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Any body of knowledge, be it Accounting, Engineering, Law, Medicine or whatever, acquires a vocabulary of its own. Supply Chain Management, Synchronous Flow (Theory of Constraints), Total Systems Thinking, Manufacturing Resource Planning (MRP II) and Just-In-Time (JIT) are no exceptions. We try hard to avoid jargon and acronyms in class, but the need to use specific terminology remains. Hence this glossary to help you with some terms which may not be totally familiar.

Many of these definitions are taken directly from the Dictionary of the American Production & Inventory Control Society (APICS), Sixth Edition, Thomas F. Wallace and John R. Dougherty, Editors.

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ABC Classification: 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.

ABCD Checklist: Described as "The Oliver Wright ABCD Checklist for Operational Excellence," it is the basis for the related TARGET software.

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

Action Message: 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).

Activity: A step in a process that is required to complete a process.

Activity-Based Costing (ABC): 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.

Allocation: In a Material Requirements Planning (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.

Alternate Fields: Options, as defined for OPTAS®, available for tailoring the application software to company-specific requirements and needs.

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

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

Anticipated Delay Report: 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.   As this plan affects many company functions, it is normally prepared in conjunction with marketing, manufacturing, engineering, finance, materials, etc. (formerly called Production Planning).

As Is Model: The representation of the current system or business processes in a form other than the real system of business process.  The representation may take any of the following forms:  static or flow chart form, dynamic or simulation form, or both a static or simulation form.

Assemble-to-Order Product: See Make-to-Order Product.

Audit: The unique OPTAS® Methodology phase wherein surveys are used to insure the project was successfully implemented.

Auditing: Periodic reviews that are performed by the person doing the task to determine whether he or she is complying with the related instructions and/or procedures. They are also used to define whether the output meets requirements.

Automatic Rescheduling: 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 generally not recommended.

Available-to-Promise: 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.

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Back Scheduling: 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.

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

Backlog: All of the customer orders booked but not yet shipped.

Bill of Material (BOM): 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," "ingredients list" in certain industries.

Blow-Through: 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.

Breakthrough JIT/TQC Pilot: A method of implementing Just-In-Time (JIT) and Total Quality Control (TQC) 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.

Bucketed System: An MRP, Distribution Resource Planning (DRP) or other time-phased system in which all time-phased data are accumulated into time periods or "buckets." If the period of accumulation were one week, then the system would be said to have weekly buckets.

Bucketless System: 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."

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

Business Plan: 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 sales & operations plan, although frequently stated in different terms, should be in agreement with each other.

Business Rules / Business Intelligence: The specialized knowledge required to specifically complete a task efficiently. These rules are often reflected in "If" statements but may be in notes or work instructions.

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

Capacity Constrained Resource: any resource which if not properly managed and scheduled is likely to cause the actual flow in a system to deviate from the planned flow.

Capacity Requirements Planning (CRP): 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. In earlier years, the computer portion of CRP was called "infinite loading," a misnomer.

Cellular Manufacturing: A method of organizing production equipment that locates dissimilar equipment together. The goal is to produce items from start to finish in one sequential flow; as opposed to a traditional job shop (functional) arrangement that requires moves and queues between each operation. See Group Technology, U-Lines.

Certification: Procedure by which a third party gives written assurance that a product, process, or service conforms to specified requirements.

Closed-Loop (MRP): A system built around Material Requirements Planning and 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 suppliers, Vendor Scheduling, etc. The term "closed-loop" implies that not only are 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.

Common Parts Bill of Material: A type of planning Bill of Material which groups all common components for a product or family of products into one Bill of Material, structured to a "pseudo" parent item number.

Compliance: An affirmative indication or judgment that the supplier of a product or service has met the requirements of the relevant specifications, contract, or regulation; also the state of meeting requirements.

Constraints: any element that prevents the system from achieving the goal of making more money.

