Glossary

A Lean methodology that provides a focus on Workplace organization to improve housekeeping, safety and productivity.

ABC Classification is a method of categorizing items based on dollar volume or other criteria. The “A” items are those with the greatest dollar impact, and hence receive the most attention in terms of control. “B” items have less dollar impact and receive less control effort, and the “C” items least of all.

See PARETO’S LAW.

Demands that are not part of the forecast. Typically abnormal demands are large, one-time orders.

An output of an MRP system that identifies the need for and the type of action to be taken to correct a current or a potential problem. Examples of action messages are “Release Order,” “Reschedule Out,” “Cancel,” etc.

(Syn. EXCEPTION REPORT).

A newer method of cost accounting is which overhead is applied to products by means of “cost drivers”, i.e. those elements which directly cause costs. This is in contrast to traditional methods of product costing which often allocate overhead via a relatively unrelated factor such as direct labor hours. For example, product engineering overhead may be more accurately allocated to products based on the number of engineering changes per product, rather than via direct labor hours.

It is a new level of information combining financial and operational data in a way that both can be used for improved decision making. It is a management information tool not a financial evaluation model. To fulfill this purpose requires that the information system take into account both the operational processes of the organization and the resources costs as represented in the financial system. These are then combined in such a way that they provide information on how the organization consumes resource and costs and capture the total costs in the financial system.

A real time picture of what is happening in the supply environment that measures productivity at the closest point, as it happens – not after the event.

The process of comparing the sales forecast to the supply capabilities to develop a business strategy. The sales forecast and supply capabilities are compared and a business strategy that includes a supply plan, budgets and financial statements, and supporting plans for purchasing, workforce, technical etc are developed. The supply plan is the result of the aggregate planning process.

Once Lean methodologies have been implemented it is then right to consider the benefits to be gained from agility. To be cost efficient the resource requirements to achieve an agile offering need to be introduced when waste has been removed from processes so that additional machines, inventory or people can be re-introduced to exploit customer changes or abnormal demands.

In an MRP system, an allocated item is one for which a picking order has been released but not yet issued from the stockroom. It is an “uncashed” stockroom requisition.

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

The principle of enabling production workers to halt a process before it goes out of control. The operator(s) then fix the problem and/or help is forthcoming before production is resumed. Andon in Japanese loosely translated refers to a warning light.

A report, normally issued by both Manufacturing and Purchasing to the material planning function, regarding jobs or purchase orders which will not be completed on time, why not, and when they will be completed. This is an essential ingredient of a closed-loop MRP system. Except perhaps in very large companies, the Anticipated Delay Report is manually prepared.

See MAKE-TO-ORDER PRODUCT.

A careful record of the criteria used to generate, strategies, business plans, budgets, forecasts, supply plans etc so that if challenged in the future the reasoning behind a particular plan can still be understood, even if the originator is no longer available.

Available to Order

The practice of allowing the computer to automatically change due dates on scheduled receipts when it detects that due dates and need dates are out of phase. This technique is not recommended.

The highest reasonable output rate which can be achieved with a given product mix, product specifications, work force, plant, and equipment.

The uncommitted portion of a company’s inventory or planned production. This figure is normally calculated from the Master Production Schedule and is maintained as a tool for order promising.

A technique for calculating operation start and due dates. The schedule is computed starting with the due date for the order and working backward to determine the required start date and/or due dates for each operation.

A method of inventory book-keeping where the book (computer) inventory of components is reduced only after completion of production of their upper level parent or assembly.

The load utilization of transportation methods on return trips.

All of the customer orders booked but not yet shipped, including future due and past due orders.

Basically, the Balanced Score Card (BSC) is a methodology that defines an organization’s performance measurement system or metrics based on the organization’s value drivers and strategy. Once this metric have been defined they are rolled up into a scorecard which the company uses to measure, record and analyse its performance and determine if it is meeting its goals. The concept was developed by Dr Robert Kaplan and David Norton in the early 1990’s and sets out to view performance from a Stakeholder, Process, Environmental and People perspective.

A manufacturing facility whose resources or work centers are organized around particular types of equipment or operations, such as drilling, forging, spinning, mixing, compressing, blending, etc. Products move through departments by individual work orders. (Syn. JOB SHOP).

A process designed to enable a subjective comparison to be made between internal and/or external activities. A process used to identify the specific performance of an activity when compared to best in class and thereby identify any gaps that may exist requiring actions to close.

Standard, published operating methods found to produce the best performance and results in a given industry or organization

A phenomenon where plans are deliberately developed either understating or overstating a situation. Often found when sales teams generate their sales plans and consistently forecast less sales than actually transpires, for this reason sales teams performance should be measured on forecast accuracy and not sales plan performance.

A listing of all the sub-assemblies, intermediates, parts, raw materials, etc. that go into a parent item, showing the quantity of each component required. May also be called “formula”, “recipe”, or “ingredient list” in certain industries.

A list of the required capacity and key resources needed to supply one unit of selected product or family. Rough Cut Capacity Planning uses these bills to calculate the approximate capacity requirements of the master schedule.

The computer technique for passing requirements through pseudo and phantom bill of material items. The process creates requirements for the component materials needed to manufacture higher level items.

In MRP, the process of using pegging data to solve material availability and/or problems. This process is accomplished by the planner (not the computer system), who evaluates the effects of possible solutions. Potential solutions would include compressing lead times, cutting order quantity, substituting material, and changing the master schedule. It is a manual intervention that seeks a solution at the lowest possible level in the MRP to protect stability of the schedule.

A method of implementing Just-in-Time and Total Quality Control where as many JIT/TQC practices as possible are implemented into one product and/or manufacturing process. Breakthrough JIT is one of three “Fast Track Implementation” approaches.

An MRP, DRP or other time-phased system in which all time-phased data are accumulated into time periods or “buckets.” If the period of accumulation would be one week, then the system would be said to have weekly buckets.

See BUCKETLESS SYSTEM, TIME BUCKET.

An MRP, DRP or other time-phased system in which all time-phased data are processed, stored and displayed using dated records rather than defined time periods or “buckets.”

The standard 12 month window representing the company’s expectations for its Fiscal Year.

The practice of transferring items from stores to production areas in bulk, not based on specific work orders

Relates to the activities performed in order to supply a Customer base with its required Products or Service in such a way that Profitability between the engaged parties is mutually generated to sustain each other’s existence

From the Strategic Planning Process has the company been clear in selecting 2 of the 5 competing priorities as the focus for their company:

• Share Value
• Acquisition
• Cash Flow
• Profit
• Growth

From an understanding of the Business Maturity Model a company can determine its position relative to the 4 Phases. The position determined is an expression of the company’s maturity ranging from “Fire Fighting” through to Integration.

A statement of income projections costs and profits usually accompanied by budgets and a projected balance sheet as well as a cash flow (source and application of funds) statement. It is usually stated in dollars. The business plan and the production plan, although frequently stated in different terms, should be in agreement with each other.

The integration of Computer Aided Design and Computer Aided Manufacturing to achieve automation from design through manufacturing.

A more advanced form of Available to Promise (ATP) where the company ensures it has the capability to make the promise for delivery.

What is the capacity required, represents the capability needed to make a given product or service. To satisfy your strategic direction it is essential to identify future capacity requirements in order to plan for their availability when required.

The process of determining how much labor and/or machine resources are required to accomplish the tasks of production, and making plans to provide these resources. Open shop orders, as well as planned orders in the MRP system are input to CRP which “translates” these orders into hours of work by work center by time period.

