In the theory of constraints: The planned amount by which the available capacity exceeds current productive capacity. This capacity provides protection from planned activities, such as resource contention, and preventive maintenance and unplanned activities, such as resource breakdown, poor quality, rework, or lateness. Safety capacity plus productive capacity plus excess capacity is equal to 100% of capacity. See: protective capacity.
1) The ratio of average strength to the worst stress expected. It is essential that the variation, in addition to the average value, be considered in design. 2) The numerical value used in the service function (based on the standard deviation or mean absolute deviation of the forecast) to provide a given level of customer service. For example, if the item MAD is 100 and a .95 customer service level (safety factor of 2.06) is desired, then a safety stock of 206 units should be carried. This safety stock must be adjusted if the forecast interval and item lead times differ. Syn: service factor. See: service function.
Safety lead time
An element of time added to normal lead time to protect against fluctuations in lead time so that an order can be completed before its real need date. When used, the MRP system, in offsetting for lead time, will plan both order release and order completion for earlier dates than it would otherwise. Syn: protection time, safety time.
1) In general, a quantity of stock planned to be in inventory to protect against fluctuations in demand or supply. 2) In the context of master production scheduling, the additional inventory and capacity planned as protection against forecast errors and short-term changes in the backlog. Overplanning can be used to create safety stock. Syn: buffer stock, reserve stock. See: hedge, inventory buffer.
Syn: safety lead time.
A part or assembly authorized for sale to final customers through the marketing function.
An agreement by which a firm first sells its assets to a financial institution and then leases these same assets from the financial institution.
Sales and operations planning
A process to develop tactical plans that provide management the ability to strategically direct its businesses to achieve competitive advantage on a continuous basis by integrating customer-focused marketing plans for new and existing products with the management of the supply chain. The process brings together all the plans for the business (sales, marketing, development, manufacturing, sourcing, and financial) into one integrated set of plans. It is performed at least once a month and is reviewed by management at an aggregate (product family) level. The process must reconcile all supply, demand, and new-product plans at both the detail and aggregate levels and tie to the business plan. It is the definitive statement of the company’s plans for the near to intermediate term, covering a horizon sufficient to plan for resources and to support the annual business planning process. Executed properly, the sales and operation planning process links the strategic plans for the business with its execution and reviews performance measurements for continuous improvement. See: aggregate planning, production plan, production planning, sales plan, tactical planning.
Syn: forecast accuracy, forecast.
The proportion of individual product-type sales volumes that make up the total sales volume.
Sales order configuration
Syn: customer order servicing system.
Sales order number
A unique control number assigned to each new customer order, usually during order entry. It is often used by order promising, master scheduling, cost accounting, invoicing, etc. For some make-to-order products, it can also take the place of an end item part number by becoming the control number that is scheduled through the finishing operations.
A time-phased statement of expected customer orders anticipated to be received (incoming sales, not outgoing shipments) for each major product family or item. It represents sales and marketing management’s commitment to take all reasonable steps necessary to achieve this level of actual customer orders. The sales plan is a necessary input to the production planning process (or sales and operations planning process). It is expressed in units identical to those used for the production plan (as well as in sales dollars). See: aggregate planning, production plan, production planning, sales and operations planning.
The process of determining the overall sales plan to best support customer needs and operations capabilities while meeting general business objectives of profitability, productivity, competitive customer lead times, and so on, as expressed in the overall business plan. See: production planning, sales and operations planning.
1) Sales activities that supplement both personal selling and marketing, coordinate the two, and help to make them effective, e.g., displays. 2) More loosely, the combination of personal selling, advertising, and all supplementary selling activities. 3) Promotion activities—other than advertising, publicity, and personal selling—that stimulate interest, trial, or purchase by final customers or others in the marketing channel.
The level of sales that an individual or group is expected to meet.
An employee authorized to accept a customer’s order for a product. Sales representatives usually go to the customer’s location when industrial products are being marketed.
Property that, because of its worn, damaged, deteriorated, or incomplete condition or specialized nature has no reasonable prospect of sale or use as serviceable property without major repairs or alterations, but that has some value in excess of its scrap value.
1) The cost recovered or that could be recovered from used property when removed, sold, or scrapped. A factor in appraisal of property value and in computing depreciation. 2) The market value of a machine or facility at any point in time. Normally, an estimate of an asset’s net value at the end of its estimated life.
A portion of a universe of data chosen to estimate some characteristics about the whole universe. The universe of data could consist of sizes of customer orders, number of units of inventory, number of lines on a purchase order, etc.
The number of elements selected for analysis from the population.
1) A statistical process where generalizations regarding an entire body of phenomena are drawn from a relatively small number of observations. 2) In marketing, the delivery of free trial goods to consumers.
The distribution of values of a statistic calculated from samples of a given size.
A quantity-versus-time graphic representation of the order point/order quantity inventory system showing inventory being received and then used up and reordered.
Abbreviation for standard batch quantity.
Abbreviation for strategic business unit.
A system of group incentives on a companywide or plantwide basis that sets up one measure that reflects the results of all efforts. The universal standard is the ratio of labor costs to sales value added by production. If there is an increase in production sales value with no change in labor costs, productivity has increased while unit cost has decreased.
An electronic device that optically converts coded information into electrical control signals for data collection or system transaction input.
A concept central to economics—that less of a good is freely available than consumers would like.
A graphical technique to analyze the relationship between two variables. Two sets of data are plotted on a graph, with the y axis used for the variable to be predicted and the x axis used for the variable to make the prediction. The graph will show possible relationships (although two variables might appear to be related, they might not be—those who know most about the variables must make that evaluation). The scatter chart is one of the seven tools of quality. Syn: cross plot, scatter diagram.
