A high-speed device used within a computer to store frequently retrieved data.
Acronym for computer-aided design.
The integration of computer-aided design and computer-aided manufacturing to achieve automation from design through manufacturing.
Abbreviation for computer-aided engineering.
Abbreviation for computer-aided inspection and test.
Syn: rated capacity.
The determination of usage of components or ingredients in a manufacturing process by multiplying the receipt quantity of a parent by the quantity per of each component or ingredient in the bill or recipe, accommodating standard yields.
The passage of days or weeks as in the definition of lead time or scheduling rules, in contrast with running time.
The comparison of a measurement instrument or system of unverified accuracy with a measurement instrument or system of a known accuracy to detect any variation from the required performance specification.
The interval in days between tooling calibrations.
A facility housing personnel who respond to customer phone queries. These personnel may provide customer service or technical support. Call center services may be in-house or outsourced.
Acronym for computer-aided manufacturing.
A series of batches of the same product run together (back to back).
A fee charged by a seller to cover its costs associated with a customer’s cancellation of an order. If the seller has started engineering work, purchased raw materials, or started manufacturing operations, these charges could also be included in the cancellation charge.
An ordering system used when multiple items are ordered from one vendor. The can-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 is set by considering the additional holding cost that would be incurred should the item be ordered early.
Syn: process capability analysis.
The process of committing orders against available capacity as well as inventory. This process may involve multiple manufacturing or distribution sites. Capable-to-promise is used to determine when a new or unscheduled customer order can be delivered. Capable-to-promise employs a finite-scheduling model of the manufacturing system to determine when an item can be delivered. It includes any constraints that might restrict the production, such as availability of resources, lead times for raw materials or purchased parts, and requirements for lower-level components or subassemblies. The resulting delivery date takes into consideration production capacity, the current manufacturing environment, and future order commitments. The objective is to reduce the time spent by production planners in expediting orders and adjusting plans because of inaccurate delivery-date promises.
1) The capability of a system to perform its expected function. 2) The capability of a worker, machine, work center, plant, or organization to produce output per time period. Capacity required represents the system capability needed to make a given product mix (assuming technology, product specification, etc.). As a planning function, both capacity available and capacity required can be measured in the short term (capacity requirements plan), intermediate term (rough-cut capacity plan), and long term (resource requirements plan). Capacity control is the execution through the I/O control report of the short-term plan. Capacity can be classified as budgeted, dedicated, demonstrated, productive, protective, rated, safety, standing, or theoretical. See: capacity available, capacity required. 3) Required mental ability to enter into a contract.
The capability of a system or resource to produce a quantity of output in a particular time period. Syn: available capacity. See: capacity.
Capacity bill procedure
A rough-cut capacity planning method that takes into account any shifts in product mix. Bill of material and routing information are required with direct labor-hour or machine-hour data available for each operation. See: bill of labor.
A purchasing practice whereby a company commits to a supplier for a given amount of its capacity per unit of time. Subsequently, schedules for individual items are given to the supplier in quantities to match the committed level of capacity. Syn: buying capacity.
Capacity constraint resource (CCR)
A resource that is not a constraint but will become a constraint unless scheduled carefully.
The process of measuring production output and comparing it with the capacity plan, determining if the variance exceeds preestablished limits, and taking corrective action to get back on plan if the limits are exceeded. See: input/output control.
The function of establishing, measuring, monitoring, and adjusting limits or levels of capacity in order to execute all manufacturing schedules; i.e., the production plan, master production schedule, material requirements plan, and dispatch list. Capacity management is executed at four levels: resource requirements planning, rough-cut capacity planning, capacity requirements planning, and input/output control.
Displaying the specific sources of capacity requirements. This is analogous to pegging in MRP, which displays the source of material requirements.
The process of determining the amount of capacity required to produce in the future. This process may be performed at an aggregate or product-line level (resource requirements planning), at the master-scheduling level (rough-cut capacity planning), and at the material requirements planning level (capacity requirements planning). See: capacity requirements planning, resource planning, rough-cut capacity planning.
Capacity planning using overall factors (CPOF)
A rough-cut capacity planning technique. The master schedule items and quantities are multiplied by the total time required to build each item to provide the total number of hours to produce the schedule. Historical work center percentages are then applied to the total number of hours to provide an estimate of the hours per work center to support the master schedule. This technique eliminates the need for engineered time standards. Syn: overall factors. See: bill of resources, capacity planning, resource profile, rough-cut capacity planning.
Costs generally related to increasing (or decreasing) capacity in the medium- to long-range time horizon. Personnel costs include hiring and training of direct laborers, supervisors, and support personnel in the areas related to the capacity increase. Equipment purchases to increase capacity are also considered. In contrast, costs related to decreasing capacity include layoffs, the fixed overhead spread over fewer units, the impact of low morale, and the inefficiencies of lower production levels.
The capacity of a system or resource needed to produce a desired output in a particular time period. Syn: required capacity. See: capacity.
The resources needed to produce the projected level of work required from a facility over a time horizon. Capacity requirements are usually expressed in terms of hours of work or, when units consume similar resources at the same rate, units of production.
Capacity requirements plan
A time-phased display of present and future load (capacity required) on all resources based on the planned and released supply authorizations (i.e., orders) and the planned capacity (capacity available) of these resources over a span of time. See: load profile.
Capacity requirements planning (CRP)
The function of establishing, measuring, and adjusting limits or levels of capacity. The term capacity requirements planning in this context refers to the process of determining in detail the amount of labor and machine resources required to accomplish the tasks of production. Open shop orders and planned orders in the MRP system are input to CRP, which through the use of parts routings and time standards translates these orders into hours of work by work center by time period. Even though rough-cut capacity planning may indicate that sufficient capacity exists to execute the MPS, CRP may show that capacity is insufficient during specific time periods. See: capacity planning.
The ability to do rough-cut capacity planning using a simulated master production schedule or material plan rather than live data.
Syn: load leveling.
One of the strategic choices that a firm must make as part of its manufacturing strategy. There are three commonly recognized capacity strategies: lead, lag, and tracking. A lead capacity strategy adds capacity in anticipation of increasing demand. A lag strategy does not add capacity until the firm is operating at or beyond full capacity. A tracking strategy adds capacity in small amounts to attempt to respond to changing demand in the marketplace.