• Physical Constraint: an example would be where the setup and process times on a resource are such that the resource is at its physical limit of production. A bottleneck is a physical constraint.
• Logistical Constraint: an example would be where the order entry system takes a few weeks and represents a significant portion of the lead time from receipt of order to shipment. Another example is where the material control system uses monthly order buckets, thus losing all visibility of exact requirement dates. In both cases, the lead-time that can be promised to the customer is at least four weeks.
• Managerial Constraint: an example would be a policy that determines batch sizes as Economic Order Quantity (EOQ). The batch size calculated by this rule might be too large and thus make the production lead times excessive.
• Behavioral Constraint: an example is a tendency on the part of the shop operators to prefer the largest batch that is ahead of a work station, irrespective of due dates or priorities. Such a behavioral tendency is generally acquired as a result of reward systems that are based on the quantity of production at individual workstations. Such behavior leads to long and unpredictable lead times.

Continuous Flow Production: Production where products flow continuously rather than being divided into individual lots or batches.

Critical Fields: Options, as defined for OPTAS®, available for tailoring the application software to company-specific requirements and needs.

Cumulative Lead-Time: The longest length of time involved to accomplish the activity in question. For any item planned through MRP, the Cumulative Lead Time 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, and critical path lead-time.

Current State Model: The representation of the current system or business processes in a form other than the real system of business process.  The representation may take any of the following forms:  static or flow chart form, dynamic or simulation form, or both a static or simulation form.

Customer Connectivity: 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.

Cutover: The unique OPTAS® Methodology phase wherein checklists are used to insure successful implementation of the project once all prerequisites have been satisfied.

Cycle Counting: Physically counting a 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.

Cycle Time: The average time in takes for entities that exit the business system.

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Dampeners: A technique within MRP used to suppress the reporting of certain action messages created during the computer processing of MRP. Extensive use of Dampeners is not recommended.

Database Definition: The unique OPTAS® Methodology phase wherein the parameters in which the application software will operate.

DBR System: the Drum-Buffer-Rope System is used to control the production process.  The bottleneck is the Drum and controls the Throughput of the plant by setting the pace of production. The tying of material release to the pace of the drummer is analogous to using a Rope. A Time Buffer is an inventory buffer queued up a small time before it is needed.

Demand Chain: a system by which organizations manage sales and distribution of products and services to end-users.

Demand Management: The 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.

Demand-pull: See Kanban.

Demand: 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.

Demonstrated Capacity: Capacity calculated from actual performance data, usually number of items produced multiplied by the standard hours per item.

Dependent Demand: 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.

Design for Manufacturability (DFM): 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 cost, and with fewer downstream engineering changes.

Detailed Project Plan: It is the unique OPTAS® plan customized by a companies detailing the methods and timetables by which a project is completed.

Discovery: The unique OPTAS Methodology phase wherein functional managers, process owners and others are interviewed in detail to determine the present process and their failings, and what improvements are needed and expected as a result of installing the application software.

Discrete Issue Inventory Transaction Processing: 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.

Dispatch List: A listing of manufacturing orders in priority sequence. The dispatch list is usually communicated to the manufacturing floor via hard copy or CRT display, and contains detailed information on priority, location, quantity, and the capacity requirements of the manufacturing order by operation. Dispatch lists are normally generated daily and oriented by work center. Also called the Daffy Foremen's Report.

Dispatching: The selecting and sequencing of available jobs to be run at individual workstations and the assignment of these jobs to the workers.

Distribution Center: 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 warehouses, it is may be called a regional distribution center.

Distribution Requirements Planning: The function of determining the needs 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 supply source(s) is recognized as dependent and standard MRP logic applies.

Distribution Resource Planning (DRP): 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.

Dynamic Lot Sizing: A range of order quantity techniques that 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

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Education Data Base: The information regarding personnel education as used by Knowledge DataBase.

Education: Ongoing process wherein managers and all levels of personnel are informed of procedure changes, technology updates, policy adjustments, etc.

Electronic Data Interchange (EDI): 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.

Engineer-to-Order Product: 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.

Engineering Change: A revision to a Bill of Material authorized by the Engineering Department.