Syn: scatter chart.
A timetable for planned occurrences, e.g., shipping schedule, master production schedule, maintenance schedule, supplier schedule. Some schedules include the starting and ending time for activities, e.g., project schedule.
Syn: control board.
Usually a large piece of graph paper used in the same manner as a control board. Where the control board often uses strings and markers to represent plans and progress, the schedule chart is typically filled in with pencil. See: control board.
Control of a plant floor by schedules rather than by job orders (called order control). Schedules are derived by taking requirements over a period of time and dividing by the number of workdays allowed to run the parts or assemblies. Production completed is compared with the schedule to provide control. This type of control is most frequently used in repetitive and process manufacturing.
Planned shutdown of equipment or plant to perform maintenance or to adjust to softening demand.
Scheduled finish date
In project management, an activity’s planned finish time, normally between the early finish time and the late finish time. It may reflect resource limitations. Syn: planned finish date.
The standard hours of work required by scheduled receipts, i.e., open production orders.
An open order that has an assigned due date. See: open order.
Scheduled start date
In project management, an activity’s planned start time, normally between the early start time and the late start time. It may reflect resource limitations. Syn: planned start date.
In supply chains, the arrival of goods at a transfer point with a small buffer time in front of their departure via a different transportation mode.
A general term that can refer to a material planner, dispatcher, or a combined function.
The act of creating a schedule, such as a shipping schedule, master production schedule, maintenance schedule, or supplier schedule.
Syn: scheduling rules.
Basic rules that can be used consistently in a scheduling system. Scheduling rules usually specify the amount of time to allow for a move, queue, load calculation, etc. Syn: scheduling algorithm.
Scientific inventory control
Syn: statistical inventory control.
In project management, the totality of products to be created by a project.
In project management, a change to a project’s scope, usually requiring an adjustment to the project’s budget and schedule.
In project management, subdividing a project into smaller components to facilitate management.
Material outside of specifications and possessing characteristics that make rework impractical.
A factor that expresses the quantity of a particular component that is expected to be scrapped upon receipt from a vendor, completion of production, or while that component is being built into a given assembly. It is usually expressed as a decimal value. For a given operation or process, the scrap factor plus the yield factor is equal to one. If the scrap factor is 30% (or .3) then the yield is 70% (or .7). In manufacturing planning and control systems, the scrap factor is usually related to a specific item in the item master, but may be related to a specific component in the product structure. For example, if 50 units of a product are required by a customer and a scrap factor of 30% (a yield of 70%) is expected then 72 units (computed as 50 units divided by .7) should be started in the manufacturing process. Syn: scrap rate. See: yield, yield factor.
Syn: scrap factor.
In project management, graphic display of cumulative project attributes such as costs, labor hours, or percentage of work. The name derives from the typical shape of the curve.
Abbreviation for single-digit setup.
Web software that enables a user to find a page or Web site devoted to a particular topic.
Operations research models that attempt to find optimal solutions with adaptive searching approaches.
Syn: seasonal index.
A component of demand, usually describing the impact of variations that occur because of the time of year (quarter, month, week) on demand. See: decomposition, time series analysis.
Syn: harmonic smoothing.
A number used to adjust data to seasonal demand. Syn: seasonal adjustment. See: base series.
Inventory built up to smooth production in anticipation of a peak seasonal demand. Syn: seasonal stock.
A repetitive pattern of demand from year to year (or other repeating time interval) with some periods considerably higher than others. See: base series.
Syn: seasonal inventory.
A method of exponential smoothing for trend situations that employs two previously computed averages, the singly and doubly smoothed values, to extrapolate into the future. Syn: double smoothing.
The general direction of the long-run change in the value of a particular time series.
Secure electronic transaction (SET)
In e-commerce, a system for guaranteeing the security of financial transactions conducted over the Internet.
In e-commerce, a Web server that protects users’ messages from interception while being transmitted over the Internet.
Self-directed work team
Generally, a small, independent, self-organized, and self-controlling group in which members flexibly plan, organize, determine, and manage their duties and actions, as well as perform many other supportive functions. It may work without immediate supervision and can often have authority to select, hire, promote, or discharge its members.
A market condition in which goods cannot easily be secured (purchased) and when the economic forces of business tend to cause goods to be priced at the supplier’s estimate of value.
An expense or class of expense incurred in selling or marketing, e.g., salespersons’ salaries and commissions, advertising, samples, and shipping cost.
Products that have been stored uncompleted awaiting final operations that adapt them to different uses or customer specifications.
A manufacturing configuration in which most jobs go through the same sequence of operations even though production is in job lots.
Costs that change in increments. They remain fixed over a given range, and outside that range, the cost changes to a new level.
Syn: pilot plant.
The movement of a portion of a lot of material to a subsequent operation before completion of the current operation for all units of the lot. The purpose of sending material ahead is to reduce the manufacturing lead time. See: overlapped schedule.
A technique for determining how much an expected outcome or result will change in response to a given change in an input variable. For example, given a projected level of resources, what would be the effect on net income if variable costs of production increased 20%?
Devices that can monitor differences in conditions to control equipment on a dynamic basis.
Determining the order in which a manufacturing facility is to process a number of different jobs in order to achieve certain objectives.
In numeric sequence, normally in ascending order.
A unique number assigned for identification to a single piece that will never be repeated for similar pieces . Serial numbers are usually applied by the manufacturer but can be applied at other points, including by the distributor or wholesaler.
A computer, or software package, that provides a specific kind of service to client software running on other computers. The term can refer to a particular piece of software, for example a Web server, or to the machine on which the software is running. A single server machine could have several different server software packages running on it, thus providing many different servers to clients on the network.