A physical object that is held by an organization for its production potential and that costs more than some threshold value.
Actions relating to the planning and financing of capital outlays for such purposes as the purchase of new equipment, the introduction of new product lines, and the modernization of plant facilities.
Money invested in a long-term asset, one that is expected to last longer than one year. The investment is expected to generate a stream of future benefits.
In financial management, the process of apportioning capital expenditures among prospective projects to conserve limited investment funds.
1) Charging periodically to operations amounts that will ultimately equal the amount of capital expenditure. See: amortization, depletion, depreciation. 2) The replacement of the original cost of an asset plus interest. 3) The process of regaining the net investment in a project by means of revenue in excess of the cost from the project. (Usually implies amortization of principal plus interest on the diminishing unrecovered balance.)
The combination of permanent short-term debt, long-term debt, preferred stock, and common equity used to finance a firm.
Acronym for computer-aided process planning.
A nonserviceable item obtained from a customer which is intended for use in remanufacturing.
A product shipped in an aircraft, railroad car, ship, barge, or truck.
Cargo container capacity
The inside usable cubic volume of a container.
A shipment that qualifies for a reduced freight rate because it is greater than a specified minimum weight. Since carload rates usually include minimum rates per unit of volume, the higher LCL (less than carload) rate may be less expensive for a heavy but relatively small shipment.
The cost of holding inventory, usually defined as a percentage of the dollar value of inventory per unit of time (generally one year). Carrying cost depends mainly on the cost of capital invested as well as such costs of maintaining the inventory as taxes and insurance, obsolescence, spoilage, and space occupied. Such costs vary from 10% to 35% annually, depending on type of industry. Carrying cost is ultimately a policy variable reflecting the opportunity cost of alternative uses for funds invested in inventory. Syn: holding costs.
A group of companies that agree to cooperate, rather than compete, in producing a product or service, thus limiting or regulating competition.
Multistage operations. The input to each stage is the output of a preceding stage, thereby causing interdependencies among the stages.
Cascading yield loss
The condition where yield loss happens in multiple operations or tasks, resulting in a compounded yield loss. Syn: cumulative yield. See: composite yield.
Acronym for computer-assisted software engineering.
A budget based on planned cash receipts and disbursements of a plant, division, or firm.
Cash conversion cycle
1) In retailing, the length of time between the sale of products and the cash payments for a company’s resources. 2) In manufacturing, the length of time from the purchase of raw materials to the collection of accounts receivable from customers for the sale of products or services.
A highly profitable product in a low-growth market. See: growth share matrix
A price break offered for the early payment of an invoice.
The net flow of dollars into or out of the proposed project. The algebraic sum, in any time period, of all cash receipts, expenses, and investments. Also called cash proceeds or cash generated.
Cash flow management
Syn: funds flow management.
Cash flow statement
Syn: funds flow statement.
A method of selecting and evaluating suppliers that considers input from many departments and functions within the buyer’s organization and systematically categorizes that input. Engineering, production, quality assurance, and other functional areas evaluate all suppliers for critical factors within their scope of responsibility. For example, engineering would develop a category evaluating suppliers’ design flexibility. Rankings are developed across categories, and performance ratings are obtained and supplier selections are made. See: weighted-point plan.
In marketing, an organizational structure giving managers responsibility for planning and implementing marketing systems for certain product lines.
A type of forecasting that uses cause-and-effect associations to predict and explain relationships between the independent and dependent variables. An example of a causal model is an econometric model used to explain the demand for housing starts based on consumer base, interest rates, personal incomes, and land availability.
A tool for analyzing process dispersion. It is also referred to as the Ishikawa diagram (because Kaoru Ishikawa developed it) and the fishbone diagram (because the complete diagram resembles a fish skeleton). The diagram illustrates the main causes and subcauses leading to an effect (symptom). The cause-and-effect diagram is one of the seven tools of quality. Syn: fishbone chart, Ishikawa diagram.
A Latin phrase meaning “Let the buyer beware,” i.e., the purchase is at the buyer’s risk.
A control chart for evaluating the stability of a process in terms of the count of events of a given classification occurring in a sample. Syn: count chart.
Abbreviation for capacity constraint resource.
A manufacturing or service unit consisting of a number of workstations and the materials transport mechanisms and storage buffers that interconnect them.
An equipment configuration to support cellular manufacturing.
A manufacturing process that produces families of parts within a single line or cell of machines controlled by operators who work only within the line or cell.
A methodology for locating distribution centers at approximately the location representing the minimum transportation costs between the plants, the distribution centers, and the markets.
Centralized computer network
A network in which there is one computer (or possibly more) linked to all others in a given enterprise.
The organization of the dispatching function into one central location. This structure often involves the use of data collection devices for communication between the centralized dispatching function, which usually reports to the production control department, and the shop manufacturing departments.
Centralized inventory control
Inventory decision making (for all SKUs) exercised from one office or department for an entire company.
Centralized marketing system
An organizational structure in which a central marketing group manages functionally divided areas, such as advertising, sales, and marketing research.
Central processing unit (CPU)
The electronic processing unit of a computer, where mathematical calculations are performed.
Certificate of analysis
A certification of conformance to quality standards or specifications for products or materials. It may include a list or reference of analysis results and process information. It is often required for transfer of the custody of materials.
Certificate of compliance
A supplier’s certification that the supplies or services in question meet specified requirements.
Certified Fellow in Production and Inventory Management (CFPIM)
The APICS certification that is a recognition of superior knowledge and performance in contributing to the profession.
The inspection models that conform to known specifications.
Certified in Integrated Resource Management (CIRM)
The APICS certification that is a recognition of a high level of professional knowledge in enterprisewide processes and activities.
Certified in Production and Inventory Management (CPIM)
The APICS certification that is a recognition of a high level of professional knowledge.
Certified Purchasing Manager (C.P.M.)
The Institute for Supply Management (ISM) [formerly NAPM] certification.
A status awarded to a supplier who consistently meets predetermined quality, cost, delivery, financial, and count objectives. Incoming inspection may not be required.
Latin for all other things being the same.
Abbreviation for Certified Fellow in Production and Inventory Management.
