split lot may be worked on in parallel, or before the material is required. This action is often
a portion of the original quantity may be sent ahead to taken to identify shortages, but it can lead to increased
a subsequent operation to be worked on while work problems in availability and inventory accuracy.
on the remainder of the quantity is being completed staging and consolidation–Physically moving
at the current operation. The purpose of splitting a lot material from the packing area to a staging area,
is to reduce the lead time of the order. based on a prescribed set of instructions related to
spoiled work order–Syn: rework order. a particular outbound vehicle or delivery route, often
for shipment consolidation purposes.
sponsor–A person who provides financial support, in
cash or in kind. stakeholder relationship management–Addressing
and managing the competing priorities, needs, and
spot buy–A purchase made on a one-time basis for concerns of internal and external stakeholders
standard off-the-shelf material or equipment. in a proactive and sustained manner, resulting in
decreased cost and enhanced stakeholder acceptance
spot demand–Short lead-time demand that is
or buy-in.
difficult to estimate. Usually supply for this demand is
provided at a premium price.
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stakeholders–People with a vested interest
in a company, including managers, employees,
spot stock warehousing–Positioning seasonal items
stockholders, customers, and suppliers.
in proximity to the market. When the season ends,
these items are either disposed of or relocated to a standard–1) An established norm against which
more centralized location. measurements are compared. 2) An established norm
of productivity defined in terms of units of output
spread–Variability of an action. Often measured by the
per set time (units/hour) or in standard time (minutes
range or standard deviation of a particular dimension.
per unit). 3) The time allowed to perform a specific
SPT–Abbreviation for shortest processing time rule. job including quantity of work to be produced. See:
standard time.
square root rule–A technique that assists planners to
calculate the change in total safety stock needed to standard allowance–The established or accepted
maintain customer service levels within a distribution amount by which the normal time for an operation
network when the number of stocking locations is is increased within an area, plant, or industry to
changed. The square root rule states that total safety compensate for the usual amount of personal, fatigue,
stock inventories in a specified number of facilities and unavoidable delay times.

standard batch quantity (SBQ) • star
standard batch quantity (SBQ)–The quantity of a parent standardized ingredient–A raw ingredient that has
that is used as the basis for specifying the material been preprocessed to bring all its specifications within
requirements for production. The quantity per is standard ranges before it is introduced to the main
expressed as the quantity to make the SBQ, not to make process. This preprocessing minimizes variability in the
only one of the parent. Often used by manufacturers production process.
that use some components in standard quantities or
standardized product–A product that can be made in
by process-related manufacturers. Syn: run size.
large quantities, or continuously, because it has very
standard components–Components of a finished few product designs.
product that are easy to manufacture and are made
standardized work–A work process that is always
by many suppliers, making them more of commodity
carried out exactly the same way, preferably using the
to buy at low cost.
current best known way under which the output can
standard containers–Predetermined, specifically be achieved.
sized containers used for storing and moving
standard output–An estimate of what should be
components. These containers protect the
produced, given a certain level of resources. Can
components from damage and simplify the task of
be stated in units per hour or units per period (day,
counting components.
shift, etc.).
standard cost accounting system–A cost accounting
standard practice–The means by which a wide range
system that uses cost units determined before
of organizations and supply chains have historically
production for estimating the cost of an order
conducted operations. These well-established
or product. For management control purposes,
practices provide good performance but do not
the standards are compared to actual costs, and
provide a significant cost or competitive advantage
variances are computed.
over emerging and best practices. Implementation of
standard costs–The target costs of an operation, this type of practice involves low risk and results in
process, or product including direct material, direct acceptable performance.
labor, and overhead charges.
standard ratio–A relationship based on a sample
standard deviation–A measurement of dispersion distribution by value for a particular company. When
of data or of a variable. The standard deviation is the standard ratio for a particular company is known,
computed by finding the differences between the certain aggregate inventory predictions can be made
average and actual observations, squaring each (e.g., the amount of inventory increase that would be
difference, adding the squared differences, dividing required to provide a particular increase in customer
by n – 1 (for a sample), and taking the square root of service).
the result. See: estimate of error.
standard service–Service that is the same for
standard error–A measurement of the variability most customers.
of statistics such as the sample mean. See: estimate
standard time–The length of time that should be
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of error.
required to (1) set up a given machine or operation
standard hours–Syn: standard time. and (2) run one batch or one or more parts,
assemblies, or end products through that operation.
standard industrial classification (SIC)–
Used in determining machine requirements and labor
Classification codes that are used to categorize
requirements. Assumes an average worker who follows
companies into industry groupings.
prescribed methods, and allows time for personal rest
standardization–1) The process of designing and to overcome fatigue and unavoidable delays. Also
altering products, parts, processes, and procedures to frequently used as a basis for incentive pay systems
establish and use standard specifications for them and and as a basis of allocating overhead in cost accounting
their components. 2) Reduction of the total numbers systems. Syn: standard hours. See: standard.
of parts and materials used and products, models, or
standing capacity–Syn: rated capacity.
grades produced. 3) The function of bringing a raw
ingredient into standard (acceptable) range per the standing order–Syn: blanket purchase order.
specification before introduction to the main process.
star–A slang term used to refer to a high-growth,
high-profit-margin product. See: growth-share matrix.

start date • statute of limitations
start date–In project management, the time an static budget–Syn: master budget.
activity begins; may be defined as an actual start date
static inventory models–Syn: single-period
or a planned start date.
inventory models.
start manufacture to order complete manufacture–The
statistical control–The situation where variations
time from when the manufacturing of an order starts
among the observed samples can be attributed to a
until an order is ready to be shipped to the customer.
constant system of chance causes.
start-to-finish–In project management, a network
statistical control charts–A chart on which
requirement that activity A must start before
data is collected from physical measurements or
subsequent activity B can finish. See: logical
customer surveys, and plotted so that conformance
relationship.
to specifications or customer satisfaction can be
start-to-start–In project management, a network tracked and improved.
requirement that activity A must start before
statistical inventory control–The use of statistical
subsequent activity B can start. See: logical relationship.
methods to model the demands and lead times
startup–That period starting with the date of initial experienced by an inventory item or group of items.
operation during which the unit is brought up to Demand during lead time and between reviews
acceptable production capacity and quality within can be modeled, and reorder points, safety stocks,
estimated production costs. The activity that and maximum inventory levels can be defined to
commences on the date of initial activity and has strive for desired customer service levels, inventory
significant duration on most projects, but is often investments, manufacturing and distribution
confused (used interchangeably) with date of efficiency, and targeted returns on investments.
initial operation. Syn: scientific inventory control. See: fixed reorder
quantity inventory model.
startup audit–The technique of having an
implementation team tour or visit the implementation statistical order point–Syn: order point.
site on a frequent basis and use the “management
statistical order point system–Syn: order point system.
by walking around” technique to identify problems
and solutions. statistical process control (SPC)–The application
of statistical techniques to monitor and adjust an
startup costs–The extra operating costs to bring the
operation. Often used interchangeably with statistical
plant or product on-stream incurred between the
quality control, although statistical quality control
completion of construction and the start of normal
includes acceptance sampling as well as statistical
operations. In addition to the difference between
process control.
actual operating costs during that period and normal
costs, they include employee training, equipment tests, statistical quality control (SQC)–The application
process adjustments, salaries and travel expense of of statistical techniques to control quality. Includes
temporary labor staff and consultants, report writing, acceptance sampling as well as statistical process
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post-startup monitoring, and associated overhead. control, but is often used interchangeably with
Additional capital required to correct plant problems statistical process control.
may be included. Startup costs are sometimes
expensed over the lifetime of the asset(s). statistical safety stock calculations–The mathematical
determination of safety stock quantities considering
statement of cash flows–Syn: funds flow statement. forecast errors, lot sizes, desired customer service
levels, and the ratio of lead time to the length of
statement of work–1) A description of products to be
the forecast period. Safety stock is frequently the
supplied under a contract. 2) In project management,
product of the appropriate safety factor and the
the first project planning document that should
standard deviation or mean absolute deviation of the
be prepared. Describes the purpose, history,
distribution of demand forecast errors.
deliverables, and measurable success indicators for
a project. Captures the support required from the statistical thinking–The ability to draw conclusions
customer and identifies contingency plans for events based on data.
that could throw the project off course. Because the
project must be validated for management, staff, and statute of limitations–A statute restricting the length
review groups, the statement of work should be a of time in which a lawsuit may be filed.
persuasive document.

steady state • stores issue order
steady state– The state occurring when the variables stockout–A lack of materials, components, or
that define the behavior of a system or process are finished goods that are needed. See: backorder.
behaving naturally as if operating for some time. In
stockout alert–A signal or notification of an item
simulations, data is not collected until after this state
indicating a lack of inventory on hand that is required.
is reached. See: transient state.
stockout costs–The costs associated with a
step budget–A budget that establishes the anticipated
stockout. Those costs may include lost sales,
targets at which an operation will perform for each
backorder costs, expediting, and additional
step or level of production. Can be likened to several
manufacturing and purchasing costs.
different fixed budgets. A useful method because most
of the manufacturing overhead expenditures vary in stockout percentage–A measure of the effectiveness
steps, not as a straight line. See: flexible budget. with which a company responds to actual demand
or requirements. The stockout percentage can be a
step-function scheduling–Scheduling logic that
comparison of total orders containing a stockout to
recognizes run length to be a multiple of the number
total orders, or of line items incurring stockouts to
of batches to be run rather than simply a linear
total line items ordered during a period. One formula
relationship of run time to total production quantity.
is stockout percentage = (1 – customer service ratio) ×
stickering–Placing manufacturer- or customer- 100 percent. Ant: customer service ratio.
requested stickers on the boxes of the product being
stockout probability–Syn: cycle service level.
sent to them. Typically done so that the customer,
usually a retailer, can more effectively track its inventory. stockpoint–A designated location in an active area
Bar coding is commonly a part of the stickering process. of operation into which material is placed and from
which it is taken. A way of tracking and controlling
stochastic models–Models where uncertainty is
active material. Not necessarily a stockroom isolated
explicitly considered in the analysis.
from activity.
stock–1) Items in inventory. 2) Stored products or
stock record card–A ledger card that contains
service parts ready for sale, as distinguished from
inventory status for a given item.
stores, which are usually components or raw materials.
stock split–The issuance of new shares to
stockchase–Syn: expedite.
stockholders without requiring additional equity.
stock code–Syn: item number.
stock status–A report showing the inventory on hand
stock dividend–A dividend paid to shareholders in and usually showing the inventory on order and some
stock rather than cash. sales or usage history for the products it covers.
stock keeping unit (SKU)–1) An inventory item. For stop sequence–A loading procedure in which the first
example, a shirt in six colors and five sizes represents stop is loaded last.
30 different SKUs. 2) In a distribution system, an item
stop work order–Syn: hold order.
at a particular geographic location. For example,
one product stocked at the plant and at six different
distribution centers would represent seven SKUs.
storage–The retention of parts or products for future
use or shipment. S
stockless production–Syn: just in time. storage costs–A subset of inventory carrying costs,
including the cost of warehouse utilities, material
stockless purchasing–Buying material, parts,
handling personnel, equipment maintenance, building
supplies, and so on for direct use by the departments
maintenance, and security personnel.
involved, as opposed to receiving them into stores
and subsequently issuing them to the departments. store–A storage point located upstream of a work
The intent is to reduce inventory investment, increase station, intended to make it easier to see customer
cash flow, reduce material handling and storage, and requirements.
provide better service. See: dock-to-stock inventory.
stores–1) Stored materials used in making a product.
stock number–Syn: item number. 2) The room where stored components, parts,
assemblies, tools, fixtures, and so forth are kept.
stock order–An order to replenish stock, as opposed
to a production order to make a particular product for stores issue order–Syn: picking list.
a specific customer.

