# A

A

ABB
Abbreviation for activity-based budgeting.

ABC
Abbreviation for activity-based cost accounting.

ABC analysis
Syn: ABC classification.

ABC classification
The classification of a group of items in decreasing order of annual dollar volume (price multiplied by projected volume) or other criteria. This array is then split into three classes, called A, B, and C. The A group usually represents 10% to 20% by number of items and 50% to 70% by projected dollar volume. The next grouping, B, usually represents about 20% of the items and about 20% of the dollar volume. The C class contains 60% to 70% of the items and represents about 10% to 30% of the dollar volume. The ABC principle states that effort and money can be saved through applying looser controls to the low-dollar-volume class items than will be applied to high-dollar-volume class items. The ABC principle is applicable to inventories, purchasing, sales, and so on. Syn: ABC analysis, distribution by value, . See: 80-20, Pareto analysis, Pareto’s law.

ABC inventory control
An inventory control approach based on the ABC classification.

ABM
Abbreviation for activity-based management.

Abnormal demand
Demand in any period that is outside the limits established by management policy. This demand may come from a new customer or from existing customers whose own demand is increasing or decreasing. Care must be taken in evaluating the nature of the demand: is it a volume change, is it a change in product mix, or is it related to the timing of the order? See: outlier.

ABP
Abbreviation for activity-based planning.

Absentee rate
A ratio comparing the number of employee-days lost with the total number of available employee-days of employment during some base period, usually one month.

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 on the basis of direct labor hours, machine hours, or material costs. Syn: allocation costing. See: activity-based costing.

Accelerated depreciation
A depreciation method involving high write-offs in the early years of an asset’s life and lower write-offs later. This method lowers the value of an asset faster than straight-line depreciation.

Acceptable quality level (AQL)
When a continuing series of lots is considered, a quality level that, for the purposes of sampling inspection, is the limit of a satisfactory process average.

Acceptable sampling plan
A specific plan that indicates the sampling sizes and the associated acceptance or nonacceptance criteria to be used.

Acceptance number
1) A number used in acceptance sampling as a cutoff at which the lot will be accepted or rejected. For example, if x or more units are bad within the sample, the lot will be rejected. 2) The value of the test statistic that divides all possible values into acceptance and rejection regions.

Acceptance sampling
1) The process of sampling a portion of goods for inspection rather than examining the entire lot. The entire lot may be accepted or rejected based on the sample even though the specific units in the lot are better or worse than the sample. There are two types: attributes sampling and variables sampling. In attributes sampling, the presence or absence of a characteristic is noted in each of the units inspected. In variables sampling, the numerical magnitude of a characteristic is measured and recorded for each inspected unit; this type of sampling involves reference to a continuous scale of some kind. 2) A method of measuring random samples of lots or batches of products against predetermined standards.

Accessory
A choice or feature added to the good or service offered to the customer for customizing the end product. An accessory enhances the capabilities of the product but is not necessary for the basic 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 date. In other companies, this choice must be made before shipment. See: feature.

Accident prevention
The application of basic scientific and technical principles including education and training for the detection, analysis, and minimization of hazards, with the objective of avoiding accidents.

Acclimatization
The physiological, emotional, and behavioral adjustment to changes in the environment. Proper performance depends on adequate acclimatization to the workplace, including significant mechanical features such as seat height and lighting. Heat, cold, humidity, and light are important physiologically.

Accountability
Being answerable for but not necessarily personally charged with doing the work. Accountability cannot be delegated, but it can be shared.

Accounting
The function of maintaining, analyzing, and explaining the financial records and status of an organization.

Account manager
A manager who has direct responsibility for a customer’s interest.

Accounts payable
The value of goods and services acquired for which payment has not yet been made.

Accounts receivable
The value of goods shipped or services rendered to a customer on which payment has not yet been received. Usually includes an allowance for bad debts.

Accreditation
Certification by a recognized body of the facilities, capability, objectivity, competence, and integrity of an agency, service, operational group, or individual to provide the specific service or operation needed. For example, the Registrar Accreditation Board accredits those organizations that register companies to the ISO 9000 Series Standards.

Accumulation bin
A place, usually a physical location, used to accumulate all components that go into an assembly before the assembly is sent out to the assembly floor. Syn: assembly bin.

Accuracy
The degree of freedom from error or the degree of conformity to a standard. Accuracy is different from precision. For example, four-significant-digit numbers are less precise than six-significant-digit numbers; however, a properly computed four-significant-digit number might be more accurate than an improperly computed six-significant-digit number.

