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ERP/supply chain
education
need to define a term
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0-9
2D bar code- Two-dimensional bar code based on a flat set of
rows of encrypted data in the form of bars and spaces, normally in a
rectangular or square pattern.
3D bar
code- Three-dimensional bar code based on a physically embossed or
stamped set of encrypted data interpreted by variations in height
rather than contrast between spaces and bars (as used in 2D bar
codes). Often used in environments where labels can not be easily attached
to items.
40/30/30 rule-
A rule that specifies the sources of quality problems as due to
40% from product design, 30% from manufacturing and 30% from
vendors.
5S- A set of
workplace organization rules designed to increase efficiency and help
enable lean manufacturing, as defined by: Sort- separate and
categorize needed and unneeded materials and tools; Set in Order-
arrange tools and other items for ease of use; Shine (or scrub)-
maintain high level of cleanliness; Standardize- create a systematic
plan to perform the first three steps; Sustain- devise methods to turn
performing the steps on an ongoing basis into a habit.
80/20
rule- Rule based on
Pareto's Law stating that 80% of an end result
(quality problems, inventory valuation, distribution of wealth) comes
from a source of 20% (items, number of people, etc.).
A
ABC
analysis- An inventory classification scheme that ranks items
based on past (or projected) annual usage times cost or price, with
A items accounting for the top 10-20% in terms of number of items and
60-70% of dollar volume, B items the next 20-25% of items and 20-30%
of dollar volume, and C items as the bottom 60-70% of items and only
15-30% of the dollar volume. A Class D is sometimes used for obsolete
or non-moving items. ABC categories are often used in specifying the
amount of attention and control paid to specific items, (with the
tightest control over A items), in exception reporting and in
selecting items for periodic inventory
cycle counts (A items are
counted the most frequently).
abnormal demand- An unusually high product demand outside
normal parameters that may be due to a promotion, price break or
substitution. Forecast systems can filter abnormal demand outside
calculated standard deviation parameters based on past history, and
not assume the same demand will occur in the future.
absorption-
The allocation of specific pools or groups of fixed costs to
associated units of production by a predetermined percentage or
dollar amount, based on unit cost, machine or labor hours, or other
factors.
acceptable
quality level (AQL)- A calculated or historical level of quality
test results that indicates the future acceptance limits for
production or purchased material.
acceptance sampling- Predetermined rules for choosing and analyzing samples
of production or purchased material based on third-party agreements or
previous experience with product, equipment, date, vendor or other
characteristics.
accessory-
An item or service selected on an order designed for use with a
base item. An accessory is not required to be ordered, while an
option
usually must be selected from the available choices (ex.- in ordering
a laptop computer a carrying case is an accessory, while one option
selection from the hard drive choices must be taken).
accounts payable- A current
liability; the financial obligation created by the receipt of
items and services not yet paid for. Also used to refer to the
department that matches vendor invoices to receipts, prioritizes and
selects invoices for payment, and performs the check
processing/disbursement cycle.
accounts receivable- A
current asset; the expected value to be received from customers for
items shipped and services performed but not yet paid for. Also used
to refer to the department that applies cash received from customers
against open invoices and manages invoice adjustments and credit
memos.
accrual accounting- Recognizing
revenues and expenditures as they occur, rather than when actual
payment is received or made (as in the cash accounting method).
acknowledgement- Documentation
from a vendor to a customer that verifies receipt of an order
and associated date, quantity, item and terms information.
active
ingredient- The
material or chemical in a batch or formula responsible for producing
the desired result and giving the product its main characteristic.
Other substances enhance or buffer the active ingredient, and may be
classified as inert.
activity- A
discrete unit of work that consumes organizational resources.
activity based costing
(ABC)- A cost accounting methodology that assigns costs to
activities based on their use of resources, and assigns costs to cost
objects (products, functions, projects) based on their use of
activities. It attempts to precisely allocate overhead based on the
real factors that create costs.
activity based
management (ABM)- An overall approach to cost management
that focuses on the relationships between activities, cost drivers and
resources to identify and separate value-added and non-value added
systems and functions.
activity driver- The
factor used to measure usage of a defined activity. ex.- the materials
support activity of a forklift driver retrieving goods from the
warehouse could be driven either based on number of trips, or total
time required on trips.
actual cost- The
real cost associated with purchasing materials and services, and
paying internal personnel. A
standard cost system
tracks actual usage, as defined by hours or units consumed,
based on a standard value, to calculate and track variances versus the
standard hours or units; an actual cost system (often used in to-order environments) attempts to assign the true
cost of every purchase, material issue and labor activity to jobs and products.