stores ledger card • strict liability
stores ledger card–A card on which records of the strategic performance measurements–
items on hand and on order are maintained. Measurements that relate to the long-term goals
of a business. Examples include profitability,
stores requisition–Syn: picking list.
market share, growth, and productivity. See:
stowability–The ease or difficulty of loading, handling, global performance measurements, operational
and storage of shipping items. Used as a factor performance measurements.
for determining shipment costs and classifying
strategic plan–The plan for how to marshal and
freight, it considers regulations, liability, and item
determine actions to support the mission, goals, and
characteristics (e.g., hazardous materials, excessive
objectives of an organization. Generally includes an
weight, irregular shape).
organization’s explicit mission, goals, and objectives
straight-line depreciation–A method of depreciation and the specific actions needed to achieve those
whereby the amount to be recovered (written off as an goals and objectives. See: business plan, operational
expense) is spread uniformly over the estimated life of plan, strategic planning, strategy, tactical plan.
the asset in terms of time periods. See: depreciation.
strategic planning–The process of developing a
straight-line schedule–Syn: gapped schedule. strategic plan. See: operational planning, strategic
plan, tactical planning.
strategic alliance–A relationship formed by two or
more organizations that share information (proprietary), strategic quality planning–Weaving quality
participate in joint investments, and develop linked considerations into strategic business plans.
and common processes to increase the performance
strategic sourcing–A comprehensive approach for
of both companies. Many organizations form strategic
locating and sourcing key material suppliers, which
alliances to increase the performance of their common
often includes the business process of analyzing
supply chain.
total-spend-for-material spend categories. Includes a
strategic benchmarking–Benchmarking how others focus on the development of long-term relationships
compete. Often involves benchmarking across with trading partners who can help the purchaser
industries. See: benchmarking. meet profitability and customer satisfaction goals.
From an information technology applications
strategic business unit (SBU)–An approach to strategic perspective, includes automation of requests for
planning that develops a plan based on products. A quote (RFQ), requests for proposal (RFP), electronic
company’s products are typically grouped into strategic auctioning (e-auction or reverse auction), and
business units (SBUs) with each SBU evaluated in terms contract management processes.
of strengths and weaknesses vis-à-vis similar business
units made and marketed by competitors. The units strategic variables–The most important variables
are evaluated in terms of their competitive strengths, that affect the business environment and business
relative advantages, life cycles, and cash flow patterns. strategy. Typically include the economic situation,
population demographics, changes in technology,
strategic deployment–See: hoshin planning. and government policies.
S strategic drivers–Factors that influence business

unit and manufacturing strategies.
strategy–For an enterprise, identifies how the
company will function in its environment. Specifies
strategic inventory positioning–The process of how to satisfy customers, how to grow the business,
determining, for inventory in the supply chain or how to compete in its environment, how to manage
production process, the location that will best protect the organization and develop capabilities within the
the system against variability. business, and how to achieve financial objectives.
See: strategic plan.
strategic mission–A statement of the future business
scope of an enterprise. Incorporates what is being stratification analysis–A statistical tool for determining
satisfied (customer needs), who is being satisfied root causes in which observed historical data is
(customer groups), and how the company creates separated by particular characteristics to determine
value for the customer (processes, technologies, and the effect of each characteristic upon the observed
core competencies). results. See: root cause analysis.
strategic partnerships–Alliances with top supplier and strict liability–A tort doctrine requiring those engaging
buyer performers to enhance a firm’s performance. in very hazardous activities or those manufacturing very
hazardous items be held to a high standard of conduct.

strict performance • supplier
strict performance–The performance of a contract indented bill of material, it does not list the levels of
good enough for the contractor to be paid full price manufacture and lists a component only once for the
less the other party’s losses. total quantity used.
structured problem solving–A defined process applied summarized where-used–A form of an indented
to determine, evaluate, and resolve an identified where-used bill of material that shows all parents
problem. The methodology includes (1) the collection in which a given component is used, the required
of factual data, (2) defining why the situation is a quantities, and all the next-level parents until the end
problem, (3) defining a concise definition of what the item is reached. Unlike the indented where-used, it
problem is, (4) generation of possible solutions without does not list the levels of manufacture.
discussing solutions at this time, (5) evaluation of the
summary judgment–A judicial ruling that no essential
pros and cons of each option within the organization’s
facts are in dispute and that one party to the suit
objectives and feasibility, and (6) implementation of the
merits judgment as a matter of law.
solution selected.
sum of deviations–Syn: cumulative sum.
subassembly–An assembly that is used at the next
level of the bill of material to build another assembly. sunk cost–1) The unrecovered balance of an investment.
It is a cost, already paid, that is not relevant to the
subcontracting–Sending production work outside to
decision being made about the future. Capital already
another manufacturer. See: outsourcing.
invested that for some reason cannot be retrieved. 2) A
subcontractor and supplier networks–Creating past cost that has no relevance with respect to future
long-term contracts between a manufacturer and receipts and disbursements of a facility undergoing an
several suppliers of parts and components. economic study. This concept implies that since a past
outlay is the same regardless of the alternative selected,
suboptimization–A solution to a problem that is
it should not influence the choice between alternatives.
best from a narrow point of view but not from a
higher or overall company point of view. For example, super bill of material–A type of planning bill, located
a department manager who refuses to allow at the top level in the structure, that ties together
employees to work overtime in order to minimize the various modular bills (and possibly a common parts
department’s operating expense may cause lost sales bill) to define an entire product or product family. The
and a reduction in overall company profitability. quantity per relationship of the super bill to its modules
represents the forecasted percentage of demand of
subplant–An organizational structure within a factory
each module. The master-scheduled quantities of
consisting of a compact entrepreneurial unit that is
the super bill explode to create requirements for the
either process-oriented or product-oriented and is
modules that also are master scheduled. See: pseudo
structured to achieve maximum productivity.
bill of material.
substitutability–When a buyer can purchase similar
superflush–A technique to relieve all components
products from different suppliers. Increases the buyer’s
down to the lowest level using the complete bill
power because the buyer doesn't have to rely on just
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of material, based on the count of finished units
one supplier.
produced or transferred to finished goods inventory.
substitution–The use of a nonprimary product
supermarket approach–A way of managing inventory
or component, normally when the primary item
and improving picking by making all parts easy to take
is not available.
off of a shelf, much like the shelves of a supermarket.
sub-tier supplier–A supplier who delivers a product to Inventory is then restocked in such a way that
a direct supplier of the customer. employees always have easy access.
successor activity–1) In project management, in an supervisor estimate–An estimate, made by a

activity-on-arrow network, the activity (arrow) that knowledgeable manager, of the labor required
departs a node. 2) In project management, in an activity- for an operation.
on-node network, the activity at the tip of the arrow.
supplier–1) Provider of goods or services. See: vendor.
summarized bill of material–A form of multilevel bill 2) Seller with whom the buyer does business, as
of material that lists all the parts and their quantities opposed to vendor, which is a generic term referring
required in a given product structure. Unlike the to all sellers in the marketplace.

supplier alternate • supplier relationship management (SRM)
supplier alternate–A seller other than the primary supplier measurement–The act of measuring the
one. The supplier alternate may or may not supply the supplier’s performance to a contract. Measurements
items purchased, but is usually approved to supply usually cover delivery reliability, lead time, and price.
those items. Syn: purchasing performance measurement. See:
vendor measurement.
supplier audit–Auditing supplier processes as part of
a supplier development system. supplier number–A numerical code used to
distinguish one supplier from another.
supplier base–The group of suppliers from which a
firm acquires goods and services. Syn: supply base. supplier-owned inventory–A system in which the
supplier not only controls the inventory, but also
supplier certification–Certification procedures
owns it and keeps it close to the consumer until it is
verifying that a supplier operates, maintains,
purchased by the consumer. Falls within the supplier
improves, and documents effective procedures
managed inventory umbrella.
that relate to the customer’s requirements. Such
requirements can include cost, quality, delivery, supplier partner–A supplier organization with
flexibility, maintenance, safety, and ISO quality and which a company has formed a customer-supplier
environmental standards. partnership. See: outpartnering.
supplier clustering–Deliberately sole sourcing remote supplier partnership–The establishment of a

suppliers within a small geographical area to facilitate working relationship with a supplier organization
joint shipments of what would otherwise be less- whereby two organizations act as one. Syn:
than-truckload quantities. collaborative supply relationship.
supplier development–Technical and financial supplier performance evaluation–Monitoring and

assistance given to existing and potential suppliers evaluating key suppliers on cost, quality, engineering,
to improve quality and/or due date/performance. purchasing, and so on, based on an agreed set of
measurements.
supplier footprint–Describes the supply base for
a particular material, component, or service. When supplier quality assurance–The confidence that a
stratified properly for leverage, cost impact, risk, supplier’s goods or services will fulfill its customers’
and performance, can lead to a supplier footprint needs. This confidence is achieved by creating a
transition plan for consolidated leverage, supply-base relationship between the customer and supplier
reduction, and focused effort. that ensures that the product will be fit for use with
minimal corrective action and inspection. According
supplier-input-process-output-customer (SIPOC)
to J.M. Juran, nine primary activities are needed: (1)
diagram–A high-level process map that shows
define product and program quality requirements,
substantial subprocesses in an organization’s
(2) evaluate alternative suppliers, (3) select suppliers,
process together with the structure of the process
(4) conduct joint quality planning, (5) cooperate with
represented by the suppliers, inputs, outputs, and
the supplier during the execution of the contract,
customers. A SIPOC diagram defines the critical
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(6) obtain proof of conformance to requirements,
aspects of a process without losing the overall
(7) certify qualified suppliers, (8) conduct quality
perspective.
improvement programs as required, and (9) create
supplier lead time–The amount of time that normally and use supplier quality ratings.
elapses between the time an order is received by a
supplier relationship management (SRM)–A
supplier and the time the order is shipped. Syn: vendor
comprehensive approach to managing an enterprise’s
lead time. See: purchasing lead time.
interactions with the organizations that supply the
supplier-managed inventory–A relationship where goods and services the enterprise uses. The goal of
the buyer maintains inventory, usually at its facility, SRM is to streamline and make more effective the
and provides the supplier information about the processes between an enterprise and its suppliers.
amount of stock on hand. It is the responsibility of SRM is often associated with automating procure-
the supplier to monitor this information and send to-pay business processes, evaluating supplier
replacement items when the inventory reaches a performance, and exchanging information with
particular level. suppliers. An e-procurement system is often an
example of an SRM family of applications.

supplier scheduler • supply chain network design systems
supplier scheduler–A person whose main job is supply chain cycle time–The time it would take to fill
working with suppliers regarding what is needed a customer order if inventory levels were zero. Sum
and when. Are in direct contact with both MRP and of the longest lead times for each stage in the supply
the suppliers. Do the material planning for the items chain. See: cycle time, cycle service level.
under their control, communicate the resultant
supply chain design–The determination of how to
schedules to their assigned suppliers, do follow-up,
structure a supply chain. Design decisions include
resolve problems, and advise other planners and
the selection of partners, the location and capacity
the master scheduler when purchased items will
of warehouse and production facilities, the products,
not arrive on time to support the schedule. Normally
the modes of transportation, and supporting
organized by commodity, as are the buyers. Using
information systems.
the supplier scheduler approach frees buyers from
day-to-day order placement and expediting, giving supply chain event management (SCEM)–A term
them more time to do cost reduction, negotiation, associated with supply chain management software
supplier selection, alternate sourcing, and so forth. applications, where users have the ability to flag the
Syn: planner/buyer, vendor scheduler. occurrence of certain supply chain events to trigger
some form of alert or action within another supply
supplier scheduling–A purchasing approach that chain application. SCEM can be deployed to monitor
provides suppliers with schedules rather than with supply chain business processes such as planning,
individual hard-copy purchase orders. Normally, a transportation, logistics, or procurement. Can also
supplier scheduling system will include a business be applied to supply chain business intelligence
agreement (contract) for each supplier, a weekly (or applications to alert users to any unplanned or
more frequent) schedule for each supplier extending unexpected event.
for some time into the future, and individuals called
supplier schedulers. Also required is a formal priority supply chain execution–Execution-oriented software
planning system that works well, because it is applications for effective procurement and supply of
essential in this arrangement to provide the supplier goods and services across a supply chain. Includes
with valid due dates. Syn: vendor scheduling. manufacturing, warehouse, and transportation
execution systems, and systems providing visibility
supplies–Materials used in manufacturing that are across the supply chain.
not normally charged to finished production, such as
cutting and lubricating oils, machine repair parts, glue, supply chain integration–When supply chain partners
interact at all levels to maximize mutual benefit.
or tape. Syn: general stores, indirect materials.
supply chain inventory visibility–Software applications
supply–1) The quantity of goods available for use. 2)
that permit monitoring events across a supply chain.
The actual or planned replenishment of a product
These systems track and trace inventory globally
or component. The replenishment quantities are
on a line-item level and notify the user of significant
created in response to a demand for the product or
deviations from plans. Companies are provided with
component or in anticipation of such a demand.
realistic estimates of when material will arrive.
supply base–Syn: supplier base.
S
supply chain management–The design, planning,
supply chain–The global network used to deliver execution, control, and monitoring of supply chain
products and services from raw materials to end activities with the objective of creating net value,
customers through an engineered flow of information, building a competitive infrastructure, leveraging
physical distribution, and cash. worldwide logistics, synchronizing supply with
demand, and measuring performance globally.
supply chain community–The set of trading partners
and nominal trading partners that define a complete supply chain mastery–A firm’s ability to achieve
supply chain. superior results through exceptional management of
revenue generation, segmented supplier and customer
supply chain continuity–An organization’s strategic management, collaboration and information sharing,
and tactical capability to plan for and respond to risk management, data analysis, and appropriate use
conditions, situations, and events as necessary of technology.
in order to continue supply chain operations at an
acceptable predefined level. supply chain network design systems–Systems
created among all members of the supply chain in
order to get all members on the same page and with
the same goals in order to promote efficiency.