Chain of customers
The sequence of customers who in turn consume the output of each other, forming a chain. For example, individuals are customers of a department store, which in turn is the customer of a producer, who is the customer of a material supplier.
The business process that coordinates and monitors all changes to the business processes and applications operated by the business as well as to their internal equipment, resources, operating systems, and procedures. The change management discipline is carried out in a way that minimizes the risk of problems that will affect the operating environment and service delivery to the users.
A formal notification that a purchase order or shop order must be modified in some way. This change can result from a revised quantity, date, or specification by the customer; an engineering change; a change in inventory requirement date; etc.
Syn: setup costs.
Channels of distribution
Any series of firms or individuals that participates in the flow of goods and services from the raw material supplier and producer to the final user or consumer. See: distribution channel.
The initial loading of ingredients or raw materials into a processor, such as a reactor, to begin the manufacturing process.
A document used for receiving goods and charging those goods to an operating cost center.
Chart of accounts
In accounting, a list of general ledger accounts used to track costs, revenues, assets, liabilities, and so on by category.
Chase production method
A production planning method that maintains a stable inventory level while varying production to meet demand. Companies may combine chase and level production schedule methods. Syn: chase strategy.
Syn: chase production method.
A digit added to each number in a coding system that allows for detection of errors in the recording of the code numbers. Through the use of the check digit and a predetermined mathematical formula, recording errors such as digit reversal or omission can be discovered.
Verifying and documenting the order selection in terms of both product number and quantity.
A tool used to ensure that important steps or actions in an operation have been taken. Checklists contain items that are important or relevant to an issue or situation.
A simple data-recording device. The check sheet is designed by the user to facilitate the user’s interpretation of the results. The check sheet is one of the seven tools of quality. Check sheets are often confused with data sheets and checklists.
The process of customers changing their buying preferences because they find better and/or cheaper products and services elsewhere. The Internet makes it easy for customers to shop electronically in search of a better deal.
Abbreviation for cost, insurance, freight.
Acronym for computer-integrated manufacturing.
Acronym for Certified in Integrated Resource Management.
Classification of defects
The delineation of possible defects on a unit, classified by seriousness: critical (A), major (B), minor (C), or incidental (D).
A technical measure taken to reduce or eliminate at the source the production of any nuisance, pollution, or waste and to help save raw materials, natural resources, and energy.
The neutralizing of the effects of production just completed. It may involve cleaning residues, sanitation, equipment refixturing, and so on.
Several related activities necessary for the organization’s operation, generally including but not limited to the following: updating records and files based on receipts, shipments, and adjustments; maintaining labor and equipment records; and performing locating, order consolidation, correspondence preparation, and similar activities.
In information systems, a software program that is used to contact and obtain data from a server program on another computer. Each client program is designed to work with one or more specific kinds of server programs, and each server requires a specific kind of client. A browser is one type of client.
A distributed computing system in which work is assigned to the computer best able to perform it from among a network of computers.
Syn: time card.
Closed-loop feedback system
A planning and control system that monitors system progress toward the plan and has an internal control and replanning capability.
A system built around material requirements planning that includes the additional planning processes of production planning (sales and operations planning), master production scheduling, and capacity requirements planning. Once this planning phase is complete and the plans have been accepted as realistic and attainable, the execution processes come into play. These processes include the manufacturing control processes of input-output (capacity) measurement, detailed scheduling and dispatching, as well as anticipated delay reports from both the plant and suppliers, supplier scheduling, and so on. The term closed loop implies not only that each of these processes is included in the overall system, but also that feedback is provided by the execution processes so that the planning can be kept valid at all times.
The accounting time period for which the adjusting and closing entries have been posted. Ant: open period.
A description of an organization owned by a small number of people.
Abbreviation for computer numerical control.
Syn: participative design/engineering.
The evolution of a supply chain from intraorganizational management to interorganizational management.
Abbreviation for container on a railroad flatcar.
Syn: collaborative planning, forecasting, and replenishment.
Collaborative planning, forecasting, and replenishment (CPFR)
1) A collaboration process whereby supply chain trading partners can jointly plan key supply chain activities from production and delivery of raw materials to production and delivery of final products to end customers. Collaboration encompasses business planning, sales forecasting, and all operations required to replenish raw materials and finished goods. 2) A process philosophy for facilitating collaborative communications. CPFR is considered a standard, endorsed by the Voluntary Interindustry Commerce Standards. Syn: collaborative planning.
Collaborative supply relationship
Syn: supplier partnership.
A highly regulated system established to control conflict between labor and management. It defines and specifies the rules and procedures of initiating, negotiating, maintaining, changing, and terminating the labor-management relationship.
Combined lead time
Syn: cumulative lead time.
Communication that is primarily for a business purpose. Such speech is protected under the First Amendment to the U.S. Constitution but less so than is noncommercial speech.
The portion of the production capability that is currently in use or is scheduled for use.
An item that is traded in commerce. The term usually implies an undifferentiated product competing primarily on price and availability.
Grouping like parts or materials under one buyer’s control for the procurement of all requirements to support production.
Commodity procurement strategy
The purchasing plan for a family of items. This would include the plan to manage the supplier base and solve problems.
A condition where given raw materials or ingredients are used in multiple parents.
Transportation available to the public that does not provide special treatment to any one party and is regulated as to the rates charged, the liability assumed, and the service provided. A common carrier must obtain a certificate of public convenience and necessity from the Federal Trade Commission for interstate traffic. Ant: private carrier.
Causes of variation that are inherent in a process over time. They affect every outcome of the process and everyone working in the process. Syn: random cause. See: assignable cause, common cause variability.
Common cause variability
The variability in product quality that results from numerous uncontrollable everyday factors, such as temperature, humidity, tool wear, etc. See: common causes.
Law flowing from judicial decisions over the years rather than from legislative action.
Readily available items used in industry that require no special handling.
Common parts bill
Syn: common parts bill of material.
Common parts bill of material
A type of planning bill that groups common components for a product or family of products into one bill of material, structured to a pseudoparent item number. Syn: common parts bill.
Common-size income statement
In accounting, an income statement having values expressed as a percentage of sales rather than dollar values.
A system of values, beliefs, and behaviors inherent in a company. To optimize business performance, top management must define and create the necessary culture.