actual cost of work performed (ACWP)- A project cost measurement
that tracks the actual costs associated with tasks performed in a
given time frame and compares them to budget costs to track rate
variances.
actual demand- Demand
in the form of booked customer orders and interplant orders (not
actual sales). Actual demand is netted against forecasted demand for a
given time period to generate requirements for material planning
systems.
adaptive smoothing- A
version of
exponential smoothing where the smoothing (alpha) factor is
automatically adjusted, or adapted, based on interpretations of
observed forecast error.
ad hoc query-
A report or inquiry constructed as required that accesses data
files and fields selected at the time of creation. A decision support
tool that may be saved and run again in the future (as a
predefined
query).
advanced planning and scheduling (APS)-
A real-time tool combining material and capacity planning at the same
time, as opposed to separate batch material and capacity runs. APS
tools use
finite scheduling and material availability data to schedule
orders and demand. They can typically be used to evaluate the effect
of adding single new orders into an existing schedule, and are often
used as a short-term tool in conjunction with longer-term family level
planning.
advanced shipping
notification (ASN)- A message, usually sent through
EDI,
from
a vendor to a
customer at the time of the vendor shipment that notifies the customer
of the order, item and quantity information. Some customers may refuse
receipt or penalize the vendor if the ASN is not communicated at
shipment time or within a specified time frame.
affinity diagram-
A process similar to brainstorming in which group
participants silently write down ideas which are later gathered and
organized into natural categories. Used in situations where the
problem may be complex or uncertain and both independent and group
participation is beneficial.
aging- The
separation of invoices, orders, inventory and production lots into
time buckets based on due dates, receipt dates, expiration dates, or
other factors. Used to focus attention on past due and most urgent
items.
aggregate planning- Sales,
revenue, inventory and production planning done at total organization,
facility or family levels. Typically done as part of the long-term
production planning and budgeting process to identify overall
production, facility and personnel requirements.
aggregator- A
system or service that combines data or items with similar
characteristics (geographic area, target market, size, etc.) into
larger entities. Value is derived from cost savings, or the ability to
reach a larger market and charge higher prices from bundling multiple
goods or services.
allocation- A
reservation of material based on an accepted order or system-
generated planned order. The on-hand balance of an item, less the
allocation, leaves the balance available for production or to promise
to customer orders.
allowance factor- A
percentage, unit or dollar amount added to a calculation of an exact
specification to allow for an imperfect process or observed history
(ex.- a material scrap factor or labor performance standard). The
exact specification is not changed so that the theoretically-possible
result is still visible.
alpha smoothing
factor-
In
exponential
smoothing, the factor used to smooth or filter the
data from the most recent period. (ex.- an alpha factor of 0.1 means
to give the most recent data period a weighting of 0.1 and the
previous period(s) a weighting of 0.9). A higher alpha indicates the
future forecast will more closely resemble recent history, and is more
likely to vary greatly with each recalculation.
alternate operation- A
manufacturing
operation done instead of the standard or normal
operation. Typically used due to short term material or capacity
shortages.
amortization- A
variety of practices such as depreciation, depletion, or writeoffs to
expense the initial cost of a capital investment over multiple fiscal
periods.
analysis of variation
(ANOVA)- A statistical method used for a single dependent
variable that performs comparisons and tracks the effects of a number
of discrete factors (independent variables), each of which may have a
number of levels and may interact to affect the dependent
variable.
andon board- A
lighted board used in production areas to provide a visual signal that
indicates an actual or potential problem at a specific workstation.
annualized- Short
term or current period data used to project results for a hypothetical
full year that filters out seasonality and abnormalities.
anticipated delay
report- A report of production or purchase orders that are
projected to be delayed past the current schedule date. It should
include the orders, products and facilities affected and provide
reasons for the delay to allow later analysis of recurring
problems.
application service
provider (ASP)- A third party that provides
ERP or other business
applications on a hosted basis to customers and users. Instead of
buying a license from the software vendor, the customer contracts for
Internet or other access to specific applications and usage volumes
with the third party, who is responsible for software maintenance,
upgrades and security.
application software-
Software written to provide manufacturing, financial, distribution
or support functions (as opposed to systems software that regulates
the operation of hardware and network systems).