EOQ (Economic Order Quantity): A type of fixed order quantity that 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 (setup, receiving, etc.) are fixed. As such, it is in direct conflict with the JIT approach, which attempts to drive acquisition costs to zero via minimizing setup time and utilizing techniques such as statistical process control source inspection, pooled freight arrangements, etc.

Executive Sponsor: This individual is responsible for managing through major policy issues that arise during a project. Their decisions are final.

External Audits: Conducted by organizations that is not within the management structure of the organization being audited. Conducted by customers, registrars and/or government agencies.

External Setup Time: Elements of a setup procedure performed while the equipment is in production. See Internal Setup Time.

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Fail-Safe Mini-DRP: A method of implementing DRP very quickly over a small number of product families. This is one of three Fast Track Implementation approaches.

Fast-Track Implementation: 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/TQC Pilot, Quick Slice MRP, and Fail-Safe Mini-DRP.

Final Assembly Schedule (FAS): 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.

Finite Loading: 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.

Firm Planned Order (FPO): 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.

Fixed Order Quantity: An order quantity technique where the same quantity is planned to be ordered each time.

Flexible Manufacturing Systems (FMS): 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 tune.

Flowcharting: An invaluable tool for understanding the inner workings of, and relationships between, processes. Defined as: A method of graphically describing an existing process or a proposed new process by utilizing simple symbols, lines, and words to display pictorially the activities and their sequence in the process.

Flow Shop: A plant in which machines and operators handle a standard, often uninterrupted, material flow. The plant 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.

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

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

Function: A group of interrelated processes.

Future State Model: the representation of the "current state" system or business processes WITH modifications or changes that are known or hypothesized in order to improve the system or business process.  The representation of this "to be" or "future state" model can be in any of the following forms: static or flow chart form, dynamic or simulation form, or both a static or simulation form.  In all cases by using simulation we are able to determine the performance characteristic of each variable or change in terms of Throughput, Inventory and Operating Expense by experimenting with changes in demand, cycle time changes and other key variables.   By performing such analysis one is able to predict and manage both current and future constraints.

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Gainsharing: 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).

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

Group Technology: An engineering and manufacturing approach that identifies the "sameness" of parts, equipment, or processes. It provides for rapid retrieval of existing designs and anticipates a cellular type of production layout.

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Hedge: 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.

Horizontal Display: 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.

Independent Demand: 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.

Infinite Loading: See Capacity Requirements Planning (CRP).

Information Flow: The process by which information is passed through a company, either electronically and/or by paper.

Initial Software Education: The unique OPTAS Methodology phase wherein a Business Partner provides education as to the breadth and power of the application software.

Input/Output Control: 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.

Internal Setup Time: Elements of a setup procedure performed while the equipment is not in production. See External Setup Time.

Interplant Demand: 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.

Inventory Turnover: 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.

Item Record: 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.

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Job Shop: 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.

Just-In-Time (JIT): 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 that 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.

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Kanban: 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" (Syn: Demand-Pull).

Kitting: See Picking.

Knowledge Data Base: Information reservoir providing resources for scheduling education and training for managers and all levels of personnel. It includes both an Education Data Base and a Training Data Base.

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Lead Time Offset: A term used in MRP where a planned order receipt in a given 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.

Lead Time: The span of time required to perform an activity. In a logistics context, the activity in question is 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, setup time, production time, move or transportation time, receiving and inspection time.

Level: 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 "0" and the items immediately going into it level "1" and so on. The MRP explosion process starts from level "0" and proceeds downward one level at a time.

Load Profile: 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.

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

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

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

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Machine Loading: An obsolete 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.

Made-to-Order Product: A product that 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. Where options or other sub-assemblies are stocked prior to the arrival of customer orders, the term "assemble-to-order" is frequently used.

Make-to-Stock Product: A product planned to be shipped routinely from finished goods, "off the shelf," and therefore finished prior to the arrival of the customer order.

Management Self-Audits: Conducted every (X) months and evaluate whether or not departments are complying with the procedure and/or process and whether the desired outputs are being obtained.

Manufacturing Resource Planning (MRP II): 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 Plan, purchase commitment reports, shipping budget, inventory projections in dollars, etc.