Acid test ratio
Syn: quick asset ratio.

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 the supplier.

Acquisition cost
The cost required to obtain one or more units of an item. It is order quantity times unit cost. See: ordering cost.

Action message
An output of a system that identifies the need for and the type of action to be taken to correct a current or potential problem. Examples of action messages in an MRP system include release order, reschedule in, reschedule out, and cancel. Syn: exception message, action report.

Action report
Syn: action message.

Activation
In constraints management, the use of nonconstraint resources to make parts or products above the level needed to support the system constraint(s). The result is excessive work-in-process inventories or finished goods inventories, or both. In contrast, the term utilization is used to describe the situation in which nonconstraint resource(s) usage is synchronized to support the needs of the constraint.

Active inventory
The raw materials, work in process, and finished goods that will be used or sold within a given period.

Work scheduled that may not be on hand.

Activity
1) In activity-based cost accounting, a task or activity, performed by or at a resource, required in producing the organization’s output of goods and services. A resource may be a person, machine, or facility. Activities are grouped into pools by type of activity and allocated to products. 2) In project management, an element of work on a project. It usually has an anticipated duration, anticipated cost, and expected resource requirements. Sometimes “major activity” is used for larger bodies of work.

Activity analysis
The identification and description of activities within an organization for the purpose of activity-based costing.

Activity-based budgeting (ABB)
In activity-based cost accounting, a budgeting process employing knowledge of activities and driver relationships to predict workload and resource requirements in developing a business plan. Budgets show the predicted consumption and cost of resources using forecast workload as a basis. The company can use performance to budget in evaluating success in setting and pursuing strategic goals; this activity is part of the activity-based planning process.

Activity-based cost accounting (ABC)
A cost accounting system that accumulates costs based on activities performed and then uses cost drivers to allocate these costs to products or other bases, such as customers, markets, or projects. It is an attempt to allocate overhead costs on a more realistic basis than direct labor or machine hours. Syn: activity-based costing, activity-based cost accounting. See: absorption costing.

Activity-based costing
Syn: activity-based cost accounting.

Activity-based costing model
In activity-based cost accounting, a model, by time period, of resource costs created because of activities related to products or services or other items causing the activity to be carried out.

Activity-based costing system
A set of activity-based cost accounting models that collectively define data on an organization’s resources, activities, drivers, objects, and measurements.

Activity-based management (ABM)
The use of activity-based costing information about cost pools and drivers, activity analysis, and business processes to identify business strategies; improve product design, manufacturing, and distribution; and remove waste from operations. See: activity-based cost accounting.

Activity-based planning (ABP)
In activity-based cost accounting, a continuing definition of activity and resource requirements (for both financial and operational systems) based on future demand for products or services by specific customer needs. Demand for resources is related to resource availability; capacity overages and shortfalls are corrected. Activity-based budgeting derives from the outputs of activity-based planning.

Activity dictionary
In activity-based cost accounting, a set of standard definitions of activities including descriptions, business process, function source, cost drivers, and other data important to activity-based planning.

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 cost objects.

Activity level
A description of how reactive one activity is to changes in the level of another activity or cost object.

Activity-on-arc network
A process for representing a project network by having each arc stand for an activity. Syn: activity-on-arrow network.

Activity-on-arrow network (AOA)
A project management network in which the passage of time, via activities, takes place on the arrows. The start of an activity is represented by the tail of the arrow, while the completion of the activity is represented by the tip of the arrow. The sequence of the arrows represents the sequence of activities. Arrows are connected by nodes, which are usually circles. Syn: activity-on-arc network, arrow diagram method, event-on-arrow network.

Activity-on-node network (AON)
A project management network in which the passage of time, via activities, takes place on circles called nodes. Each node contains a number representing the estimated duration of the activity it represents. Nodes are connected by arrows that give precedence relationships. Syn: event-on-node network, precedence diagram method.

Activity ratio
A financial ratio to determine how an organization’s resources perform relative to the revenue the resources produce. Activity ratios include inventory turnover, receivables conversion period, fixed-asset turnover, and return on assets.

Actual cost of work performed
The direct costs actually incurred and the indirect costs applied in accomplishing the work performed within a given time period. These costs should reconcile with the contractor’s incurred-cost ledgers, which are regularly audited by the client.

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

Actual cost system
A cost system that collects costs historically as they are applied to production and allocates indirect costs to products based on the specific costs and achieved volume of the products.