Supply Chain Operations Reference (SCOR) model • synchronization alerts
Supply Chain Operations Reference (SCOR) model–A supply rate–Production rate, or quantity of units per
process reference model developed by the Supply unit of time, sent to inventory.
Chain Council and endorsed by the Association
supply uncertainty–The risk of interruptions in the
for Supply Chain Management (ASCM) as the
flow of components from upstream suppliers.
standard cross-industry diagnostic tool for supply
chain management. The SCOR model describes support costs–In activity-based cost accounting,
the business activities associated with satisfying activity costs not directly related to producing a
a customer’s demand, which include plan, source, product, such as the cost of the information system.
make, deliver, return, and enable. Use of the model
includes analyzing the current state of a company’s support functions–Activities such as accounting and
processes and goals, quantifying operational information systems that do not directly participate in
performance, and comparing company performance production but that are nevertheless essential.
to benchmark data. SCOR has developed a set of surge capacity–The ability to meet sudden,
metrics for supply chain performance, and ASCM unexpected increases in demand by expanding
members have formed industry groups to collect production with existing personnel and equipment.
best practices information that companies can use to
evaluate their supply chain performance. surge tank–A container to hold output from one
process and feed it to a subsequent process. It is used
supply chain planning–The determination of a set of when line balancing is not possible or practical or only
policies and procedures that govern the operation of on a contingency basis when downstream equipment
a supply chain. Planning includes the determination of is nonoperational.
marketing channels, promotions, respective quantities
and timing, inventory and replenishment policies, surplus–A situation in which an oversupply exists.
and production policies. Planning establishes the
surrogate driver–In activity-based cost accounting,
parameters within which the supply chain will operate.
a substitute for the best possible driver that is useful
supply chain resilience–The ability of a supply chain to because it is less costly and almost as accurate.
anticipate, create plans to avoid or mitigate, and/or to
survey research–A form of research (frequently used
recover from disruptions to supply chain functionality.
in marketing research) where data is collected by
supply chain risk–The variety of possible events and mailing questionnaires to a group of people within a
their outcomes that could have a negative effect on target audience. See: marketing research.
the flow of goods, services, funds, or information
sustainability–An organizational focus on activities
resulting in some level of quantitative or qualitative
that provide present benefit without compromising
loss for the supply chain.
the needs of future generations.
supply chain stress testing–A rigorous analytical
sustaining activity–In activity-based cost
process of assessing plausible risks of all companies
accounting, an activity that is not directly beneficial
linked to a supply chain. With the objective of chain
to any specific cost object but does benefit the
S
solvency now and in the future, analysis pertains
organization as a whole.
to factors over which management has control,
represented by a combination of financial ratios SWOT–Abbreviation for strengths, weaknesses,
and models. Factors out of management control are opportunities, and threats.
forces of nature, like labor disruptions and war. Stress
testing a supply chain involves quantitative methods SWOT analysis–An analysis of the strengths,
that are fairly uniform and qualitative analysis that weaknesses, opportunities, and threats of and
may vary from one situation to another. to an organization. SWOT analysis is useful in
developing strategy.
supply chain visibility–Sharing information throughout
the supply chain to create transparency among supply synchronization alerts–Alerts in demand-driven
chain partners; for example, the ability of supply material requirements planning (DDMRP) designed
chain partners to access demand and production to highlight potential problems before they occur
information from trading partners. through expediting, rescheduling for components
to coincide with parent item planned receipt, or
supply offset–Adjusting the timing of the application adjusting item lead times.
of a demand adjustment factor to account for long lead
time components. See: demand adjustment factor.

synchronized production • tactical planning
synchronized production–A manufacturing systems concept–An attempt to create the most

management philosophy that includes a consistent efficient complete system as opposed to the most
set of principles, procedures, and techniques where efficient individual parts. A “whole process” or “whole
every action is evaluated in terms of the global goal company” operating system that is driven by cause
of the system. Both kanban, which is a part of the and effect.
JIT philosophy, and drum-buffer-rope, which is a part
systems network–A group of interconnected nodes.
of the theory of constraints philosophy, represent
Implies redundancy in connections and some means
synchronized production control approaches. Syn:
(e.g., machines) for implementing the connection.
synchronous manufacturing. See: drum-buffer-rope,
kanban, synchronous scheduling. systems rollup–Integrating computer systems;
enables faster data retrieval and better information
synchronous control–A pull-type production control
system responsiveness.
system that is based on setting production rates and
feeding work into production to meet the planned systems thinking–A school of thought that focuses
rates, then monitoring and controlling production. on recognizing the interconnections between the
parts of a system and synthesizing them into a unified
synchronous manufacturing–Syn: synchronized
view of the whole.
production.
systems view–A holistic approach to management
synchronous scheduling–Scheduling processes
that considers how actions impact the production
(kanban in just in time and drum-buffer-rope in
process. Included within the system are suppliers,
theory of constraints environments) that focus on
product design, process design, the production
synchronizing all operations to the constraint of the
process, distribution, and customers.
system. See: synchronized production.
T
synthetic time standard–Syn: predetermined
motion time.
system–A regularly interacting or interdependent

group of items forming a unified whole toward the
T&M–Abbreviation for time and materials.
achievement of a goal.
tactical buying–The purchasing process focused
system constraint–In supply chain management, the
on transactions and nonstrategic material buying.
supply chain is viewed as the complete system. The
Closely aligned with the “ordering” portion of
system constraint is the resource at any one of the
executing the purchasing transaction process. Its
trading partners that is most limiting the end-to-end
characteristics include stable, limited fluctuations;
throughput of the supply chain.
defined standard specifications noncritical to
system layout planning (SLP)–A facility layout production; no delivery issues; and high reliability
methodology that develops the layout of a facility concerning quality-standard material with very little
by considering the importance of proximity of each concern for rejects. See: strategic sourcing.
department to the other departments.
tactical plan(s)–The set of functional plans (e.g.,
T
system nervousness–See: nervousness. production plan, sales plan, marketing plan)
synchronizing activities across functions that
systems analysis–1) The analyzing in detail of specify production levels, capacity levels, staffing
the information needed for an organization, the levels, funding levels, and so on, for achieving the
characteristics and components of the current intermediate goals and objectives to support the
information system, and the requirements of any organization’s strategic plan. See: aggregate planning,
proposed changes to the information system. 2) A operational plan, production planning, sales and
method of problem solving that encompasses the operations planning, strategic plan, tactical planning.
identification, study, and evaluation of interdependent
parts and their attributes that function in an ongoing tactical planning–The process of developing a set
process and that constitute an organic whole. of tactical plans (e.g., production plan, sales plan,
marketing plan). Two approaches to tactical planning
systems audit–The audit of any activity that can exist for linking tactical plans to strategic plans—
affect final product quality. production planning and sales and operations
planning. See: operational planning, strategic
planning, tactical plan.

tact time • teardown time
tact time–Syn: takt time. desired profit as well as marketing and distribution
costs, thus leaving the required manufacturing or
Taguchi methodology–A concept of off-line quality target cost.
control methods conducted at the product and
process design stages in the product development target inventory level–In a min-max inventory
cycle. This concept, expressed by Genichi Taguchi, system, the equivalent of the maximum. The target
encompasses three phases of product design: system inventory is equal to the order point plus a variable
design, parameter design, and tolerance design. order quantity. Often called an order-up-to inventory
The goal is to reduce quality loss by reducing the level and is used in a periodic review system. Syn:
variability of the product’s characteristics during order-up-to level.
the parameter phase of product development. Syn:
Taguchi methods. target market–1) A fairly homogeneous group of
customers to whom a company wishes to appeal. 2)
Taguchi methods–Syn: Taguchi methodology. A definable group of buyers to which a marketer has
decided to market.
takt time–Sets the pace of production to match
the rate of customer demand and becomes the target marketing–The process of focusing marketing
heartbeat of any lean production system. Computed activities specifically on those people who are most
as the available production time divided by the rate likely to buy a company’s products and services.
of customer demand. For example, assume demand Data gathered on people who use the internet
is 10,000 units per month, or 500 units per day, and enables companies to identify and focus on more
planned available capacity is 420 minutes per day. The likely candidates.
takt time = 420 minutes per day ÷ 500 units per day =
0.84 minutes per unit. This takt time means that a unit tariff–An official schedule of taxes and fees imposed
should be planned to exit the production system on by a country on imports or exports.
average every 0.84 minutes. Syn: tact time. task–1) In project management, the lowest level
tampering–Action taken to compensate for variation to which work can be subdivided on a project. 2) In
within the control limits of a stable system. Tampering activity-based cost accounting, a task, a subdivision
increases rather than decreases variation, as evidenced of an activity, is the least amount of work. Tasks are
in the funnel experiment. See: funnel experiment. used to describe activities.
tangibles–Things that can be quantitatively measured task interleaving–An attempt at reducing/eliminating

or valued, such as the costs of physical assets. A deadheading (i.e., driving an empty material-handling
dimension of service quality referring to the physical vehicle). A warehouse management system directs a
appearance of the service facility, including the material-carrying vehicle to put away materials as it
personnel and equipment. goes to pick up other materials.
tank inventory–Goods stored in tanks. These goods TBC–Abbreviation for time-based competition.
may be raw materials, intermediates, or finished TBL–Abbreviation for triple bottom line.
goods. The description of inventory as tank inventory
indicates the necessity of calculating the quantity on TCO–Abbreviation for total cost of ownership.
hand from the levels within the tanks.
TCP/IP–Abbreviation for transmission control
tapering rate–A rate structure in which a shipping protocol/internet protocol.
T rate increases as the distance shipped increases,

but the increases are not directly correlated to the
increase in the distance shipped.
team design/engineering–Syn: participative design/
engineering.
teardown–All work items required between the end
tardiness–For jobs that are late, the delivery date
of one operation or job and the start of setup for the
minus the due date. See: earliness, lateness.
next operation or job, both jobs requiring the same
tare weight–The weight of an empty container, machinery or facilities. See: teardown time.
obtained by deducting the net weight of the
teardown bill of material–Syn: disassembly bill of
contents of the container from the gross weight of
material.
the full container.
teardown time–The time needed to remove a setup
target costing–The process of designing a product to
from a machine or facility. Teardown is an element of
meet a specific cost objective. Target costing involves
manufacturing lead time, but it is often allowed for in
setting the planned selling price and subtracting the
setup or run time rather than separately. See: teardown.