ARIMA
modeling- The Auto Regressive Integrated Moving Average
forecast technique based on time series analysis and
regression modeling; often useful
in creating short-term forecasts.
arrival notice- Documentation
containing shipment arrival date and location information sent by a
carrier to a designated third party.
assemble to order (ATO)- A
manufacturing environment where the final product is assembled based
on the receipt of a customer order (instead of to stock). The assembly
is normally performed using standard components, modules and
subassemblies that are already stocked based on forecasts developed
from past usage history. An ATO environment allows each customer order
to specify a custom combination of previously-defined standard
options.
association rules- Rules
that relate objects or events based on if this, then that logic.
attribute chart- Results
of quality tests that charts the percent and number of products or
quality characteristics that do not conform to specification.
assortment- In a retail environment, the
selection of merchandise stocked or offered at a retail outlet or
distribution center. The target customer base and physical product
characteristics determine the depth and breadth of an assortment and
the length of time it is carried.
audit trail- A
system or report that provides the transactions and background data
that created a current status.
authorized work-
1) Production orders at a given work center or line that have been
released and scheduled; production of other items or quantities is
considered unscheduled and may not be included in incentive programs
2) Vendor production that occurs in a given time frame or zone based
on agreement with the customer that allows adding labor value to
vendor raw materials.
auto-create- Software
system functions that automatically generate purchase or production
orders based on system suggestions, instead of requiring manual review
and creation by a planner or buyer. Many systems contain time fences
that only allow auto-creation beyond a specified future date.
auto ID- Automatic
identification and tracking of material movement and inventory by data
collection devices, using bar codes or other methods.
automated guided
vehicle system (AGVS)- Warehouse and logistics equipment, such as
robots or picking systems with no operator, that are routed to planned
inventory or production locations by software and network
commands.
automated
storage/retrieval system (AS/RS)- A system that uses automatic
machines and controls to locate, transport, store and retrieve
materials as directed by order requirements.
automated test
equipment (ATE)- Test systems integrated into the production
process that operate and report without human intervention.
automatic substitution-
Software functions that automatically substitute a pre-approved
alternate component or product for picking to a production or customer
order when the primary item is not available.
autoregressive model-
A time series analysis model based on previous weighted outputs of a
system.
auto-reschedule- Software
planning functions that automatically move existing purchase or
production orders to new dates based on calculated requirements,
without manual intervention. Many
systems use time fences to limit the use of auto-rescheduling beyond a defined
date in the future to avoid disruption of short-term schedules and
commitments.
available to promise
(ATP)- End items that can be promised to customer order
requirements for a given period based on an uncommitted or available
status, calculated as: on-hand inventory, less booked customer orders,
plus expected master schedule receipts for the period. Cumulative ATP
includes past due orders and indicated total availability for
successive periods.
available work- Production
or components physically at a work center or line that can be
immediately used for work, as opposed to those scheduled but not yet
present.
B
backfill scheduling-
Scheduling small, short-run production jobs using fixed duration
or stop-time parameters that use idle or underutilized resources and
can be run without delaying the start of priority jobs. Typically used
in filling safety stock or other to-stock requirements.
backflush- The
calculated reduction of a component inventory balance based on the
reported production of a parent item and the quantity of the component
used per each parent. A system transaction that may not represent
physical usage based on timing and bill of material accuracy issues. (syn:
post-deduct)
backlog- Booked
(accepted) but unshipped customer orders or interplant orders. The
backlog represents all open orders, not necessarily a past due
status.
back office-
Internal organizational functions such as production operations or
cycle counting that normally do not interact with outside
entities.
backorder- A
current or past due customer order (or line item) that cannot be
shipped due to lack of inventory availability. Customer agreements
govern how backorders are handled (ship when available, ship whole
order only, cancel, etc.).
backward scheduling- A
method that calculates production and purchase order dates by taking a
given order or operation due date and backing into the required start
or release date based on the indicated lead time. The opposite of
forward scheduling.
balanced scorecard- A
business performance measurement and management system developed by
Robert S. Kaplan and David P. Norton that analyzes organizational
success by reviewing the combination of financial, customer, internal
business process and employee learning and growth perspectives. A
balanced system includes both leading and lagging measures, and aligns
individual and department goals with overall corporate strategic
objectives.
balance sheet- A
basic financial statement that measures the positions of a company's
assets, liabilities and shareholders' equity as of a given date and
usually compares those positions to the status on the same date in the
previous fiscal year.
balloon number- A
reference number that points to a component or assembly on an
engineering drawing and corresponds to a part number, usually listed
in a table on the side of the drawing. (syn: bubble number)
bar code- An
arrangement of bars and spaces on a label or stamped or embossed onto
an item or container that identifies the item and sometimes its
quantity. A variety of fixed and variable length code schemes are used
by industries and standards bodies to enable automatic interpretation
by collection systems and avoid manual input. (See:
Code
39,
Code 128)
bar code reader- A
movable or fixed device that scans a bar code and interprets the
combination of bars and spaces to record a transaction or a status.