The concept that sees the optimization of a carrier’s potential through collaboration with others to save on distribution costs. In other words the carrier’s vehicle will be distributing products on behalf of many contributors to the overall supply chain.

A manufacturing process which produces families of parts within a single line or cell of machines, operated by personnel who work only within the line or cell.

A person who leads a change project or business-wide initiative by defining, researching, planning, building business support and carefully selecting volunteers to be part of the change team. Change agents must have the conviction to state the facts based on data, even if the consequences are associated with unpleasantness.

They must be people who have business knowledge, command respect, are well liked and have a real future in the company. Why? Because they are going to be re-designing processes that will deliver the future business, consequently they need to be the best people.

A process that is to be used for requesting and managing changes to products, processes, policies etc to ensure employees cannot make changes without the knowledge and involvement of appropriate people. The process facilitates communication about the requested change among stakeholders, creates a common process for the resolution of changes or problems and reduces the uncertainty around the existence, state and outcome of a change that has been requested. The process is designed to stop the traditional “change for change sake” scenario and will develop the cost associated with the change and when it can be most cost effectively implemented.

For the change control process to work effectively the employees must understand the rules associated with change and how to utilize the Change control process. The authorization process needs to be clearly understood to ensure people do not try to make changes independently.

Or more specifically team charter. It is a written document that defines the team’s mission, scope of operation, objectives, time frame, and consequences. They can be developed by top management and issued to teams or better still the teams can create their own and be presented back. Either way it is essential that Top Management support the charter to ensure the team does not perform incorrectly. This type of communication also enables non-team members to understand what the Top Managers expect from the team. It’s an effective empowerment tool and enables the team to show their authority to non-team members.

A system built around Material Requirements Planning, also including the additional planning functions of Production Planning, Master Production Scheduling, and Capacity Requirements Planning. Further, once the planning phase is complete and the plans have been accepted as realistic and attainable, the execution functions come into play. These include the shop floor control functions of Input-Output measurement, Dispatching, plus Anticipated Delay Reports from both the shop and vendors, Vendor Scheduling, etc. The term “closed-loop” implies that not only is each of these elements included in the overall system but, also, that there is feedback from the execution functions so that the planning can be kept valid at all times.

Unlike mentoring, but often confused. Coaching is specifically designed to improve a person’s performance whilst they undertake a particular task or management role. Mentoring is a much broader subject (see mentoring).

Collaboration is when barriers for people, companies or supply chain members with common interests are broken down to enable teamwork across organizations, supply chains, geographies and disciplines. Collaboration allows the reduction of lifecycles, eliminates wasted time and money, keeps all interested parties informed and discovers new opportunities.

Systems and software that enable group participation in problem or process. Collaboration systems supply methods for group definition, common technology, interaction and follow up, and present a common situation view to all who participate while enabling faster problem resolution.

Purchasing Commodities are natural groupings of items we purchase which have common features such as:

• Common Technology
• Common Terms and Conditions
• Common Suppliers
• Common Logistics Requirements
• Common Service Standards

A type of planning bill of material which groups all common components for product or family of products into one bill of material, structured to a “pseudo” parent item number.

To gain the most out of the communications to be made and to ensure the right people are involved the company must design a Framework of Communications to list, Who, When, What, Where and How. Some communications may be weekly other monthly and some yearly. It is a document to be communicated to clearly demonstrate management’s commitment to open and two communication.

A legal association formed to carry on some commercial or industrial undertaking.

A forecast that has been limited from its initially communicated potential due to known factors such as machine capacity, strategic direction conflict, resource availability, technology constraints etc.

What is the anticipated “Real Interest Rate” and how is this anticipated to influence the consumers buying pattern or rate. In the assumptions would there be an increase in consumption, a decrease or no change?

The concept that plans should be drawn up and held in reserve should the authorized plans or strategic direction fail.

Production where products flow continuously rather than being divided into individual lots of batches.

The practice of partnering between distribution channel members that changes the traditional replenishment process from distributor generated purchase orders, based on EOQs, to the replenishment of products based on actual and forecasted product demand. It is based on the logic of a “Pull” environment and requires accurate Inventory information to ensure waste is not generated.

A method typically used between retailers and distributors or manufacturers that use point of sale inventory and sales data to trigger automatic replenishments, with the vendor assuming responsibility for initiation and fulfillment.

The competencies, i.e. skills, talents, technologies that have been identified as fundamental for the success of the Company and Business, ones that are being heavily invested in through education, training and recruitment. These competencies would be protected against outsourcing decisions as they provide the competitive advantage require for success in their chosen Markets. Core competencies lead to the development of core products. Core Products are not sold to end-users; they are used to build a large number of end user products.

Without core competencies multi-nationals and large concerns become just a collection of discrete businesses. Core competencies become the glue that holds the various units together and thereby generates its aligned portfolio.

Clearly there are numerous processes that are live in any company; however, they all tend to focus on a handful of processes that are known as the CORE PROCESSES – Supply, Product and Services, Demand, Strategic Planning and Supply Chain.

The steps taken to rectify a problem when it has been identified.

The root cause of costs being generated. Depending on your Business Maturity these may be Cycle Times, Quality, Attitudes, Supply Chain linkages etc.

Collaborative Planning, forecasting and replenishment is a visionary framework for aligning supply and demand across a network of trading partners.

Product that is received in a distribution center and immediately loaded on an outbound transportation vehicle for delivery to the next location.

The longest length of time involved to accomplish the activity in question. For any item planned through MRP, it is found by reviewing each bill of material path below the item, and whichever path adds up to the greatest number defines cumulative material lead time. Also called aggregate lead time, stacked lead time, composite lead time, critical path lead time.

The process of “linking” customers and suppliers. This is often made possible by tools such as distribution Resource Planning and Supplier Scheduling. Frequently electronic Data Interchange (EDI) is used as the communications medium

A process that enables understanding of Customer needs and then translates this understanding into actions, which can then be measured. As the actions can be measured it is then possible to determine how improvements can be made which provides a systematic approach to improving your customers satisfaction with your Products and Services.

Physically counting relatively few items in inventory each day throughout the year, rather than counting all of the items at one time (annual physical inventory). Cycle counting is an essential element in achieving the ninety-five percent plus inventory record accuracy necessary for successful MRP.

A technique within Material Requirements Planning used to suppress the reporting of certain action messages created during the computer processing of MRP. Extensive use of dampeners is not recommended.

This refers to the consistency, accuracy and correctness of data stored in a database. The old adage “Rubbish in leads to Rubbish out” is at the heart of this subject along with the drive to ensure only “one set of numbers” is used. What measures are in place to communicate to users that not only has the data been subjected to a major focus that its integrity is 95% or above. For the 6th Edition we are aiming for 99.5%.

This is basically all about how companies store, protect, maintain and correct their data.

The data that has been entered into a system to enable its consistent and accurate functionality to eliminate the potential to receive inaccurate and wasteful action messages. Again this data needs to be the focus of measurement to prove that it is consistently achieving an accuracy of 95% +. For the 6th Edition we are aiming for 99.5%.

To control the run time rules execution, it is possible to specify the period of time in which a rule should be effective.

A need for a particular product or component. The demand could come from any number of sources, i.e. customer order, forecast, interplant, branch warehouse, service part, or to manufacture the next higher level.

See DEPENDENT DEMAND, INDEPENDENT DEMAND.

This function of recognizing and managing all of the demands for products to insure that the master scheduler is aware of them. It encompasses the activities of forecasting, order entry, order promising, and planning for branch warehouse requirements, interplant requirements, and service parts demand.