Manufacturing Resource Planning is a direct outgrowth and extension of Closed-Loop MRP. MRP II has also been validly defined as a management system based on network scheduling. Also, and perhaps best, as organized common sense.

Manufacturing Strategy: 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.

Master Production Schedule (MPS): 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 consider customer orders and forecasts, backlog, availability of capacity, management policy and goals, etc.

Master Scheduled Item: 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, dollars, etc. Therefore, the Master Scheduler, not the computer, would maintain the plan for these items. A Master Schedule Item may be an end item, a component, a pseudo number or a Planning Bill of Material.

Master Scheduler: The job title of the person who manages the Master Production Schedule. This person should have substantial knowledge of the company's products, processes and people.

Material Requirements Planning (MRP): 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.

Materials Management: 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.

Mission: How the Vision will be accomplished.

Mistake-Proofing: See Poka-Yoke.

Mixed Model Master Scheduling: 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.

Model: A group of objects in a system that are in a form other than the real system itself.

Modification Definition: The unique OPTAS Methodology phase wherein the application software is tailored to company-specific requirements and needs.

Modular Bill of Material: An organization of Bills of Material in which components are grouped by product option of feature. Often used in products with many optional features, e.g., eight-, six- and four-cylinder engines; automatic vs. manual transmissions; power steering vs. manual, etc.

Modules: Various application software modules available at press time.

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Net Change MRP: A method of processing Material Requirements Planning on the computer whereby the material plan is continually retained in the computer. Whenever there is changes in requirements, open order or inventory status, Bills of Material, etc., a partial explosion is made only for those parts affected by the change.

Net Requirements: In MRP, the net requirements for an item are derived from netting gross requirements against inventory on hand and the scheduled receipts. Net requirements, lot sized and offset for Lead Time, become Planned Orders.

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On-Hand Balance: The quantity shown in the inventory records as being physically in stock.

Open Order: A released manufacturing order or purchase order. Also called Scheduled Receipt.

OPTAS™- is a methodology and a set of tools based upon the management philosophies of total systems thinking and constraint management. OPTAS™ is an acronym for the process of synchronizing the Organization (structure and metrics), Processes, and Technology to insure Alignment with the business Strategy.

Order Entry: 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.

Order Point: An inventory replenishment technique that 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 constant, 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.

Order Promising: 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.

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

Organization: A company, corporation, firm, enterprise or association, or part thereof, whether incorporated or not, public or private, that has its own functions and administrations. The context is expanded in ProcdureNet® to include desired visibility into completed procedures.

Organizational Structure: The responsibilities, authorities, and relationships, arranged in a pattern, through which an organization performs its functions.

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.

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Pareto's Law: 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 extensive within Just-In-Time and Total Quality Control.

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

Period Order Quantity: 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.

Phantom: An intermediate or assembly that is manufactured but is immediately consumed in the manufacture of its parent. Phantoms are Blow-Through items.

Pick List: A document used to pick manufacturing or customer orders.

Picking: 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.

Planned Order: A suggested order quantity and due date created by MRP processing, when it encounters net requirements. Planned orders are created by the computer, they exist only within 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.

Planner/Buyer: See Supplier Scheduler.

Planning & Organization: The unique OPTAS Methodology phase wherein Vision, Mission, Scope, Success Criteria, etc define the project.

Planning Bill of Material: A usage or forecast relationship between a product family or model and its options or features. This relationship is used to coordinate the forecasting and master schedules of the options.

Plant Types

• V-Type Plant- are those manufacturing operations which have few raw materials that result in a large number of end items, that's products are produced in essentially the same way, and likely are capital intensive with specialized equipment. Ex: textiles, metals, and chemicals
• A-Type Plant- are those manufacturing operations where the assembly of parts are manufactured by the same company and the manufactured parts are fairly unique to specific end products. A-plants generally share general-purpose machinery. Ex: aircraft engine assembly, specialized equipment assembly
• T-Type Plant- are those manufacturing operations where manufactured and purchased parts are common to many assemblies. Each assembly is made up of several common components. Common parts are common to the different assemblies. They tend to carry very large finished goods and component parts inventories. Ex: small appliances, electronic and electrical connectors, door locks

Poka-Yoke: A Japanese phrase that means "mistake proofing." It refers to the designing of products and/or processes to make defects impossible.