baseline- A set of
measurements that establishes the status of a system or other item as
of a given date. Used to provide a common denominator and starting
point for later measurements and comparisons.
base standard- In
a costing system, the initial standard established at the beginning of
a fiscal year used for creating budgets and performance measurements
for that period. The base standard may be frozen to provide a
consistent starting point for the period; the current standard is
updated to reflect changes in process or material costs during the
year.
batch- 1) In
production, a lot or given quantity processed at the same time with
the same process parameters. A batch may consist of more than one item
number but all items are considered to have the same characteristics
for purposes of traceability. 2) In data processing, a set of files or
records gathered and processed together instead of one at a time. When
a batch run is being processed, the files or records used may be
locked from additional update until the batch is done.
batch-and-queue-
The production of multiple parts at a given operation as a batch that
is finished and moved to the input queue of the succeeding operation.
batch bill of material-
A bill of material typically used in process industries that
describes an ingredients list required for a batch quantity of the end
item, instead of a quantity of one as typically used in discrete
manufacturing environments.
batch pull- An
order picking efficiency technique that combines multiple orders for a
date or customer range and summarizes the total requirements for items
on all orders. It allows going to an inventory location once to pick
for several orders instead of returning to the same location multiple
times.
Bayes' Theorem- A
formula that considers the conditional probability of the existence of
a given event or variable as being caused by a second variable, and
the probability of the occurrence of the second variable.
beginning inventory- The
calculated (perpetual) inventory at the start of an accounting period;
often generated from month-end close functions that use the ending
inventory of one period as the beginning inventory of the
next.
benchmarking- The
practice of establishing goals and targets for process performance
levels and identifying required improvement
areas based on the published or known performance of direct
competitors or a relevant industry.
best fit- In
forecasting, software functions that compare multiple possible
forecast methods to past actual demand to determine the best method to
use in the future. Generically used to indicate the best alternative
from given choices.
best of breed- Systems
or functions that exhibit the highest level of performance in their
class. Tradeoffs occur in multiple-function systems when the costs of
integrating several systems offset the benefits of having the best
system in each individual area.
best practices- Standard,
published operating methods found to produce the best performance and
results in a given industry or organization.
beta test- A
software version released to a limited population of users for
functionality and bug test evaluation before the final release to
the general user base.
bias- A set of
results consistently above or below an established centerline that
indicates the need for corrective action.
bi-directional bar
code- A bar code that can be scanned in either direction.
bill of
activities- In
activity-based costing, a list of the activities
and associated costs used by a cost object (product, department,
etc.).
bill of lading (BOL)- A
document created for a given shipment that indicates the contents and
destination, and forms a contractual basis for claims or resolution
with the carrier if required.
bill of material
(BOM)-
A structured list of the items used in making a parent assembly
that reflects the actual production process in terms of timing and
quantities consumed. It is constructed in conjunction with the
routing, which describes the individual production steps and rates
used. A BOM may optionally include information relating to
backflushing, use of alternate and optional components, tie between
components and the operations that use them, and other data. BOMs are
used by the
MRP function to calculate component requirements when
given a parent demand, and in building product costs. (Syn: product
structure, recipe, formulation, ingredients list)
bill of material
comparison- A tool that compares two or more bills of material to
identify duplicates and highlight exceptions and differences in the
components. Used in database maintenance and obsolescence
reporting.
bill of material
explosion- The function of using the bill of material to generate
component item demand quantities and timing given a requirement for
the parent.
bill of
resource- A
listing of the key resources and quantities used in production of an
item or family. A bill of resource may list only critical resources
consumed (machine, personnel, logistics or other), while the product
routing shows each individual step or operation. Used in
rough cut
capacity planning (RCCP) to provide resource requirements for a given
forecast or master schedule.
bin- 1) A standard
container for components 2) An inventory shelf or rack location with a
specific identifier.
black
belt- In the
six sigma
quality improvement methodology, a fulltime leadership position in
teams that develop related programs and monitor progress.
blanket order- A
purchase order or customer order combining requirements for a given
vendor or customer and group of items over an agreed-upon time frame.
It creates a purchase commitment and pricing definition for the
specified period, which can range from weeks to years based on the
industries or commodities involved. The blanket often consists of the
total agreement terms only; individual delivery dates and quantities
are later generated by the planning system.
blanket order release- A
purchase or customer order requesting delivery of specific items and
quantities against a previously-created blanket authorization. Based on
requirements generated by the planning system, releases are
accumulated against the total commitment in the blanket
authorization.
blend- The mixing
or combination of multiple ingredients to create a liquid, powder or
gas form identified by a unique item number. An initial batch may be
modified with a subsequent blend based on the analysis of quality
tests that require additional processing to meet specifications.
blind count- A physical inventory or
cycle
count in which the count tag
or sheet contains item and location information but does not include
the book (calculated) inventory as of the time of count.
block schedule- A
schedule based on blocks or periods of time rather than quantities.