The triggering of material movement to a work center only when that work center is out of work and/or ready to begin the next job. It in effect eliminates the queue from in front of a work center, but it can cause a queue at the end of a previous work center. When flow has been established you can then supply to actual demand.

(See KANBAN)

Capacity calculated from actual performance data, usually expressed as average output per time period for the last four weeks.

See EARNED HOURS.

The performance actually being achieved even though the authorized hours may suggest that the performance should be higher. The difference between demonstrated performance and authorized performance is known as the Load Factor (see Load Factor) and is used to calculate the Planned Demonstrated Performance. Future plans should not be produced with anything other than the demonstrated performance, if they are they are a wish list.

Demand is considered dependent when it comes from production schedules for other items. These demands should be calculated, not forecasted. A given item may have both dependent and independent demand at any given time.

See INDEPENDENT DEMAND.

A rigorous, structured method of new product design and introduction which intensively involves people from manufacturing, marketing and suppliers in the development process. DFM, done effectively, can dramatically enhance a company’s ability to bring new products to market quickly, at lower costs, and with fewer downstream engineering changes.

In the Strategic Planning Process the need to perform a Diagnostic Review at least once a year is generally stated. This review is deliberately planned and usually see’s one of the Strategic Business Objectives being selected for a detail analysis or diagnostic. Should problems be found then depending on the magnitude of the gap it may be necessary to authorize a re-run of the Strategic Planning Process to correct the situation.

A method of doing inventory record keeping which decreases the inventory balance of an item as material is issued from stock, and increases the inventory balance as material is received into stock. The key concept here is that the book record is updated coincident with the movement of material out of or into stock. As a result, the book record is a representation of what is physically in stock. Also called direct-deduct inventory transaction processing.

A listing of manufacturing orders in priority sequence for each work center. The Dispatch List is usually communicated to the manufacturing floor via hard copy or CRT display, and contains the following detailed information for each job: date, order number, part number, quantity, operation number, operation due date, order due date, and status of the job (at this and previous work center). Dispatch Lists are normally generated daily.

The selecting and sequencing of available jobs to be run at individual work stations and the assignment of these jobs to the workers.

A warehouse with finished goods and/or service items made elsewhere. A typical company, for example, might have a manufacturing facility in Philadelphia and distribution centers in Atlanta, Dallas, Los Angeles, San Francisco, and Chicago. The term distribution center is synonymous with the term branch warehouse, although the former has become more commonly used. When there is a warehouse that regularly supplies other warehouse, it may be called a regional distribution center.

The system that has been created to distribute products to the Customers and Consumers.

The function of determining the need to replenish inventory at distribution centers. A time-phased order point approach is used, based on regional forecasts, customer orders, and inventories. The planned orders at the distribution center level are “exploded” via MRP logic to become gross requirements on the supplying source. In the case of multi-level distribution networks, this explosion process can continue down through the various levels of regional distribution center, factory warehouse, etc. and become input to the master production schedule. Demand on the supplying source(s) is recognized as dependent, and standard MRP logic applies.

The extension of Distribution Requirements Planning into the planning of the key resources contained in a distribution system: warehouse space, manpower, money, trucks and freight cars, etc.

With an abundance of data availability in real time and with the time pressures of modern business data is ever changing requiring safe guards to prevent unauthorized use, maintain its accuracy and ensure appropriate utilization. With ever increasing use of Web Sites data is becoming more and more dynamic as it becomes available to all, when used in collaboration, when used for benchmarking et

A range of order quantity techniques, which are sensitive to changing requirements and/or costs. Examples include least unit cost, least total cost, part period balancing, period order quantity. With the possible exception of the latter, these are not recommended due to their complexity and their tendency to cause “nervousness” within MRP.

The electronic linkage of Purchasers with their Suppliers to conduct all aspects of Procurement, it is a set of systems or services that allow you to manage requisitions for purchasing products.

A statement of output reflecting the standard hours of actual production during the period.

A type of fixed order quantity which determines the amount of an item to be purchased or produced at one time. The intent is to minimize the combined costs of acquiring and carrying inventory. EOQ assumes that acquisition costs (set up, receiving, etc.) are fixed. As such, it is in direct conflict with the Just-in-Time approach, which attempts to drive acquisition costs to zero via minimizing set up time and utilizing techniques such as statistical process control, source inspection, pooled freight arrangements, etc.

The computer-to-computer exchange of information between separate organizations. Companies are now communicating their supplier schedules to suppliers via EDI, instead of mailing printed schedules or hard copy purchase orders.

The systematic identification of non-value adding steps that are then rigorously subjected to improvement process that removes these waste generating steps completely.

A survey that is conducted to understand what employees at all levels of the organization think of the Company, the Business, the Environment, the workplace, the company ethics, the management etc.

Although these can be administered internally the best are those that are done through an independent company who also provides an analysis of the findings.

As with any communication an expectation is created so these surveys will only gain future increased support if positive actions are taken with the findings.

This is a huge subject covering: Employee merit awards and systems, Looking after retired employees, employee insurance, Health schemes, salaries and pensions, mobility assistance, religious needs, scholarships, sports activities, welfare funding and more.

Is a multi-dimensional process that helps employees gain control over their area of responsibility through the offered and accepted responsibility and authority given to then? Employees who accept this power understand their scope of responsibility and use this freedom to progress their situation both in a Business sense and in a personal development sense.

When management empower they do not abdicate from their overall responsibility, on the contrary they have to be more skill in coaching and mentoring to ensure they gain the most from empowering people.

Empowering decompresses organizations as it effectively enables delegated scenarios to be worked on by different levels in the organization.

See Extended Supply Chain.

Products whose customer specifications require unique engineering design, significant customization, or new purchased materials. Each customer order results in a unique set of part numbers, bills of materials, and routings.

A product that requires engineering design, and bill of material and routing work before manufacturing can be completed. Such products typically require master scheduling of “average” or “typical” items or expected activities and capacities, with many individual components being identified only after preliminary design work is complete.

A revision to a bill of material or routing authorized by the Engineering Department.

See Company.

An accounting orientated information system for identifying and planning the enterprise wide resources needed to supply against customer orders. An ERP system differs from the typical MRPII system in technical requirements such as graphical user interface, relational database, use of forth generation language, and computer aided software engineering tools in development, client / server architecture, and open-system portability.

The representation of a set of real or abstract things (people, objects, places, events, ideas, combination of things) that are recognized as the same type because they share the same characteristics and can participate in the same relationship.

Teams developed in the enterprise add into their scope people from either the Customer, Consumers and Suppliers to strengthen their ability to develop solutions for the future.

The design of an end-to-end supply chain with the resources, capability, inventory and optimized services required to supply the customers / consumers with their stated needs. The Extended Supply Chain therefore considers all parties involved in the supply of quality Products and Services, consequently, third party suppliers and customers/consumers are included.

Elements of a setup procedure performed while the equipment is in production.

See INTERNAL SETUP TIME.

A manufacturing facility in which a configuration or geometric change is the majority of activity.

A method of implementing DRP very quickly over a small number of product families. This is one of three “Fast Track Implementation” approaches.

An implementation approach which focuses on a small number of products and/or processes, with the goal of achieving significant benefits in a very short time, typically about one hundred days. The three Fast Track Implementation routes are Breakthrough JIT Pilot, Quick Slice MRP, and Fail-Safe Mini-DRP.