technical components • therbligs
technical components–Parts that are difficult to terms of sale–In international trade, the element of a
make, have long lead times, and require expert contract that states the delivery and payment terms
knowledge to produce. Generally are produced by between a buyer and a seller. It includes when and
only a few suppliers because of these characteristics. where the transfer of goods will occur, documentation
Tooling to produce these products usually is owned by that is required, and liabilities for both parties while
the customer to avoid proprietary or patent issues. the goods are in transit.
technical/office protocol (TOP)–An application-specific terms of trade–The portion of a contract of sale that
protocol based on open systems interconnection (OSI) specifies the responsibilities of the seller or exporter and
standards. Designed to allow communication between the responsibilities of the buyer or importer, especially
computers from different suppliers in the technical the point at which one party’s responsibilities end
development and office environments. and the other party’s responsibilities begin (including
the point at which title to the goods is transferred).
technologies–The terms, concepts, philosophies, Commonly specified using International Commercial
hardware, software, and other attributes used in a Terms (Incoterms®).
field, industrial sector, or business function.
TEU–Abbreviation for twenty-foot equivalent unit.
technology transfer–The transmission of technology
(e.g., knowledge, skills, software, hardware) from one theoretical capacity–The maximum output capability,
country, organization, business, or entity to another allowing no adjustments for preventive maintenance,
country, organization, business, or entity. unplanned downtime, shutdown, and so forth.
TEI–Abbreviation for total employee involvement. theoretical cycle time–The amount of time,
eliminating all stops, waiting, and additional time due
telecommunications–Transmission of voice and to error, that is needed for one item to go through an
image data at a distance by electronic means. entire process.
telescoping–Syn: overlapped schedule. theory of constraints (TOC)–A holistic management
tender offer–An offer by an organization to buy a philosophy developed by Dr. Eliyahu M. Goldratt, based
block of shares directly from shareholders of on the principle that complex systems exhibit inherent
another organization. simplicity. Even a very complex system comprising
thousands of people and pieces of equipment can have,
terminal delivery allowance–A discount provided if at any given time, only a very, very small number of
freight is delivered to or picked up from the carrier’s variables—perhaps only one, known as a constraint—
terminal. that actually limit the ability to generate more of the
system’s goal.
terminal-handling charges–1) Carrier charges
dependent on the number of times a shipment must be theory of constraints (TOC) accounting–A cost and
loaded, handled, and unloaded. Cost can be reduced managerial accounting system that accumulates
by consolidating shipments into fewer parcels or by costs and revenues into three areas—throughput,
shipping in truckload quantities. 2) For shipping lines, the inventory, and operating expense. Does not create
costs of paying container terminals for unloading and incentives (through allocation of overhead) to build up
loading during shipment. These costs are borne by the inventory. Is considered to provide a truer reflection
shipping lines at the port of shipment or destination. of actual revenues and costs than traditional cost
T
accounting, and is closer to a cash flow concept of
terminals–In transportation, locations where
income than is traditional accounting.
carriers load and unload goods to and from vehicles.
Also used to make connections between local Provides a simplified and more accurate form of direct
pickup and delivery service and line-haul service. costing that subtracts true variable costs (those costs
Functions performed in terminals include weighing that vary with throughput quantity). Unlike traditional
connections with other routes and carriers, vehicle cost accounting systems in which the focus is generally
routing, dispatching, maintenance, paperwork, placed on reducing costs in all the various accounts,
and administration. Terminals may be owned and the primary focus of TOC accounting is on aggressively
operated by the carrier or the public. exploiting the constraint(s) to make more money for the
firm. Syn: constraint accounting, throughput accounting.
terminal value–The value of an operation or entity at
the end of the period considered. therbligs–The 17 basic movements identified by
Frank and Lillian Gilbreth. (The name of the term is
terms and conditions–All the provisions and
essentially Gilbreth spelled backwards.) Examples of
agreements of a contract.
movements include grasp, move, release, select, and
position. See: predetermined time standards.

third-order smoothing • time buffer
third-order smoothing–Syn: triple smoothing. throughput accounting–A management accounting

method based on the belief that because every system
third-party logistics (3PL)–A buyer and supplier
has a constraint that limits global performance, the
team with a third party that provides product delivery
most effective way to evaluate the impact that any
services. This third party may provide added supply
proposed action will have on the system as a whole is
chain expertise.
to look at the expected changes in the global measures
third-party logistics company–A company that of throughput, inventory, and operating expense.
manages all or part of another company’s product
throughput time–See: cycle time.
delivery operations.
tiered workforce–A strategy used to vary workforce
third-party registration system–Using an outside
levels, where additional full-time or part-time employees
party (rather than the buyer) to determine the
are hired during peak demand periods while a smaller
adequacy of a seller’s product quality. If several
permanent staff is maintained year-round. This
buyers use the same third-party system, such as
technique is used heavily in perishable seasonal goods
ISO9000, the seller avoids having multiple audits.
industries (e.g., chocolate production, nursery plants).
third-party transportation services–Outside firms
tier one–The group of suppliers that is directly
providing transportation of goods.
responsible for not only product supply but product
third-party warehousing–The outsourcing of the development.
warehousing function by the seller of the goods.
tiger teams–Teams that attempt to achieve a specific
Thomas Register or ThomasNet® –A privately goal within a short time period.
produced reference set that includes a listing of part
time and attendance–A collection of data relating to
suppliers by product type and geographic area.
an employee’s record of absences and hours worked.
three-bin kanban–Simple kanban structure that
time and materials (T&M) contract–A type of
focuses on cycling three bins of material continually
contract that is a hybrid between cost-reimbursable
and provides a visible method to align replenishment
and fixed-time contracts.
with consumption. One bin is ready to ship from the
supplier at all times, while two are back to back in time-based competition (TBC)–A broad-based
manufacturing/production at or near point of use. As corporate strategy that emphasizes time as the
the front bin empties, a signal is sent to the supplier to vehicle for achieving and maintaining a sustainable
send a full bin and the back bin is issued forward into competitive edge. Its characteristics are: (1) it deals
production. See: kanban. only with those lead times that are important to the
customers; (2) the lead-time reductions must involve
three-point estimate–A project management
decreases in both the mean and the variance; and (3)
technique that uses three cost or duration estimates
the lead-time reductions must be achieved through
to stand for the optimistic (O), most likely (M), and
system/process analysis (the processes must be
pessimistic (P) situation. The mean value (MV) is often
changed to reduce lead times). Reductions in lead
found using MV = (O + 4M + P) ÷ 6. This technique can
times are achieved by changing the processes and
improve the accuracy of cost or duration estimates
the decision structures used to design, produce, and
T
when underlying assumptions are uncertain.
deliver products to the customers. Involves design,
threshold costs–A company’s variable costs, which manufacturing, and logistical processes.
must be covered for a company to continue to stay
time-based order system–Syn: fixed reorder cycle
in business.
inventory model.
throughput–The rate at which the system generates
time bucket–A number of days of data summarized
“goal units.” Because throughput is a rate, it is always
into a columnar or row-wise display. For example, a
expressed for a given time period—such as per month,
weekly time bucket contains all the relevant data for
week, day, or even minute. If the goal units are money,
an entire week. Weekly time buckets are considered
throughput is an amount of money per time period.
to be the largest possible (at least in the near and
In that case, throughput is calculated as revenues
medium term) to permit effective MRP.
received minus totally variable costs divided by units
of the chosen time period. time buffer–Protection against uncertainty that takes
the form of time.

time card • tipping point
time card–A document recording attendance time, time series forecasting–A forecasting method that
often used for indicating the number of hours for projects historical data patterns into the future.
which wages are to be paid. Syn: clock card. Involves the assumption that the near-term future will
be like the recent past.
time-definite services–Delivery of goods and
services where an agreement has been reached times interest earned–Ratio of profits before payment
on the day and time of the delivery. of interest and income taxes (EBIT) to interest on debt.
time fence–A policy or guideline established to note time stamping–Tracking with each transaction the
where various restrictions or changes in operating time of occurrence. Used in period closings and to
procedures take place. For example, changes to the tie end items to samples for certification of item
master production schedule can be accomplished easily properties.
beyond the cumulative lead time, while changes inside
time standard–The predetermined times allowed for
the cumulative lead time become increasingly more
the performance of a specific job. Often consist of
difficult to a point where changes should be resisted.
two parts, one for machine setup and one for actual
Time fences can be used to define these points. See:
running. Can be developed through observation of
demand time fence, hedge, planning time fence.
the actual work (time study), summation of standard
time-now date–Syn: data date. micromotion times (predetermined or synthetic time
standards), or approximation (historical job times).
time period safety stock–A safety stock that is
based on usage over a designated time frame. The time study–Timing employees as they accomplish
period can be set as days, weeks, or months. Safety jobs for the purpose of setting time standards.
stock varies directly with demand. This differs from
timetables–Schedules that are organized by starting
statistical-based safety stocks in that the amount is
location/destination and show the times for departures
not based on deviation from demand.
and arrivals.
time-phased order point (TPOP)–MRP-like time
time ticket–An operator-entered labor claim.
planning logic technique for independent demand
Syn: job ticket.
items, where gross requirements come from a
forecast, not via explosion. Can be used to plan time-to-market–The total time required to design,
distribution center inventories as well as to plan for build, and deliver a product (timed from concept to
service (repair) parts, because MRP logic can readily delivery). See: procurement lead time.
handle items with dependent demand, independent
demand, or a combination of both. An approach time-to-product–The total time required to receive,
that uses time periods, thus allowing for lumpy fill, and deliver an order for an existing product to a
withdrawals instead of average demand. When used customer, timed from the moment that the customer
in distribution environments, the planned order places the order until the customer receives the
releases are input to the master schedule dependent product. See: purchasing lead time.
demands. See: fixed reorder quantity inventory model. time to reliably replenish (TRR)–The time in which a
time phasing–The technique of expressing future part can reliably be obtained if necessary.
T
demand, supply, and inventories by time period. time utility–When a delivery gets to a customer at
Time phasing is one of the key elements of material exactly the right time (not early, not late).
requirements planning.
time value of money–1) The cumulative effect of
time series–A set of data that is distributed over time, elapsed time on the money value of an event, based
such as demand data in monthly time periods. Various on the earning power of equivalent invested funds.
patterns of demand—seasonal, trend, cyclical, and See: future worth, present value. 2) The interest rate
random—must be considered in time series analysis. that capital is expected to earn.
time series analysis–Analysis of any variable tipping point–The moment when something unique
classified by time in which the values of the variable becomes common. The term often refers to the
are functions of the time periods. Time series analysis popular acceptance of new technologies. The
is used in forecasting. A time series consists of concept has been applied to any process in which,
seasonal, cyclical, trend, and random components. beyond a certain point, the rate at which the process
See: cyclical component, random component, (chemical, sociological, environmental, etc.) proceeds
seasonal component, trend component. increases dramatically.

TL • total cost of quality curve
TL–Abbreviation for truckload. providing the resources and training that the lower
levels need to achieve the goals, participating in
TMS–Abbreviation for transportation management
quality improvement teams, reviewing organization-
system.
wide progress, recognizing those who have performed
TOC–Abbreviation for theory of constraints. well, and revising the current reward system to reflect
the importance of achieving the quality goals.
TOC performance measures–In the theory of
constraints, throughput, inventory, and operating total annual material receipts–The amount (in
expense are considered performance measures that dollars) of all direct materials that were received in
link operational decisions to organizational profit. a calendar year. This number should fall very close
to the direct material dollars that were used in a
TOFC–Abbreviation for trailer on a flatcar. calendar year in a lean environment.
tolerance–Allowable departure from a nominal value total cost analysis–In purchasing, a process by which
established by design engineers that is deemed a firm seeks to identify and quantify all of the major
acceptable for the functioning of the good or service costs associated with various sourcing options.
over its life cycle.
total cost concept–In logistics, the idea that all
tolerance limits–1) The upper and lower extreme logistical decisions that provide equal service levels
values permitted by the tolerance. 2) In work should favor the option that minimizes the total of
measurement, the limits between which a specified all logistical costs and should not be used on cost
operation time value or other work unit will be reductions in one area (such as lower transportation
expected to vary. See: lower specification limit, upper charges) alone.
specification limit. Syn: specification limits.
total cost consideration–Considering all cost
tolerance stack up–When two or more impacts, rather than just one cost impact, on
components—all within tolerance limits but at some customer service improvement.
distance from the specification itself—are assembled
together, causing the assembly potentially to be total cost curve–1) In cost-volume-profit (breakeven)
subject to early failure because of the interaction analysis, the total cost curve is composed of total
between the components. fixed and variable costs per unit multiplied by the
number of units provided. Breakeven quantity occurs
ton-mile–A way to measure the transportation where the total cost curve and total sales revenue
of freight. It is the multiplication of weight being curve intersect. See: break-even chart, break-even
transported (in tons) by the distance it is being point. 2) In inventory theory, the total cost curve for
transported (in miles). Heavily used in rail and ship an inventory item is the sum of the costs of acquiring
transportation mode. and carrying the item. See: economic order quantity.
tool calibration frequency–The recommended length total cost of ownership (TCO)–In supply chain
of time between tool calibrations. Normally expressed management, the total cost of ownership of the supply
in days. delivery system is the sum of all the costs associated
tool issue order–Syn: tool order. with every activity of the supply stream. The main
T
insight that TCO offers to the supply chain manager is
tool number–The identification number assigned to the understanding that the acquisition cost is often a
reference and control a specific tool. very small portion of the total cost of ownership.
tool order–A document authorizing issue of specific total cost of quality–A sum that includes costs
tools from the tool crib or other storage. Syn: tool associated with rework, scrap, warranty costs, and
issue order. other costs associated with preventing or resolving
quality problems.
TOP–Acronym for technical/office protocol.
total cost of quality curve–A curve that suggests
top management commitment (quality)–In the
there is some optimal quality level, Q*. The curve is
total quality management philosophy, participation
calculated by adding costs of internal and external
of the highest-level official in the organization’s
failures, prevention costs, and appraisal costs. The
quality improvement efforts. Participation includes
optimal quality level occurs where this curve reaches
establishing and serving on a quality committee,
a minimum point. It is a single turning point curve that
establishing quality policies and goals, deploying
always has a minimum.
those goals to lower levels of the organization,