Sometimes required when the process dictates a fixed drying or curing
time, or a contracted vendor turnaround time.
blowthrough- See:
phantom.
bolt-on- A third
party, specific application designed to enhance or extend a base
system through increased functionality.
bonded- Contractual
description of service delivery performance specifying terms and
conditions that may involve posting a bond.
bookings- New
customer orders taken or accepted over a designated time frame. Cancellations
are deducted to arrive at net bookings.
book inventory- See:
perpetual inventory.
bottleneck- A
resource that constrains the flow of production, inventory movement or
data in a system. In a free-flowing system, the first place to
restrict throughput when demand is raised.
Box-Behnken design-
A three-level, multiple-variable experiment design method that assumes
values at the center point and eliminates extreme values.
Box-Jenkins Model- A
variation of
ARIMA modeling that creates a forecast using
regression and moving average
and incorporates previous errors. Most often used in developing short-term
forecasts.
boxplot- A
graphical representation of a quality test that shows process
variability distribution based on the mean, upper and lower
specification limits in the form of a box.
break-even analysis- An
examination of changes in fixed and variable costs based on varying
revenue and production levels that identifies a break-even point where
revenues are equal to costs. It highlights the profit results from
alternative levels of operation. (syn: cost-profit-volume
analysis)
breeder bill of
material- A bill of material that accounts for the generation and
cost implications of
byproducts as a result of manufacturing the
parent item.
bricks and mortar- Organizations
with physical (vs. Internet-only) production or logistics facilities and operations.
broadcast system- Sequenced
plans or data communicated to multiple points at the same time in
order to provide a common view and synchronize results.
bucketed- A
reporting system that accumulates multiple daily records into a
larger, user-specified time frame (weeks, quarters, years, etc.).
Enables easier analysis when daily detail is not required.
bucketless- A
reporting system that presents a view of orders or records based on
individual dates rather than accumulating into a larger time frame.
Useful for short-term detail planning and analysis.
budget- A
planning, control and reporting system that estimates future costs and
revenues based on projected operating levels. It provides target
spending levels and profit estimation, and allows for interim review
and corrective action.
budgeted cost of work
performed (BCWP)- The earned (standard) cost or budget value of
project tasks completed for a given time period. It is compared to
actual cost of work performed (ACWP) to determine variance
conditions.
budgeted cost of work
scheduled (BCWS)- The earned (standard) cost or budget value of
project tasks scheduled to be completed for a given time period. A
cumulative view of the planned costs based on the budget
schedule.
buffer- Stock
positioned at a processing or usage point to allow for demand or
process variations, or to maintain continued operation of a
constrained resource.
buffer management- The
set of processes used in the
theory of constraints to manage the
buffers used to ensure continued operation of the constraint.
Activities and materials processing operations are prioritized on the
basis of their criticality to maintaining or rebuilding buffer
stocks.
bulk issue- Components
and materials issued to the production floor based on the cumulative
requirements for multiple production orders, shifts or days. Not
used in to-order environments where lot traceability is an
issue.
burden
rate- A
percentage or fixed-dollar amount that allocates department or product
overhead expenses to production on a labor hour, machine hour. labor
dollar, material dollar or unit
basis. (syn:
overhead rate)
business case
scenario- A common, defined situation encountered in normal
business operations; systems and procedures are developed and
documented to define the standard methodology used for that process.
business intelligence-
Systems that provide directed background data and reporting tools
to support and improve the decision-making
process.
business
plan- A
long term, family-level financial and operating plan that supports the
strategic plan in fulfilling organizational objectives. It provides
the high-level detail for the strategic considerations of market,
product, facility and resource positioning. An intermediate planning
level between the strategic plan and the
sales and operations plan
(S&OP).
business process
mapping- Techniques that specify the steps, control points and
resources involved in current state business processes, identify
desired changes and risk/reward tradeoffs, and create the methods to
implement cross-functional systems that support the desired new processes.
buyer/planner- A
buyer, authorized to determine sourcing, negotiate agreements and
place purchase orders with vendors, who also performs material
planning and review functions done solely by planners in other
organizations.
byproduct-
An
item, automatically generated by the production process of another
item, that has value and is inventoried. The byproduct is not
scheduled but can be planned as an expected receipt as a result of
scheduling the generating item, and its cost may be netted against the
original item.
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Glossary
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