The Internet address of a server.
Sometimes used to describe those activities that support the production or distribution functions in any organization, such as customer service and field service.
1) Design characteristic that facilitates the easy and efficient performance of service activities. Service activities include those activities required to keep equipment in operating condition, such as lubrication, fueling, oiling, and cleaning. 2) A measurement of the degree to which servicing of an item will be accomplished within a given time under specified conditions. See: maintainability. 3) The competitive advantage gained when an organization focuses on aspects such as the speed and courtesy in which customer complaints and questions are answered, following up with customers after the sale to ensure satisfaction, and offering on-site service for product repairs.
A service analysis method that allows service designers to identify processes involved in the service delivery system, isolate potential failure points in the system, establish time frames for the service delivery, and set standards for each step that can be quantified for measurement.
Service bureau model
A business strategy in which a company outsources certain products and services from another company. The company prefers to concentrate on its core business rather than expending resources on the outsourced item.
Syn: safety factor.
A mathematical relationship of the safety factor to service level, i.e., the fraction of demand that is routinely met from stock.
1) In its narrowest sense, an organization that provides an intangible product, e.g., medical or legal advice. 2) In its broadest sense, all organizations except farming, mining, and manufacturing. This definition of service industry includes retail trade; wholesale trade; transportation and utilities; finance, insurance, and real estate; construction; professional, personal, and social services; and local, state, and federal governments.
Syn: level of service.
Those modules, components, and elements that are planned to be used without modification to replace an original part. Syn: repair parts, spare parts.
Service parts demand
The need or requirement for a component to be sold by itself, as opposed to being used in production to make a higher level product. Syn: repair parts demand, spare parts demand.
Syn: product positioning.
The time taken to serve a customer, e.g., the time required to fill a sales order or the time required to fill a request at a tool crib.
Service vs. investment chart
A curve showing the amount of inventory that will be required to give various levels of customer service.
A control mechanism linking a system’s input and output, designed to feed back data on system output to regulate the operation of the system.
Acronym for secure electronic transaction.
1) The work required to change a specific machine, resource, work center, or line from making the last good piece of item A to making the first good piece of item B. 2) The refitting of equipment to neutralize the effects of the last lot produced (e.g., teardown of the just-completed production and preparation of the equipment for production of the next scheduled item). Syn: changeover, turnaround, turnaround time.
Costs such as scrap costs, calibration costs, downtime costs, and lost sales associated with preparing the resource for the next product. Syn: changeover costs, turnaround costs.
Setup lead time
Syn: setup time.
The time required for a specific machine, resource, work center, process, or line to convert from the production of the last good piece of item A to the first good piece of item B. Syn: setup lead time.
Seven tools of quality
Tools that help organizations understand their processes in order to improve them. The tools are the cause-and-effect diagram, check sheet, control chart, flowchart, histogram, Pareto chart, and scatter chart.
A violation of Section VII of the 1964 Civil Rights Act by unwanted sexual advances, comments, touching, or promise of benefits or loss contingent on the giving of sexual favors.
The present value of all anticipated payments to the shareholders of a firm.
The amount of time an item may be held in inventory before it becomes unusable.
Shelf life control
A technique of physical first-in, first-out usage aimed at minimizing stock obsolescence.
Shewhart circle of quality
Shingo’s seven wastes
Shigeo Shingo, a pioneer in the Japanese Just-in-Time philosophy, identified seven barriers to improving manufacturing. They are the waste of overproduction, waste of waiting, waste of transportation, waste of stocks, waste of motion, waste of making defects, and waste of the processing itself.
The date after which a product cannot be shipped to a customer.
The function that performs tasks for the outgoing shipment of parts, components, and products. It includes packaging, marking, weighing, and loading for shipment.
Shipping lead time
The number of working days normally required for goods to move between a shipping and receiving point, plus acceptance time in days at the receiving point.
A document that lists the pieces in a shipment. A manifest usually covers an entire load regardless of whether the load is to be delivered to a single destination or to many destinations. Manifests usually list the items, piece count, total weight, and the destination name and address for each destination in the load.
Shipping order debit memo
The document used to authorize the shipment of rejected material back to the supplier and create a debit entry in accounts payable.
The location from which material is sent. Ant: receiving point.
An allowable deviation that the supplier can ship over or under the contract quantity.
Continually balancing the number of workers in a work center to meet demand with a minimum number of workers. It requires a line design, such as U-shaped, that supports varying the number of workers.
Syn: manufacturing calendar.
Shop floor control
A system for using data from the shop floor to maintain and communicate status information on shop orders (manufacturing orders) and on work centers. Shop floor control can use order control or flow control to monitor material movement through the facility. The major subfunctions of shop floor control are (1) assigning priority of each shop order; (2) maintaining work-in-process quantity information; (3) conveying shop order status information to the office; (4) providing actual output data for capacity control purposes; (5) providing quantity by location by shop order for work-in-process inventory and accounting purposes; and (6) providing measurement of efficiency, utilization, and productivity of the workforce and machines. The major subfunctions for flow control are based primarily on production rates and feeding work into production to meet these planned rates, then monitoring and controlling production. See: flow control, order control, production activity control.
Syn: manufacturing order.
Shop order close-out station
A stocking point on the shop floor where completed production of components is transacted (received) into and subsequently transacted (issued) to assembly or other downstream operations. This technique is used to reduce material handling by avoiding the need to move items into and out of stockrooms, while simultaneously enabling a high degree of inventory record accuracy.
Shop order reporting
Syn: production reporting and status control.