total costs • Toyota Production System (TPS)
total costs–Considering all cost impacts, rather than total productive maintenance (TPM)–Preventive
just one cost impact, on customer service improvement. maintenance plus continuing efforts to adapt, modify,
and refine equipment to increase flexibility, reduce
total cost to serve–The sum of the supply chain cost to
material handling, and promote continuous flows. It is
deliver products and services to customers. Includes
operator-oriented maintenance with the involvement
the cost to plan the supply chain; source materials,
of all qualified employees in all maintenance activities.
products, goods, merchandize and services; produce,
Syn: total preventive maintenance.
manufacture, remanufacture, refurbish, repair
and maintain goods and services; manage orders, total quality control (TQC)–The process of creating
customer inquiries and returns; and deliver products and producing the total composite good and
and services at the agreed location (point of revenue). service characteristics (by marketing, engineering,
Comprises both direct cost and indirect cost. manufacturing, purchasing, etc.) through which
the good and service will meet the expectations of
total cumulative manufacturing cycle time–Average
customers.
time between a part entering a manufacturing system
and completion of final packaging. total quality engineering (TQE)–The discipline of
designing quality into the product and manufacturing
total employee involvement (TEI)–An empowerment
processes by understanding the needs of the
program in which employees are invited to participate
customer and performance capabilities of the
in actions and decision making that were traditionally
equipment. See: design for quality.
reserved for management.
total quality management (TQM)–A term coined to
total factor productivity–A measure of productivity
describe Japanese-style management approaches
(of a department, plant, strategic business unit, firm,
to quality improvement. Since then, total quality
etc.) that combines the individual productivities of all
management (TQM) has taken on many meanings.
its resources, including labor, capital, energy, material,
Simply put, TQM is a management approach to long-
and equipment. These individual factor productivities
term success through customer satisfaction. TQM
are often combined by weighting each according to its
is based on the participation of all members of an
monetary value and then adding them. For example,
organization in improving processes, goods, services,
if material accounts for 40 percent of the total cost of
and the culture in which they work. The methods for
sales, labor 10 percent of the total cost of sales, and
implementing this approach are found in teachings of
other resources 60 percent, total factor productivity
such quality leaders as Philip B. Crosby, W. Edwards
= .4 (material productivity) + .1 (labor productivity) + .6
Deming, Armand V. Feigenbaum, Kaoru Ishikawa, J.M.
(other resource productivity).
Juran, and Genichi Taguchi.
total fixed costs–Costs that remain constant in total
total value analysis–A method of economic analysis
regardless of changes in activity.
in which a model expresses the dependent variable of
total float–In project management, the length of time interest as a function of independent variables, some
an activity can be late without delaying succeeding of which are controllable.
activities. See: float, free float, independent float.
total variable costs–Costs that vary in total in
total lead time–Syn: lead time. proportion to changes in activity.
total line-haul cost–Basic costs of carrier operation

to move a container of freight, including drivers’
total waste management (TWM)–A methodology that
enables finding solutions to waste issues while keeping
in mind financial elements and the business case.
T
wages and usage depreciation, which vary with the
distance shipped and the cost per mile.
touches–A statistic that is used to determine
total make cycle time–Average cumulative processing efficiency for costing/pricing functions. A touch
time between a part entering a manufacturing system occurs anytime a labor activity is utilized during the
and completion of manufacturing activities (not manufacturing or service creation process. Generated
including packaging). the term “touch labor” for direct labor personnel.
total preventive maintenance–Syn: total productive touch labor–Syn: direct labor.

maintenance.
Toyota Production System (TPS)–A manufacturing
total procurement lead time–Syn: procurement methodology developed at Toyota that has
lead time. evolved into the concepts of just in time and lean
manufacturing.

TPM • transient bill of material
TPM–Abbreviation for total productive maintenance. trading partner–Any organization external to the
firm that plays an integral role within the supply chain
TPOP–Abbreviation for time-phased order point.
community and whose business fortune depends on
TPS–Abbreviation for Toyota Production System. the success of the supply chain community.
TQC–Abbreviation for total quality control. trading partner agreement–A contract between
trading partners that describes all facets of their
TQE–Abbreviation for total quality engineering. business together. A legal and binding agreement
TQM–Abbreviation for total quality management. suitable for legal purposes as well as standard
working agreements.
traceability–1) The attribute allowing the ongoing
location of a shipment to be determined. 2) The traffic–A department or function charged with the
registering and tracking of parts, processes, and responsibility for arranging the most economic
materials used in production, by lot or serial number. classification and method of shipment for both
incoming and outgoing materials and products.
tracer–A request to a transportation line to trace a
shipment to expedite its movement or to verify delivery. traffic department–The area of an organization that
plans and executes shipping requirements.
tracing–In activity-based cost accounting,
connecting resources to activities to cost objects traffic management–Control of transportation
using underlying causal drivers to understand how carriers, modes, and services.
costs occur during normal business activities. trailer on a flatcar (TOFC)–A specialized form of
tracking–The process of determining and reporting containerization in which motor and rail transport
the location of a shipment throughout the supply coordinate. Syn: piggyback.
chain channel. training aid–An item to enhance training, usually
tracking capacity strategy–Adding capacity in small minor in nature. Training aids may include charts,
amounts to attempt to respond to changing demand graphs, slides, and schematics.
in real time in the marketplace. This approach may transaction channel–A distribution network that
satisfy total demand and help minimize unit costs, deals with change of ownership of goods and services
but it can be difficult in some situations to add including the activities of negotiation, selling, and
incremental amounts of capacity, especially if the contracting.
facility has no more space available.
transactions–Individual events reported to the
tracking signal–The ratio of the cumulative algebraic system (e.g., issues, receipts, transfers, adjustments).
sum of the deviations between the forecasts and the
actual values to the mean absolute deviation. Used transfer batch–The quantity of an item moved
to signal when the validity of the forecasting model between sequential work centers during production.
might be in doubt. See: forecast error, mean absolute See: batch, overlap quantity.
deviation.
transfer price–Price that one segment (subunit,
trade bloc–An agreement between countries department, division, etc.) of an organization charges
T
intended to reduce or remove barriers to trade within for a good or service supplied to another segment of
member countries. Frequently, but not always, those the same organization.
countries are geographically close. Examples of trade
transfer pricing–The pricing of goods or services
blocs are the European Economic Community and the
transferred from one segment of a business to
North American Free Trade Agreement (NAFTA). Syn:
another. See: interplant transfer.
trading bloc.
transformation process–The process of
trade secret–Knowledge of a manufacturing process
converting inputs into finished goods or services.
that gives the owner an advantage over competitors
In a service firm, the input may be a customer. Syn:
who do not have it. Trade secrets are legally protectable.
transformation system. See: manufacturing process,
trading bloc–Syn: trade bloc. production process.
trading company–A company that introduces foreign transformation system–Syn: transformation process.
buyers and sellers and arranges all product export/
transient bill of material–Syn: phantom bill of material.
import details, documentation, and transportation.

transient state • tree diagram
transient state–When the variables in a system or transportation management–The process of

process have changed, but not reached steady state executing requirements for the planning, scheduling,
yet. Data is usually not collected from the model until and budgeting of transportation assets, services,
less erratic behavior emerges. See: steady state. and related systems of the shipping process
through delivery.
transit inventory–Inventory in transit between
manufacturing and stocking locations. See: transportation management system (TMS)–
transportation inventory. A computer application system designed to manage
transportation operations. Typically offer modules
transition tree (TRT)–In the theory of constraints,
focused on specific functions, such as intermodal
a logic-based tool for identifying and sequencing
transportation, import/export management,
actions in accomplishing an objective. The transitions
fleet service management, and load planning
represent the states or stages in moving from the
and optimization.
present situation to the desired objective.
transportation method–A linear programming
transit privilege–A service provided by a shipper that
model concerned with minimizing the costs involved
allows the purchasing company to stop a shipment
in supplying requirements to several locations from
mid-route to allow changes to the delivery, but to pay
several sources with different costs related to the
the non-stop rate.
various combinations of source and requirement
transit time–A standard allowance that is assumed locations.
on any given order for the movement of items from
transportation mode–The manner in which an item
one operation to the next. Syn: travel time.
is transported.
translation software–Software that converts business
transportation requirements planning (TRP)–
data into an electronic data interchange standard
Using existing MRP, DRP, or ERP databases to plan
format, and vice versa.
transportation requirements based on actual demand.
transmission acknowledgement–The receiver of a
transport stocks–A carrier material designed to move
transmission notifies the sender that the transmission
solids in solution or slurry or to dilute ingredients to
was received error-free.
safe levels for reaction.
transmission control protocol/internet protocol
traveler–A copy of the manufacturing order that
(TCP/IP)–The communication protocol used
actually moves with the work through the shop.
by the internet.
Syn: shop traveler.
transparency–When a company allows outsiders,
traveling purchase requisition–A purchase requisition
typically customers, to see some internal information
designed for repetitive use. After a purchase order
(typically regarding an order) without giving any more
has been prepared for the goods requisitioned, the
than the outsider requires.
form is returned to the originator, who holds it until a
transportation–The function of planning, scheduling, repurchase of the goods is required. The name is derived
and controlling activities related to mode, vendor, and from the repetitive travel between the originating and
movement of inventories into and out of an organization. purchasing departments. Syn: traveling requisition.
transportation brokers–Firms that find shipments for

carriers for a fee.
traveling requisition–Syn: traveling purchase
requisition. T
transportation cycle time–A logistics performance travel time–Syn: transit time.
measure of the lead time required for a product to
treasury stock–Common stock that has been
reach its final destination; the time between leaving
repurchased by the issuing company.
a warehouse and arriving at the destination.
tree diagram–1) A management technique used to
transportation inventory–Inventory that is in transit
analyze a situation in increasing detail. The full range
between locations. See: pipeline stock, transit inventory.
of tasks to be accomplished to achieve a primary goal
transportation legal classifications–Legal regulatory and supporting subgoal may be illustrated. 2) In the
classification of transportation by product, shipping theory of constraints, a diagram relating effects to
size, rates, carriers, and types of services. underlying causes. See: current reality tree, future
reality tree.