Also referred to as the “finishing schedule” as it may include other operations than simply the final operation, and also may be used for environments where there is no assembly but only filling, packaging, painting, etc. It is a schedule of end items either to replenish finished goods inventory or to finish a make-to-order product. For make-to-order products, it is prepared after receipt of a customer order, is constrained by the availability of material and capacity, and it schedules the operations required to complete the product from the level where it is stocked (or master scheduled) to the end item level.

Conceptually, the term means putting no more work into a work center than it can be expected to execute. Master Scheduling with Available-To-Promise and associated Rough-Cut Capacity Planning, is fundamentally a finite loading technique, and is very effective.

However, the specific term Finite Loading usually refers to a computer technique that involves automatic priority revision in job shop schedules for components, in order to level the workload operation by operation. Successful applications of this kind of finite loading are difficult to find. These kinds of automated computer techniques are not recommended because they tend to fence out human judgment and knowledge of the business, and drastically weaken accountability.

An equipment scheduling technique that builds a schedule by proceeding sequentially from the initial period to the final period while observing capacity limitations. A Gantt chart may be used with this technique.

A planned order that can be frozen in quantity and/or time. The computer is not allowed to change it; this is the responsibility of the planner in charge of the item. This technique can aid planners to respond to material and capacity problems by firming up selected planned orders. Firm planned orders are also the normal method of stating the master production schedule.

An order quantity technique where the same quantity is planned to be ordered each time

A manufacturing process designed so that production may be changed often, rapidly matching output to changes in demand. It can involve mixed-model scheduling, multi-skilled operators, standardization of equipment for quick changeovers, and design of the process to allow workers to do more than one job and to cut down on transportation time.

A manufacturing facility whose resources or work centers are organized in such a manner to have an uninterrupted material flow that results in a continuous production layout. The plant layout (arrangement of machines, cells, lines, etc.) is designed to facilitate the product flow. Facilities in the “process industries” (chemicals, oil, paint, etc.) are examples where each product, though variable in material specifications, follows the same path through the plant. Many “repetitive” manufacturing operations are also examples of flow plants.

A plant in which machines and operators handle a standard, often uninterrupted, material flow. The plan layout (arrangement of machines, cells, lines, etc.) is designed to facilitate a production “flow”. Facilities in the “process industries” (chemicals, oil, paint, etc.) are extreme examples of flow shops, where each product follows essentially the same path through the plant. Many “repetitive” manufacturing operations are also examples of flow shops (Syn: process plant).

See JOB SHOP.

A system that allows the user to simulate the effectiveness of numerous forecasting techniques, thereby being able to select the most effective one

The process of the forecast as customer orders are entered. The sum of the unconsumed forecast and the booked customers should remain constant unless an intentional change to the forecast is desired. Abnormal demands should not consume the forecast.

Unconsumed forecast can be rolled into the next period providing there have been no changes to assumptions. At the end of a month the decision to roll may be changed because the next month’s forecast should not be increased if the assumptions have not be changed, in this case it could be dropped.

On the journey to 6 Sigma levels of performance there are other levels quoted one of which is 4-sigma, which equates to 6,210 defects per million opportunities. As we know 6-sigma equates to 3.4 defects per million opportunities. 2-sigma equates to 308,537 defects per million opportunities.

Trading partner agreements that formally define supply chain partnerships for objectives, performance measures, goals, roles, responsibility, accountability, risk sharing, information sharing, and methods of information sharing. It is a signed document between trading partners.

A method of incentive compensation where employees share collectively in savings from productivity improvements (as opposed to individual or departmental incentives, which can frequently create problems in a JIT/TQC environment).

In a way they should be seen as very similar to the gates in the Stage and Gate project management tool, however, in this instance they relate to the company rather than a specific project. There are 4 Gateways:

• Factory in-bound
  Department in-bound
  Internal out-bound
  External out-bound

As with stage and gate there are specific rules governing the Gateways that need to be clearly communicated and adhered to.

A group of practices and principles which defines how a manufacturing company should be managed. Included are such elements as the need for data accuracy, frequent communications between Marketing and Manufacturing, top management control of the production planning process, systems and procedures capable of validly translating high level plans into detailed schedules, etc.

Understanding the environment around you and how the actions you take improve those of your neighbors

The total time a specific resource has available, irrespective of any constraints.

See LOAD FACTOR.

The total of independent and dependent demand for a part or an assembly prior to the netting of on-hand inventory and scheduled receipts.

(Syn. PROJECTED GROSS REQUIREMENTS).

An Engineering and Manufacturing philosophy which identifies the “sameness” of parts, equipment or processes. It provides for rapid retrieval of existing designs and anticipates a cellular type production equipment layout.

1. In master production scheduling, a quantity of stock used to protect against uncertainty in demand. The hedge is similar to safety stock, except that a hedge has the dimension of timing as well as amount.

2. In purchasing, any purchase or sale transaction intended to eliminate the negative aspects of price fluctuations.

A method of displaying output from an MRP system where requirements, scheduled receipts, projected balance, etc. are displayed horizontally, i.e., across the page. Horizontal displays are difficult to use in conjunction with bucketless systems.

Demand for an item is considered independent when such demand is unrelated to the demand for other items. Demand for finished goods and service parts are examples of independent demand.

A technique for planning the workload without regard to available capacity. The result is typically a load that is not level over time. The leveling of the load is accomplished through Capacity Requirements Planning.

A technique for capacity control where actual output from a work center is compared with the planned output (as developed by CRP and approved by Manufacturing). The input is also monitored to see if it corresponds with plans so that work centers will not be expected to generate output when jobs are not available to work on.

Developed from the Strategic Business Objectives you will find a hierarchy of measures that clearly demonstrates to all employees the importance of their respective roles in achieving the companies future direction.

Processes performed between supply chain linkages. For example, the process between a warehouse wholesale operation and a transport company, pick and ship.

Elements of a setup procedure performed while the equipment is not in production.

See EXTERNAL SETUP TIME.

Demand for material to be shipped to another plant or division within the corporation. Although it is not a customer order, it is usually handled by the master production scheduling system or MRP in a similar manner.

The number of times that an inventory “turns over” or cycles during the year. One way to compute inventory turnover is to divide the average inventory level into the annual cost of sales. For example, if average inventory were three million dollars and cost of sales were thirty million, the inventory would be considered to turn ten times per year.

(see SPINS)

A set of 5 auditable standards of the International Standards Organisation that establishes the role of a quality system in a company and which is used to assess whether the company can be certified as compliant to the standards.

The “master” record for an item. Typically it contains identifying and descriptive data, planning values (lead times, order quantities, etc.) and may contain data on inventory status, requirements, and planned orders. Item records are linked together by bill of material records (or product structure records), thus defining the bill of material.

A functional organization whose departments or work centers are organized around particular types of equipment or operations, such as drilling, forging, spinning, mixing, compressing, blending, etc. Products move through departments by individual work orders.

(See FLOW SHOP)

In the broad sense, Just-In-Time is an approach to achieving excellence in a manufacturing company based on continuing elimination of waste and consistent improvement in productivity. Waste is then defined as those things which do not add value to the product. Waste can be divided into two categories: necessary and unnecessary. Unnecessary waste should be eliminated, and necessary waste should be made unnecessary so that it too can be eliminated.

In the narrow (and less correct) sense, Just-In-Time is considered by some as a production and logistics method designed to result in minimum inventory by having material arrive at each operation just in time to be used.

A method for just-in-time production in which consuming (“downstream”) operations pull from feeding (“upstream”) operations. Feeding operations are authorized to produce only after receiving a kanban card (or other trigger) from the consuming operation. Kanban in Japanese loosely translated means “card,” literally “billboard” or “sign.”