Actual demand
Actual demand is composed of customer orders (and often allocations of items, ingredients, or raw materials to production or distribution). Actual demand nets against or “consumes” the forecast, depending upon the rules chosen over a time horizon. For example, actual demand will totally replace forecast inside the sold-out customer order backlog horizon (often called the demand time fence) but will net against the forecast outside this horizon based on the chosen forecast consumption rule.

Actual finish date
In project management, the date on which an activity in a project was actually completed.

Actual start date
In project management, the date on which an activity in a project was actually started.

Actual volume
Actual output expressed as a volume of capacity. It is used in the calculation of variances when compared with demonstrated capacity (practical capacity) or budgeted capacity.

In e-commerce, a site that a visitor can change to customize.

1) The ability of a control system to change its own parameters in response to a measured change in operating conditions. 2) Machine control units in which feeds and/or speeds are not fixed. The control unit, working from feedback sensors, is able to optimize favorable situations by automatically increasing or decreasing the machining parameters. This process ensures optimum tool life or surface finish and/or machining costs or production rates.

A form of exponential smoothing in which the smoothing constant is automatically adjusted as a function of forecast error measurement.

In e-commerce, a site that records a visitor’s behavior, uses artificial intelligence software to “learn” this behavior, and chooses what to present to the visitor based on this learning.

A special class of ingredients characterized either by being used in minimal quantities or by being introduced into the processing cycle after the initial stage.

To hear and decide an issue under legal dispute.

A government employee who ensures compliance with the terms and conditions of contracts.

Techniques that deal with analysis and planning of logistics and manufacturing over the short, intermediate, and long-term time periods. APS describes any computer program that uses advanced mathematical algorithms or logic to perform optimization or simulation on finite capacity scheduling, sourcing, capital planning, resource planning, forecasting, demand management, and others. These techniques simultaneously consider a range of constraints and business rules to provide real-time planning and scheduling, decision support, available-to-promise, and capable-to-promise capabilities. APS often generates and evaluates multiple scenarios. Management then selects one scenario to use as the “official plan.” The five main components of APS systems are demand planning, production planning, production scheduling, distribution planning, and transportation planning.

Ordering materials before the release of the formal product design. This early release is required because of long lead times.

An EDI notification of shipment of product.

Sponsored promotions that are nonpersonal in nature.

Affidavit
A sworn written statement.

Affinity diagram
A total quality management tool whereby employees working in silence generate ideas and later categorize these ideas.

Affirmative action
A hiring policy that requires employers to analyze the workforce for underrepresentation of protected classes. It involves recruiting minorities and members of protected classes, changing management attitudes or prejudices toward them, removing discriminatory employment practices, and giving preferential treatment to protected classes.

After-sale service
Syn: field service.

Agent
One who acts on behalf of another (the principal) in dealing with a third party. Examples include a sales agent and a purchasing agent.

Aggregate forecast
An estimate of sales, often time phased, for a grouping of products or product families produced by a facility or firm. Stated in terms of units, dollars, or both, the aggregate forecast is used for sales and production planning (or for sales and operations planning) purposes. See: product group forecast.

Aggregate inventory
The inventory for any grouping of items or products involving multiple stockkeeping units. See: base inventory level.

Aggregate inventory management
Establishing the overall level (dollar value) of inventory desired and implementing controls to achieve this goal.

Aggregate plan
A plan that includes budgeted levels of finished goods, inventory, production backlogs, and changes in the workforce to support the production strategy. Aggregated information (e.g., product line, family) rather than product information is used, hence the name aggregate plan.

Aggregate planning
A process to develop tactical plans to support the organization’s business plan. Aggregate planning usually includes the development, analysis, and maintenance of plans for total sales, total production, targeted inventory, and targeted customer backlog for families of products. The production plan is the result of the aggregate planning process. Two approaches to aggregate planning exist—production planning and sales and operations planning. See: production planning, sales and operations planning, sales plan.

Aggregate reporting
1) Reporting of process hours in general, allowing the system to assign the actual hours to specific products run during the period based on standards. 2) Also known as gang reporting, the reporting of total labor hours.

Agility
The ability to successfully manufacture and market a broad range of low-cost, high-quality products and services with short lead times and varying volumes that provide enhanced value to customers through customization. Agility merges the four distinctive competencies of cost, quality, dependability, and flexibility.

AGVS
Abbreviation for automated guided vehicle system.

AI
Abbreviation for artificial intelligence.

AIS
Abbreviation for automated information system.

Algorithm
A prescribed set of well-defined rules or processes for solving a problem in a finite number of steps, e.g., the full statement of the arithmetic procedure for calculating the reorder point.