trend • type II error
trend–General upward or downward movement of a turnkey system–1) Computer packages that are
variable over time (e.g., demand, process attribute). already prepared by a hardware manufacturer or
software house and are ready to run. 2) Any system
trend adjusted exponential smoothing forecasting–
of machines that is ready for immediate use.
A form of exponential smoothing forecasting that
includes a factor for increasing or decreasing trends turnover–1) Syn: inventory turnover. 2) In the
in the data resulting from variables such as population United Kingdom and certain other countries,
growth or income changes. annual sales volume.
trend analysis–An analysis to determine whether turnover ratio–An indicator of whether or not a
trend (general upward or downward change) exists in company is using its assets efficiently. It is
data. See: trend forecasting models. measured by dividing sales by average assets
during a particular period.
trend component–A component of demand, usually
describing the impact of increasing or decreasing turns–Syn: inventory turnover.
growth on demand. See: time series analysis.
twenty-foot equivalent unit (TEU)–A measurement
trend control chart–A control chart in which the used to describe the carrying capacity of a cargo ship
deviation of the subgroup average (X-bar) from an or a terminal’s handing capacity. One TEU equals a
expected trend in the process level is used to evaluate standard 20 ft. x 8 ft. x 8 ft. (length x width x height)
the stability of a process. shipping container.
trend forecasting models–Methods for forecasting TWM–Abbreviation for total waste management.
sales data when a definite upward or downward
two-bin inventory system–A type of fixed-order
pattern exists. Models include double exponential
system in which inventory is carried in two bins. A
smoothing, regression, and triple smoothing.
replenishment quantity is ordered when the first bin
See: trend analysis.
(working) is empty. During the replenishment lead time,
trigger level–Syn: order point. material is used from the second bin. When the material
is received, the second bin (which contains a quantity to
triple bottom line (TBL)–An approach that measures
cover demand during lead time plus some safety stock)
the economic, social, and environmental impact of
is refilled and the excess is put into the working bin. At
an organization’s activities with the intent of creating
this time, stock is drawn from the first bin until it is again
value for both its shareholders and society.
exhausted. Also used loosely to describe any fixed-order
triple smoothing–A method of exponential smoothing system even when physical “bins” do not exist. Syn: bin
that accounts for accelerating or decelerating trends, reserve system. See: visual review system.
such as would be experienced in a fad cycle. Syn:
two-card kanban system–A kanban system where a
third-order smoothing.
move card and production card are employed. The move
TRP–Abbreviation for transportation requirements card authorizes the movement of a specific number
planning. of parts from a source to a point of use. The move
card is attached to the standard container of parts
TRR–Abbreviation for time to reliably replenish. during movement of the parts to the point of use. The
T TRT–Abbreviation for transition tree.
truckload (TL) carriers–Carriers that deliver/charge

production card authorizes the production of a given
number of parts for use or replenishment. Syn: dual-card
kanban system. See: one-card kanban system.
only for full truckload shipments.
two-level master schedule–A master-scheduling
truckload lot–A truck shipment that qualifies for approach in which a planning bill of material is used to
a lower freight rate because it meets a minimum master schedule an end product or family, along with
weight and/or volume. selected key features (options and accessories). See:
hedge, multilevel master schedule, production forecast.
trust–A fiduciary relationship in which the trustee holds
ownership for the benefit of another party (benefactor). type I error–An incorrect decision to reject something
(such as a statistical hypothesis or a lot of products)
TS 16949–Syn: ISO/TS 16949.
when it is acceptable. See: producer’s risk.
turnaround costs–Syn: setup costs.
type II error–An incorrect decision to accept something
turnaround time–Syn: setup, cycle time. when it is unacceptable. See: consumer’s risk.

ubiquity • unit load concept
U
measuring, and communicating the United Nations
Global Compact and its principles.
uniform-delivered pricing–A type of geographic pricing

ubiquity–In inventory control, a raw material that is policy in which all customers pay the same delivered
found at all locations. price regardless of their location. A company allocates
the total transportation cost among all customers.
U chart–A control chart for evaluating the stability of
a process in terms of the average count of events of uniform plant loading–In lean, the distribution of work
a given classification per unit occurring in a sample. between work stations so that the time required for
Syn: count-per-unit chart. each station to complete all tasks is as close to equal
as possible. See: line balancing.
UCL–Abbreviation for upper control limit.
uniform product code–A retail product numbering
UDE–Abbreviation for undesirable effect. and bar coding system that identifies the item and
Pronounced “oodee.” the manufacturer.
U-lines–Production lines shaped like the letter “U.” uniform resource locator (URL)–A means of locating
The shape allows workers to easily perform several web pages regardless of where they are on the internet.
nonsequential tasks without much walk time. The
number of workstations in a U-line is usually determined uniform warehouse receipts act–An act that regulates
by line balancing. U-lines promote communication. public warehousing; it sets up the legal responsibilities
of warehouse managers and determines the receipts
unattainable capability–The portion of the production that can be issued.
capability that cannot be attained. Typically caused by
factors such as equipment unavailability, suboptimal union contract–A formal contract between a
scheduling, or resource limitations. company and the union representing its employees,
usually covering two to six years, that covers all
uncertainty–Unknown future events that cannot be aspects of pay, working conditions, and strike options.
predicted quantitatively within useful limits; for example,
an accident that destroys facilities, a major strike, or union free–A designation that indicates that a
an innovation that makes existing products obsolete. company or operation does not have a union contract.
uncontrollable factors–In the environment of a union shop–A facility in which all hourly employees
production system, those factors that cannot be are unionized; more formally, a clause in a collective
changed (e.g., temperature, natural causes, bargaining agreement under which membership in
weather, vibration). the union is required as a condition of employment.
Union shops are illegal in some regions.
under-capacity scheduling–Allowing more time than
should be necessary to complete a day’s work. As a unit cost–Total labor, material, and overhead cost
result, a daily quota is met more often and workers for one unit of production (e.g., one part, one gallon,
have time to cross train or perform maintenance on one pound).
their tools and machines.
United Nations Global Compact–A voluntary initiative
undertime–A condition occurring when more personnel whereby companies embrace, support, and enact,
are on the payroll than are required to produce the within their sphere of influence, a set of core values
U
planned output. in the areas of human rights, labor standards, the
environment, and anticorruption.
undesirable effects (UDE)–In theory of constraints,
those negative aspects of an environment that are unitization–In warehousing, the consolidation of
noted so that a current reality tree may be constructed. several units into larger units for fewer handlings.
unfair labor practice–Activities by management or unit load–A shipping unit made up of a number of items;
labor that violate the National Labor Relations Act. bulky material arranged or constrained so the mass
Failure to bargain in good faith is an example. can be picked up or moved as a single unit. Reduces
material handling costs. Often shrink-packed on a
UN Global Compact Management Model–A framework pallet before shipment.
for guiding companies through the process of formally
committing to, assessing, defining, implementing, unit load concept–Waiting for a container or pallet to
be filled before the material is moved.

unit of driver measure • user interface
unit of driver measure–The common unit of measure upcharges–Additional charges added to a delivered
used to group similar processes so comparisons can bill that were not included in the original contract.
be made easily. Occur because of unforeseen increases in the
deliverer’s cost base.
unit of issue–The standard issue quantity of an item
from stores (e.g., pounds, each, box of 12, package of upgrade–Improvement in operating characteristics.
20, case of 144).
upper control limit (UCL)–Control limit for points
unit of measure–The unit in which the quantity of above the central line in a control chart.
an item is managed (e.g., pounds, each, box of 12,
upper specification limit (USL)–In statistical process
package of 20, case of 144).
control, the line that defines the maximum acceptable
unit of measure (purchasing)–The unit used to level of random output. See: tolerance limits.
purchase an item. This may or may not be the same
upside flexibility–The ability of a facility to increase
unit of measure used in the internal systems. For
its output and capacity to deliver for the foreseeable
example, purchasing buys steel by the ton, but it may
future in order to meet a nonforecasted increase in
be issued and used in square inches. Syn: purchasing
demand. The main drivers of this flexibility are the
unit of measure.
availability of direct labor and/or direct materials and
unit-of-measure conversion–A standard conversion the actual production capacity of the facility.
ratio that a company or its computer system uses
upside supply chain adaptability–A discrete
to quickly enter in the amount delivered based on a
measurement of the quantity of increased production
known quantity within each unit of measure (e.g., a
a supply chain can achieve and sustain for 30 days.
case of soda contains 24 cans).
upside supply chain flexibility–A discrete
unit-size–To combine a number of packages into one
measurement of the amount of time it takes a supply
unit by attaching them together.
chain to respond to an unplanned 20 percent increase
units-of-production depreciation–A method of in demand without service or cost penalty.
depreciation whereby the amount to be recovered
upstream–Used as a relative reference within a firm
(written off as a period expense) is calculated based
or supply chain to indicate moving in the direction of
on the estimated life of the equipment in units to
the raw material supplier.
be produced over the life and the number of units
produced in a given time period. See: depreciation. URL–Abbreviation for uniform resource locator.
universality–The strategy of designing a product usage–The number of units or dollars of an inventory
initially intended for one market in such a way item consumed over a period of time.
that it can also be sold in other markets. A form of
standardization. usage rate–Demand per product per unit of time.
universe–The population, or large set of data, usage variance–Deviation of the actual consumption
from which samples are drawn. Usually assumed of materials as compared to the standard.
to be infinitely large or at least very large relative use as is–Classification for material that has been
to the sample. declared to be unacceptable per the specifications,
unplanned issue–An issue transaction that updates yet can be used.
U the quantity on hand but for which no allocation exists.
unplanned order–After a forecast has been developed,

user-friendly–Characteristic of computer software
or hardware that makes it easy for the user or
operator to use the programs or equipment with a
an unplanned order is any order outside this forecast.
minimum of specialized knowledge or recourse to
unplanned receipt–A receipt transaction that updates operating manuals.
the quantity on hand but for which no order exists.
user interface–The portion of a computer system
unplanned repair–Repair and replacement through which the end user interacts with the system.
requirements that are unknown until remanufacturing May include the keyboard, mouse, touch-screen, and
teardown and inspection. other devices.

USL • value of transfers
USL–Abbreviation for upper specification limit. value-adding/non-value-adding–The assessment of

each of the company’s activities to determine if that
utilization–1) A measure (usually expressed as a
activity adds value to the organization or its customers.
percentage) of how intensively a resource is being used
If an activity is considered non-value-adding, it should
to produce a good or service. Compares actual time
be eliminated to increase an organization’s efficiency.
used to available time. Traditionally, calculated as the
ratio of direct time charged (run time plus setup time) value analysis–The systematic use of techniques
to the clock time available. Utilization is a percentage that identify a required function, establish a value
between 0 percent and 100 percent that is equal to for that function, and finally provide that function at
100 percent minus the percentage of time lost due to the lowest overall cost. Focuses on the functions of
the unavailability of machines, tools, workers, and so an item rather than the methods of producing the
forth. See: efficiency, lost time factor, productivity. 2) In present product design.
the theory of constraints, activation of a resource that
VAR–Abbreviation for value at risk.
productively contributes to reaching the goal. Over-
activation of a resource does not productively utilize a value-based management (VBM)–The concept of
resource. See: available time. satisfying customers to create shareholder wealth.
value chain–The functions within a company that add
V value to the goods or services that the organization

sells to customers and for which it receives payment.
value chain analysis–An examination of all links a

valid schedule–A detailed, feasible calendar of company uses to produce and deliver its products
specific items flowing into and through a factory. and services, starting from the origination point and
valuation–The technique of determining worth, continuing through delivery to the final customer.
typically of inventory. Valuation of inventories may be value chain initiative–A process that combines
expressed in standard dollars, replacement dollars, software, hardware, and supply chain companies to
current average dollars, or last-purchase-price dollars. develop an integrated system to support software
value–The worth of an item, good, or service. sharing among diverse applications.
value added–1) In accounting, the addition of direct value delivery network–The resources and processes
labor, direct material, and allocated overhead assigned used to deliver a product to customers.
at an operation. It is the cost roll-up as a part goes value-driven enterprise–An organization that
through a manufacturing process to finished inventory. is designed and managed to add utility from the
2) In current manufacturing terms, the actual increase viewpoint of the customer in the transformation of
of utility from the viewpoint of the customer as a part raw materials into a finished good or service.
is transformed from raw material to finished inventory;
the contribution made by an operation or a plant to the value engineering and/or analysis–A disciplined
final usefulness and value of a product, as seen by the approach to the elimination of waste from products
customer. The objective is to eliminate all non-value- or processes through an investigative process that
added activities in producing and providing a good focuses on the functions to be performed and whether
or service. such functions add value to the good or service.
value-added network (VAN)–A network, often value index–A measure that uses the performance
supporting EDI, providing services additional to those and importance scores for various dimensions of
V
provided by common carriers. performance for an item or service to calculate a
score that indicates the overall value of the item or
value-added productivity per employee–A measure service to a customer.
that is determined by three things: total output of a
company, materials purchased, and total employment. value-of-service pricing–Allowing the market to
Found by subtracting materials purchased from determine the price.
total output and then dividing that number by total
value of transfers–The amount transferred, in a fiscal
employment. Allows a company to understand
year, from one stage of the manufacturing process
easily how much production the typical employee
to another. For example, the amount of raw materials
is producing.
that are transformed into work in process.