Policy: A set of business definitions that establish process or organizational boundaries.

Procedure: A structured and approved collection of knowledge that governs the day to day application of business processes and related activities.

Procedure Development: The unique OPTAS® phase wherein procedures are tailored to meet company-specific needs.

Process: A set of interrelated resources and activities that transform inputs into outputs. For example: the Procurement or Accounts Payable processes.

Process Champion: Person who leads the administration and on-going process improvement initiatives from within a division. The champion will coordinate with the Process Owner to ensure that their division’s needs are met within the framework of a total solution.

Process Owner: An individual who will take ownership for coordinating and improving each of the major processes.

Process Plant: See Flow Shop.

Process Testing Cycle: The unique OPTAS® Methodology phase wherein the application software is given a real-time run through testing various scenarios known as "steps" and "situations" in order to insure personnel competency in using the system.

Production Plan: The overall level of manufacturing output planned to be produced. Usually stated as a monthly rate for each product family (group of products, items, operations, 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.

Production Planning: See Sales and Operations Planning.

Project Definition: The initial phase of the unique OPTAS Methodology wherein the project is defined in terms of present needs and what will be required to fulfill those needs.

Project Manager: Person responsible for managing project budgets, schedules, meetings, management communications and is accountable for attaining the project objectives.

Project Management: defined here in terms of change control, risk assessment, paradigm shifts, etc.

Projected Available Balance: 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.

Pseudo: A grouping of components that is artificial in that it cannot be manufactured. Pseudo common parts groups and option groups are frequently found in modularized Bills of Materials. Pseudo's are Blow-Through items.

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

Push System: 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.

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Quality at the Source: 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.

Quality Measurements: What parameters will be used during the Audit phase in order to access the success of the project.

Queue Time: The amount of time a job waits at a work center before setup 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.

Queue: A waiting line. In manufacturing, the jobs at a given work center waiting to be processed. As Queues increase, so do average Lead Times and Work-In-Process inventories.

Quick Slice MRP: 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.

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Regeneration MRP: A method of processing Material Requirements Planning on the computer whereby 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.

Repetitive Manufacturing: 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 Process Plant.

Rescheduling Assumption: 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.

Resource Requirements Planning: See Rough-Cut Capacity Planning.

Rough-Cut Capacity Planning: The process of converting the production plan and/or the Master Production Schedule into the capacity needs for key resources: manpower, machinery, warehouse space, suppliers' 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.

Routing: Is a ProcdureNet® concept that includes two processes. First the personal specifically involved as stakeholders in using the procedure and secondly the personnel required to approve the policies, procedures and regulatory requirements if any prior to publication. For example the Quality Council may approve all policies and procedures.

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

Safety Time: A technique in MRP whereby 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.

Sales and Operations Planning: The function of setting the overall level of manufacturing

Sales Plan: 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 Management's' commitment to take all reasonable steps necessary to make the Sales Forecast (a prediction) accurately represent actual customer orders received.

Scheduled Receipts: 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.

Scrap Factor: 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.

Service Parts: Parts used for the repair and/or maintenance of an assembled product. Also called repair parts, spares.

Shop Floor Control: 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.

Shop Order Close-Out Station: 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.

Shrinkage Factor: A factor used in MRP which compensates for expected loss during the manufacturing cycle either by increasing the gross requirements of components or by reducing the expected completion quantity of planned and open orders. The Shrinkage Factor differs from the Scrap Factor in that shrinkage affects all uses of the part and its components. The Scrap Factor relates to only one parent-component usage.

Simulation: 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?".

Simulation Model: a representation of a group of objects or ideas in some form other than that of a real system itself.  Consultants use computer simulation modeling because of its ability to mimic real world systems accurately.

Single-Minute Exchange of Die (SMED): 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.