(See: DEMAND PULL)

​(See: PICKING)

This is a difficult subject to define in a short statement because it covers such a broad topic, however, from the 6th Edition’s point of view, we are looking for organizations to ensure they become less dependent on people as they Journey through Phase 2. In simple terms, as employees mature and become less and less focused on power management they begin to develop team working skills which in turn leads to them sharing knowledge.

As this knowledge is being shared there needs to be a process to ensure it is captured in the companies processes to ensure it is not lost.

This knowledge capturing capability is part of knowledge management and would commence the preparation for Automation in Phase 3.

In a knowledge worker organization people are the main resource. In the current climate of rapid technological change, it is becoming necessary for knowledge workers to be in continuous learning mode. Government agencies often find themselves unable to recruit new technical workers and at the same time are showing a decline in training of existing employees. Learning is more than training it also includes things like mentors and tutors within the organization, as well as that ease communication among workers that allows them to readily get help on a problem when it is needed. It also includes technological tools like the Intranet.

A span of time required to perform an activity, normally the procurement of materials and/or products either from an outside supplier or from one’s own manufacturing facility. The individual components of any given lead time can include some or all of the following: order preparation time, queue time, set up time, production time, move or transportation time, receiving and inspection time.

A term used in MRP where a planned order receipt in one time period will require the release of that order in some earlier time period based on the lead time for the item. The difference between the due date and the release date is the lead time offset.

Lean is a methodology to be applied when flow can be established and supply achieved against a pull from demand. The methodology follows 5 steps to the perfect lean enterprise.

Lean is the antidote to waste (MUDA). It is a way to do more and more with less and less – less human effort, less equipment, less time and less space – while coming closer to providing customers exactly what they want. A way of creating work rather than simply destroying jobs in the name of efficiency.

A learning organization is one in which people at all levels, individually and collectively, are continually increasing their capacity to produce results they really care about.

Every item in a bill of material is assigned a level code signifying the relative level at which it is used. Normally the end item is assigned level “o” and the items immediately going into it level “1” and so on. The MRP explosion process starts from level “0” and proceeds downwards one level at a time.

The amount of work scheduled for a manufacturing facility, usually expressed in standard hours, or units of production.

A factor used to translate standard hours into gross hours and compensates for all constraints that cause gross hours and standard hours not to be equal.

A statement of the key resources required to manufacture one unit of a selected item. Often used to predict the impact of the item scheduled in the production plan and/or the master schedule on these resources.

The distribution of capacity to effectively provide a more balanced supply environment.

In an industrial context, this term refers to the functions of obtaining and distributing material and product.

The planning activities required to obtain and distribute material and/or product to its correct location.

An order quantity technique in MRP which generates planned orders in quantities equal to the net requirements in each period. Also called “discrete”, “one for-one”.

A technique for calculating future workload in Manufacturing. Machine loading differs from Capacity Requirements Planning in that it does not use the planned orders from MRP, but operates solely from scheduled receipts. As such, it has a short horizon and hence very limited usefulness.

A product which is finished after receipt of a customer order. Frequently, long lead time components are planned prior to the customer order arriving in order to reduce the delivery time to the customer.

A make-to-order product for which key components (bulk, semi-finished, intermediate, sub-assembly, fabricated, purchased, packaging, etc.) used in the assembly or finishing process are planned and stocked in anticipation of a customer order.

A product planned to be shipped routinely from finished goods, “off-the-shelf”, and therefore, finished prior to the customer order arriving.

Managers delegate as much responsibility and activity as possible to those below them, stepping in only when absolutely necessary. A principle in management in which management decisions that cannot be made at one level is passed up to the next level for a decision (i.e. exception decisions are passed up the management tree). The principle used in budgetary control in which items of income or expenditure that show no variance or small variances require no action, whereas exceptional items showing adverse variances to an unacceptable level require action to be taken.

A method for the effective planning of the resources of a manufacturing company. Ideally, it addresses operational planning in units, financial planning in dollars, and has a simulation capability to answer “what if” questions. It is made up of a variety of functions, each linked together: Business Planning, Production Planning, Master Production Scheduling, Material Requirements Planning, Capacity Requirements Planning and the execution support systems for capacity and material. Output from these systems would be integrated with financial reports such as the business inventory projections in dollars, etc. Manufacturing Resource Planning is a direct outgrowth and extension of closed loop MRP. MRP II has also been defined, validly, as a management system based on network scheduling. Also, and perhaps best, as organized common sense.

A collective pattern of decisions that act upon the formulation and deployment of manufacturing resources. To be most effective, the manufacturing strategy should act in support of the overall strategic direction of the business unit, and provide competitive advantage where called for.

See: MASTER PRODUCTION SCHEDULE

The anticipated build schedule. The master scheduler maintains this schedule and, in turn, it becomes a set of planning numbers which “drives” MRP. It represents what the company plans to produce expressed in specific configurations, quantities and dates. The master production schedule must take into account customer orders and forecasts, backlog, availability of material, availability of capacity, management policy and goals, etc.

An item number selected to be planned by the master scheduler. The item would be deemed critical in terms of its impact on lower level components and/or resources such as skilled labor, key machines, dol

The job title of the person(s) who manage the Master Production Schedule. This person should have substantial knowledge of the company’s products, processes, and people.

A set of techniques which uses bills of material, inventory data and the master production schedule to calculate requirements for items. It makes recommendations to release replenishment orders for material. Further, since it is time-phased, it makes recommendations to reschedule open orders when due dates and need dates are not in phase. Originally seen as merely a better way to order inventory, today it is thought of as primarily a scheduling technique, i.e., a method for establishing and maintaining valid due dates on orders. It is the foundation for Closed-loop MRP.

An organizational structure which groups all or most of the functions related to the complete cycle of material flow, from the purchase and internal control of production materials, to the planning and control of work-in-process, to the warehousing, shipping, and distribution of the finished product.

An organizational structure that combines the strengths of the functional organization with those of a process based organization to enable Customer Focus and Business Focus.

In short this is the planned demonstrated capacity increased by a known achievable amount, may be through the authorization of overtime for example. It is not in question; this increase will always be possible.

This is the actual time recorded from the correction of one failure to the occurrence of the next. The mean therefore is the statistical mean of a set of data relating to this failure.

This is the actual time to repair/recover a failure from the point of detection to normal operation. The mean therefore is the statistical mean of a set of data relating to the repair.

Mentoring from the Greek word enduring is defined as the sustained relationship between a youth and an adult. Through continued involvement the adult offers support, guidance, and assistance as the younger person goes through a difficult period, faces new challenges, or works to correct earlier problems. In particular, where parents are either unavailable or unable to provide responsible guidance for their children, mentors can play a crucial role.

The two types of mentoring are natural mentoring and planned mentoring. Natural occurs through friendship, collegiality, teaching, coaching and counseling. In contrast, planned occurs through structured programs in which mentors and participants are selected and matched through formal process.

Method of Marketing or Merchandising products or categories of products to drive sales demand – components of merchandise planning are: assortment mix, product packaging, product location, product price, and marketing promotion/advertising.

See POKA-YOKE.

Scheduling and making a variety of products in varying lot sizes so that a plant is producing close to the same mix of products as will be sold that day. The mixed model schedule governs the making and the delivery of component parts, including outside suppliers. The goal is to build every model every day, according to demand.

An organization of bills of material in which components are grouped by product option or feature. Often used in products with many optional features, e.g., eight, six and four cylinder engines; automatic vs. manual transmissions; power steer vs. manual, etc.