value perspective • vehicle
value perspective–A quality perspective that holds variable overhead–All manufacturing costs, other
that quality must be judged, in part, by how well the than direct labor and direct materials, that vary
characteristics of a particular product or service align directly with production volume. Variable overhead
with the needs of a specific user. is necessary to produce the product, but cannot be
directly assigned to a specific product.
value stream–The processes of creating, producing,
and delivering a good or service to the market. For a variables data–Measurement information. Control
good, the value stream encompasses the raw material charts based on variables data include average (X-bar)
supplier, the manufacture and assembly of the good, charts, range (R) charts, and sample standard
and the distribution network. For a service, the value deviations charts.
stream consists of suppliers, support personnel
variable yield–The condition that occurs when the
and technology, the service “producer,” and the
output of a process is not consistently repeatable in
distribution channel. May be controlled by a single
quantity, quality, or combinations of these.
business or a network of several businesses.
variance–1) The difference between the expected
value stream map–A graph displaying the sequence
(budgeted or planned) value and the actual. 2) In
of operations needed to produce and deliver a
statistics, a measurement of dispersion of data.
product or service.
See: estimate of error.
value stream mapping–A lean production tool
variation–A change in data, a characteristic, or a
to visually understand the flow of materials from
function that is caused by one of four factors:
supplier to customer that includes the current
special causes, common causes, tampering, or
process and flow as well as the value-added and
structural variation.
non-value-added time of all the process steps. Used
to lead to reduction of waste, decrease flow time, and VATI analysis–In the theory of constraints, a
make the process flow more efficient and effective. procedure for determining the general flow of parts
and products from raw materials to finished products
valve inventory–In a just-in-time context, inventory at
(logical product structure). A V logical structure
a stockpoint that is too large to be located next to the
starts with one or a few raw materials, and the
point of use of the material, and from which material is
product expands into a number of different products
drawn by a pull system. Often located at a stockpoint
as it flows through divergent points in its routings.
in the plant’s receiving area.
The shape of an A logical structure is dominated by
VAN–Acronym for value-added network. converging points. Many raw materials are fabricated
and assembled into a few finished products. A T
VAR–Abbreviation for overall value at risk.
logical structure consists of numerous similar finished
variable–A quantity that can assume any of a given products assembled from common assemblies,
set of values. Ant: constant. subassemblies, and parts. An I logical structure is
the simplest of production flows, where resources
variable cost–An operating cost that varies directly are shared between different products and the flow
with a change of one unit in the production volume is in a straight line sequence (e.g., an assembly line).
(e.g., direct materials consumed, sales commissions). Once the general parts flow is determined, the system
variable costing–An inventory valuation method in control points (gating operations, convergent points,
which only variable production costs are applied to divergent points, constraints, and shipping points)
the product; fixed factory overhead is not assigned to can be identified and managed.
the product. Traditionally, variable production costs VBM–Abbreviation for value-based management.
V
are direct labor, direct material, and variable overhead
costs. Variable costing can be helpful for internal vehicle–A carrying and power unit to move goods.
management analysis but is not widely accepted Includes all forms of transportation means except
for external financial reporting. For inventory order pipeline. The carrier generally owns or leases
quantity purposes, however, the unit costs must vehicles, but a shipper also may own or lease.
include both the variable and allocated fixed costs
to be compatible with the other terms in the order
quantity formula. For make-or-buy decisions, variable
costing should be used rather than full absorption
costing. Syn: direct costing.

velocity • virtual corporation
velocity–1) The rate of change of an item with respect manufacturer that decides to begin producing
to time. See: inventory turnover, lead time. 2) In parts, components, and materials that it normally
supply chain management, a term used to indicate purchases is said to be backward integrated.
the relative speed of all transactions, collectively, Likewise, a manufacturer that decides to take
within a supply chain community. A maximum velocity over distribution and perhaps sale to the ultimate
is most desirable because it indicates higher asset consumer is said to be forward integrated. See:
turnover for stockholders and faster order-to-delivery backward integration, forward integration.
response for customers.
vertically integrated firm–An organization with
vendor–Any seller of an item in the marketplace. functions that were previously performed by suppliers
See: supplier. but are now done internally. See: horizontally
integrated firm.
vendor lead time–Syn: supplier lead time.
vertical marketing–A coordinated product marketing
vendor-managed inventory (VMI)–A means of
system, with activities undertaken by one company,
optimizing supply chain performance in which the
for a supply chain.
supplier has access to the customer’s inventory data
and is responsible for maintaining the inventory level vertical marketing system–A marketing system
required by the customer. Accomplished by a process that focuses on the means to reduce the traditional
in which resupply is performed by the vendor through independence of indirect channels. The system
regularly scheduled reviews of the on-site inventory. strategically seeks to increase the integration and
The on-site inventory is counted, damaged or outdated interdependence of channels by uniting them with
goods are removed, and the inventory is restocked common objectives and team management (e.g.,
to predefined levels. The vendor obtains a receipt for franchising, cooperatives, vertical integration).
the restocked inventory and accordingly invoices the
vertical marketplace–An online marketplace
customer. See: continuous replenishment.
connecting buyers and sellers within the same industry.
vendor measurement–The act of measuring the It enables lower prices by lowering transaction costs.
vendor’s performance to a contract. Measurements
vertical merger–An alliance of two firms where one
usually cover delivery reliability, lead time, quality,
firm is a supplier to the other.
and price. See: supplier measurement.
vestibule training–A variant of job rotation in which a
vendor-owned inventory (VOI)–Syn: consigned stocks.
separate work area is set up for a trainee so that the
vendor scheduler–Syn: supplier scheduler. actual work situation does not pressure the trainee.
Examples are cockpit simulators and other machine
vendor scheduling–Syn: supplier scheduling.
simulators.
venture team–A set of individuals assigned outside
viral marketing–An advertisement that is embedded
normal channels to develop ideas for new products.
into web-based technology (e.g., email or pop-up ads)
vertical dependency–The relationship between a that can easily move through the internet and get in
parent item and a component in its bill of material front of the target audience, who may never have seen
that defines the need for the component based it otherwise.
on producing the parent, without regard to the
virtual cell–A logical rather than physical grouping of
availability of other components at the same level in
manufacturing resources. Resources in virtual cells can
the bill of material. See: horizontal dependency.
be dispersed throughout a facility. Product mix changes
V
vertical display–A method of displaying or printing may change the layout of a virtual cell. This technique is
output from an MRP system where requirements, used when it is not practical to move the equipment.
scheduled receipts, projected balance, and so forth
virtual corporation–The logical extension of
are displayed vertically. Vertical displays are often
outpartnering. With the virtual corporation, the
used in conjunction with bucketless systems. Ant:
capabilities and systems of the firm are merged
horizontal display.
with those of the suppliers, resulting in a new type
vertical integration–The degree to which a firm has of corporation where the boundaries between the
decided to directly produce multiple value-adding suppliers’ systems and those of the firm seem to
stages from raw material to the sale of the product disappear. The virtual corporation is dynamic in that
to the ultimate consumer. The more steps in the the relationships and structures formed change
sequence, the greater the vertical integration. A according to the changing needs of the customer.

virtual factory • voucher
virtual factory–A transformation process most visual inspection–Inspection performed without

frequently found under the virtual corporation. test instruments.
Involves merging the capabilities and capacities
visual management–A management system whereby
of the firm with those of its suppliers. Typically, the
every metric that matters, standardized work, and
components provided by the suppliers are those that
improvement approaches are displayed on the shop
are not related to a core competency of the firm, while
floor and in the office.
the components managed by the firm are related
to core competencies. One characteristic of the visual review system–A simple inventory control
virtual factory is that it can be restructured quickly in system where the inventory reordering is based on
response to changing customer demands and needs. actually looking at the amount of inventory on hand.
Usually used for low-value items, such as nuts and
virtual inventory system–A virtual system that
bolts. See: two-bin inventory system.
enables supply chain partners to share data in a
central database. vital few, useful many–A term used by J.M. Juran
to describe his use of the Pareto principle in quality
virtual organization–Short-term alliances between
management, which he first described in 1950. (The
independent organizations in a potentially long-term
principle was used much earlier in economics and
relationship to design, produce, and distribute a
inventory control methodologies.) The principle
product. Organizations cooperate based on mutual
suggests that most effects come from relatively few
values and act as a single entity to third parties.
causes; that is, 80 percent of the effects come from 20
virtual reality–Hardware and software that create an percent of the possible causes. The 20 percent of the
apparently real environment. possible causes are referred to as the “vital few”; the
remaining causes are referred to as the “useful many.”
virtual supply chain–A collection of firms that
When Juran first defined this principle, he referred to
typically exists for only a short period. Virtual supply
the remaining causes as the “trivial many,” but since no
chains are more flexible than traditional supply
problems are trivial in quality assurance, he changed it
chains, but less efficient.
to “useful many.”
virtual trading exchange–An online trading exchange
VMI–Abbreviation for vendor-managed inventory.
that enables both information integration and
collaboration between multiple trading partners. VOC–Abbreviation for voice of the customer.
visibility–The ability to view important information VOI–Abbreviation for vendor-owned inventory.

throughout a facility or supply chain no matter where in
voice-based picking–Syn: pick-to-voice system.
the facility or supply chain the information is located.
voice of the customer (VOC)–Actual customer
vision–The shared perception of the organization’s
descriptions in words for the functions and features
future—what the organization will achieve and a
customers desire for goods and services. In the strict
supporting philosophy. This shared vision must be
definition, as related to quality function deployment
supported by strategic objectives, strategies, and
(QFD), the term customer indicates the external
action plans to move it in the desired direction. See:
customer of the supplying entity.
vision statement.
volume flexibility–The ability of the transformation
vision statement–An organization’s statement of its
process to quickly accommodate large variations in
vision. See: vision.
production levels.
visits–In e-commerce, the set of requests made by
V
voluntary layoff–Layoffs where the employees are
one user at one website. If there is no activity within
given the option of taking a non-paid leave from their
a given time frame (usually 30 minutes), the visit is
work for a short, specified period of time.
considered closed.
voucher–A written document that bears witness to,
visual control–The control of authorized levels of
or “vouches” for, something. A voucher generally is an
activities and inventories in a way that is instantly
instrument that shows services performed or goods
and visibly obvious. A type of activity and inventory
purchased and authorizes payment to the supplier.
control used in a workplace organization where
everything has an assigned place and is in its place.

Wagner-Whitin algorithm • waste exchange
W
a warehouse. Often interfaces with automated data
capture and enterprise resources planning systems.
warehouse receiving–A key process in warehouse

Wagner-Whitin algorithm–A mathematically operation that ensures the correct product has been
complex, dynamic lot-sizing technique that received, in the right quantity, in the right condition,
evaluates all possible ways of ordering to cover net and at the right time.
requirements in each period of the planning horizon
warehouses (distribution centers)–Facilities used
to arrive at the theoretically optimum ordering
to store inventory. Decisions driving warehouse
strategy for the entire net requirements schedule.
management include site selection, number of
See: discrete order quantity, dynamic lot sizing.
facilities in the system, layout, and methods of
waiting line theory–Syn: queuing theory. receiving, storing, and retrieving goods.
wait time–The time a job remains at a work center after warehouse storage–Using a building or other
an operation is completed until it is moved to the next structure as a planned space for storing goods and
operation. It is often expressed as a part of move time. materials.
waiver–Authorization to accept an item that, during warehousing–The activities related to receiving,

production or upon inspection, is found to depart storing, and shipping materials to and from
from specified requirements, but nevertheless is production or distribution locations.
considered suitable for use as is or after rework.
warranty–A commitment, either expressed or
walkthrough–Syn: pilot test. implied, that a certain fact regarding the subject
matter of a contract is presently true or will be true.
wall-to-wall inventory–An inventory management The word should be distinguished from guarantee,
technique in which material enters a plant and is which means a contract or promise by an entity to
processed through the plant into finished goods answer for the performance of a product or person.
without ever having entered a formal stock area. See: general warranty, guarantee, special warranty.
Syn: four-wall inventory.
warranty costs–All of the costs associated with a
WAN–Acronym for wide area network. warranty; these include shipping, receiving, repairing,
wand–A device connected to a bar code reader to replacement, and the materials needed for repair or
identify a bar code. replacement.
wandering bottleneck–An undesirable effect in which warranty of merchantability–An implied warranty

the bottleneck moves relatively frequently from one that goods are fit for the use to which they are
resource to another. generally applied.
warehouse–A place to receive, store, and ship materials. waste–1) Any activity that does not add value to
the good or service in the eyes of the consumer.
warehouse automation–The utilization of mechanical or 2) A by-product of a process or task with unique
electronic devices to complete tasks related to storing, characteristics requiring special management
retrieving, and moving inventory as a substitute for labor control. Waste production can usually be planned and
resources. Used for cost savings, added security, and somewhat controlled. Scrap is typically not planned
to keep human workers out of sensitive environments. and may result from the same production run as
waste. See: hazardous waste.
warehouse demand–The need for an item to replenish
stock at a branch warehouse. Syn: branch warehouse waste exchange–1) Arrangement in which companies
demand. exchange their wastes for the benefit of both parties.
W
2) An exchange service of valuable information
warehouse management and transportation
between generators and potential users of industrial
execution systems–Logistics information systems
and commercial wastes, whereby a beneficial use
that initiate and control the movement of materials
rather than disposal is the end result. This service
between supply chain partners.
identifies both the producers and potential markets
warehouse management system (WMS)–A computer for by-products, surpluses, unspent materials, and
application system designed to manage and other forms of solid waste that is no longer needed.
optimize workflows and the storage of goods within