The pay and benefits given for services rendered to an organization.
The advantage a company has over its rivals in attracting customers and defending against competitors. Sources of the advantage include characteristics such as a manufacturing technique, brand name, human skill set, etc., that a competitor cannot duplicate without substantial cost and risk. Syn: competitive edge.
An analysis of a competitor that includes its strategies, capabilities, prices, and costs.
Benchmarking a product or service against competitors. Syn: performance benchmarking. See: benchmarking, process benchmarking.
Syn: competitive advantage.
The information required to conduct a competitive analysis about external events and trends that can affect a company’s plans.
The raw material, part, or subassembly that goes into a higher level assembly, compound, or other item. This term may also include packaging materials for finished items. See: ingredient, intermediate part.
The availability of component inventory for the manufacture of a specific parent order or group of orders or schedules.
Component lead-time offset
Syn: lead-time offset.
Composite lead time
Syn: cumulative lead time.
Composite manufacturing lead time
Syn: cumulative manufacturing lead time.
A part that represents operations common to a family or group of parts controlled by group technology. Tools, jigs, and dies are used for the composite part; therefore, any parts of that family can be processed with the same operations and tooling. The goal here is to reduce setup costs.
A condition where loss occurs along several operations resulting in a decreased yield for the end item. Syn: cumulative yield.
The makeup of an item, typically expressing chemical properties rather than physical properties.
1) The type of interest that is periodically added to the amount of investment (or loan) so that subsequent interest is based on the cumulative amount. 2) The interest charges under the condition that interest is charged on any previous interest earned in any time period, as well as on the principal.
The cumulative effect of yield loss at multiple operations within the manufacturing cycle.
Computer-aided design (CAD)
The use of computers in interactive engineering drawing and storage of designs. Programs complete the layout, geometric transformations, projections, rotations, magnifications, and interval (cross-section) views of a part and its relationship with other parts.
Computer-aided engineering (CAE)
The process of generating and testing engineering specifications on a computer workstation.
Computer-aided inspection and test (CAIT)
The use of computer technology in the inspection and testing of manufactured products.
Computer-aided manufacturing (CAM)
The use of computers to program, direct, and control production equipment in the fabrication of manufactured items.
Computer-aided process planning (CAPP)
A method of process planning in which a computer system assists in the development of manufacturing process plans (defining operation sequences, machine and tooling requirements, cut parameters, part tolerances, inspection criteria, and other items). Artificial intelligence and classification and coding systems may be used in the generation of the process plan.
Computer-assisted software engineering (CASE)
The use of computerized tools to assist in the process of designing, developing, and maintaining software products and systems.
Computer-integrated manufacturing (CIM)
The integration of the total manufacturing organization through the use of computer systems and managerial philosophies that improve the organization’s effectiveness; the application of a computer to bridge various computerized systems and connect them into a coherent, integrated whole. For example, budgets, CAD/CAM, process controls, group technology systems, MRP II, financial reporting systems, etc., are linked and interfaced.
Computer numerical control (CNC)
A technique in which a machine tool controller uses a computer or microprocessor to store and execute numerical instructions.
A small program that invades other programs. Some are relatively harmless; others may destroy large amounts of data.
The percentage of an active ingredient within the whole, as a 40% solution of hydrochloric acid (HCl).
Syn: resource contention.
Syn: participative design/engineering.
Syn: participative design/engineering.
Conference room pilot
Simulation of all business processes from end-to-end within the new information system in a controlled environment.
The range on either side of an estimated value from a sample that is likely to contain the true value for the whole population.
The probability that a particular value lies between an upper and a lower bound—the confidence limits.
The bounds of an interval. A probability can be given for the likelihood that the true value will lie between the confidence limits.
The arrangement of components as specified to produce an assembly.
A review of the product against the engineering specifications to determine whether the engineering documentation is accurate, up-to-date, and representative of the components, subsystems, or systems being produced.
The function of ensuring that the product being built and shipped corresponds to the product that was designed and ordered. This means that the correct features, customer options, and engineering changes have been incorporated and documented.
Syn: customer order servicing system.
Software system that creates, uses, and maintains product models that allow complete definition of all possible product options and variations with a minimum of data entries.
A purchase order issued to a supplier, listing the goods or services and terms of an order placed orally or otherwise before the usual purchase document.
The taking of property without adequate compensation for it.
Conflict of interest
Any business activity, personal or company-related, that interferes with a company’s goals or that entails unethical or illegal actions.
An affirmative indication or judgment that a product or service has met the requirements of a relevant specification, contract, or regulation.
The ability to communicate effectively with supply chain partners to facilitate interorganization synchronization.
In contract law, an obligation that is to the detriment of one party (promisee) or to the benefit of the other party (promisor).
Inventories, generally of finished goods, that are in the possession of customers, dealers, agents, and so on, but remain the property of the manufacturer by agreement with those in possession. Syn: consignment inventory, vendor-owned inventory. See: consignment.
1) A shipment that is handled by a common carrier. 2) The process of a supplier placing goods at a customer location without receiving payment until after the goods are used or sold. See: consigned stocks.
Syn: consigned stocks. See: consignment.
Packages and lots that move from suppliers to a carrier terminal and are sorted and then combined with similar shipments from other suppliers for travel to their final destination. See: milk run.
A group of companies that work together to jointly produce a product, service, or project.
A quantity that has a fixed value. Ant: variable.
Achieving the best possible solution to a problem in terms of a specified objective function and a given set of constraints.
Any element or factor that prevents a system from achieving a higher level of performance with respect to its goal. Constraints can be physical, such as a machine center or lack of material, but they can also be managerial, such as a policy or procedure.
Syn: theory of constraints accounting.
The practice of managing resources and organizations in accordance with the theory of constraints (TOC) principles. See: theory of constraints.
Syn: theory of constraints.
Supplies or materials (such as paint, cleaning materials, or fuel) that are consumed or exhausted in the production or sale of a good or service. Syn: consumable tooling, supplies; expendables.
Consumable tooling, supplies
A person who purchases a good or service for his or her own use (not for resale). See: customer.
A market composed of individuals and families who buy products and services for consumption. See government market, industrial market, institutional market.