A method of processing material requirements planning on the computer whereby the material plan is continually retained in the computer. Whenever there is a change in requirements, open order or inventory status, bills of material, etc. a partial explosion is made only for those parts affected by the change.

In MRP, the net requirements for an item are derived as a result of netting gross requirements against inventory on hand and the scheduled receipts. Net requirements, lot sized and offset for lead time, become planned orders.

A term of many opinions and practices, but most generally defined as a product or service new to the firm marketing it. It usually excludes products or services that are only changed in promotions.

Elements of a process that have been identified as waste and as such can be removed from the process as a non-value adding step.

The quantity shown in the inventory records as being physically in stock.

A released manufacturing order or purchase order. Also called scheduled receipt.

The action of making the best of something, the state or the condition of being optimal to ensure the most cost effective supply of product and/or service.

A general term that may refer to such diverse items as a purchase order, shop order, customer order, planned order or schedule.

The process of accepting and translating what a customer wants into terms used by the manufacturer. This can be as simple as creating shipping documents for a finished goods product to a far more complicated series of activities including engineering effort for engineer-to-order products.

An inventory replenishment technique which considers forecasted demand over replenishment lead time, plus an allowance for safety stock. When the available inventory of an item drops below the order point, a replenishment order is triggered. This technique assumes that demand is linear and consistent, and as such is not appropriate for virtually all items with dependent demand. The “two-bin”, “min-max”, and “order-up-to” techniques are all variations of the basic order point approach.

The process of making a delivery commitment, i.e., answering the question “when can you ship?” For make-to-order products this usually involves a check of material and capacity availability. This can be greatly facilitated via the use of available-to-promise information in the master schedule.

The amount of an item to be ordered. Also called lot size.

The hierarchy of roles that is used to run a Company that clearly shows the relationship between employees, departments, functions and processes.

The structure of a European or Global Company showing the relationship between HQ and all of the Companies physical assets.

This is when a company decides to buy from the supply chain rather than retain the capability in-house.

The basis for the principle of the “vital few-trivial many”. For example, in many companies, 30 to 60 percent of the sales come from 5 to 10 percent of the products. Pareto’s Law is also the basis for ABC inventory analysis and is used extensively within Just-In-Time and Total Quality Control.

A partnership requires an agreement, often called a “Partnership Agreement”, between two or more individuals or entities to jointly own and carry on a trade or business. In general, a partnership shares the same advantages and disadvantages.

In MRP, pegging displays for a given item the details of the sources of its gross requirements and/or allocations. Pegging can be thought of as,“live” where-used information.

Failure free delivery (including correct location), quality, documentation (including invoice information, certificates etc), correct packaging and correctly organized for ease of use.

An order quantity technique under which the order quantity will be equal to the net requirements for a given number of periods (e.g., days or weeks) into the future. Also called days’ supply, weeks’ supply, fixed period.

An intermediate or assembly which is manufactured but is immediately consumed in the manufacture of its parent. Phantoms are “blow-through” items.

A bill of material coding and structuring technique used primarily for transient (non-stocked) sub-assemblies. For the transient sub-assembly item, lead time is set to zero and the order quantity to lot-for-lot. This permits MRP logic to drive requirements straight through the phantom item to its components, but retains its ability to net against any occasional inventories of the sub-assembly. This technique also facilitates the use of common bills of material for Engineering and Manufacturing.

A planned situation which determines when a new product will be phased in to the portfolio and made available for sale and when the product it is replacing will be removed.

A document used to pick manufacturing or customer orders.

The process of issuing components to the production floor, on a job-by-job basis (also called kitting). Can also refer to the picking of customer orders.

Similar to the techniques used in production to smooth manufacture but in this case to smooth the workload in the warehouse.

Shop floor commitment of hours available to the planner for scheduling purposes. As this is a commitment the planned capacity will be based on the Demonstrated capability, consequently, it is often referred to as Planned Demonstrated Capacity. It is the expected capacity to be available in a future time period.

A suggested order quantity and due date created by MRP processing, when it encounters net requirements. Planned orders are created by the computer; exist only within the computer, and may be changed or deleted by the computer during subsequent MRP processing if conditions change. Planned orders at one level will be exploded into gross requirements for components at the next lower level. Planned orders also serve as input to capacity requirements planning, along with scheduled receipts, to show the total capacity requirements in future time periods.

See: SUPPLIER SCHEDULER

An artificial grouping of items and/or events, in bill of material format, used to facilitate master scheduling and/or material planning.

The amount of time a plan extends into the future.

A Japanese phrase which means “mistake proofing”. It refers to the designing of products and/or processes to make defects impossible.

As an organization matures into Phase 2 of the maturity map its employees will be more inclined to work as Multi-Functional teams. If this is the case then the organization is more generally focusing on the needs of processes and not those of the traditional functions. To capitalize more on this many organizations will re-organize so that they have a deliberate process focus, consequently, their organization may be represented by:

• Customer Development Process Director
  Order Fulfillment Director
  Strategic Planning Director
  Supply Chain Director
  New Product Director

A manufacturing facility in which a chemical or compositional change is the majority of activity.

A multi-functional team of people brought together to focus their individual skills and competencies on a particular process to ensure it works effectively and efficiently. Process teams generally exist in Phase 2 as the company’s environment is maturing to enable more and more employees to move from the safety of their functional homes.

See: SALES AND OPERATIONS PLANNING

The overall level of manufacturing output planned to be produced. Usually stated as a monthly rate for each product family (group of products, items, options, features, etc.). Various units of measure can be used to express the plan: units, tonnage, standard hours, number of workers, and others. The Production Plan is management’s authorization for the Master Scheduler to convert it into a more detailed plan, i.e. the Master Production Schedule.

The inventory balance projected out into the future. It is the running sum of on hand inventory, minus requirements, plus scheduled receipts and (usually) planned orders.

A grouping of components which is artificial in that it cannot be manufactured. “Pseudo” common parts groups and option groups are frequently found in modularized bills of materials. Pseudos are “blow-through” items.

Usually refers to how material is moved on the plant floor. Pull indicates that material moves upon only receipt of a signal from the next operation.

See KANBAN

Usually refers to how material is moved on the plant floor. Push indicates that material moves to the next operation automatically upon completion of the prior operation.

Creating the capability and responsibility for 100% quality as part of the production process. Separate inspection steps can then normally be eliminated. This concept applies not only to suppliers, but also to one’s own plants.

If the quality of life at work could be improved, it would benefit and reward the individual employee but also the company, its customers and society as a whole.

Companies should recognize the need not to burn employees out, not to exploit employees, realize they have homes and families etc.

Job satisfaction is not as much about the job itself as it is about how you hold the circumstances of your job in mind. Quality of life in the work place comes when you separate who you are from “the job”—when you can look at what you do as a source of energy, fulfillment and learning.

A waiting line. In manufacturing, the jobs at a given work center waiting to be completed.

The amount of time a job waits at a work center before set up or work is performed on the job. Queue time is one element of total manufacturing lead time. Increases in queue time result in direct increases to manufacturing lead time.

A method of implementing most of the MRP II functions into a small slice of the business, typically one product or product line, in a very short time. Quick Slice MRP is one of the Fast Track Implementation approaches.

A method of processing material requirements planning on the computer where by the master production schedule is totally re-exploded down through all the bills of material, at least once per week to maintain valid priorities. New requirements and planned orders are completely “regenerated” at that time.

Production of discrete units, planned and executed via schedule, usually at relatively high speeds and volumes. Material tends to move in a sequential flow.