waste hierarchy • work center
waste hierarchy–A tool that ranks waste management The weights used should total 100 percent for all
options according to what is most environmentally categories. See: categorical plan.
sound. Gives top priority to preventing waste in the
what-if analysis–The process of evaluating alternate
first place and can be applied to various applications.
strategies by answering the consequences of changes
waterspider–An expert worker who makes the rounds to forecasts, manufacturing plans, inventory levels,
of workstations and provides assistance as needed. and so forth. See: simulation.
The waterspider knows all processes well enough to
what-if simulation–An approach to conducting a what-if
take over if necessary. At Toyota, this position is a
analysis usually found in MRP II and ERP systems.
prerequisite to supervision and management positions.
what you see is what you get (WYSIWYG)–Computer
wave picking–A method of selecting and sequencing
jargon that means the file appears to the editor
picking lists or items to minimize the waiting time of
exactly the same way that it appears to the end user.
the delivered material. Shipping orders may be picked
in waves combined by common carrier or destination, where-used list–A listing of every parent item that calls
and manufacturing orders in waves related to work for a given component, and the respective quantity
centers. required, from a bill-of-material file. See: implosion.
waybill–A document containing a list of goods with wholesaler–Syn: distributor.
shipping instructions related to a shipment.
wide area network (WAN)–A public or private
ways–Paths over which a carrier operates, including data communication system for linking computers
right-of-way, roadbed, tracks, and other physical distributed over a large geographic area.
facilities. May be owned by the government, privately
held by the carrier, or provided by nature. will call–A service process that allows customers to
walk up to the seller’s facility and pick up the parts
webcasting–Syn: push technology. they have previously ordered.
web directory–A list of web pages that is structured WIP–Acronym for work in process.
hierarchically.
withdrawal–1) Removal of material from stores.
web page–A document containing hypertext links 2) A transaction issuing material to a specific
to certain other documents (including multimedia location, run, or schedule.
documents).
withdrawal kanban–An indicator that a container can
web services–A common internet or intranet be transported between work areas.
framework that enables the movement of data from
one supply chain application to another, without the WMS–Abbreviation for warehouse management
requirement for a direct connection between the two system.
applications and without regard to the underlying workaround–A project management technique
operating system for those applications. that provides a response to a negative risk or event
weight confirmation–The process of confirming a that has happened. A workaround is different from
shipment arrival only by confirming that the correct a contingency plan because a workaround is not
weight has been delivered. planned before the risk event occurs.
weighted-factor rating model–A method to analyze work breakdown structure–In project management,
the advantages of various locations along several a hierarchical description of a project in which each
qualitative and quantitative dimensions. lower level is more detailed. See: project summary
work breakdown structure.
weighted moving average–An averaging technique in
W which the data to be averaged is not uniformly weighted work cell–Dissimilar machines grouped together into
but is given values according to its importance. See: a production unit to produce a family of parts having
moving average, simple moving average. similar routings.
weighted-point plan–A supplier selection and work center–A specific production area, consisting
rating approach that uses the input gathered in of one or more people and/or machines with similar
the categorical plan approach and assigns weights capabilities, that can be considered as one unit for
to each evaluation category. A weighted sum for purposes of capacity requirements planning and
each supplier is obtained and a comparison made. detailed scheduling. Syn: load center.

work center schedule • XML
work center schedule–Syn: dispatch list. are used frequently are located for fast, easy access
and replacement. This concept extends the idea of “a
work center where-used–A listing (constructed from
place for everything and everything in its place.”
a routing file) of every manufactured item that is
routed (primary or secondary) to a given work center. work rules–1) Compensation rules concerning such
issues as overtime, vacation, and shift premiums.
worker efficiency–A measure (usually computed as
2) Between employee and employer, job rights and
a percentage) of worker performance that compares
obligation rules, such as performance standards,
the standard time allowed to complete a task to
promotion procedures, job descriptions, and layoff
the actual worker time to complete it. Syn: labor
rules. Work rules are usually a part of a union contract
efficiency.
and may include a code of conduct for workers and
worker productivity–The value of total goods and language to ensure decent conditions and health
services produced by an employee divided by the standards.
labor hours required to produce those goods and
work sampling–The use of a number of random
services.
samples to determine the frequency with which
workers’ compensation–A state-administered certain activities are performed.
program whereby employees are guaranteed medical
work sequence–Ordered activities performed to
coverage and replacement of earnings in case they
accomplish work.
are injured on the job, and companies are limited as
to their liability for such job-related injuries. Formerly workstation–The assigned location where a
known as workmen’s compensation. worker performs the job; it could be a machine or a
workbench.
working capital–Syn: net working capital.
work teams–Teams of employees formed to shepherd
working stock–Stock, located in a facility, that is used
a particular work area or function.
to fulfill demand.
work ticket–Syn: work order.
work in process (WIP)–A good or goods in various
stages of completion throughout the plant, including world-class company–An organization that has
all material from raw material that has been released reached a level of excellence due to superior products
for initial processing up to completely processed or services and customer satisfaction; best of the
material awaiting final inspection and acceptance as best.
finished goods inventory. Many accounting systems
world-class quality–A term used to indicate a
also include the value of semifinished stock and
standard of excellence: the best of the best.
components in this category. Syn: in-process inventory.
World Trade Organization (WTO)–The successor to
workload–Syn: load.
the General Agreement on Tariffs and Trade (GATT);
work measurement–Estimating how long it takes for the international agency overseeing trade between
an employee to produce one unit of output. nations.
work order–1) An order to the machine shop for tool write-off–In accounting, the process of removing
manufacture or equipment maintenance; not to be an asset from an organization’s books through the
confused with a manufacturing order. Syn: work expensing process.
ticket. 2) An authorization to start work on an activity
WTO–Abbreviation for World Trade Organization.
(e.g., maintenance) or product.
WYSIWYG–Acronym for what you see is what you get.
work package–In project management, a deliverable
at the bottom of a work breakdown structure. This
X
may be treated as a subproject to be assigned to a
project manager to plan and execute, in which case
X
this manager will define new activities.
workplace organization–The arrangement of tools, X-bar chart–Syn: average chart.

equipment, materials, and supplies according to their
frequency of use. Those items that are never used are XML–Abbreviation for extensible markup language.
removed from the workplace, and those items that

yard management system (YMS) • zone price
Y Z
yard management system (YMS)–A system that zero-based budgeting–A budget procedure used
organizes and directs the traffic of all vehicles primarily by governmental agencies, in which
in the parking yards located at various industrial managers are required to newly justify each
buildings like warehouses, distribution centers, and budgetary expenditure as if the budget were being
manufacturing plants. initiated for the first time, rather than being based on
an adjustment of prior-year data.
yellow belt–One who has completed six sigma
training in certain hands-on tools. zero defects–A performance standard developed
by Philip B. Crosby to address a dual attitude in the
yellow zone–The middle-level buffer zone in drum-
workplace: People are willing to accept imperfection
buffer-rope scheduling where the yellow color is used
in some areas, while in other areas they expect the
to indicate cautious situation of buffer consumption.
number of defects to be zero. This dual attitude has
yield–The amount of good or acceptable material developed as a result of the conditioning that people
available after the completion of a process. Usually are human and humans make mistakes. However,
computed as the final amount divided by the initial the zero-defects methodology states that if people
amount converted to a decimal or percentage. In commit themselves to watching details and avoiding
manufacturing planning and control systems, yield errors, they can move closer to the goal of zero defects.
is usually related to specific routing steps or to the The performance standard that must be set is “zero
parent item to determine how many units should be defects,” not “close enough.”
scheduled to produce a specific number of finished
zero inventories–Syn: just in time.
goods. For example, if 50 units of a product are
required by a customer and a yield of 70 percent is zone–1) A warehouse location methodology that
expected, then 72 units (computed as 50 units divided includes some of the characteristics of fixed and
by .7) should be started in the manufacturing process. random location methods. Zone locations hold certain
Syn: material yield. See: scrap factor, yield factor. kinds of items, depending on physical characteristics
or frequency of use. 2) The specific warehouse location
yield factor–A measurement of the yield of a process.
assigned to an order picker. In picking items for an
For a specific process or operation, yield factor plus
order, the stock picker gets only the items for each
scrap factor equals 1. See: scrap factor, yield.
order that are within his/her zone. The picker then fills
yield management–An approach commonly used by the next order for items from his/her zone.
services with highly perishable products, in which
zone of freedom–Legal authority for transportation
prices are regularly adjusted to maximize total profit.
companies to charge, within limits, more than their
YMS–Abbreviation for yard management system. variable costs.
yokoten–A Japanese word meaning sharing zone picking–A method of subdividing a picking list
information. by areas within a storeroom for more efficient and
rapid order picking. A zone-picked order must be
grouped to a single location before delivery or must
be delivered to different locations such as work
centers. See: batch picking, discrete order picking,
order picking.
zone price–A standard product price that applies to

all geographic locations within a zone.
Z
Stock# 001102-V16
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SIXTEENTH EDITION

Paul H. Pittman, PhD, CFPIM, CSCP, Jonah

J. Brian Atwater, PhD, CPIM, Jonah

Copyright 2019 by APICS, Inc. d/b/a ASCM

International Standard Book Number: 978-O-56490-6

All rights reserved. No part of this publication covered by copyright

As an important international reference, the dictionary continues to be translated into

The Institute of Industrial Engineers provided permission to include several definitions

The Theory of Constraints International Certification Organization provided permission

100 percent inspection–The act of inspecting or

A absorption costing–An approach to inventory

ABC–Abbreviation for activity-based cost accounting. accelerated depreciation–A depreciation method

APICS Dictionary, 16th edition 1

A accept–To take receipt of an item as being complete

2 APICS Dictionary, 16th edition

acknowledgment–A communication by a supplier to

APICS Dictionary, 16th edition 3

A activity driver–In activity-based cost accounting, a

4 APICS Dictionary, 16th edition

adaptive smoothing–A form of exponential smoothing

APICS Dictionary, 16th edition 5

A aggregate plan–A plan that includes budgeted levels

6 APICS Dictionary, 16th edition

allowance–1) In work measurement, a time value

APICS Dictionary, 16th edition 7

A ANOVA–Acronym for analysis of variance.

ANSI–Acronym for American National Standards

8 APICS Dictionary, 16th edition

arbitration–The process by which an independent

arrow diagram–A technique to determine the assembly chart–Overview of a product containing

APICS Dictionary, 16th edition 9

A asset recovery–The cost-effective classification

ATO–Abbreviation for assemble-to-order.

10 APICS Dictionary, 16th edition

authorized deviation–Permission for a supplier

APICS Dictionary, 16th edition 11

A available-to-promise (ATP)–1) In operations, the

average collection period–Syn: receivables AVL–Abbreviation for approved vendor list.

average forecast error–1) The arithmetic mean of

12 APICS Dictionary, 16th edition

B2B–Abbreviation for business-to-business commerce.

BAC–Acronym for budget at completion. backup support–An alternate location or maintainer

APICS Dictionary, 16th edition 13

balance sheet–A financial statement showing the

baseband coax–A coaxial cable offering a single

14 APICS Dictionary, 16th edition

APICS Dictionary, 16th edition 15

B improvements in processes, functions, products, and

16 APICS Dictionary, 16th edition

bill of lading (uniform) (B/L)–A carrier’s contract and

bin–1) A storage device designed to hold small B

APICS Dictionary, 16th edition 17

B items may have small differences in size, but they use

18 APICS Dictionary, 16th edition

bottleneck–A facility, function, department, or branch warehouse–Syn: distribution center.

APICS Dictionary, 16th edition 19

B repaired on an emergency or priority basis. Syn:

20 APICS Dictionary, 16th edition

buffer status alerts–Alerts in demand-driven material

burden rate–A cost, usually in dollars per hour, that

APICS Dictionary, 16th edition 21

22 APICS Dictionary, 16th edition

C order point is a point higher than the original order