Allocated item
In an MRP system, an item for which a picking order has been released to the stockroom but not yet sent from the stockroom.

Allocated material
Syn: reserved material.

Allocation
1) The classification of quantities of items that have been assigned to specific orders but have not yet been released from the stockroom to production. It is an “uncashed” stockroom requisition. 2) A process used to distribute material in short supply. Syn: assignment. See: reservation.

Allocation costing
Syn: absorption costing.

Allocative efficiency
The use of resources to produce those goods and services most wanted by consumers.

Allowable cost
A reasonable cost specifically permitted under the Federal Acquisition Regulations (FAR).

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 applied, to compensate for justifiable causes or policy requirements that necessitate performance time not directly measured for each element or task. Usually includes irregular
elements, incentive opportunity on machine-controlled time, minor unavoidable delays, rest time to overcome fatigue, and time for personal needs. 2) In assembly, the minimum clearance or maximum interference distance between two adjacent objects.

Allowed time
A normal time value increased by appropriate allowances.

Alpha factor
Syn: smoothing constant.

Alternate feedstock
A backup supply of an item that either acts as a substitute or is used with alternate equipment.

Alternate operation
Replacement for a normal step in the manufacturing process. Ant: primary operation.

Alternate routing
A routing, usually less preferred than the primary routing, but resulting in an identical item. Alternate routings may be maintained in the computer or off-line via manual methods, but the computer software must be able to accept alternate routings for specific jobs.

Alternate work center
The work center where an operation is not normally performed but can be performed. Ant: primary work center.

American National Standards Institute (ANSI)
The parent organization of the interindustry electronic interchange of the business transaction standard. This group is the clearinghouse on U.S. electronic data interchange standards.

American Society for Quality (ASQ)
Founded in 1946, a not-for-profit educational organization with 144,000 members who are interested in quality improvement.

American Society for Quality Control (ASQC)
Renamed American Society for Quality in 1997. See: American Society for Quality.

American Standard Code for Information Interchange (ASCII)
Standard seven-bit character code used by computer manufacturers to represent 128 characters for information interchange among data processing systems, communications systems, and other information system equipment. An eighth bit is added as a parity bit to check a string of ASCII characters for correct transmission.

Amortization
The process of recovering (via expensing) a capital investment over a period of time. See: capital recovery.

Analog
As applied to an electrical or computer system, the capability of representing data in continuously varying physical phenomena (as in a voltmeter) and converting them into numbers.

Analysis of variance (ANOVA)
A basic statistical technique for analyzing experimental data. It subdivides the total variation of a data set into meaningful component parts associated with specific sources of variation in order to test a hypothesis on the parameters of the model or to estimate variance components. There are three models: fixed, random, and mixed.

Analytic workplace design
A design based on established biomechanical and behavioral concepts, including the known operating characteristics of people. Produces a workplace situation well within the range of human capacity and does not generally require modification, improvement, or preliminary experimental “mock-up.”

Andon
1) An electronic board that provides visibility of floor status and provides information to help coordinate the efforts to linked work centers. Signal lights are green (running), red (stop), and yellow (needs attention). 2) A visual signaling system.

Annual inventory count
Syn: physical inventory.

Annualized contract
A negotiated agreement with a supplier for one year that sets pricing, helps ensure a continuous supply of material, and provides the supplier with estimated future requirements.

Annual percentage rate
In finance, the rate of interest paid for a loan after compounding is considered. Syn: effective interest rate.

Annual physical inventory
Syn: physical inventory.

Annuity
A stream of fixed payments for a stipulated time, yearly or at other intervals.

ANOVA
Acronym for analysis of variance.

ANSI
Acronym for American National Standards Institute.

Anticipated delay report
A report, normally issued by both manufacturing and purchasing to the material planning function, regarding jobs or purchase orders that will not be completed on time and explaining why the jobs or purchases are delayed and when they will be completed. This report is an essential ingredient of the closed-loop MRP system. It is normally a handwritten report. Syn: delay report.

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

AOA
Abbreviation for activity-on-arrow network.

AON
Abbreviation for activity-on-node network.

AOQ
Abbreviation for average outgoing quality.

AOQL
Abbreviation for average outgoing quality limit.

APICS
Founded in 1957 as the American Production and Inventory Control Society, APICS is a not-for-profit educational organization consisting of 60,000 members in the production/operations, materials, and integrated resource management areas.