See FLOW MANUFACTURING

The capacity of a system or resource needed to produce a desired output in a particular time period.

A fundamental piece of MRP logic which assumes that existing open orders can be rescheduled in nearer time periods far more easily than new orders can be released and received. As a result, planned order receipts are not created until all scheduled receipts have been applied to cover gross requirements.

Capacity that has been planned for a specific purpose or set aside to deal with abnormal demands.

See ROUGH CUT CAPACITY PLANNING

If you have a situation that consumes resource and tends to happen in a repeated fashion then there is a possibility that it might be beneficial to figure out what is really causing this situation to occur and remove it permanently. This is generally referred to as Root Cause Analysis, finding the real cause of the problem and dealing with it rather than simply continuing to deal with the symptoms.

The process of converting the production plan and/or the master production schedule into capacity needs for key resources: manpower, machinery, warehouse space, vendors’ capabilities, and in some cases, money. Load profiles are often used to accomplish this. The purpose of rough cut capacity planning is to evaluate the plan prior to exploding it through MRP. Sometimes called Resource Requirements Planning.

A set of information detailing the method of manufacture of a particular item. It includes the operations to be performed, their sequence, the various work centers to be involved, and the standards for setup and run. In some companies, the routing also includes information on tooling, operator skill levels, inspection operations, testing requirements, etc.

In general, a quantity of stock planned to be available to protect against fluctuations in demand and/or supply.

A technique in MRP where by material is planned to arrive ahead of the requirement date. The difference between the requirement date and the planned in-stock-date is safety time.

The function of setting the overall level of manufacturing output (Production Plan) and other activities to best satisfy the current planned levels of sales (Sales Plan and/or Forecasts) while meeting general business objectives of profitability, productivity, competitive customer lead times, etc. as expressed in the overall Business Plan. One of its primary purposes is to establish production rates that will achieve management’s objective of maintaining, raising or lowering inventories or backlogs, while usually attempting to keep the work force relatively stable. It must extend through a planning horizon sufficient to plan the labor, equipment, facilities, material and finances required to accomplish the production plan. As this plan affects many company functions, it is normally prepared with information from Marketing, Manufacturing, Engineering, Finance, Materials, etc.

The overall level of sales expected to be achieved. Usually stated as a monthly rate of sales for a product family (group of products, items, options, features, etc.) It needs to be expressed in units identical to the Production Plan (as well as dollars) for planning purposes. It represents Sales and Marketing Managements’ commitment to take all reasonable steps necessary to make the Sales Forecast (a prediction) accurately represent actual customer orders received.

A timetable for planned occurrences, e.g. shipping schedule, master production schedule, maintenance schedule, and supplier schedule. Some schedules include the starting and ending time for activities, e.g. project schedule.

Within MRP, open manufacturing orders and open purchase orders are considered as “scheduled receipts” on their due date and will be treated as part of available inventory during the netting process for the time period in question. Scheduled receipt dates and/or quantities are not normally altered automatically by the computer. Further, scheduled receipts are not exploded into requirements for components as MRP logic assumes that all components required for the manufacture of the item in question have either been allocated or issued to the shop floor.

A percentage factor used by MRP to increase gross requirements of a given component to account for anticipated loss of that component during the manufacture of its parent. This factor is applied to the Bill of Material link.

See SHRINKAGE FACTOR.

The direct reports of the managers who make up the Top Management Team, however, it really does depend on the size of the organization because some smaller companies would describe their Top Management Team as being one and the same. Multi Nationals with a CEO and Vice Presidents would probably describe their Director level as the Senior Managers.

Service level agreements are fundamental to both providers and recipients of service. They define the terms of engagement – the rules that will govern the relationship.

Parts used for the repair and/or maintenance of an assembled product. Also called Repair Parts, Spares.

Through the development of a team based culture it is much more probable to see shared learning as people have become much easier with each other. The idea is that people more freely share experiences, knowledge and skills consequently, increasing each other’s abilities and understanding. It should be an encouraged value within an organization and communicated as a supporting activity to on going education and training program.

A system for utilizing data from the shop floor as well as data processing files to maintain and communicate status information on manufacturing orders and work centers. The major sub-functions of shop floor control are:

1. assigning priority of each shop order.

2. maintaining work-in-process quantity information via data collection from the shop floor.

3. conveying shop order status information.

4. providing actual input and output data for capacity control purposes.

5. providing quantity by location by shop order for work-in-process inventory and accounting purposes.

6. providing measurement of efficiency, utilization and productivity of manpower and machines.

A stocking point on the shop floor. Completed production of components is transacted (received) into the shop order close-out station and subsequently transacted (issued) to assembly or other “downstream” operations This technique is used to reduce material handling by not having to move items into and out of stockrooms, while simultaneously enabling a high degree of inventory record accuracy.

A factor used in Material Requirements Planning which compensates for expected loss during the manufacturing cycle either by increasing the gross requirements of components or by increasing planned orders. The shrinkage factor differs from the scrap factor in that shrinkage affects all uses of the part its components. The scrap factor relates to only one parent-component usage. This factor is applied to the item master for the part.

See SCRAP FACTOR

A simple concept that basically means employees will assume all is well and as planned unless somebody tells them differently. It is a concept to stop the traditional running around after people to check that they have completed their actions.

Within MRP II, utilizing 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 financial mode to help answer the question “do we really want to?”

An approach to reduce all setup or changeover times to less than ten minutes. It is based on dividing all setup activities into external activities (can be performed while the process is still running) and internal activities (can only be performed while the process is stopped). As many activities as possible are done externally, so that internal activities and hence machine downtime are minimized.

See: EXTERNAL SETUP TIME and INTERNAL SETUP TIME

In simple terms, a situational leader is one who can adopt different leadership styles depending on the situation.

Most of us do this anyway with our dealings with people: we try not to get angry with a nervous colleague on their first day, we chase up tasks with some people more than others because we know they’ll forget otherwise. Its knowing when to Direct, Coach, Support and Delegate.

A compensation method where workers’ pay is based partially on the number of different skills they possess. People who can do a wider variety of jobs are paid more for a given job than others. Skill-based compensation plans can enhance factory flexibility, resulting in higher output and lower work-in-process inventories.

To ensure that the right capabilities exist in the company to achieve its Strategic Business Objectives the necessary skill set must be developed to ensure this capability exists when required. This could relate to specific people having the right skill and talent or to a team having the right mix of people hence creating the right skill set.

These systems may include Shoe Sorters, Cross Belt Sorters, Pop-Wheel and Roller Sorters, a variety of conveyors, and other automated sortation systems. They are designed for either low or high volume sizes to promote shipping accuracy, and the ability to ship more frequently. They also offer increased productivity, labor savings, cost reduction, and lead to vastly improved customer satisfaction.

The number of inventory turns during a cycle, such as monthly or yearly.

See: INVENTORY TURNOVER

These are equivalent to the “GATES” in the Stage and Gate process.

The length of time that should be required to:

a) set up a given machine or operation and:

b) run one part/assembly/batch/end product through that operation. This time is used in determining machine requirements and labor requirements. Also frequently used as a basis for incentive payrolls and cost accounting.

A set of techniques based on the continuous measurement of processes and/or products during production. The goal of SPC is to eliminate the production of defects by indicating in advance when a process is going out of control. To be effective SPC usually requires a company to authorize the production workers to stop the process rather than make bad items. SPC is a key element of Quality At The Source and Total Quality Control.

The amount of on hand material available for planning and promising purposes, which will be held at various points in the end-to-end supply chain.

