Syn: experimental order.
A factory worker’s report listing the jobs the employee has worked on, the number of pieces, the number of hours, etc., and often the amount of money to which the employee is entitled. A labor claim is usually made on a labor chit or time ticket. Syn: labor ticket, labor voucher.
The dollar amount of labor performed during manufacturing. This amount is added to direct material cost and overhead cost to obtain total manufacturing cost.
1) Syn: worker efficiency. 2) The average of worker efficiency for all direct workers in a department or facility.
Labor efficiency variance
Labor efficiency variance is (actual number of hours worked minus standard number of hours worked) times standard labor wage rate. The variance is unfavorable if the actual hours exceed the standard hours. Syn: labor usage variance.
A classification of workers whose capability indicates their skill level or craft. See: skill-based compensation, skills inventories.
A partial productivity measure, the rate of output of a worker or group of workers per unit of time compared to an established standard or rate of output. Labor productivity can be expressed as output per unit of time or output per labor hour. See: machine productivity, productivity.
Labor rate variance
Labor rate variance is (actual wage rate minus standard wage rate) times actual number of labor hours. The variance is unfavorable if the actual rate is greater than the standard rate.
Syn: labor claim.
Labor usage variance
Syn: labor efficiency variance.
Syn: labor claim.
The sum of the product and transportation costs. The laid-down cost is useful in comparing the total cost of a product shipped from different supply sources to a customer’s point of use.
Acronym for local area network.
Syn: overlapped schedule.
Last in, first out (LIFO)
A method of inventory valuation for accounting purposes. The accounting assumption is that the most recently received (last in) is the first to be used or sold (first out) for costing purposes, but there is no necessary relationship with the actual physical movement of specific items. See: average cost systems.
Late finish date (LF)
In the critical path method of project management, the last date upon which a given activity can be completed without delaying the completion date of the project.
Delivery date minus due date. Lateness may be positive or, in the case of early jobs, negative. See: earliness, tardiness.
Syn: past due order.
Late start date (LS)
In the critical path method of project management, the last date upon which a given activity can be started without delaying the completion date of the project.
Law of diminishing marginal returns
A principle that as the quantity of a variable factor applied to a fixed factor is increased, the additional units of the variable factor will result in smaller and smaller increases in output. See: marginal product.
Physical arrangement of resources or centers of economic activity (machines, groups of people, workstations, storage areas, aisles, etc.) within a facility. Layouts include product (linear or line), functional (job shop or process), cellular, and fixed position.
Abbreviation for leveraged buyout.
1) Abbreviation for less than carload (lot shipment). 2) Abbreviation for lower control limit.
A specific business activity index that indicates future trends. For example, housing starts is a leading indicator for the industry that supplies builders’ hardware.
1) A span of time required to perform a process (or series of operations). 2) In a logistics context, the time between recognition of the need for an order and the receipt of goods. Individual components of lead time can include order preparation time, queue time, processing time, move or transportation time, and receiving and inspection time. Syn: total lead time. See: manufacturing lead time, purchasing lead time.
Inventory that is carried to cover demand during the lead time.
A technique used in MRP where a planned order receipt in one time period will require the release of that order in an earlier time period based on the lead time for the item. Syn: component lead-time offset, offsetting.
Syn: lean production.
A group of individuals, functions, and sometimes legally separate but operationally synchronized organizations. The value stream defines the lean enterprise. The objectives of the lean enterprise are to correctly specify value to the ultimate customer, and to analyze and focus the value stream so that it does everything from product development and production to sales and service in a way that actions that do not create value are removed and actions that do create value proceed in a continuous flow as pulled by the customer. Lean enterprise differs from a “virtual corporation” in which the organizational membership and structure keeps changing.
Syn: lean production.
A metric that permits a balanced evaluation and response—quality without sacrificing quantity objectives. The types of metrics are financial, behavioral, and core-process performance.
A philosophy of production that emphasizes the minimization of the amount of all the resources (including time) used in the various activities of the enterprise. It involves identifying and eliminating non-value-adding activities in design, production, supply chain management, and dealing with customers. Lean producers employ teams of multiskilled workers at all levels of the organization and use highly flexible, increasingly automated machines to produce volumes of products in potentially enormous variety. It contains a set of principles and practices to reduce cost through the relentless removal of waste and through the simplification of all manufacturing and support processes. Syn: lean, lean manufacturing.