Apparent authority
Authority perceived by a third party to flow from a principal to an ostensible agent when in fact no agency relationship exists.

Appellant
One who appeals a court decision to higher authority.

Application package
A computer program or set of programs designed for a specific application; e.g., inventory control, MRP.

Applications software
A computer program or set of programs designed to assist in the performance of a specific task, such as word processing, accounting, or inventory management. See: application system

Application system
A set of programs of specific instructions for processing activities needed to compute specific tasks for computer users, as opposed to operating systems that control the computer’s internal operations. Examples are payroll, spreadsheets, and word processing programs. See: application software.

Appraisal
1) An evaluation of employee performance. 2) In TQM, the formal evaluation and audit of quality.

Appraisal costs
Those costs associated with the formal evaluation and audit of quality in the firm. Typical costs include inspection, quality audits, testing, calibration, and checking time.

Appreciation of a currency
An increase in the buying power of a country’s currency in terms of other countries’ goods and services.

APR
Abbreviation for annual percentage rate.

APS

AQL
Abbreviation for acceptable quality level.

Arbitrage
Risk-free buying of an asset in one market and simultaneous selling of an identical asset at a profit in another market.

Arbitration
The process by which an independent third party is brought in to settle a dispute or to preserve the interest of two conflicting parties.

Arithmetic mean
Syn: mean.

Arrival date
The date purchased material is due to arrive at the receiving site. The arrival date can be input, it can be equal to the current due date, or it can be calculated from the ship date plus transit time. See: due date.

Arrow
1) In activity-on-arrow networks, the graphic presentation of an activity. The tail of the arrow represents the start of the activity. The head of the arrow represents the finish. Unless a timescale is used, the length of the arrow stem has no relation to the duration of the activity. Length and direction of the arrow are usually a matter of convenience and clarity. 2) In activity-on-node networks, an arrow represents a precedence requirement.

Arrow diagram
A technique to determine the relationships and precedence of different activities and the time estimate for project completion. The technique is useful in identifying potential problems and improvement opportunities.

Arrow diagram method
Syn: activity-on-arrow network.

Artificial intelligence (AI)
1) Computer programs that can learn and reason in a manner similar to humans. The problem is defined in terms of states and operators to generate a search space that is examined for the best solution. In contrast, conventional programming collects and processes data by algorithm or fixed step-by-step procedures. 2) An area in computer science that attempts to develop AI computer programs.

ASCII
Acronym for American Standard Code for Information Interchange.

ASN

ASQ
Abbreviation for American Society for Quality.

ASQC
Abbreviation for American Society for Quality Control.

AS/RS
Abbreviation for automated storage/retrieval system.

Assays
Tests of the physical and chemical properties of a sample.

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

Assembly
A group of subassemblies and/or parts that are put together and that constitute a major subdivision for the final product. An assembly may be an end item or a component of a higher level assembly.

Assembly bin
Syn: accumulation bin.

The time that normally elapses between the issuance of a work order to the assembly floor and work completion.

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

Assembly order
A manufacturing order to an assembly department authorizing it to put components together into an assembly. See: blend order.

Assembly parts list
As used in the manufacturing process, a list of all parts (and subassemblies) that make up a particular assembly. See: batch card, manufacturing order.

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

Asset value
The adjusted purchase price of the asset plus any costs necessary to prepare the asset for use.

Assignable cause
A source of variation in a process that can be isolated, especially when its significantly larger magnitude or different origin readily distinguishes it from random causes of variation. Syn: special cause. See: common causes.

Assigned material
Syn: reserved material.

Assignee
One who receives a transfer of contract rights from a party to the contract.

Assignment
Syn: allocation.

Assignor
One who sells contract rights to a third person.

Assumed receipt
A receiving technique based on the assumption that a shipment is as expected. Receiving personnel do not verify the delivery quantity. This technique is used to eliminate invoices.

ATP
Abbreviation for available-to-promise.

Attachment
An accessory that has to be physically attached to the product. See: feature.

Attractability efficiency
In e-commerce, a measure of how well an organization persuades people who are aware of its Web site to actually use the site. See: conversion efficiency.

Attractor
In information systems, a Web site that, over time, continues to attract a large number of visitors.

Attribute data
Go/no-go information. The control charts based on attribute data include percent chart, number of affected units chart, count chart, count-per-unit chart, quality score chart, and demerit chart.

Attrition factor
The budget fraction apportioned for replacement personnel training because of projected personnel losses (retirements, promotions, and terminations).

Audit
An objective comparison of actions to policies and plans.