A package of documents used to plan and control the shop floor movement of an order. The packet may include a manufacturing order, operations sheets, engineering blueprints, picking lists, move tickets, inspection tickets, and time tickets.
The function of coordinating the availability of material handling, material, resources, setup, and tooling so that an operation or job can be done on a particular machine. Shop planning is often part of the dispatching function. The term shop planning is sometimes used interchangeably with dispatching, although dispatching does not necessarily include shop planning. For example, the selection of jobs might be handled by the centralized dispatching function, while the actual shop planning might be done by the foreman or a representative.
Syn: operations scheduling.
The marginal profit that is lost when a customer orders an item that is not immediately available in stock.
Shortest processing time rule (SPT)
A dispatching rule that directs the sequencing of jobs in ascending order by processing time. If this rule is followed, the most jobs at a work center per time period will be processed. As a result, the average lateness of jobs at that work center is minimized, but some jobs will be very late. Syn: smallest processing time rule.
The function of adjusting limits or levels of capacity within relatively short periods of time, such as parts of a day, a day, or a week.
Reductions of actual quantities of items in stock, in process, or in transit. The loss may be caused by scrap, theft, deterioration, evaporation, etc.
A percentage factor used to compensate for the expected loss during the manufacturing cycle of an item. This factor differs from the scrap factor in that it affects all components of the item, where the scrap factor relates to only one component’s usage. Syn: shrinkage rate.
Syn: shrinkage factor.
Abbreviation for standard industrial classification.
A Greek letter (Σ) commonly used to designate the standard deviation of a population.
In information systems, a message for which the sender can be authenticated.
Significant part number
A part number that is intended to convey certain information, such as the source of the part, the material in the part, or the shape of the part. Using numbers to represent this information usually makes these part numbers longer than corresponding nonsignificant part numbers. Ant: nonsignificant part number.
Those differences between planned and actual performance that exceed established thresholds and that require further review, analysis, and action.
1) Interest that is not compounded; i.e., is not added to the income-producing investment or loan. 2) The interest charged under the condition that interest in any time period is only charged on the principal.
Simple moving average
A moving average where the oldest data point is dropped and the newest data point is included in the calculation. All data points are assigned equal weights. See: moving average, weighted moving average.
A procedure for solving a general linear programming problem.
1) The technique of using representative or artificial data to reproduce in a model various conditions that are likely to occur in the actual performance of a system. It is frequently used to test the behavior of a system under different operating policies. 2) Within MRP II, using the operational data to perform what-if evaluations of alternative plans to answer the question, Can we do it? If yes, the simulation can then be run in the financial mode to help answer the question, Do we really want to? See: what-if analysis.
Syn: participative design/engineering.
Syn: participative design/engineering.
Single-card kanban system
Syn: one-card kanban system.
Single-digit setup (SDS)
The idea of performing setups in less than 10 minutes. See: single-minute exchange of die.
Single exponential smoothing
Syn: first-order smoothing.
The average amount of a given product (output) attributed to a unit of a given resource (input). Factors include labor and capital. Syn: partial productivity factor.
A form of backflush that reduces inventory of only the parts used in the next level down in an assembly or subassembly.
Single-level bill of material
A display of components that are directly used in a parent item. It shows only the relationships one level down.
Single-level where-used for a component lists each parent in which that component is directly used and in what quantity. This information is usually made available through the technique known as implosion.
Single-minute exchange of die (SMED)
The concept of setup times of less than 10 minutes, developed by Shigeo Shingo in 1970 at Toyota. See: single-digit setup.
Single-period inventory models
Inventory models used to define economical or profit maximizing lot-size quantities when an item is ordered or produced only once, e.g., newspapers, calendars, tax guides, greeting cards, or periodicals, while facing uncertain demands. Syn: static inventory models.
Syn: first-order smoothing.
A company that is selected to have 100% of the business for a part although alternate suppliers are available. See: sole-source supplier.
A method whereby a purchased part is supplied by only one supplier. Traditional manufacturers usually have at least two suppliers for each component part they purchase to ensure continuity of supply and (more so) to foster price competition between the suppliers. A JIT manufacturer will frequently have only one supplier for a purchased part so that close relationships can be established with a smaller number of suppliers. These close relationships (and mutual interdependence) foster high quality, reliability, short lead times, and cooperative action. Ant: multisourcing. See: sole source.
An acronym for supplier, input, process, output—pronounced sye-pahk.
A methodology that furnishes tools for the improvement of business processes. The intent is to decrease process variation and improve product quality.
The six-sigma approach is a set of concepts and practices that key on reducing variability in processes and reducing deficiencies in the product. Important elements are (1) Producing only 3.4 defects for every one million opportunities or operations; (2) Process improvement initiatives striving for six sigma-level performance. Six sigma is a business process that permits organizations to improve bottom-line performance, creating and monitoring business activities to reduce waste and resource requirements while increasing customer satisfaction.
The degree of nonsymmetry shown by a frequency or probability distribution.
A method of employee compensation that bases the employee’s wage rate on the number of skills the employee is qualified to perform. People who are qualified to do a wider variety of skills are paid more. See: labor grade.
An organized file of information on each employee’s skills, abilities, knowledge, and experience, usually maintained by a personnel office. See: labor grade.
Abbreviation and acronym (pronounced skew) for stockkeeping unit.
Syn: float, slack time.
In project management, the amount of time that an activity may be delayed from its early start without delaying the project finish date. Syn: slack.
Slack time rule
A dispatching rule that directs the sequencing of jobs based on slack time. Slack time is equal to (days left until due date × hrs/day) minus standard hours of work left on this specific job, e.g., (5 × 8) – 12 = 28 hours of slack. The lower the amount of slack time, the higher the priority in sequencing of jobs.