A curve reflecting the rate of improvement in time per piece as more units of an item are made. A planning technique, the learning curve is particularly useful in project-oriented industries in which new products are frequently phased in. The basis for the learning curve calculation is that workers will be able to produce the product more quickly after they get used to making it. Syn: experience curve, manufacturing progress curve.
1) Group of people who have woven a continuous, enhanced capacity to learn into the corporate culture. 2) An organization in which learning processes are analyzed, monitored, developed, and aligned with competitive goals..
A rental agreement lasting an extended period.
A method of curve fitting that selects a line of best fit through a plot of data to minimize the sum of squares of the deviations of the given points from the line. See: regression analysis.
Least total cost
A dynamic lot-sizing technique that calculates the order quantity by comparing the setup (or ordering) costs and the carrying cost for various lot sizes and selects the lot size where these costs are most nearly equal. See: discrete order quantity, dynamic lot sizing.
Least unit cost
A dynamic lot-sizing technique that adds ordering cost and inventory carrying cost for each trial lot size and divides by the number of units in the lot size, picking the lot size with the lowest unit cost. See: discrete order quantity, dynamic lot sizing.
The governmental restrictions placed on an organization regarding the goods and services provided by the business, for example, environmental regulations, export/import restrictions, safety regulations, and mandated deregulations.
Less than carload (LCL)
Either a small shipment that does not fill the railcar or a shipment of not enough weight to qualify for a carload quantity rate discount.
Less than truckload (LTL)
Either a small shipment that does not fill the truck or a shipment of not enough weight to qualify for a truckload quantity (usually set at about 10,000 lbs.) rate discount, offered to a general commodity trucker.
Letter of credit
An assurance by a bank that payment will be made as long as the sales terms agreed to by the buyer and seller are met. This method of payment for sales contracts provides a high degree of protection for the seller.
Every part or assembly in a product structure is assigned a level code signifying the relative level in which that part or assembly is used within the product structure. Often times the end items are assigned level 0 with the components and subassemblies going into it assigned to level 1 and so on. The MRP explosion process starts from level 0 and proceeds downward one level at a time.
Syn: resource leveling.
Syn: load leveling.
Level of service
A measure (usually expressed as a percentage) of satisfying demand through inventory or by the current production schedule in time to satisfy the customers’ requested delivery dates and quantities. In a make-to-stock environment, level of service is sometimes calculated as the percentage of orders picked complete from stock upon receipt of the customer order, the percentage of line items picked complete, or the percentage of total dollar demand picked complete. In make-to-order and design-to-order environments, level of service is the percentage of times the customer-requested or acknowledged date was met by shipping complete product quantities. Syn: measure of service, service level.
Level production method
A production planning method that maintains a stable production rate while varying inventory levels to meet demand. Syn: level strategy, production leveling. See: level schedule.
Level production schedule
Syn: level schedule.
1) In traditional management, a production schedule or master production schedule that generates material and labor requirements that are as evenly spread over time as possible. Finished goods inventories buffer the production system against seasonal demand. See: level production method. 2) In JIT, a level schedule (usually constructed monthly) in which each day’s customer demand is scheduled to be built on the day it will be shipped. A level schedule is the output of the load-leveling process. Syn: JIT master schedule, level production schedule. See: load leveling.
Syn: level production method.
Leverage-capital structure ratio
An indicator of whether or not a company has the ability to retire its long-term debts.
Leveraged buyout (LBO)
A takeover of a company using borrowed funds where assets of the acquired company are used as partial collateral for the loan.
Abbreviation for late finish date.
An accounting/financial term (balance sheet classification of accounts) representing debts or obligations owed by a company to creditors. Liabilities may have a short-term time horizon, such as accounts payable, or a longer-term obligation, such as mortgage payable or bonds payable. See: assets, balance sheet, debt, owner’s equity.
Paying a fee for permission to manufacture and sell a product created by another.
Life cycle analysis
A quantitative forecasting technique based on applying past patterns of demand data covering introduction, growth, maturity, saturation, and decline of similar products to a new product family.
In evaluating alternatives, the consideration of all costs, including acquisition, operation, and disposition costs, that will be incurred over the entire time of ownership of a product.
The simulation of a product’s life under controlled real-world conditions to see if it holds up and performs as required.
Acronym for last in, first out.
Syn: dark factory.
Acronym for lot-size inventory management interpolation technique.
Limited liability company
In the United States: A business organization that, as does a corporation, enjoys limited liability yet is not a taxable entity.
Limited life material
Material having a finite shelf life.