Authentication
In information systems, the act of identifying a person or confirming the source of a message.

Authentication key
In information systems, a key that ensures that data in an electronic business transaction are not changed. It can also be used as a form of digital signature.

Authorized deviation
Permission for a supplier or the plant to manufacture an item that is not in conformance with the applicable drawings or specifications.

Automated data capture system
Any device such as a bar-code reader or optical character reader that mechanizes the entry of information into an information system.

Automated guided vehicle system (AGVS)
A transportation network that automatically routes one or more material handling devices, such as carts or pallet trucks, and positions them at predetermined destinations without operator intervention.

Automated information system (AIS)
Computer hardware and software configured to automate calculating, computing, sequencing, storing, retrieving, displaying, communicating, or otherwise manipulating data and textual material to provide information.

Automated storage/retrieval system (AS/RS)

Automatic relief
A set of inventory bookkeeping methods that automatically adjusts computerized inventory records based on a production transaction. Examples of automatic relief methods are backflushing, direct-deduct, and pre-deduct processing.

Automatic rescheduling
Rescheduling done by the computer to automatically change due dates on scheduled receipts when it detects that due dates and need dates are out of phase. Ant: manual rescheduling.

Automation
The substitution of machine work for human physical and mental work, or the use of machines for work not otherwise able to be accomplished, entailing a less continuous interaction with humans than previous equipment used for similar tasks.

Autonomation
Automated shutdown of a line, process, or machine upon detection of an abnormality or defect.

Autonomous work group
A production team that operates a highly focused segment of the production process to an externally imposed schedule but with little external reporting, supervision, interference, or help.

Auxiliary item
An item required to support the operation of another item.

Availability
The percentage of time that a worker or machine is capable of working. The formula is

Availability = (S – B) × 100%
S
where S is the scheduled time and B is the downtime.

Available capacity
Syn: capacity available.

Available inventory
The on-hand inventory balance minus allocations, reservations, backorders, and (usually) quantities held for quality problems. Often called beginning available balance. Syn: beginning available balance, net inventory.

Available-to-promise (ATP)
The uncommitted portion of a company’s inventory and planned production maintained in the master schedule to support customer-order promising. The ATP quantity is the uncommitted inventory balance in the first period and is normally calculated for each period in which an MPS receipt is scheduled. In the first period, ATP includes on-hand inventory less customer orders that are due and overdue. Three methods of calculation are used: discrete ATP, cumulative ATP with look-ahead, and cumulative ATP without look-ahead. See: discrete available-to-promise, cumulative available-to-promise.

Available work
Work that is actually in a department ready to be worked on as opposed to scheduled work that may not yet be physically on hand. Syn: live load.

Average chart
A control chart in which the subgroup average, X-bar, is used to evaluate the stability of the process level. Syn: X-bar chart.

Average collection period
Syn: receivables conversion period.

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

Average cost system
In cost accounting, a method of inventory valuation for accounting purposes. A weighted average (based on quantity) of item cost is used to determine the cost of goods sold (income statement) and inventory valuation (balance sheet). Average cost provides a valuation between last in, first out and first in, first out methods. See: first in, first out; last in, first out.

Average fixed cost
The total fixed cost divided by units 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.

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. The average can be calculated as an average of several inventory observations taken over several historical time periods; e.g., 12-month ending inventories may be averaged. When demand and lot sizes are not uniform, the stock level versus time can be graphed to determine the average.

Average outgoing quality (AOQ)
The expected average quality level of outgoing product for a given value of incoming product quality.

Average outgoing quality limit (AOQL)
The maximum average outgoing quality over all possible levels of incoming quality for a given acceptance sampling plan and disposal specification.

Average total cost
The ratio of total costs (the sum of total fixed costs and total variable costs) over units produced.

Average variable cost
The ratio of total variable costs over units produced.

Avoidable cost
A cost associated with an activity that would not be incurred if the activity was not performed (e.g., telephone cost associated with vendor support).

Avoidable delay
The delay controlled by a worker and therefore not allowed in the job standard.

Awareness efficiency
In e-commerce, a measurement of how well an organization informs people who have access to the Web that the organization’s Web site exists.

Previous articleB
Next articleBecoming a Lean Supply Chain Professional
At Supply Chain Minded we are always excited to meet professionals who are interested in writing supply chain related articles. Join our line up of contributors. With tens of thousands of members – Supply Chain Minded is a very active & fast growing online community for Planning, Sourcing, Manufacturing, Warehousing, Transportation and Reverse Logistics professionals.