Those inventory items with a low turnover, i.e., items in inventory that have a relatively low rate of usage compared to the normal amount of inventory carried.
Smallest processing time rule
Syn: shortest processing time rule.
Small group improvement activity
An organizational technique for involving employees in continuous improvement activities. See: quality circle.
Acronym for single-minute exchange of die.
The process of averaging data by a mathematical process or by curve fitting, such as the least-squares method or exponential smoothing.
In exponential smoothing, the weighting factor that is applied to the most recent demand, observation, or error. In this case, the error is defined as the difference between actual demand and the forecast for the most recent period. The weighting factor is represented by the symbol α. Theoretically, the range of α is 0.0 to 1. Syn: alpha factor, smoothing factor.
Syn: smoothing constant.
The programs and documentation necessary to make use of a computer.
A form of business in which one person has ownership and control. See: corporation, partnership.
The situation where the supply of a product is available from only one organization. Usually technical barriers such as patents preclude other suppliers from offering the product. See: single sourcing.
The only supplier capable of meeting (usually technical) requirements for an item. See: single-source supplier.
The function of physically separating a homogeneous subgroup from a heterogeneous population of items.
An original written or printed record of some type that is to be converted into machine-readable form.
Inspection at the source of supply or of production, e.g., the supplier or the work center, as opposed to inspection following receipt from the supplier or following transfer of the items from one work center to another.
The process of identifying a company that provides a needed good or service.
A physical space allocated to prevent a bottleneck work center from stopping production because no more room exists to offload finished material from that work center.
Syn: service parts.
Spare parts demand
Syn: service parts demand.
Abbreviation for statistical process control.
Syn: assignable cause.
An assurance that the product is fit for the specific purpose for which the product will be used. See: general warranty, warranty.
A clear, complete, and accurate statement of the technical requirements of a material, an item, or a service, and of the procedure to determine if the requirements are met.
A contract remedy requiring defendants to do what they have contracted to do.
A method by which a larger quantity is ordered on a purchase order to secure a lower price, but delivery is divided into smaller quantities and spread out over several dates to control inventory investment, save storage space, etc.
A manufacturing order quantity that has been divided into two or more smaller quantities, usually after the order has been released. The quantities of a split lot may be worked on in parallel, or a portion of the original quantity may be sent ahead to a subsequent operation to be worked on while work on the remainder of the quantity is being completed at the current operation. The purpose of splitting a lot is to reduce the lead time of the order.
Spoiled work order
Syn: rework order.
A purchase made for standard off-the-shelf material or equipment, on a one-time basis.
Demand, having a short lead time, that is difficult to estimate. Usually supply for this demand is provided at a premium price.
Abbreviation for shortest processing time rule.
Abbreviation for statistical quality control.
Abbreviation for structured query language.
An inventory that is carried on hand above the base inventory level to provide protection against incurring overtime or downtime.
Stacked lead time
Syn: cumulative lead time.
Pulling material for an order from inventory before the material is required. This action is often taken to identify shortages, but it can lead to increased problems in availability and inventory accuracy.
Staging and consolidation
Physically moving material from the packing area to a staging area, based on a prescribed set of instructions related to a particular outbound vehicle or delivery route, often for shipment consolidation purposes.
People with a vested interest in a company, including managers, employees, stockholders, customers, suppliers, and others.
1) An established norm against which measurements are compared. 2) An established norm of productivity defined in terms of units of output per set time (units/hour) or in standard time (minutes per unit). 3) The time allowed to perform a specific job including quantity of work to be produced. See: standard time.
The established or accepted amount by which the normal time for an operation is increased within an area, plant, or industry to compensate for the usual amount of personal, fatigue, and unavoidable delay times.
Standard batch quantity (SBQ)
The quantity of a parent that is used as the basis for specifying the material requirements for production. The quantity per is expressed as the quantity to make the SBQ, not to make only one of the parent. Often used by manufacturers that use some components in standard quantities or by process-related manufacturers. Syn: run size.
Predetermined, specifically sized containers used for storing and moving components. These containers protect the components from damage and simplify the task of counting components.
Standard cost accounting system
A cost accounting system that uses cost units determined before production for estimating the cost of an order or product. For management control purposes, the standards are compared to actual costs, and variances are computed.
The target costs of an operation, process, or product including direct material, direct labor, and overhead charges.
A measurement of dispersion of data or of a variable. The standard deviation is computed by finding the differences between the average and actual observations, squaring each difference, adding the squared differences, dividing by n – 1 (for a sample), and taking the square root of the result. See: estimate of error.
A measurement of the variability of statistics such as the sample mean. See: estimate of error.
Syn: standard time.
Standard industrial classification (SIC)
Classification codes that are used to categorize companies into industry groupings.
1) The process of designing and altering products, parts, processes, and procedures to establish and use standard specifications for them and their components. 2) Reduction of the total numbers of parts and materials used and products, models, or grades produced. 3) The function of bringing a raw ingredient into standard (acceptable) range per the specification before introduction to the main process.
A raw ingredient that has been preprocessed to bring all its specifications within standard ranges before it is introduced to the main process. This preprocessing minimizes variability in the production process.
A relationship based on a sample distribution by value for a particular company. When the standard ratio for a particular company is known, certain aggregate inventory predictions can be made, e.g., the amount of inventory increase that would be required to provide a particular increase in customer service.
The length of time that should be required to (1) set up a given machine or operation and (2) run one batch or one or more parts, assemblies, or end products through that operation. This time is used in determining machine requirements and labor requirements. Standard time assumes an average worker following prescribed methods and allows time for personal rest to overcome fatigue and unavoidable delays. It is also frequently used as a basis for incentive pay systems and as a basis of allocating overhead in cost accounting systems. Syn: standard hours. See: standard.