Consumer price index
A measure of the overall level of prices. It attempts to relate the cost of buying a specific set of goods and services with the cost of buying the same set of goods and services during an earlier time period.
Consumer’s risk (ß)
For a given sampling plan, the probability of acceptance of a lot, the quality of which has designated numerical value representing a level that is worse than some threshold value. See: type II error.
The difference between the highest price a consumer is willing to pay for a good or service and the price actually paid.
Consuming the forecast
The process of reducing the forecast by customer orders or other types of actual demands as they are received. The adjustments yield the value of the remaining forecast for each period. Syn: forecast consumption.
The amount of each bill-of-material component used in the production process to make the parent.
A measure of how well an organization transforms Web site hits into visits.
A large box in which commodities to be shipped are placed.
The characteristics of the product that make it transportable with ease of handling and stowability. Container concepts include packaging, monetary density, and physical density.
A shipment method in which commodities are placed in containers, and after initial loading, the commodities per se are not rehandled in shipment until they are unloaded at the destination.
Container on a flatcar (COFC)
A specialized form of containerization in which rail, motor, and sea transport coordinate.
A market having low entry costs.
A process for creating a document that specifies alternative plans to facilitate project success if certain risk events occur.
A project that can be accepted only if one or more other projects is accepted first. See: independent project, mutually exclusive project.
Continuous flow (production)
Syn: continuous production.
Syn: continuous process improvement.
Syn: continuous production.
Continuous process control
The use of transducers (sensors) to monitor a process and make automatic changes in operations through the design of appropriate feedback control loops. Although such devices have historically been mechanical or electromechanical, there is now widespread use of microcomputers and centralized control.
Continuous process improvement (CPI)
A never-ending effort to expose and eliminate root causes of problems; small-step improvement as opposed to big-step improvement. Syn: continuous improvement. See: kaizen.
A production system in which the productive equipment is organized and sequenced according to the steps involved to produce the product. This term denotes that material flow is continuous during the production process. The routing of the jobs is fixed and setups are seldom changed. Syn: continuous flow (production), continuous process. See: mass production, project manufacturing.
A process by which a supplier is notified daily of actual sales or warehouse shipments and commits to replenishing these sales (by size, color, and so on) without stockouts and without receiving replenishment orders. The result is a lowering of associated costs and an improvement in inventory turnover. See: vendor-managed inventory.
An agreement between two or more competent persons or companies to perform or not to perform specific acts or services or to deliver merchandise. A contract may be oral or written. A purchase order, when accepted by a supplier, becomes a contract. Acceptance may be in writing or by performance, unless the purchase order requires acceptance in writing.
The function of collecting costs incurred on a given job or contract, usually in a progress payment situation. Certain U.S. government contracting procedures require contract accounting.
Managing all aspects of a contract to guarantee that the contractor fulfills his obligations.
A carrier that does not serve the general public, but provides transportation for hire for one or a limited number of shippers under a specific contract.
The date when a contract is accepted by all parties.
Self-employed individuals or firms contracted by an organization to perform specific services on an intermittent or short-term basis.
Syn: full pegging.
Reporting of and the accumulation of finished production against commitments to a customer.
Contract target cost
The estimated cost negotiated in a contract.
The difference between sales price and variable costs. Contribution is used to cover fixed costs and profits.
An amount equal to the difference between sales revenue and variable costs.
Contribution margin pricing
A method of setting prices based on the contribution margin. It provides a ceiling and a floor between which the price setter operates. The ceiling is the target selling price—what the seller would like to get—and the floor is the total variable costs of the product using traditional accounting.
An investment by one stakeholder may benefit others in the supply chain.
A rule under which a defendant may escape liability if it can be shown that the plaintiff was negligent to some extent.
A visual means of showing machine loading or project planning, usually a variation of the basic Gantt chart. Syn: dispatch(ing) board, planning board, schedule board. See: schedule chart.
In a centralized dispatching operation, the place at which the dispatching is done.
A graphic comparison of process performance data with predetermined computed control limits. The process performance data usually consist of groups of measurements selected in regular sequence of production that preserve the order. The primary use of control charts is to detect assignable causes of variation in the process as opposed to random variations. The control chart is one of the seven tools of quality. Syn: process control chart.
A cost that is under the direct control of a given level of management.
Syn: planned issue.
The person responsible for financial and managerial accounting within a company. Syn: comptroller.
A statistically determined line on a control chart (upper control limit or lower control limit). If a value occurs outside of this limit, the process is deemed to be out of control.
Typically, the manufacturing order or schedule number used to identify a specific instance or period of production.
In the theory of constraints, strategic locations in the logical product structure for a product or family that simplify the planning, scheduling, and control functions. Control points include gating operations, convergent points, divergent points, constraints, and shipping points. Detailed scheduling instructions are planned, implemented, and monitored at these locations. Other work centers are instructed to “work if they have work; otherwise, be prepared for work.” In this manner, materials flow rapidly through the facility without detailed work center scheduling and control.
A system that has as its primary function the collection and analysis of feedback from a given set of functions for the purpose of controlling the functions. Control may be implemented by monitoring or systematically modifying parameters or policies used in those functions, or by preparing control reports that initiate useful action with respect to significant deviations and exceptions.
In the theory of constraints, a control point in the logical product structure where nonconstraint parts are assembled with constraint parts. To maintain the flow of parts to products, the schedule of nonconstraint parts must be synchronized with that of constraint parts.
In e-commerce, a measure of how well an organization transforms visits to its Web site into customer orders. See: attractability efficiency.
A manufacturer that changes the products of a basic producer into a variety of industrial and consumer products. An example is a firm that changes steel ingot into bar stock, tubing, or plate. Other converter products are paper, soap, and dyes.
An asset (stock or bond) that may be changed for another asset at the owner’s request.
An educational process in which students alternate formal studies with actual on-the-job experience. Successful completion of the off-campus experience may be a prerequisite for graduation from the program of study.
A product that is usually manufactured together or sequentially because of product or process similarities. See: by-product.