See: JUST-IN-TIME

Usually, developed as part of the Strategic Planning Process, the company will have between 4 and 6 Strategic Objectives that have been so selected that if achieved will drive the company to its created future, towards its vision. These objectives are quantifiable and clear and will be explained to the employees through the deployment process and followed up monthly through Integrated Business Management.

These are activities that have resulted, or will result, from the companies Strategic Planning Process. To achieve a companies 5 or 10 year Strategic Plan requires the prioritization of Strategic Initiatives to enable the company’s future to be achieved.

Is a comprehensive approach to managing an enterprise’s interactions with the organizations that supply the goods and services it uses. The goal of SRM is to streamline and make more effective the processes between an enterprise and its suppliers.

A person whose main job is working with suppliers regarding what’s 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, etc. 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.

See: SUPPLIER SCHEDULING

A purchasing approach which provides suppliers with schedules rather than individual hard-copy purchase orders. Normally a supplier scheduling system will include a business agreement (contract) for each supplier, a daily or weekly 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 very well, because it is essential in this arrangement to routinely provide the supplier with valid due dates. Some form of supplier scheduling is essential for just-in-time purchasing.

See: VENDOR SCHEDULING

The process from the initial raw materials to the ultimate consumption of the finished product linking across supplier-user companies. The functions within and outside a company that enables the value chain to make products and services to customers.

Many techniques are available; basically, you use a software tool to construct and run your supply chain to identify problems and bottlenecks before the supply chain is physically set up.

Within the end-to-end Supply Chain there will be various suppliers, you included, which individually are referred to as Supply Points.

A system where the production and movement of inventory is determined by a pre existing schedule that authorizes a material issue or transfer, or the start of a production operation. The using department or location receives material when determined by the feeder location and not based on his or her generation of a replenishment signal.

As part of the operating strategy the required supply chain design and make buy policies will be determined to deliver the requirements of the Marketing Strategy.

To bring to the same level, rate or status, as in the synchronization of linked production resources to the same timing or volume, or in distributing the same set of data to remote databases.

Through the development of a suitably supportive and empowered environment, it is possible to make the company values generate an ability for employees at all levels to lower traditional paradigms. With this ability, employees have the potential to work together better which over time leads to the company enabling teamwork at all levels.

It’s a focus on the soft issues coupled with the hard measures that make a team-based culture possible. It’s not teams for team’s sake but an ability to call upon when the need arises.

The specific knowledge of how a process, tool, machine, etc. performs which may then enable improvements to be introduced so that performance is improved.

The simplest definition is a Tool. It refers to the language or terminology of a particular subject and how it is developing and maturing as knowledge introduces new aspects.

A number of days of data summarized into one columnar display. A weekly time bucket in MRP would contain all of the relevant data summarized for an entire week. Weekly time buckets are considered to be the largest possible (at least in the near and medium term) to permit effective MRP.

A point in time where various restrictions or changes in operating procedures take place. For example, changes to the master production schedule can be accomplished easily beyond the cumulative lead time, whereas changes inside the cumulative lead time become increasingly more difficult, to a point where changes should be resisted. Time fences can be used to define these points.

MRP for independent demand items. Gross requirements come from a forecast, not via explosions. This technique can be used to plan warehouse inventories as well as planning for service parts (repair parts, spares) since MRP logic can readily handle items with dependent demand, independent demand or a combination of both.

The identification and communication of time fences and associated time zones are essential as they clearly demonstrate when serious costs will be incurred should changes to the schedules be authorized. Generally, changes that are to be made affecting the Emergency zone can only be authorized at Senior Management level due to the costs involved. Rules of this nature need to be thought through and communicated.

The definition of Time Fences indicates that between them are zones, generally speaking there are two, the Emergency Zone and the Trading Zone. The trading zone lies between the Cumulative lead time and the Emergency time fence, consequently the Emergency Zone indicates the period where assets are being used to supply products.

The CEO and his immediate direct reports constitute the Top Management Team. Where there is a General Manager at a site for example, then the Top Management team would be the GM and his immediate direct reports.

The present value of all costs associated with a product, service or capital equipment that are incurred over its expected life.

When lean manufacturing machine downtime becomes a problem a different approach to maintenance is required.

The common focus is changed from fixing breakdowns to preventing them. To do this a process needs to be developed to transfer the skills between machine operators and maintenance people.

Since operators are closest to the machines, they must be included in maintenance and monitoring activities in order to prevent and provide warning of malfunctions. The machine operator stays and helps when the machine breaks down, learns how to do some of the routine maintenance tasks like cleaning, and detecting abnormal conditions early.

Total Productive Maintenance is the systematic execution of maintenance by all employees through small group activities. The dual goals are zero breakdowns and zero defects; this improves equipment efficiency and reduces costs. It also reduces inventory costs associated with spare parts. The 5 goals of TPM are:

• Improve equipment effectiveness
  Achieve autonomous maintenance
  Plan maintenance
  Train all staff in relevant maintenance skills
  Achieve early equipment management

Where the trading partners have developed such a mature relationship they are able to collaborate on Planning and Forecasting.

A supply chain vendor or customer that does business with a given organization and normally has linked communications.

The optimized utilization of transport taking into account, load size, shortest route etc.

A master scheduling approach for make-to-order products where an end product type is master scheduled along with key options and common parts.

Production lines shaped like the letter “U”. This shape allows workers to easily perform several different tasks without much walk time. U-lines can promote communication among workers.

Industry standards body used for Bar Coding and RFID.

In simple terms, without getting into statistical jargon this refers to the performance being achieved by companies who are in the top 25%. The Upper Quartile is the median of the upper half of a data set and represents the worst performer in that upper set.

There are three propositions; Price Competitive, Customer Focused or Product Leader. Only one can be selected as the focus with the other two supporting. In all cases, they need to be supported by Operational excellence. Normally, the selection of which proposition is to be the focus would be done through the Strategic Planning Process; the proposition may change over time as the company and its market matures.

Value stream mapping is a paper and pencil tool that helps you to see and understand the flow of material and information as a product or service makes its way through the value stream.

A value stream map takes into account not only the activity of the product, but the management and information systems that support the basic process. This is especially helpful when working to reduce cycle time, because you gain insights into the decision making flow in addition to the process flow. It is actually a Lean tool.

The basic idea is to first map your process, then above the map the information flow that enables the process to occur.

Values describe what your management really cares about. What it holds dear. What makes them tick? How do your managers respond to a trade off between product quality and profit? That’s really a question of value.

Is the ratio between the steps in a process that add value divided by the total elapsed time, expressed as a percentage?

This simple equation can be applied to any process, anywhere at anytime and gives a very useful benchmark for improvement.

To use this successfully employees need to understand exactly what is value so they can accurately determine what is value adding, what is non value adding and finally what would be essential non value adding.

See: SUPPLIER SCHEDULER

See SUPPLIER SCHEDULING

Any activity that does not add value to the product or service in the eyes of the Customer or Consumer, in other words if you sent them an invoice with the activities listed they would happily pay for them. It is also the by-product of a process or task with unique characteristics requiring special management control.

One or more people and/or machines which can be considered as one unit for purposes of capacity planning and detailed scheduling.

Product in various stages of completion throughout the plant, including raw material that has been released for initial processing, and completely processed material awaiting final inspection and acceptance as finished product or shipment to a customer. Scheduled receipts are considered Work In Process.

See: SHRINKAGE FACTOR

A term adopted by APICS (American Production & Inventory Control Society) the meaning of which is similar to Just-in-Time.