Syn: rated capacity.
Syn: blanket purchase order.
A slang term used to refer to a high-growth, high-profit-margin product. See: growth share matrix.
In project management, the time an activity begins; this may be defined as an actual start date or a planned start date.
In project management, a network requirement that activity A must start before subsequent activity B can finish. See: logical relationship.
In project management, a network requirement that activity A must start before subsequent activity B can start. See: logical relationship.
That period starting with the date of initial operation during which the unit is brought up to acceptable production capacity and quality within estimated production costs. Startup is the activity that commences on the date of initial activity and has significant duration on most projects, but is often confused (used interchangeably) with date of initial operation.
The technique of having an implementation team tour or visit the implementation site on a frequent basis and use the management by walking around technique to identify problems and solutions.
The extra operating costs to bring the plant or product on-stream incurred between the completion of construction and the start of normal operations. In addition to the difference between actual operating costs during that period and normal costs, they include employee training, equipment tests, process adjustments, salaries and travel expense of temporary labor staff and consultants, report writing, post-startup monitoring, and associated overhead. Additional capital required to correct plant problems may be included. Startup costs are sometimes capitalized.
Statement of cash flows
Syn: funds flow statement
Statement of work
1) A description of products to be supplied under a contract. 2) In projection management, the first project planning document that should be prepared. It describes the purpose, history, deliverables, and measurable success indicators for a project. It captures the support required from the customer and identifies contingency plans for events that could throw the project off course. Because the project must be sold to management, staff, and review groups, the statement of work should be a persuasive document.
Syn: master budget.
Static inventory models
Syn: single-period inventory models.
The situation where variations among the observed samples can be attributed to a constant system of chance causes.
Statistical inventory control
The use of statistical methods to model the demands and lead times experienced by an inventory item or group of items. Demand during lead time and between reviews can be modeled, and reorder points, safety stocks, and maximum inventory levels can be defined to strive for desired customer service levels, inventory investments, manufacturing and distribution efficiency, and targeted returns on investments. Syn: scientific inventory control. See: fixed reorder quantity inventory model.
Statistical order point
Syn: order point.
Statistical order point system
Syn: order point system.
Statistical process control (SPC)
The application of statistical techniques to monitor and adjust an operation. Often the term statistical process control is used interchangeably with statistical quality control.
Statistical quality control (SQC)
The application of statistical techniques to control quality. Often the term statistical process control is used interchangeably with statistical quality control, although statistical quality control includes acceptance sampling as well as statistical process control.
Statistical safety stock calculations
The mathematical determination of safety stock quantities considering forecast errors, lot sizes, desired customer service levels, and the ratio of lead time to the length of the forecast period. Safety stock is frequently the product of the appropriate safety factor and the standard deviation or mean absolute deviation of the distribution of demand forecast errors.
Statute of limitations
A statute restricting the length of time in which a lawsuit may be filed.
A budget that establishes anticipated targets at which an operation will perform for each step or level of production. A step budget can be likened to several different fixed budgets. This method of budgeting is useful because most of the manufacturing overhead expenditures vary in steps, not as a straight line. See: flexible budget.
Scheduling logic that recognizes run length to be a multiple of the number of batches to be run rather than simply a linear relationship of run time to total production quantity.
Models where uncertainty is explicitly considered in the analysis.
1) Items in inventory. 2) Stored products or service parts ready for sale, as distinguished from stores, which are usually components or raw materials.
Syn: item number.
A dividend paid to shareholders in stock rather than cash.
Stockkeeping unit (SKU)
1) An inventory item. For example, a shirt in six colors and five sizes would represent 30 different SKUs. 2) In a distribution system, an item at a particular geographic location. For example, one product stocked at the plant and at six different distribution centers would represent seven SKUs.
Buying material, parts, supplies, and so on, for direct use by the departments involved, as opposed to receiving them into stores and subsequently issuing them to the departments. The intent is to reduce inventory investment, increase cash flow, reduce material handling and storage, and provide better service. See: dock-to-stock inventory.
Syn: item number.
An order to replenish stock, as opposed to a production order to make a particular product for a specific customer.
A lack of materials, components, or finished goods that are needed. See: backorder.
The costs associated with a stockout. Those costs may include lost sales, backorder costs, expediting, and additional manufacturing and purchasing costs.
A measure of the effectiveness with which a company responds to actual demand or requirements. The stockout percentage can be a measurement of total orders containing a stockout to total orders, or of line items incurring stockouts to total line items ordered during a period. One formula is
stockout percentage = (1 – customer service ratio) × 100%.
Ant: customer service ratio.
A designated location in an active area of operation into which material is placed and from which it is taken. Not necessarily a stockroom isolated from activity, it is a way of tracking and controlling active material.
Stock record card
A ledger card that contains inventory status for a given item.
The issuance of new shares to stockholders without requiring additional equity.
A report showing the inventory on hand and usually showing the inventory on order and some sales or usage history for the products that are covered in the stock status report.
Stop work order
Syn: hold order.
The retention of parts or products for future use or shipment.
A subset of inventory carrying costs, including the cost of warehouse utilities, material handling personnel, equipment maintenance, building maintenance, and security personnel.
1) Stored materials used in making a product. 2) The room where stored components, parts, assemblies, tools, fixtures, etc., are kept.
Stores issue order
Syn: picking list.
Stores ledger card
A card on which records of the items on hand and on order are maintained.
Syn: picking list.
A method of depreciation whereby the amount to be recovered (written off as an expense) is spread uniformly over the estimated life of the asset in terms of time periods. See: depreciation.