Skill-Based Compensation: 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 are. Skill-based compensation plans can enhance factory flexibility, resulting in higher output and lower Work-In-Process inventories.

Stakeholder: People, whose job responsibilities interact with the business process by provides input, receive output or participate in a stated business process.

Statistical Process Control (SPC): 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.

Stockless Production: See Just-In-Time.

Success Criteria: Factors critical to the success of project completion.

Supplier Scheduler: 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, 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. (Syn: Vendor Scheduler, Planner/Buyer).

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 (Syn: Vendor Scheduling).

Supply Chain: a system by which organizations' source, make and deliver their products or services in concert with market demand.

Synchronous Systems Thinking, SST: achieving a smooth, fast flow of material through a manufacturing operation in concert with market demand.

System: A group of defined processes, organizational structure, responsibilities that cooperate to accomplish a stated objective. Systems are usually made up of many major processes that take an input, add value to it, and produce an output. For example: an Engineering Release System, Supply Chain, or ERP system.

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Tasks: Individual elements and/or subsets of an activity. Normally, tasks relate to how an item performs a specific assignment.

Tailoring Alternatives: Options available for tailoring the application software to company-specific requirements and needs.

TARGET: Described as "Enterprise Assessment and Project Management for World Class Performance," it is software developed by the Oliver Wight Companies designed to help companies identify key opportunities for significant improvement in virtually every aspect of the business. It is based on "The Oliver Wight ABCD Checklist for Operational Excellence."

Team Skills: The unique OPTAS® Methodology phase wherein Business Partner Cornelius & Associates defines proper team skills, effective team meetings, etc.

Template: A standardized format agreed upon by the organization to structure an organization's procedures. An organization may have multiple approved formats such as a HR Policy Template.

Time Bucket: 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.

Time Fence: 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 becomes increasingly more difficult to a point where changes should be resisted. Time Fences can be used to define these points.

Time-Phased Order Point: MRP for independent demand items. Gross requirements come from a forecast, not via explosion. 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 combination of both.

TIOE- A set of measurements to evaluate the impact of manufacturing actions on the total system.

• Throughput- The rate at which the system generates money through sales.
• .Inventory- the money invested in purchasing things that it intends to sell.
• Operating
  Expense- The money the system spends to turn Inventory into Throughput.

To Be Model: the representation of the "current state" system or business processes WITH modifications or changes that are known or hypothesized in order to improve the system or business process.  The representation of this "to be" or "future state" model can be in any of the following forms: static or flow chart form, dynamic or simulation form, or both a static or simulation form.  In all cases by using simulation we are able to determine the performance characteristic of each variable or change in terms of Throughput, Inventory and Operating Expense by experimenting with changes in demand, cycle time changes and other key variables.   By performing such analysis one is able to predict and manage both current and future constraints.

Total Quality Control (TQC): 1. An approach to quality performance built into all areas of a company, from design of the product to its delivery, aimed at producing no defective items. 2. A method for solving problems. As such, some see it as a necessary complement to JIT; JIT identifies the problem (waste) and TQC is used to solve it.

Total Systems Thinking: considers the TOTAL system performance rather than examining the individual parts.   Even if the performance of individual subsystems is optimized, overall performance of the "total system" may be sub-optimized because of subsystem interaction.

Training Data Base: The information regarding personnel training as used by Knowledge Data Base.

Training: Training covers the requirements related to the process and related documents.

Two-Level Master Schedule: A Master Scheduling approach for make-to-order products where an end product type is Master Scheduled along with key options and common parts.

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U-Lines: 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.

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Value Chain: consists of a strategic alliance across your whole supply chain and your demand chain concurrently.  It is managed through synchronous methods.

Vendor Scheduler: See Supplier Scheduler.

Vendor Scheduling: See Supplier Scheduling.

Vision: What is hoped to be accomplished in the project.

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Work-in-Process (WIP): 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 shipment to a customer. Many accounting systems also include semi-finished stock and components in this category.

Work Instructions: Defines a common approach to performing an activity or set of tasks. They are usually written to define how an individual will perform these tasks.

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Yield Factor: See Shrinkage Factor.