Bundles of skills or knowledge sets that enable a firm to provide the greatest level of value to its customers in a way that is difficult for competitors to emulate and that provides for future growth. Core competencies are embodied in the skills of the workers and in the organization. They are developed through collective learning, communication, and commitment to work across levels and functions in the organization and with the customers and suppliers. For example, a core competency could be the capability of a firm to coordinate and harmonize diverse production skills and multiple technologies. To illustrate, advanced casting processes for making steel require the integration of machine design with sophisticated sensors to track temperature and speed, and the sensors require mathematical modeling of heat transfer. For rapid and effective development of such a process, materials scientists must work closely with machine designers, software engineers, process specialists, and operating personnel. Core competencies are not directly related to the product or market.
That unique capability that is central to a company’s competitive strategy.
A cross-functional team of specialists formed to manage new product introduction. See: cross-functional team.
The set of important assumptions that members of the company share. It is a system of shared values about what is important and beliefs about how the company works. These common assumptions influence the ways the company operates.
A firm owned by shareholders who have rights to the firm’s profits but whose liability is limited to the value of the shares. See: partnership, sole proprietorship.
The implementation of solutions resulting in the reduction or elimination of an identified problem.
The maintenance required to restore an item to a satisfactory condition.
The relationship between two sets of data such that when one changes, the other is likely to make a corresponding change. If the changes are in the same direction, there is positive correlation. When changes tend to occur in opposite directions, there is negative correlation. When there is little correspondence or random changes, there is no correlation.
The branch of accounting that is concerned with recording and reporting business operating costs. It includes the reporting of costs by departments, activities, and products.
The assignment of costs that cannot be directly related to production activities via more measurable means, e.g., assigning corporate expenses to different products via direct labor costs or hours.
A review and an evaluation of actual or anticipated cost data.
The smallest segment of an organization for which costs are collected and formally reported, typically a department. The criteria in defining cost centers are that the cost be significant and that the area of responsibility be clearly defined. A cost center is not necessarily identical to a work center; normally, a cost center encompasses more than one work center, but this may not always be the case.
Applying procedures that monitor the progress of operations against authorized budgets, and taking action to achieve minimal costs.
Syn: driver (first definition).
Cost driver analysis
In activity-based cost accounting, the examination of the impact of cost drivers. The results of this analysis are useful in the continuous improvement of cost, quality, and delivery times.
Costed bill of material
A form of bill of material that extends the quantity per of every component in the bill by the cost of the components.
In activity-based cost accounting, the lowest subdivision of a resource, activity, or cost object.
An engineer whose judgment and experience are used in the application of scientific principles and techniques to problems of cost estimation and cost control in business planning, profitability analysis, project management and production planning, scheduling, and control.
(1) Specification of the relationship between cost and the underlying cost drivers. (2) In project management, creating an approximation of the resources and associated costs needed to complete a project..
Cost, insurance, freight (CIF)
A freight term indicating that the seller is responsible for cost, the marine insurance, and the freight charges on an ocean shipment of goods.
Control of activities to eliminate waste, improve cost drivers, and plan operations. This process should affect the organization’s setting of strategy. Factors such as product pricing, introduction of new products, and distribution of existing products are examples of strategic decisions that are affected by cost management.
In activity-based cost accounting, anything for which a separate cost measurement is desirable. This may include a product, a customer, a project, or other work unit.
Cost object driver
In activity-based cost accounting, a numerical measure of the demand placed on one cost object by other cost objects.
Cost of capital
The cost of maintaining a dollar of capital invested for a certain period, normally one year. This cost is normally expressed as a percentage and may be based on factors such as the average expected return on alternative investments and current bank interest rate for borrowing.
Cost of goods sold
An accounting classification useful for determining the amount of direct materials, direct labor, and allocated overhead associated with the products sold during a given period of time. See: cost of sales.
Cost of poor quality
The cost associated with providing poor-quality products or services. There are four categories of costs: internal failure costs (costs associated with defects found before the customer receives the product or service), external failure costs (costs associated with defects found after the customer receives the product or service), appraisal costs (costs incurred to determine the degree of conformance to quality requirements), and prevention costs (costs incurred to keep failure and appraisal costs to a minimum). Syn: cost of quality.
Cost of quality
Syn: cost of poor quality.
Cost of sales
The total cost attached (allocated) to units of finished product delivered to customers during the period. See: cost of goods sold.
A pricing method where the buyer agrees to pay the seller all the acceptable costs of the product or service up to a maximum cost plus a fixed fee. Syn: cost-type contract.
A contract in which the seller is paid for costs specified as allowable in the contract plus a stipulated fixed fee.
A contract in which the seller is paid for costs specified as allowable in the contract plus a profit provided certain provisions are met.
In activity-based cost accounting, an aggregation of resources assigned to activities or activities assigned to cost objects. Items may be aggregated or disaggregated depending on how the data are to be used.
A variation of the weighted-point plan of supplier evaluation and selection. The cost ratio is obtained by dividing the bid price by the weighted scores determined by the weighted-point plan. This procedure determines the true costs by taking into account compensating factors. Suppliers are selected and/or evaluated based on the lowest cost ratio.
The act of lowering the cost of goods or services by securing a lower price, reducing labor costs, etc. In cost reduction, the item usually is not changed, but the circumstances around which the item is secured are changed, as opposed to value analysis, in which the item itself is actually changed to produce a lower cost.
Syn: cost-plus contract.
In cost accounting, the difference between what has been budgeted for an activity and what it actually costs.
The study of how profits change with various levels of output and selling price.
The providing of basic, technical, and sometimes professional human assistance to employees to help them with personal and work-related problems.
Syn: C chart.
Any transaction in which partial or full payment is made with goods instead of money. This often applies in international trade.
Syn: U chart.
A point in a flow of material or sequence of operations at which parts, subassemblies, or assemblies are counted as being complete. Count points may be designated at the ends of lines or upon removal from a work center, but most often they are designated as the points at which material transfers from one department to another. Syn: pay point.
A promotional device offering special savings when a product is purchased.
A widely used process capability index. It is calculated by dividing the difference between the upper specification limit (USL) and the lower specification limit (LSL) by 6 times the standard deviation (s) or
Cp = upper specification limit (USL) – lower specification limit (LSL)/6s
Abbreviation for collaborative planning, forecasting, and replenishment.
Abbreviation for continuous process improvement.
Abbreviation for Certified in Production and Inventory Management.