Syn: gapped schedule.
A relationship formed by two or more organizations that share information (proprietary), participate in joint investments, and develop linked and common processes to increase the performance of both companies. Many organizations form strategic alliances to increase the performance of their common supply chain.
Strategic business unit (SBU)
An approach to strategic planning that develops a plan based on products. A company’s products are typically grouped into strategic business units (SBUs) with each SBU evaluated in terms of strengths and weaknesses vis-à-vis similar business units made and marketed by competitors. The units are evaluated in terms of their competitive strengths, their relative advantages, life cycles, and cash flow patterns.
Factors that influence business unit and manufacturing strategies.
A statement of the future business scope of an enterprise. The statement incorporates what is being satisfied (customer needs), who is being satisfied (customer groups), and how the company creates value for the customer (processes, technologies, and core competencies).
Strategic performance measurements
Measurements that relate to the long-term goals of a business. Examples include profitability, market share, growth, and productivity. See: global performance measurements, operational performance measurements.
The plan for how to marshal and determine actions to support the mission, goals, and objectives of an organization. Generally includes an organization’s explicit mission, goals, and objectives and the specific actions needed to achieve those goals and objectives. See: business plan, operational plan, strategic planning, strategy, tactical plan.
The process of developing a strategic plan. See: operational planning, strategic plan, tactical planning.
The development and management of supplier relationships to acquire goods and services in a way that aids in achieving the immediate needs of a business. It is entirely aligned with the sourcing portion of managing the procurement process. See: tactical buying.
The strategy of an enterprise identifies how a company will function in its environment. The strategy specifies how to satisfy customers, how to grow the business, how to compete in its environment, how to manage the organization and develop capabilities within the business, and how to achieve financial objectives. See: strategic plan.
A statistical tool for determining root causes in which observed historical data are separated by particular characteristics to determine the effect of each characteristic upon the observed results. See: root cause analysis.
A tort doctrine requiring those engaging in very hazardous activities or those manufacturing very hazardous items be held to a high standard of conduct.
The performance of a contract good enough for the contractor to be paid full price less the other party’s losses.
Structured query language (SQL)
A computer language that is a relational model database language. Such a language has an English vocabulary, is nonprocedural, and provides the ability to define tables, screen layouts, and indices.
An assembly that is used at the next level of the bill of material to build another assembly.
Sending production work outside to another manufacturer. See: outsourcing.
A solution to a problem that is best from a narrow point of view but not from a higher or overall company point of view. For example, a department manager who would not have employees work overtime to minimize the department’s operating expense may cause lost sales and a reduction in overall company profitability.
An organizational structure within a factory, consisting of a compact entrepreneurial unit, either process-oriented or product-oriented and structured to achieve maximum productivity.
The use of a nonprimary product or component, normally when the primary item is not available.
1) In project management, in an activity-on-arrow network, the activity (arrow) that departs a node. 2) In project management, in an activity-on-node network, the activity at the tip of the arrow.
Summarized bill of material
A form of multilevel bill of material that lists all the parts and their quantities required in a given product structure. Unlike the indented bill of material, it does not list the levels of manufacture and lists a component only once for the total quantity used.
A form of an indented where-used bill of material that shows all parents in which a given component is used, the required quantities, and all the next-level parents until the end item is reached. Unlike the indented where-used, it does not list the levels of manufacture.
A judicial ruling that no essential facts are in dispute and that one party to the suit merits judgment as a matter of law.
Sum of deviations
Syn: cumulative sum.
1) The unrecovered balance of an investment. It is a cost, already paid, that is not relevant to the decision concerning the future that is being made. Capital already invested that for some reason cannot be retrieved. 2) A past cost that has no relevance with respect to future receipts and disbursements of a facility undergoing an economic study. This concept implies that since a past outlay is the same regardless of the alternative selected, it should not influence the choice between alternatives.
Super bill of material
A type of planning bill, located at the top level in the structure, that ties together various modular bills (and possibly a common parts bill) to define an entire product or product family. The quantity per relationship of the super bill to its modules represents the forecasted percentage of demand of each module. The master-scheduled quantities of the super bill explode to create requirements for the modules that also are master scheduled. See: pseudo bill of material.
A technique to relieve all components down to the lowest level using the complete bill of material, based on the count of finished units produced or transferred to finished goods inventory.
1) Provider of goods or services. See: vendor. 2) Seller with whom the buyer does business, as opposed to vendor, which is a generic term referring to all sellers in the marketplace.
A seller other than the primary one. The supplier alternate may or may not supply the items purchased, but is usually approved to supply those items.
Certification procedures verifying that a supplier operates, maintains, improves, and documents effective procedures that relate to the customer’s requirements. Such requirements can include cost, quality, delivery, flexibility, maintenance, safety, and ISO quality and environmental standards.
Deliberately sole sourcing remote suppliers within a small geographical area to facilitate joint shipments of what would otherwise be less-than-truckload quantities.
Supplier-input-process-output-customer (SIPOC) diagram
A high-level process map that shows substantial subprocesses in an organization’s process together with the structure of the process represented by the suppliers, inputs, outputs, and customers. A SIPOC diagram defines the critical aspects of a process without losing the overall perspective.
Supplier lead time
The amount of time that normally elapses between the time an order is received by a supplier and the time the order is shipped. Syn: vendor lead time. See: purchasing lead time.
The act of measuring the supplier’s performance to a contract. Measurements usually cover delivery reliability, lead time, and price. Syn: purchasing performance measurements. See: vendor measurement.
A numerical code used to distinguish one supplier from another.
A supplier organization with which a company has formed a customer-supplier partnership. See: outpartnering.