A partnership having two types of partners: (1) limited partners contribute assets to the company without participating in management and (2) general partners manage the company and are responsible for all debts.
The operation with the least capacity in a series of operations with no alternative routings. The capacity of the total system can be no greater than the limiting operation, and as long as this limiting condition exists, the total system can be effectively scheduled by scheduling the limiting operation and providing this operation with proper buffers. See: protective capacity, protective inventory.
1) A specific physical space for the manufacture of a product that in a flow shop layout is represented by a straight line. In actuality, this may be a series of pieces of equipment connected by piping or conveyor systems. 2) A type of manufacturing process used to produce a narrow range of standard items with identical or highly similar designs. Production volumes are high, production and material handling equipment is specialized, and all products typically pass through the same sequence of operations. See: assembly line.
Linear decision rules
A modeling technique using simultaneous equations, e.g., the establishment of aggregate workforce levels, based upon minimizing the total cost of hiring, firing, holding inventory, backorders, payroll, overtime, and undertime.
1) Production at a constant quantity. 2) Use of resources at a level rate, typically measured daily or more frequently.
A layout of various machines in one straight line. This type of layout makes it difficult to reallocate operations among workers and machinery.
Actual production to a level schedule, so that a plotting of actual output versus planned output forms a straight line, even when plotted for a short segment of time.
Mathematical models for solving linear optimization problems through minimization or maximization of a linear function subject to linear constraints. For example, in blending gasoline and other petroleum products, many intermediate distillates may be available. Prices and octane ratings as well as upper limits on capacities of input materials that can be used to produce various grades of fuel are given. The problem is to blend the various inputs in such a way that (1) cost will be minimized (profit will be maximized), (2) specified optimum octane ratings will be met, and (3) the need for additional storage capacity will be avoided.
1) The balancing of the assignment of the tasks to workstations in a manner that minimizes the number of workstations and minimizes the total amount of idle time at all stations for a given output level. In balancing these tasks, the specified time requirement per unit of product for each task and its sequential relationship with the other tasks must be considered. 2) A technique for determining the product mix that can be run down an assembly line to provide a fairly consistent flow of work through that assembly line at the planned line rate.
A measure of actual work content versus cycle time of the limiting operation in a production line. Line efficiency (percentage) is equal to the sum of all station task times divided by the longest task time multiplied by the number of stations. In an assembly line layout, the line efficiency is 100% minus the balance delay percentage.
Line haul costs
Within physical distribution, such cost elements as fuel, drivers’ wages, and wear and tear on the vehicle, that vary by distance traveled and not on weight carried.
One item on an order, regardless of quantity.
The loading of a production line by multiplying the total pieces by the rate per piece for each item to come up with a finished schedule for the line.
A manager involved in managing a department that is directly involved in making a product.
Repetitive manufacturing performed by specialized equipment in a fixed sequence.
Line of balance planning
A project planning technique using a lead-time offset chart and a chart of required final assembly completions to graph a third bar chart showing the number of each component that should be completed to date. This bar chart forms a descending line, and aggregate component completions are then plotted against this line of balance. This is a crude form of material planning.
Line of credit
A contract that enables a company to borrow funds at any time up to a predetermined limit.
The ability of a firm to pay debts as they come due.
Financial ratios that are indicators of a firm’s ability to retire short-term financial obligations.
Software running on a Web-accessed computer that facilitates electronic discussions by e-mailing submissions from one member to all other members of the discussion group. Syn: listserve.
Syn: available work.
The amount of planned work scheduled for and actual work released to a facility, work center, or operation for a specific span of time. Usually expressed in terms of standard hours of work or, when items consume similar resources at the same rate, units of production. Syn: workload.
Syn: work center.
Spreading orders out in time or rescheduling operations so that the amount of work to be done in sequential time periods tends to be distributed evenly and is achievable. Although both material and labor are ideally level loaded, specific businesses and industries may load to one or the other exclusively (e.g., service industries). Syn: capacity smoothing, level loading. See: level schedule.
A display of future capacity requirements based on released and/or planned orders over a given span of time. Syn: load projection. See: capacity requirements plan.
Syn: load profile.
Local area network (LAN)
A high-speed data communication system for linking computer terminals, programs, storage, and graphic devices at multiple workstations distributed over a relatively small geographic area such as a building or campus.
The set of measurements that relates to a resource, operation, process, or part and usually has low correlation to global organization measures. Examples are errors per printed page, departmental efficiency, and volume discounts.