An index method of the variability of a process. A widely used process capability index. It is expressed as Cpk = m – nearer specification/3s where m is the mean and s is the standard deviation.
Abbreviation for critical path method.
Abbreviation for Certified Purchasing Manager.
Abbreviation for capacity planning using overall factors.
Abbreviation for central processing unit.
In project management, adding resources to critical path or near-critical path activities on a project to shorten project duration after analyzing the project to identify the most cost-effective course of action.
The time allowed a customer to pay an invoice in full.
The number of people required to perform an operation. The associated standard time should represent the total time for all crew members to perform the operation, not the net start to finish time for the crew.
In the theory of constraints, the longest route through a project network considering both technological precedence and resource contention constraints in completing the project. Where no resource contention exists the critical chain would be the same as the critical path. See: critical path.
Critical chain method
In the theory of constraints, a network planning technique for the analysis of a project’s completion time, used for planning and controlling project activities. The critical chain, which determines project duration, is based on technological and resource constraints. Strategic buffering of paths and resources is used to increase project completion success. See: critical chain, critical path method.
The attributes of a product that must function properly to avoid the failure of the product. Syn: functional requirements.
The malfunction of those parts that are essential for continual operation or the safety of the user.
Individuals who add value to the product or service. These individuals include personnel working directly on the product, personnel providing a service to the customer, and personnel who provide support for the product or service, e.g., after-sale service.
In project management, that set of activities that defines the duration of a network. These activities have very little float or slack, usually zero. A delay in any critical path activity will delay the entire project. See critical chain.
Critical path activity
In project management, any activity on a network’s critical path as determined by the critical path method.
Critical path lead time
Syn: cumulative lead time.
Critical path method (CPM)
A network planning technique for the analysis of a project’s completion time used for planning and controlling the activities in a project. By showing each of these activities and their associated times, the critical path, which identifies those elements that actually constrain the total time for the project, can be determined. See: critical chain method, network analysis.
Critical point backflush
Backflush performed at a specific point in the manufacturing process, at a critical operation, or at an operation where key components are consumed.
Processes that have large potential for loss-either money, property, or human life.
Critical process parameters
A variable or a set of variables that dominates the other variables. Focusing on these variables will yield the greatest return in investment in quality control and improvement.
A dispatching rule that calculates a priority index number by dividing the time to due date remaining by the expected elapsed time to finish the job.
critical ratio = time remaining = 30 = .75
work remaining 40
A ratio less than 1.0 indicates the job is behind schedule, a ratio greater than 1.0 indicates the job is ahead of schedule, and a ratio of 1.0 indicates the job is on schedule.
Critical success factor
One of a few organizational objectives whose achievement should be sufficient for organizational success.
Critical-to-quality characteristics (CTQs)
Critical-to-quality characteristics (CTQs) are the important and measurable traits of a product or process whose performance targets must be met to satisfy the customer. They adjust improvement efforts to meet consumer requirements. CTQs represent customer expectations for a product.
Abbreviation for customer relationship management and customer relations management.
The concept of packing products on the incoming shipments so they can be easily sorted at intermediate warehouses or for outgoing shipments based on final destination. The items are carried from the incoming vehicle docking point to the outgoing vehicle docking point without being stored in inventory at the warehouse. Cross-docking reduces inventory investment and storage space requirements. Syn: direct loading.
Thread that weaves the entire organization and manufacturing process into one fabric in which each of the different parts serves and supports the whole. See: integrated enterprise.
Organization where groups of directors, executives, and managers with a diversity of skills and backgrounds work on problems outside the bounds of their functional responsibilities. See: integrated enterprise.
A set of individuals from various departments assigned a specific task such as implementing new computer software. See: core team.
Syn: scatter chart.
Material flow activity where materials are shipped to customers from a secondary shipping point rather than from a preferred shipping point.
In activity-based cost accounting, the situation of assigning too much or too little cost to a cost object. This may lead to poor decision making relative to the economic goals of the organization.
The providing of training or experience in several different areas, e.g., training an employee on several machines rather than one. Cross-training provides backup workers in case the primary operator is unavailable.
Abbreviation for capacity requirements planning.
Abbreviation for current reality tree.
Abbreviation for customer service representative.
Abbreviation for capable-to-promise.
Cubic volume of space being used or available for shipping or storage.
In warehousing, a measurement of the utilization of the total storage capacity of a vehicle or warehouse.
In warehousing, a measurement of space available or required in transportation and warehousing.
The sociocultural factors of the organization’s external environment. It includes values, work ethics, education, religion, and consumer and ecological factors.
A calculation based on the available-to-promise (ATP) figure in the master schedule. Two methods of computing the cumulative available-to-promise are used, with and without look-ahead calculation. The cumulative with look-ahead ATP equals the ATP from the previous period plus the MPS of the period minus the backlog of the period minus the sum of the differences between the backlogs and MPSs of all future periods until, but not to include, the period where point production exceeds the backlogs. The cumulative without look-ahead procedure equals the ATP in the previous period plus the MPS, minus the backlog in the period being considered. See: available-to-promise.
Cumulative lead time
The longest planned length of time to accomplish the activity in question. It is found by reviewing the lead time for each bill of material path below the item; whichever path adds up to the greatest number defines cumulative lead time. Syn: aggregate lead time, combined lead time, composite lead time, critical path lead time, stacked lead time. See: planning horizon, planning time fence.
Cumulative manufacturing lead time
The cumulative planned lead time when all purchased items are assumed to be in stock. Syn: composite manufacturing lead time.
The planning of parts and subassemblies by exploding a master schedule, as in MRP, except that the master-scheduled items and therefore the exploded requirements are time phased in cumulative form. Usually these cumulative figures cover a planning year.
A cumulative number, or running total, as a count of parts received in a series or sequence of shipments. The cumulative receipts provide a number that can be compared with the cumulative figures from a plan developed by cumulative MRP.
The accumulated total of all forecast errors, both positive and negative. This sum will approach zero if the forecast is unbiased. Syn: sum of deviations.
Cumulative sum control chart
A control chart on which the plotted value is the cumulative sum of deviations of successive samples from a target value. The ordinate of each plotted point represents the algebraic sum of the previous ordinate and the most recent deviations from the target.
A method for planning and controlling production that makes use of cumulative MRP, cumulative requirements, and cumulative counts.