The establishment of a working relationship with a supplier organization whereby two organizations act as one. Syn: collaborative supply relationship.
Supplier performance evaluation
Monitoring and evaluating key suppliers on cost, quality, engineering, purchasing, and so on, based on an agreed set of measurements.
Supplier quality assurance
The confidence that a supplier’s goods or services will fulfill its customers’ needs. This confidence is achieved by creating a relationship between the customer and supplier that ensures that the product will be fit for use with minimal corrective action and inspection. According to J.M. Juran, nine primary activities are needed: (1) define product and program quality requirements, (2) evaluate alternative suppliers, (3) select suppliers, (4) conduct joint quality planning, (5) cooperate with the supplier during the execution of the contract, (6) obtain proof of conformance to requirements, (7) certify qualified suppliers, (8) conduct quality improvement programs as required, and (9) create and use supplier quality ratings.
A person whose main job is working with suppliers regarding what is needed and when. Supplier schedulers are in direct contact with both MRP and the suppliers. They do the material planning for the items under their control, communicate the resultant schedules to their assigned suppliers, do follow-up, resolve problems, and advise other planners and the master scheduler when purchased items will not arrive on time to support the schedule. The supplier schedulers are normally organized by commodity, as are the buyers. By using the supplier scheduler approach, the buyers are freed from day-to-day order placement and expediting, and therefore have the time to do cost reduction, negotiation, supplier selection, alternate sourcing, etc. Syn: planner/buyer, vendor scheduler.
A purchasing approach that provides suppliers with schedules rather than with individual hard-copy purchase orders. Normally, a supplier scheduling system will include a business agreement (contract) for each supplier, a weekly (or more frequent) schedule for each supplier extending for some time into the future, and individuals called supplier schedulers. Also required is a formal priority planning system that works well, because it is essential in this arrangement to provide the supplier with valid due dates. Syn: vendor scheduling.
Materials used in manufacturing that are not normally charged to finished production, such as cutting and lubricating oils, machine repair parts, glue, or tape. Syn: general stores, indirect materials.
1) The quantity of goods available for use. 2) The actual or planned replenishment of a product or component. The replenishment quantities are created in response to a demand for the product or component or in anticipation of such a demand.
The global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash.
Supply chain community
The set of trading partners and nominal trading partners that define a complete supply chain.
Supply chain design
The determination of how to structure a supply chain. Design decisions include the selection of partners, the location and capacity of warehouse and production facilities, the products, the modes of transportation, and supporting information systems.
Supply chain execution
Execution-oriented software applications for effective procurement and supply of goods and services across a supply chain. It includes manufacturing, warehouse, and transportation execution systems, and systems providing visibility across the supply chain.
Supply chain inventory visibility
Software applications that permit monitoring events across a supply chain. These systems track and trace inventory globally on a line-item level and notify the user of significant deviations from plans. Companies are provided with realistic estimates of when material will arrive.
Supply chain management
The design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally.
Supply chain planning
The determination of a set of policies and procedures that govern the operation of a supply chain. Planning includes the determination of marketing channels, promotions, respective quantities and timing, inventory and replenishment policies, and production policies. Planning establishes the parameters within which the supply chain will operate.
In activity-based cost accounting, activity costs not directly related with producing a product, such as the cost of the information system.
Activities such as accounting and information systems that do not directly participate in production but that are nevertheless essential.
The ability to meet sudden, unexpected increases in demand by expanding production with existing personnel and equipment.
A container to hold output from one process and feed it to a subsequent process. It is used when line balancing is not possible or practical or only on a contingency basis when downstream equipment is nonoperational.
A situation in which an oversupply exists at a given price and a decline in price would eliminate the surplus.
In activity-based cost accounting, a substitute for the best possible driver which is useful because it is less costly and almost as accurate.
A form of research (frequently used in marketing research) where data are collected by mailing questionnaires to a group of people within a target audience. See: marketing research.
In activity-based cost accounting, an activity that is not directly beneficial to any specific cost object but does benefit the organization as a whole.
A marketing promotion in which prizes are awarded, usually by chance.
Acronym for strengths, weaknesses, opportunities, and threats.
An analysis of the strengths, weaknesses, opportunities, and threats of and to an organization. SWOT analysis is useful in developing strategy.
A manufacturing management philosophy that includes a consistent set of principles, procedures, and techniques where every action is evaluated in terms of the global goal of the system. Both kanban, which is a part of the JIT philosophy, and drum-buffer-rope, which is a part of the theory of constraints philosophy, represent synchronized production control approaches. Syn: synchronous manufacturing. See: drum-buffer-rope, kanban, synchronous scheduling.
A pull-type production control system that is based on setting production rates and feeding work into production to meet the planned rates, then monitoring and controlling production.
Syn: synchronized production.
Scheduling processes (kanban in Just-in-Time and drum-buffer-rope in theory of constraints environments) that focus on synchronizing all operations to the constraint of the system. See: synchronized production.
Synthetic time standard
Syn: predetermined motion time.
A regularly interacting or interdependent group of items forming a unified whole toward the achievement of a goal.
In supply chain management, the supply chain is viewed as the complete system. The system constraint is the resource at any one of the trading partners that is most limiting the end-to-end throughput of the supply chain.
1) The analyzing in detail of the information needed for an organization, the characteristics and components of the current information system, and the requirements of any proposed changes to the information system. 2) A method of problem solving that encompasses the identification, study, and evaluation of interdependent parts and their attributes that function in an ongoing process and that constitute an organic whole.
The audit of any activity that can affect final product quality.
A group of interconnected nodes. This implies redundancy in connections and some means (e.g., machines) for implementing the connection.