A methodical verification of the location records for an item or group of items in inventory to ensure that when the record shows an item’s location, it is, in fact, in that location.
A file used in a stockroom (or anywhere) providing information on where each item is located. See: locator system.
A system for maintaining a record of the storage locations of items in inventory. See: locator file.
In project management, a dependency between two activities or between a milestone and an activity. The four possible relationships are (1) finish-to-start—activity A must be finished before activity B can start; (2) finish-to-finish—activity A must be finished before activity B can finish; (3) start-to-start—activity A must start before activity B can start; and (4) start-to-finish—activity A must start before activity B can finish.
1) In an industrial context, the art and science of obtaining, producing, and distributing material and product in the proper place and in proper quantities. 2) In a military sense (where it has greater usage), its meaning can also include the movement of personnel.
The planning and coordination of the physical movement aspects of a firm’s operations such that a flow of raw materials, parts, and finished goods is achieved in a manner that minimizes total costs for the levels of service desired.
Log normal distribution
A continuous probability distribution where the logarithms of the variable are normally distributed.
Business planning that addresses the strategic needs of the organization. See: business plan, resource planning.
A standard time greater than that required by a qualified worker with normal skill and effort.
Loss leader pricing
Pricing some products below cost to attract customers into the store, in the expectation that they will buy other items as well.
Lost time factor
The complement of utilization, that is one minus the utilization factor. It is the percentage of time lost to machine, tool, and worker unavailability. It can be calculated as the planned hours minus actual hours used, divided by the planned hours. See: balance delay, utilization.
A quantity produced together and sharing the same production costs and specifications. See: batch.
A set of procedures (e.g., assigning unique batch numbers and tracking each batch) used to maintain lot integrity from raw materials, from the supplier through manufacturing to consumers.
In cost accounting, those costs associated with processing a common lot or quantity of parts having the same specifications.
A lot-sizing technique that generates planned orders in quantities equal to the net requirements in each period. See: discrete order quantity.
A unique identification assigned to a homogeneous quantity of material. Syn: batch number, mix number.
Lot number control
Assignment of unique numbers to each instance of receipt and carrying forth that number into subsequent manufacturing processes so that, in review of an end item, each lot consumed from raw materials through end item can be identified as having been used for the manufacture of this specific end item lot.
Lot number traceability
Tracking parts by lot numbers to a group of items. This tracking can assist in tracing quality problems to their source. A lot number identifies a designated group of related items manufactured in a single run or received from a vendor in a single shipment.
Lot operation cycle time
The length of time required from the start of setup to the end of cleanup for a production lot at a given operation, including setup, production, and cleanup.
The amount of a particular item that is ordered from the plant or a supplier or issued as a standard quantity to the production process. Syn: order quantity.
A code that indicates the lot-sizing technique selected for a given item. Syn: order policy code.
Inventory that results whenever quantity price discounts, shipping costs, setup costs, or similar considerations make it more economical to purchase or produce in larger lots than are needed for immediate purposes.
Lot-size inventory management interpolation technique (LIMIT)
A technique for looking at the lot sizes for groups of similar products to determine the effect economic lot sizes will have on the total inventory, total setup costs, and machine availability.
Syn: fixed reorder quantity inventory model.
The process of, or techniques used in, determining lot size. See: order policy.
Dividing a lot into two or more sublots and simultaneously processing each sublot on identical (or very similar) facilities as separate lots, usually to compress lead time or to expedite a small quantity. Syn: operation splitting.
Lot tolerance percent defective (LTPD)
Expressed in percent defective, the poorest quality in an individual lot that should be accepted. Note: The LTPD is used as a basis for some inspection systems and is commonly associated with a value for a small consumer’s risk.
The ability to identify the lot or batch number of product in terms of one or all of the following: its composition, purchased parts, manufacturing date, or shipped items. In certain regulated industries, lot traceability may be a legislative requirement.
Lower control limit (LCL)
Control limit for points below the central line in a control chart.
Lower specification limit (LSL)
In statistical process control, charting the line that defines the minimum acceptable level of random output. See: tolerance limits.
A number that identifies the lowest level in any bill of material at which a particular component appears. Net requirements for a given component are not calculated until all the gross requirements have been calculated down to that level. Low-level codes are normally calculated and maintained automatically by the computer software. Syn: explosion level.
Abbreviation for late start date.
Abbreviation for lower specification limit.
Abbreviation for less than truckload.
Abbreviation for lot tolerance percent defective.
Syn: discontinuous demand.