Cumulative trauma disorder
An occupational injury believed to be caused by repetitive motions such as typing or twisting.
A cascading yield loss, composite yield.
An accounting/financial term (balance sheet classification of accounts) representing the short-term resources owned by a company, including cash, accounts receivable, and inventories. See: assets, balance sheet.
1) The current or replacement cost of labor, material, or overhead. Its computation is based on current performance or measurements, and it is used to address today’s costs before production as a revision of annual standard costs. 2) An asset’s value based on the cost of an identical asset purchased today.
Current finish time
In project management, the present estimate of an activity’s finish time.
The debts owed by a company and expected to be paid within 12 months. See: liabilities, balance sheet.
The price currently being paid as opposed to standard cost.
Current assets divided by current liabilities.
Current reality tree (CRT)
A logic-based tool for using cause-and-effect relationships to determine root problems that cause the observed undesirable effects of the system. See: root cause analysis.
Current start date
In project management, the present estimate of an activity’s start date.
An approach to forecasting based on a straight line, polynomial, or other curve that describes some historical time series data.
1) A person or organization who receives a good, service, or information. See: external customer, internal customer. 2) In project management, every project has a customer who may be internal or external to the organization and who is responsible for the final project acceptance.
In marketing, the rate at which new customers are switching to an organization’s brand.
An Internet-based marketing concept in which organizations must provide descriptions of the goods and services they offer so that potential customers locate or converge on the appropriate Web sites.
The characteristics of a good or service that are viewed as being important in addressing the needs of the customer. See: house of quality.
An order from a customer for a particular product or a number of products. It is often referred to as an actual demand to distinguish it from a forecasted demand.
Customer/order fulfillment process
A series of customers’ interactions with an organization through the order filling process, including product/service design, production and delivery, and order status reporting.
Customer order promising
Syn: order promising.
Customer order servicing system
An automated system for order entry, where orders are keyed into a local terminal and a bill-of-material translator converts the catalog ordering numbers into required manufacturing part numbers and due dates for the MRP system. Advanced systems contain customer information, sales history, forecasting information, and product option compatibility checks to facilitate order processing, “cleaning up” orders before placing a demand on the manufacturing system. Syn: configuration system, sales order configuration.
A customer organization with which a company has formed a customer-supplier partnership. See: outpartnering.
Syn: customer-supplier partnership.
Customer relationship management (CRM)
A marketing philosophy based on putting the customer first. The collection and analysis of information designed for sales and marketing decision support (as contrasted to enterprise resources planning information) to understand and support existing and potential customer needs. It includes account management, catalog and order entry, payment processing, credits and adjustments, and other functions. Syn: customer relations management.
Customer relations management (CRM)
Syn: customer relationship management.
The results of delivering a good or service that meets customer requirements.
1) The ability of a company to address the needs, inquiries, and requests from customers. 2) A measure of the delivery of a product to the customer at the time the customer specified.
Customer service level
Syn: customer service ratio.
Customer service life cycle
In information systems, a model that describes the relationship with a customer as having four phases: requirements, acquisition, ownership, and retirement.
Customer service ratio
1) A measure of delivery performance of finished goods, usually expressed as a percentage. In a make-to-stock company, this percentage usually represents the number of items or dollars (on one or more customer orders) that were shipped on schedule for a specific time period, compared with the total that were supposed to be shipped in that time period. Syn: customer service level, fill rate, order-fill ratio, percent of fill. Ant: stockout percentage. 2) In a make-to-order company, it is usually some comparison of the number of jobs or dollars shipped in a given time period (e.g., a week) compared with the number of jobs or dollars that were supposed to be shipped in that time period.
Customer service representative (CSR)
Personnel assigned to customer relations who answer customer questions and who provide technical support.
In marketing, a measurement (usually a percentage) of how many potential customers are attracted to a brand. It is a measurement of the recognition of the brand in the marketplace and the predisposition of the customer to buy the brand when presented with a choice of competing brands.
A long-term relationship between a buyer and a supplier characterized by teamwork and mutual confidence. The supplier is considered an extension of the buyer’s organization. The partnership is based on several commitments. The buyer provides long-term contracts and uses fewer suppliers. The supplier implements quality assurance processes so that incoming inspection can be minimized. The supplier also helps the buyer reduce costs and improve product and process designs. Syn: customer partnership. See: outpartnering.
Customer tolerance time
Syn: demand lead time.
A procedure for synchronizing cycle counting and transaction processing.
The technology that enables online acceptance of credit cards, approving customers for payment before delivery is made.
Any type of Internet-based promotion. Many marketing managers use the term to refer to any type of computer-based marketing.
The study of control processes in mechanical, biological, electrical, and information systems.
The information flow or information system (electronic, mechanical, logical) that controls an industrial process.
A common name encompassing both the Internet and other forms of electronic communication.
1) The interval of time during which a system or process, such as seasonal demand or a manufacturing operation, periodically returns to similar initial conditions. 2) The interval of time during which an event or set of events is completed.
An individual who is assigned to do cycle counting.
An inventory accuracy audit technique where inventory is counted on a cyclic schedule rather than once a year. A cycle inventory count is usually taken on a regular, defined basis (often more frequently for high-value or fast-moving items and less frequently for low-value or slow-moving items). Most effective cycle counting systems require the counting of a certain number of items every workday with each item counted at a prescribed frequency. The key purpose of cycle counting is to identify items in error, thus triggering research, identification, and elimination of the cause of the errors.
Syn: cycle stock.
Cycle reduction stock
Stock held to reduce delivery time.
One of the two main conceptual components of any item inventory, the cycle stock is the most active component, i.e., that which depletes gradually as customer orders are received and is replenished cyclically when supplier orders are received. The other conceptual component of the item inventory is the safety stock, which is a cushion of protection against uncertainty in the demand or in the replenishment lead time. Syn: cycle inventory.
1) In industrial engineering, the time between completion of two discrete units of production. For example, the cycle time of motors assembled at a rate of 120 per hour would be 30 seconds. 2) In materials management, it refers to the length of time from when material enters a production facility until it exits. Syn: throughput time.
A component of demand, usually describing the impact of the business cycle on demand. See: decomposition, time series analysis.